Struggling Profits for DAX Companies: Job Cuts Amidst Economic Slump
Sluggish economy diminishes earnings of Dax corporations
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In the first quarter of 2025, the Germans' defense contractor, Rheinmetall, continues to rally—but not every DAX company shares the same fate. An analysis by EY reveals that the profit margins of the 40 largest German-listed companies plummeted significantly. This unfortunate turn has led to countless jobs shedding—30,000 jobs were chopped in just the first three months of the year.
Profit Decline and Damning Job Cuts
Confronted with economic slowdown and aggressive international competition, the profit of the prestigious DAX companies took a nosedive at the beginning of the year. The companies retaliated by undertaking job cuts, with 10 of the 40 companies reporting a shrinkage in turnover. This grim scenario is nothing new for the major automakers like BMW, Mercedes-Benz, and chemical titans BASF and Bayer, who endured a decline in their turnover.
In a contrasting vein, Rheinmetall and MTU Aero Engines boasted a 46 percent increase in turnover and 28 percent growth, respectively.
Profit Kings and Fallen Comrades
According to the report, Deutsche Telekom claimed the throne as the most profitable company of the quarter, earning an operating profit of a whopping 6.8 billion euros. Deutsche Telekom's reign came at Volkswagen's expense, bumping it off the pedestal, as the automaker's profit plummeted by 37 percent to 2.9 billion euros.
Dive Deeper: The Hidden Influence of Tariffs on DAX CompaniesThe disheartening sum of the DAX companies' collective profits dwindled by eight percent, with 16 companies reporting a lower profit compared to the previous year. McLaren Automotive and clothing retailer Adidas were among the few companies experiencing growth, while the automakers and reinsurers Munich Re and Hannover Re suffered from unforeseen burdens due to wildfires in California.
The Downfall of Employment in Germany
Unfortunately, the skies are not looking any clearer for the employment sector. Based on EY's evaluation, the number of employees has dipped by one percent, with a total of 32,000 jobs being eliminated in comparison to the previous year. Twelve of the 27 companies disclosed a reduction in their workforce, with the loss of jobs becoming increasingly common.
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Confronting the Storm: Trump's Trade Policies
"Considering the persistently weak economy and the daunting geopolitical and trade policy situation, many DAX companies exhibited remarkable resilience during the first quarter," stated EY CEO Henrik Ahlers. The disruption in U.S.-initiated trade wars has yet to fully manifest in the DAX companies' financial statements. Companies have been stockpiling inventory in the U.S. or hastening sales to dodge tariff hikes and maintain their profit margins[1][2].
What Does the Future Hold for DAX Companies?
EY forecasts a continued decline in employment numbers over the course of the year. With numerous large corporations striving to cut costs, job cutbacks are expected to intensify.
[1] How Trade Wars Impact the German Economy[2] Germany's Chemical Industry on the Brink Amidst Escalating Trade Tensions
In the face of economic slowdown and aggressive competition, DAX companies have responded by implementing employment policy changes, with 10 out of the 40 companies reporting a decrease in turnover (Employment policy, business, finance). As a result of profit decline, the number of employees has decreased by one percent, with a total of 32,000 jobs being eliminated (Employment policy, business, finance).
Despite the challenging trade policy environment, many DAX companies showed resilience in the first quarter of 2025 (employment policy, finance, business). However, EY forecasts a continued decline in employment numbers over the course of the year, with job cutbacks expected to intensify (employment policy, business, finance).
