Difficult situation for suppliers: car industry warns of job cuts

The automobile association VDA anticipates a severe crisis in the automotive industry. Numerous jobs at German car manufacturers and their suppliers are affected, which already launched austerity programs before the corona crisis.

In view of the global slump in demand for cars, the German automotive industry has warned of job losses. The recovery of the economy hoped for by the federal government's economic stimulus package in the second half of the year will probably not be enough to stop the decline in employment, said head of the Association of the Automotive Industry (VDA), Hildegard Müller, at the VDA's half-year press conference, which was broadcast online. The fact that many employees are currently on short-time work should not obscure the difficult situation in which mainly medium-sized suppliers are located. If it is not possible to return to employment in a timely manner, the VDA boss warned that a severe recession could lead to job losses.

In view of the auto crisis that started in the past year, the major car manufacturers and their suppliers had already launched austerity programs before the corona pandemic, which were accompanied by a large reduction in employment. Daimler, for example, wants to motivate at least 10,000 employees in administration and production-related areas to leave the company. The number could now be significantly higher due to the virus pandemic, according to media reports. The topic is also likely to make waves at the Daimler general meeting next week.

Daimler also plans to sell its plant in Hambach, France. The group announced that it intended to adjust and realign its global production capacities to the expected development of the market. "That is why we intend to start discussions about the sale of the Hambach plant," announced Daimler CEO Ola Källenius. The Smart small car, which has so far been built in the Hambach plant, is to be produced in China in the future. Daimler employs around 1,600 people in Hambach.

Worldwide demand for passenger cars expected to decline by 17 percent

The VW subsidiary Audi, also shaken by the diesel scandal, has meanwhile announced the reduction of 9,500 jobs in Germany. BMW had recently agreed with the works council on some 6,000 jobs to be eliminated due to the Corona-related decline in sales. Suppliers are also cutting tens of thousands of jobs. So far, the staff has been largely reduced through the non-filling of vacant positions, severance payments and early retirement. But now layoffs also seem possible. In any case, the supplier Continental no longer excludes this in view of the pandemic.

VDA boss Müller referred to the rapid decline in demand for cars, which is hard on the industry worldwide. "The slump in the market is unprecedented in its scope and global scope," said the VDA boss. In 2020 the association expects the global market to drop by 17 percent to almost 66 million cars. The decline will be particularly strong in Europe with 24 percent, followed by the USA with minus 18 percent and China with minus ten percent. In Germany, the Association of the Automotive Industry expects new car registrations to drop by 23 percent to 2.8 million units. The forecasts are based on the assumption that the pandemic can be contained.

Even though there was a silver lining on the horizon recently – domestic incoming orders rose by eleven percent in June compared to the same month in the previous year – but many industry representatives are skeptical. Nobody knows how long the losing streak lasts. "The way out of this great crisis will be long and rocky and it will leave economic and social marks," said Müller. Europe therefore needed an "ambitious industry package" to help the down-to-earth industry get on its feet. The VDA chief reaffirmed the willingness of companies to protect the climate, but warned of an "overbidding competition" in CO2 regulation. It is expected "that the consequences of the Corona crisis will also be taken into account." Europe had to prove that economy and ecology were thought together. How big the decline in employment ultimately turns out also depends on how long the short-time bridge lasts, said Müller.