GERMANY’S all-powerful manufacturing sector is facing a period of industrial unrest. The giant IG Metall manufacturing union is flexing its muscles as Germany’s biggest carmaker, Volkswagen, threatens to close production lines in Germany for the first time in almost 90 years.
 
German workers who have been protected from mass layoffs not just in the main production plants but also in the supply chain are now expressing their opposition to closures through a series of “warning” strikes ahead of a further round of negotiations between the union and the company.
 
Germany’s coalition government has collapsed, and a general election is due in February next year. Any new government won’t have much room for manoeuvre constitutionally as German spending rules are likely to limit a new government’s ability to manoeuvre.
 
VW says it has been hit by delays in the development of the EV market and high costs — which have seen VW fall behind other EV makers, notably Tesla in the US and BYD in China. Donald Trump’s threats to impose even bigger tariffs on European autos for sale in the US will only make matters worse.
 
David Bailey, professor of Business Economics at the Birmingham Business School and a leading authority on the European automotive industry, put the issue succinctly: “VWs imported into China have been hit with a collapse in its core Chinese market; EV sales in the West have faltered, and Chinese EV brands have also penetrated the European market. Plus, Germany has high domestic costs, including high energy costs caused by the war in Ukraine.”
 
The German auto sector and its supply chain are responsible for 11 per cent of manufacturing jobs in the country. Bosch has announced 3,500 job cuts; ZF Friedrichshafen is proposing 12,000 layoffs by 2030, and Continental, the tyre manufacturer, is looking to cut 5,500 jobs worldwide. And other industries face big job cuts — steelmaker Thyssenkrupp is proposing 11,000 layoffs by 2030.
 
“As time goes on, we are also realising that many people are simply really angry that this is being done,” said Thorsten Groger, chief negotiator for IG Metall. He said the “warning strikes” could lead to more widespread action should talks with VW go poorly. “There is the possibility of larger-scale industrial action, and we are prepared for that.”
 
A combination of bad economic news and political paralysis ahead of the February 2025 election is impacting Chancellor Olaf Scholz’s Social Democratic Party (SPD), who have dismal polling figures.
 
Lower Saxony, where VW is based, is an SPD stronghold and is linked to VW. The state holds 20 per cent of VW, and the state’s premier, SPD politician Stephan Weil, sits on VW’s board.
 
In an interview with German newspaper Suddeutsche Zeitung, Weil said It would not be wise to dismantle the “expensive structures” that have been built to produce electric cars.
 
Weil wants to restore federal subsidies for electric car purchases or create tax incentives for consumers. The SPD and the Greens want to revive the energy-intensive German industry more broadly by reducing energy prices through subsidies.
 
The far-right AfD party is polling in second place, and mainstream parties will have to cope with a voter backlash.
 
“The question of how to solve the situation at Volkswagen is an example for how we solve the future problems of industry as a whole,” IG Metall’s Groger said. The urgency of the situation, he added, requires “concrete political action” and not “beautiful election campaign posters.”