By Andrew Stuttaford
Tuesday, December 24, 2024
The troubles affecting Germany’s auto sector are not, of
course, confined to car manufacturers. The manufacturers nourished an ecosystem
of suppliers, which have long been major contributors to the country’s
industrial success. Those suppliers are also showing signs of weakness. It
isn’t long since layoffs were announced at Bosch, the world’s largest car parts maker. At
around the same time, one of Bosch’s competitors, Schaeffler, announced a major round of job cuts, about half of which
will be in Germany. Now, in a painfully symbolic development, another parts
supplier, Gerhardi, which makes, among other products, the star displayed on
the grill of many Mercedes cars, is filing for bankruptcy. According to Bloomberg, European car
parts manufacturers have announced job cuts affecting more than 50,000 people
this year, most of them in Germany.
The source of these companies’ problems, particularly in
Germany, where auto manufacturers have a heavy exposure to China, is falling
demand (and rising competition) in China as well as at home. Moreover,
encouraged (if that’s the word) by the coerced switch to electric vehicles
(EVs) Germany’s automakers have invested heavily in EV production. But car
companies do better when they pay attention to consumers rather than to
bureaucrats. If they had done so, they would have proceeded more carefully. And
when manufacturers invested heavily in EV production, so did their suppliers.
Automotive suppliers employ around
1.7 million workers across the European Union and spend some €30 billion ($31.2
billion) each year on research and development. They range from large
conglomerates like Germany’s Robert Bosch GmbH to the hundreds of smaller
hidden champions that are often the economic backbone of their communities.
According to consulting firm
McKinsey, one in five auto suppliers expects to lose money next year after
two-thirds reported margins of 5% or less in 2024.
I wonder how many of these companies invested in the EV
sector on the advice of McKinsey.
These problems are not confined to Germany. The challenge
posed by the EV “transition” to the established auto sector, made worse by the
way that it has facilitated the emergence of China as a formidable competitor,
has now prompted a potential merger between Honda and Nissan, with Mitsubishi
Motors possibly joining.
Nevertheless, Germany, bedeviled by concerns over wider deindustrialization, is at the center of the storm
because of the importance of the auto sector to its once mighty, now troubled,
industrial sector and because of the approach of an election in late February.
The established parties have lost their once unchallengeable grip on the voters
thanks to economic weakness and the consequences of the reckless immigration
policy that reached a peak with Angela Merkel’s decision to fling open the
country’s doors in 2015. That policy has long since been reversed, but not so
completely as many Germans would like — 352,000 people requested asylum there in 2023, a 51 percent
jump over the previous year. Most of these were from Syria, Afghanistan, and
Turkey, and most of the applications from the former two countries were
successful.
The best guess continues to be that the center-right CDU/CSU
partnership will win a very comfortable plurality, but that won’t be enough to
give it a majority in parliament. With the populist right AfD, no fans of immigration or green zealotry, still
considered unacceptable partners, the center-right duo will almost certainly be
forced into an unhappy coalition with the dominant party in the outgoing
coalition, the center-left SPD.
The AfD continues to hold onto second place in the polls,
with the SPD third. The German electoral system is parliamentary, not
presidential, but it was interesting to see the results of a recent poll
for Bild. Asked whom they would pick for chancellor if they could vote
for a candidate directly, 24 percent picked the AfD’s Alice Weidel over the
CDU/CSU’s Friedrich Merz.
Just one poll (and on a hypothetical that would never
happen), but still . . .
No comments:
Post a Comment