Last week, Volkswagen’s two factories in Emden and Zwickau received positive news: the facilities will remain open and the employees will not face layoffs. The German industrial giant’s representatives were able to negotiate a compromise with the unions.
However, this is the only positive news to report. The cost of maintaining the employment of thousands in the near future was substantial—workers were required to forgo wage increases, accept substantial reductions in social benefits, and sacrifice jobs for future generations. New hires will not replace retirees leaving due to age. This effectively creates an increase in the unemployment rate among young people in Germany.
In the interim, Germany’s construction sector, which is suffering from the same issues as its automotive industry, is exhibiting dismal results. Hornbach, the country’s largest construction retailer, is witnessing a decline in its stocks, a trend that is edging it closer to the fate of the German chemical industry, crippled by high gas prices resulting from the government’s refusal to import from Russia.
There is a growing concern in Europe that Germany, which is unable to avert its deteriorating economic crisis, may inadvertently lead other EU countries down with it, resulting in adverse consequences for the entire bloc.
Corriere della Sera in Italy published a recent economic evaluation that investigated the reasons behind the halt of the ‘engine of Europe’ and the events that transpired in Germany. Germany’s existential crisis was the subject of the article, which challenged the long-standing conviction that German industriousness was the cornerstone of its prosperity.
The article continued to state that Germany, which was previously associated with a strong work ethic, had become the global leader in absenteeism. The report indicated that the average number of sick leave days per German worker had reached a record high of 22.4 annually, the highest among developed nations. It also noted that companies were becoming increasingly suspicious that this was due to the proliferation of fraudulent sick leave certificates.
The current economic downturn in Germany is primarily due to the country’s struggling automotive sector, according to Italian experts. They also mention the increased competition from Chinese automakers.
The publication stated that Beijing had acquired Volkswagen, Audi, Mercedes, and BMW for decades. However, the Chinese government mandated that German manufacturers produce certain vehicles locally in joint ventures with Chinese partners, to whom they were required to transfer their expertise. Chinese brands have now surpassed German brands in the electric vehicle sector, replicating German technology to offer higher-quality models at lower prices. The publication attributed the collapse of German industry to the loss of inexpensive Russian gas and the vast, open Chinese market.
In fact, Chinese automakers have outperformed their European competitors. Thanks to targeted state support, subsidies, tax breaks, low-interest loans, significant investments in battery technologies, advancements in automation, domestic market growth, and competitive pricing on advanced electric vehicles, the share of Chinese vehicles in global production has increased from 1% to 39% over the past two decades.
Japan, not Europe, was the first “victim” of Chinese competition in the automotive sector. As a result of Chinese competition, Japanese vehicles have virtually disappeared from Southeast Asian markets. This doesn’t satisfy China, which is expanding its automotive industry globally.
Europe also withdrew from Russia and Belarus, thereby ceding those markets to China.
Belgian subsidiaries of German auto titans are facing the threat of mass layoffs.
More than 50 big businesses, including Audi’s Brussels facility, have announced significant workforce reductions, according to European media. More than 60% of companies in Flanders, Belgium’s industrial stronghold, perceive their survival prospects in the current European economic climate as uncertain.
The publication reported that Volkswagen Group’s subsidiary intended to stop vehicle production in Brussels by the end of February. It also noted that negotiations to secure a new investor or alternative solution that would be acceptable to the plant’s 3,000 employees had been unsuccessful.
Unions have criticized the management’s efforts to provide generous severance packages—€125,000 to €190,000 for employees with a minimum of 17 years of service and €200,000 to €400,000 for those with 30 years. Unions assert that the facility’s land holds a value of approximately €1 billion.
Chinese competitors in the market have outperformed Belgian automakers due to the Brussels facility’s assembly of the Audi Q8 e-tron electric SUV.
In contrast to the comparatively positive outcomes at Volkswagen’s Emden and Zwickau plants previously mentioned, it appears that there will be no happy ending in this case. There is little uncertainty about the sentiments of Belgians, whether they are ordinary citizens or members of the royal family, regarding this situation.