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German car industry warns of job losses due to ‘unprecedented slump’ in the market

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
·2-min read
Workers wear face masks as they assemble cars at the Mercedes-Benz factory in Ludwigsfelde, Germany. Photo: Maja Hitij/Getty Images
Workers wear face masks as they assemble cars at the Mercedes-Benz factory in Ludwigsfelde, Germany. Photo: Maja Hitij/Getty Images

The German automotive industry, one of the country’s biggest employers, is facing big job cuts, despite the government’s stimulus measures raising hopes for an economic upswing in the second half of the year.

"The slump in the market is unprecedented in its scale and global scope," Hildegard Müller, president of the German Automotive Industry Association (VDA) said on Friday.

Müller said that Germany’s short-time work programme, which sees the government pay 60% of workers’ salaries so employers don’t have to lay them off, won’t be enough to prevent layoffs.

The problem is mostly the lack of global demand for new cars in the wake of the coronavirus pandemic. Car manufacturers across Europe have had a dire quarter, with plants forced to shut, first because their cross-border supply chains failed, and then because plants and showrooms were put under government lockdowns.

Carmakers were already feeling the pinch last year, long before the coronavirus pandemic hit, from a slowdown in in the Chinese economy, the US-China tariff fight, and the pressure to speed up their electric vehicle plans.

A number of German car companies had announced last year that they would need to cut staff to fund the expensive transition to electric cars.

Volkswagen-owned Audi (NSU.DE) said towards the end of last year that it would axe 9,500 jobs in Germany between now and 2025.

Daimler (DAI.DE) announced in November last year that it would cut some 10,000 jobs worldwide by 2025 as part of its cost-saving plan. BMW (BMW.DE) also plans to eliminate some 6,000 jobs.

New car sales in the EU plunged by over 50% in May, while in the UK, carmakers suffered their worst drop since 1946, with just 197 cars produced in April and 5,314 in May.

The British automotive industry body has warned that one in six jobs in the sector could be lost in the wake of the pandemic.

READ MORE: UK car production still at lowest levels since end of WWII

The VDA said on Friday that new car registrations in Germany in the first half of the year were 35% less than in the same period in 2019 — the lowest level since German reunification 30 years ago. Exports and production was down 40% compared with last year.

The VDA expects the global passenger car market to decline by 17% overall in 2020, with Europe worst-hit at a predicted decline of 24%.