400,000 people are about to lose their jobs! Dozens of Germany car suppliers lined up to go bankrupt

Automotive Business Review Magazine

2024-08-05 10:21Posted on the official account of BAIC Business Review

The full text is 2419 words, and it takes about 7 minutes to read, so help me highlight the key points

Highlight the point

01 Germany automotive suppliers are at risk of mass unemployment, with dozens of companies filing for bankruptcy, up 41% year-on-year.

02Electric vehicles have far fewer parts than gasoline vehicles, leading to massive stalls and job losses in industrial towns around the world.

03However, Germany's major car manufacturers are also struggling to meet the challenges, especially in the face of rapidly rising and cost-competitive Chinese rivals.

04In order to survive, some automotive suppliers have developed new components for electric vehicles to replace products that are about to become obsolete.

05The future of Germany's automotive industry is uncertain due to the high cost of the process of smart electric transformation, but the production of electric vehicles takes less work time and is less profitable.

The above content is generated by Tencent's hybrid model and is for reference only

Written by Windsor

Editor / Huang Dalu

Design / Ju Jia

Source / New York Times, Handelsblatt Germany, etc

Zwickau is an industrial city in eastern Germany, not as well-known as Detroit, but since August · Horch founded Audi here in the early 20th century, the city's economy has revolved around the internal combustion engine industry.

In 2018, when Volkswagen announced that it would transform its Zwickau plant to produce only electric vehicles, it was tantamount to dropping a bombshell on the city.

Volkswagen closed the assembly line of its hot-selling Golf hatchback, transforming the factory, which had its own outlet on the highway, into a place suitable for the production of six electric models. The renovated factory can produce one car per minute and transport it out by train.

This is an extreme case of a large car factory fully switching from internal combustion engines to electrification, and Zwickau became an attempt at a period of transition for the automotive industry.

Electric cars have far fewer parts than gasoline cars, and there are no radiators, exhaust pipes, fuel tanks, fan belts, and complex gearboxes. Many auto industry practitioners, executives, and politicians are speculating that electric vehicles require fewer workers, leading to massive stalls and job losses in industrial towns around the world.

With more than 10,000 people working for the public and tens of thousands more for car suppliers, an aggressive attempt seems to avert dire consequences, but the city center of Zwickau is still a bit dreary and uneasy.

The transition to electrification itself will not lead to an economic crisis, but the arrival of electric vehicles and other new technologies are shaking up the business of the established giants, and practitioners are suffering, and the automotive supply chain, which is downstream of the OEMs, is the first to feel the chill.

According to the data of Falkensteeg, a restructuring business consulting company, in January ~ June, 162 companies with a turnover of more than 10 million euros filed for bankruptcy, a year-on-year increase of 41%, and one of the industries that submitted the most applications was auto parts suppliers, with more than 20 bankrupt companies, a year-on-year increase of 60%.

The current crisis coincides with the peak of bankruptcies during the pandemic in 2020, when 28 companies exited the market. In recent years, small and medium-sized suppliers have had a better time than during the pandemic, but they are still precarious. As automakers continue to cancel and postpone orders, surviving the second half of 2024 will be critical.

Zwickau's attempt was positive, however, demand for electric vehicles in Europe and the United States was lower than expected, and many Germany auto parts suppliers looking to capitalize on the growth opportunities offered by the transition found themselves trapped by huge upfront investments. Germany's major car manufacturers are also grappling with challenges, especially against a rapidly emerging and cost-competitive Chinese rival.

On the left is the declining traditional fuel car industry, and on the right is the burgeoning electric vehicle market, and after a comfortable century, Germany cars have entered a difficult time.

Germany parts suppliers, group closures

Small businesses with hundreds or thousands of employees, often specializing in the production of individual components, are closing in droves in Germany.

The latest German parts supplier to file for bankruptcy is Recaro Automotive, a 1963-founded seating company that has given the reason that "the crisis of recent years has led to a significant increase in prices and the loss of an important contract, leaving the company in serious financial difficulties."

Recaro Automotive is a supplier to luxury car brands such as Aston· Martin, BMW, Lamborghini, Mercedes-Benz and others.

