Germany’s once-mighty car industry, once recognized around the world for its high-quality, innovative internal combustion engine cars, is winding down. Owning a German car was a symbol of luxury and status.
And the car industry prospered, boosting the country’s economy. Now, due to the tragic choices of the Scholz government, this narrative is collapsing. The German car industry is currently experiencing a major crisis.
The media reports on company meetings, accompanied by anger and protests from workers at the German company VW.
The head of the workers’ council wants to prevent factory closures. VW produced around nine million vehicles last year, against a total capacity of 14 million.
According to union representatives, more than 500,000 workers will go on strike at the end of next month if no solution is found with the company’s management.
In fact, widespread strikes could be on the way from next October as the car industry considers scrapping decades-old jobs deals and closing two German plants, the country’s biggest union said.
Performance
For German automakers that have been the undisputed technology market leaders in the industry for almost 140 years and barely had to worry about sales or competition, this is an unprecedented situation.
Increasing returns on the flagship VW brand has become more difficult due to higher logistics, energy and labor costs.
At the same time, although the union is insisting on 7% pay rises, IG Metall chief Christiane Benner said a move to a four-day week would be a possible concession workers would have to consider.
VW wants to save resources to free up the funds it needs for new products.
In Europe, two million fewer cars are currently sold annually than before the coronavirus pandemic. And that is unlikely to change. For VW, with a market share of about a quarter in Europe, this means: “We are missing 500,000 car sales and sales for about two factories. And this has nothing to do with our products or poor sales performance. The market is simply not responding’ – which makes sense, given that Europeans are groaning over the economic situation created by the conflict with Russia.
This development is a disaster for many workers, who are very likely to lose their jobs, but also for entire settlements in Germany, where a large percentage of their inhabitants are employed in the business. The factories of VW, BMW and Mercedes, if nothing else, ensured externalities of enormous scale.
Notably, in these areas, all infrastructure is geared towards factories. But this is the fate of Germany today.
Impact
What impact will this have on the economies of other European countries?
Many spare parts are not produced in Germany, but in other EU countries. This is also the case with other sectors of German industry.
Therefore, if the German economy declines, the immediate effect will also affect companies in other countries. Since cooperation and delivery have worked well for years and decades, these companies have strategically oriented themselves very strongly towards the German economy.
If there is a decrease in orders or even a loss of customers, it will be very difficult for these companies to find new customers internationally.
But now we are also looking for the culprit of this crisis. It is clear that the managements of the companies are not responsible. The issue of energy costs is mentioned again and again. Two factors have always been the basis for Germany as an industrial location:
- the seriousness and precision of the German worker and
- the cheap energy.
So the culprits are the politicians.
The discussions that take place around the issue of German energy policy move into the realm of the absurd.
- German politicians (Angela Merkel) first shut down nuclear power plants and then bought power from nuclear plants abroad.
- Then they set up wind turbines everywhere, even though this technology cannot meet the needs of the Germans.
- And now people are buying the expensive liquefied natural gas from America because they want to give up the cheaper Russian gas for political reasons.
The crisis in the German car industry mirrors the crisis in German energy policy.
Of course, with the rise of the Chinese automobile industry, the world market situation has changed and there is more competition.
But Energy is important for any production. If energy is expensive, an industry can no longer remain competitive.
Wrong political decisions are currently destroying German industry and thus impacting the entire prosperity of Europe.
