IG Metall and large German automotive suppliers are fighting for the future

Managing directors and works council chairmen of five major automotive suppliers call on Federal Chancellor Olaf Scholz to support the German automotive industry.

“We are united with IG Metall by our deep concern for Germany as an automobile location,” as the bosses and employee representatives of Bosch, Continental, Mahle, Schaeffler and the ZF Group wrote in an open letter to the Chancellor, which is available to the German Press Agency. The Handelsblatt first reported on it. The reason is that almost 50 000 jobs have had to be cut in the supplier industry since 2019, it continues. An even more dramatic employment situation can be expected in the next few months. IG Metall chairwoman Christiane Benner also signed the letter.

IG Metall is the dominant metalworkers’ union in Germany, making it the country’s largest union as well as Europe’s largest industrial union.

The decline of German automotive supremacy
“The German automotive industry, long celebrated as a global engineering powerhouse, is now confronting an existential crisis that threatens its decades-long dominance. In the third quarter of 2024, the sector’s vulnerabilities have been laid bare, revealing a complex web of challenges ranging from technological stagnation to geopolitical pressures,” said Aldo Grech, Founding Partner at CxO Consulting.

“At the heart of this crisis lies a dramatic shift in the global automotive landscape, particularly in China; the world’s largest automotive market. German automakers like Volkswagen, BMW, and Mercedes-Benz have witnessed their market share plummet, with BMW experiencing a staggering 30% sales decline, the most significant drop in over four years. This dramatic downturn is not merely a cyclical fluctuation but a symptom of a deeper strategic failure.”

“The financial mismanagement extends beyond mere technological inertia. German automakers have systematically squandered shareholder funds on demonstrably unviable technologies like eFuels and hydrogen, which industry experts have long recognised as obstructionist distractions rather than genuine mobility solutions. These investments represent more than strategic mis-judgments; they are calculated attempts to delay the inevitable transition to electric vehicles. By championing eFuels and hydrogen technologies, legacy auto manufacturers have created elaborate smokescreens designed to preserve their existing infrastructure and postpone the fundamental restructuring required for electric mobility. Successfully lobbying the European Union to exempt eFuels-powered vehicles from the 2035 combustion engine ban exemplifies this strategy of deliberate technological obstruction.”

“The primary culprit is the industry’s sluggish transition to electric vehicles. While Chinese manufacturers have rapidly developed technologically advanced and competitively priced electric vehicles, German automakers remained entrenched in their traditional internal combustion engine paradigm. This hesitation has allowed newcomers like BYD and other Chinese EV manufacturers as well as Tesla, to capture significant market share, eating into the once unassailable German automotive reputation.”

“The financial implications are profound. Volkswagen, a bellwether of the German automotive industry, has proposed drastic cost-cutting measures, including a 10% pay cut for 120 000 workers and the closure of three German plants. These proposals have sparked significant labour unrest.”

The ramp-up of electromobility is necessary
The automotive supply industry is demanding political support in order to maintain Germany as a high-performance industrial location. Last but not least, suppliers play a crucial role when it comes to value creation and innovation in the German automotive industry. A central point of the appeal is the need, in the eyes of suppliers, to accelerate the ramp-up of electromobility. After all, companies have invested significantly in this future of mobility, but the slow market start is endangering their profitability. In order to ensure competitiveness, suppliers are now calling for tax relief and the expansion of the charging infrastructure. At the same time, they are calling for more openness to technology and the consideration of CO2-neutral fuels from 2035. Otherwise, it would be difficult to meet the EU regulation’s ambitious targets for CO2 fleet limits.