Another company that went bankrupt at about the same time was BBS, a Germany company that was the sole supplier of wheels for Formula 1 cars and made a name for itself for providing wheels for high-performance cars, but was no longer able to pay wages in May and June this year.

Further back, on June 26, Germany car supplier Allgaier filed for bankruptcy with a local court, and its main customers include Porsche. Founded in 1906 and headquartered in Uhingen near Stuttgart, the group employs around 1,700 people and is a well-known supplier of automotive sheet metal forming, as well as in the fields of machine tools, tool making and screening systems.

In February, the Germany branch of Eissmann Automotive, a well-known automotive interior supplier headquartered in Bad Ulach in southern Stuttgart, which produces interiors for almost all car brands and employs 5,000 people at 17 plants worldwide, 1,000 of them in Germany, filed for bankruptcy.

There are many more such examples. Shrinking orders, high costs, strong competitors...... As a result, the competitiveness of some Germany suppliers began to disappear.

In order to survive, some automotive suppliers have developed new components for electric vehicles to replace products that are about to become obsolete. For example, Germany supplier Eberspächer, which has a plant 60 miles east of Zwickau, has begun to supply temperature control systems for electric vehicles in addition to emissions systems for conventional cars.

"You're out – a new wave of layoffs is coming"

Most of the companies that are still persisting in the cold winter have chosen to slim down.

Germany auto parts giant ZF recently announced that it expects to gradually reduce the number of Germany employees from the current 54,000 to 11,000 ~ 14,000 by the end of 2028, which accounts for almost a quarter of all jobs in Germany.

In addition, ZF plans to consolidate its plants in Germany as necessary to adjust production capacity. Previously, companies had already announced an austerity strategy over the next two years, aiming to save up to 6 billion euros.

Bosch Group said at the end of 2023 that it would lay off at least 1,500 workers at two of its transmission factories in Germany and plan to lay off about 1,200 workers in the software and electronics division by the end of 2026. After rounds of layoffs, Bosch has not ruled out the possibility of more layoffs.

For example, the halt in diesel development alone would result in the loss of 1,500 jobs in development and administration. A spokesperson for the group said, "The challenges we face are much greater than expected. ”

In February this year, another parts giant, Continental, officially launched a 7,150-job layoff plan to be completed by the end of 2025, including 1,750 R&D positions and 5,400 administrative positions. About 40% of the layoffs will occur in Germany, which is scheduled to be completed by the end of 2025.

An extraordinarily bloody purge of the Germany automotive industry is on the horizon, with hundreds of thousands of jobs, some of them highly skilled, at risk. The automotive industry (excluding repair shops, gas stations, trade and sales) employs more than 800,000 people, more than half of which, according to sources and forecasts, are at risk.

"All of a sudden, middle managers and experienced engineers are also at risk of losing their jobs." The Germany Handelsblatt wrote that it published an article at the end of February with a heart-wrenching headline, "You're out of the game – a new wave of layoffs."

According to the article, those currently laid off are not only wearing overalls, but often also suits, lab coats or hoodies. Labor market experts warn against the illusion that most of the affected people can easily change jobs, and even if they do, these new positions often pay much less than traditional positions in large companies. ”

The current wave of layoffs is far from over, and this is the beginning. "In the coming weeks and months, other companies may announce new or more brutal austerity plans." Handelsblatt quoted economic experts as saying.

The process of smart electric transformation is costly, but it takes less time to produce electric vehicles and is less profitable. In the global market, Germany car brands are competing with United States and Chinese companies, and fierce competition is also reducing orders from parts manufacturers.

Stellantis boss Carlos Tavares has spoken of a "bloody and tumultuous 2024." The group's factories in Germany, including Opel, will have a capacity utilization rate of only 60% in 2023.

Max Jankowsky, president ·of the Zwickau Chamber of Commerce, was disappointed that he didn't see any Volkswagen on a recent trip to Dubai. "It's just Tesla, Tesla, Tesla," said Mr. Jankovski, who is also an auto parts supplier to Volkswagen.

The future of Germany's cars seems uncertain, and tightening belts has become a helpless choice for suppliers to survive the winter.

View original image 69K

• 

• 

• 

• 

• 

• 

• 

•