Shocking Downfall: Volkswagen’s Struggles Illuminate Germany’s Alarming Deindustrialization
Germany faces an increasingly tangible threat of deindustrialization, with energy costs soaring after Russia’s 2022 invasion of Ukraine and China’s economic slowdown impacting trade. Martin Wansleben, leader of the German Chamber of Trade and Industry (DIHK), emphasized the growing concerns. Volkswagen (VW), Europe’s largest carmaker, is in crisis; it may close three German factories and cut 30,000 jobs, with plans to reduce salaries. This comes after VW reported a 64% drop in Q3 profits, mainly due to plummeting sales in China.
The last year has seen a series of troubling announcements from German companies. In February, Miele shifted some production to Poland, affecting 700 jobs in Gütersloh. Continental is cutting 7,000 jobs, and Michelin plans to slash 1,500 jobs while closing factories. In July, ZF Friedrichshafen announced a reduction of 14,000 jobs by 2028.
A recent DIHK survey shows mounting pessimism among businesses. One-third of companies and 40% of industrial firms plan to cut investment in Germany. Only 19% of industrial firms describe their current situation as positive, while 35% view it negatively. These figures echo the economic crisis of 2002-03, which prompted the successful Agenda 2010 reforms.
Moritz Schularick from the Kiel Institute for the World Economy suggests that VW’s crisis might finally push Germany to rethink its manufacturing-centric economic model. In response, Chancellor Olaf Scholz held a summit with key industry leaders, including VW and Siemens, although their discussion outcomes remain limited. Proposed measures include addressing high electricity costs and reducing regulatory burdens on large firms. However, the Scholz government, a coalition of Social Democrats, Greens, and Free Democrats, is plagued by dysfunction and internal conflicts, casting doubt on whether effective reforms can be enacted. The next meeting is scheduled for November 15th, following contentious budget negotiations.
Original Story https://www.livemint.com/companies/volkswagens-woes-illustrate-germany-s-creeping-deindustrialisation-11730713998504.html
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Publish Date: 2024-11-05 06:00:00
