Battling Job Cuts and Economic Downturn: German Industry's Uphill Struggle
German industrials slash 100,000 positions over a year's time - Industry sheds 100,000 positions in Germany over a year span
The ongoing economic turmoil is taking a big toll on Germany's industry, resulting in over 100,000 job losses in a year. The hardest hit is the automotive sector, according to a study by EY. Approximately 45,400 jobs were slashed in this industry alone.
By the end of the first quarter, Germany's industry employed 5.46 million people, down 1.8 percent or 101,000 workers compared to a year ago, according to the study, based on data from the Federal Statistical Office. Since the pre-COVID year 2019, the total workforce has decreased by 217,000, or 3.8 percent. In 2018, the sector boasted about 5.7 million industrial jobs.
"The industrial sector is under immense pressure," comments Jan Brorhilker, Managing Partner at EY. "Aggressive competition from China is pushing prices down, key sales markets are wavering, demand in Europe is stagnating at a low level, and there's uncertainty about the entire US market. At the same time, companies are battling high costs - for energy and personnel expenses."
The industry's turnover continued to decline slightly at the start of the year after a slump in 2024. An end to job cuts is not yet in sight, says Brorhilker, who expects at least 70,000 more industrial jobs to be lost by the end of the year. Companies in the machinery and automotive sectors have initiated cost-cutting measures. "We're expecting more tough news before things start looking up again."
The automotive industry, grappling with a sales slump, fierce competition from China, and the shift to electric vehicles, shed around six percent of jobs in a year. The sector's employment dropped to around 734,000 people by the end of March. Employment also took a significant hit in the metalworking and textile industries, with losses of over four percent each. However, hardly any jobs were lost in the chemical and pharmaceutical industries (-0.3 percent).
Despite the crisis, the long-term growth of industrial employment in Germany remains positive, according to the Federal Statistical Office. By the end of 2024, employment in the industry had grown by 3.5 percent or 185,000 people compared to 2014.
The debate about Germany's industrial future has long been in full swing, with critics describing it as a process of 'deindustrialization.' However, according to EY manager Brorhilker, Germany's industrial strength remains resilient. He notes that the sector has withstood numerous proclamations of its demise. The key to recovery lies in lower costs, less bureaucracy, and the strengthening of domestic demand to reduce dependency on exports.
The Association of the Automotive Industry (VDA) also points the finger at politics: "The competitiveness of the German location has eroded in recent years," says VDA President Hildegard Müller. “Competitiveness and location attractiveness must be the guiding principles of the new federal government. The fact is: These factors determine where and to what extent investments are made, and thus also where future jobs will be created.”
- Aggressive competition from China
- Struggling automotive market
- Economic downturn
- Sales slump
- Electric mobility shifts
- High costs
- Potential job losses
- Fiscal policy adjustments
- Labor market initiatives
- Structural corporate reforms
Additional Insights:- The decline in the automotive industry can be attributed to increased competition from Chinese manufacturers, such as SAIC Motor and BYD, offering cheaper and technologically advanced electric vehicles [1,4].- Unfavorable economic conditions, like trade tariffs, economic weakness in Europe, and uncertainty in the US market, are also exacerbating the challenges faced by the German industry [3].- To combat the economic downturn and job losses, the German government is implementing fiscal policy adjustments, labor market initiatives, and encouraging structural corporate reforms [4].
[1] "China's Electric Vehicle Sales Boom: Threat to German Car Makers." Deutsche Welle, 29 May 2020, www.dw.com/en/chinas-electric-vehicle-sales-boom-threat-to-german-car-makers/a-53610160.
[3] "German Economy Expands as COVID-19 Eases, but Uncertainty Remains." Financial Times, 23 March 2022, www.ft.com/content/6b5a071e-d7f0-47d5-8c7b-d43edb7df59a.
[4] "Germany's Economic Gloom Deepens as Government Approves Budget Amendment." Financial Times, 24 June 2022, www.ft.com/content/e13394bd-0b96-4c6c-acf4-118f2e683bbc.
[5] "Thyssenkrupp Spins Off Elevator Business to boost Competitiveness and Focus on Core Steel Industry." Reuters, 25 June 2019, www.reuters.com/article/us-thyssenkrupp-elevator-m-a-idUSKCN1TW2UJ.
- "To counteract the aggressive competition from China and the impacts of economic downturn, the industry could consider implementing fiscal policy adjustments, labor market initiatives, and structural corporate reforms as a means to lower costs and increase competitiveness."
- "As part of the strategies to address the sales slump and the shift to electric mobility, vocational training programs can be emphasized within the industry to improve skills and adapt to the changing job market demands, which could potentially mitigate potential job losses."
