THE GERMAN AUTO INDUSTRY ON ITS KNEES
- As I myself am directly involved in the car industry, I can freely say that the crisis in the German car industry is not just an economic story. It represents a clash between the political ambitions of a strange liberal understanding (and ideology), which is far from sovereignist national positions for the growth and development of its state and nation. Liberalism went in a package with some virtually imagined so-called green transformation (in the energy sector), which is far from the level of offering support to a strong real economy, which is a large consumer of energy. Now, the question is no longer whether the German car industry will change – it is already happening, and from bad to worse. The question is, will the changes that create new reset opportunities, and eliminate the aforementioned weak points, happen fast enough to replace/restore/make up for the lost jobs!? The answer to that question will determine not only the future of Baden-Württemberg but also the economic future of Germany for decades to come!
Only a cursory glance of a professional business eye will state that Baden-Württemberg – the heart of German industry – is on the verge of a historic collapse. For decades, thousands of workers in Baden-Württemberg – from Stuttgart and Sindelfingen to Ludwigsburg, Friedrichshafen and dozens of smaller industrial centers – built what was considered the strongest symbol of German economic power. The car factories and their suppliers provided steady incomes, secure jobs and a standard of living that for many was unattainable in the rest of Europe.
Today, that picture is changing rapidly.
Figures from the state government of Baden-Württemberg show that around 18,000 jobs have already been lost in the automotive and delivery industry by 2023. Even more worrying are the forecasts according to which almost every third job in the automotive sector could disappear by 2040.
Alarming projections: More than 150,000 jobs at risk
According to official information provided by the provincial government in response to an opposition parliamentary question, the number of people employed in the automotive industry and related activities could drop from 480,100 workers in 2022 to just 325,600 by 2040.
That means the potential loss of more than 154,000 jobs in the state that is the true heart of Germany’s auto industry and home to giants such as Mercedes-Benz, Porsche, Bosch, Malle and hundreds of smaller suppliers.
What seemed like a theoretical danger until yesterday is becoming a reality today.
Electrification brings new industrial calculation and calculations
A few years ago, studies commissioned by the provincial government itself warned that the electrification, digitization and automation of manufacturing could wipe out between 37,600 and 66,000 jobs by 2030.
But the dynamics of changes are proving to be much faster than expected. Electric vehicles require significantly fewer components compared to cars with internal combustion engines. This automatically means less need for manpower in production, especially in sectors related to engines, transmissions and classic drive systems.
In parallel, automation and robotics further reduce the need for human labor in factories.
German industrial giants are already cutting back
The signs of the crisis are already visible among the biggest players in the industry.
The world’s largest auto parts manufacturer, Bosch, based in Gerlingen near Stuttgart, has announced further job cuts in the mobility sector.
ZF Friedrichshafen plans to cut 14,000 jobs in Germany by 2028. Porsche has launched a new austerity program after a sharp drop in profits, while Mercedes-Benz is implementing rationalization measures due to weaker demand and rising costs.
Similar moves are announced by other companies, which for decades have been drivers of German industrial development.
A “perfect storm” for the German economy
According to the analyzes of the consulting company “I-way” and the German statistical institutions, the automotive industry in Germany has lost more than 50,000 jobs in the last year alone, and from 2019 onwards the number of employees has decreased by more than 110,000.
Economists point out that the reasons are not limited to the electric transition.
On the contrary, it is a question of a combination of several unfavorable factors:
• high energy prices;
• continuous growth of labor costs;
• reduced demand on the European market;
• competition from Chinese manufacturers;
• increased regulatory obligations related to the climate policies of the European Union.
It is increasingly felt in business circles that the German industry is still feeling the consequences of the energy policy after the severance of relations with Moscow, including the closure of nuclear power plants, things that are colossally reducing Germany’s competitiveness in the global race. These two reasons are the foundation of Germany’s disastrous policies, which have undermined its economy, industry, economy…
Let’s not forget that behind the numbers and behind the statistics are human destinies
While politicians talk about “structural transformation”, for tens of thousands of workers these numbers have a much more concrete meaning. Uncertainty is growing in cities whose economies have depended on the auto industry for generations. For people who have worked in the same factories for twenty or thirty years, the possibility of losing their job is not only an economic category.
It is a matter of livelihood, loan repayment, children’s education and family security. Critics warn that retraining programs and promises to create new jobs are not yet keeping up with the scale of the emerging problem.
Warning for all of Europe
Many analysts see what is happening today in Baden-Württemberg as a warning for all of Germany, but also for Europe. Germany, which for decades was the industrial engine of the European economy, today faces a complex task: to simultaneously carry out the energy and technological transformation, while preserving the competitiveness of its industry and the hundreds of thousands of jobs that sustain its economic power.
For now, the numbers send an unpleasant message. Namely, the transition to the new industrial era is proving to be much more expensive and painful than it has been presented to the public for years.
Finally, as I myself am involved in the automotive industry, I can freely say that the crisis in the German automotive industry is not only an economic story. It represents a clash between the political ambitions of a liberal understanding and an ideology that is far from sovereignist national positions for the growth and development of its state and nation, in a package with some kind of virtually imagined so-called green transformation, which is far from the level to offer support to the strong German real economy, which is a large consumer of energy. Now, the question is no longer whether the German car industry will change – it is already happening, and from bad to worse. The question is, will the changes create new opportunities to reset and eliminate the aforementioned weak points, and will this happen quickly enough to replace the lost jobs!?
The answer to that question will determine not only the future of Baden-Württemberg but also the economic future of Germany for decades to come!
“Volkswagen” before the biggest restructuring in its history: up to 100,000 jobs in question
German car giant Volkswagen is preparing for the most profound transformation in its modern history, a process that could result in the elimination of as many as 100,000 jobs worldwide. According to information published in German media, this figure is double the originally planned 50,000 layoffs by 2030, which was already considered one of the most radical restructuring programs in the European car industry. The plan, which was reportedly presented by CEO Oliver Blume to the concern’s Board of Directors, envisages a thorough reorganization of the company. Although there is still no official confirmation of the final number of jobs that will be cut, nor of the time frame in which the measures will be implemented, it is clear that Volkswagen is entering a period of serious structural changes. Apart from reducing the number of employees, the medium-term plans also mention the possibility of closing four production facilities in Germany – in Hanover, Zwickau, Emden and the Audi factory in Neckarsulm. Production at these plants would end at the end of the life cycle of the models currently in production. In parallel, a reorganization of the concern itself is being considered, whereby the core Volkswagen brand and the components sector could be separated into separate companies. Such a model would allow greater flexibility and easier access to capital markets. The company admits that the automotive industry is going through a period of deep technological and market changes, which is why it is necessary to adapt the business model. According to the management, the goal is to make the concern more efficient, more competitive and better prepared for the challenges brought by electrification, digitalization and intensified global competition. The final guidelines of the strategy are expected to be reviewed by the Supervisory Board on July 9.
From Germany for “Nova Makedonija”, Don Prentoski, businessman and investor
