According to the report published by Ernst & Young (EY) consultancy company, the third quarter operating profits of German automotive giants, covering the July-September period, decreased sharply. The total operating profit of Volkswagen, BMW and Mercedes-Benz decreased by approximately 76 percent to 1.7 billion euros compared to the same period last year. This number was the lowest recorded since the third quarter of 2009. EY automotive expert Constantin Gall said German car companies were under significant pressure.
WAVE OF LAYOUTS IS EXPANDING
The contraction in the sector brought about layoff decisions. Many large companies, especially Bosch, ZF Friedrichshafen, Mercedes-Benz and Volkswagen Cluster, have implemented employment reduction programs. It was announced that Siemens plans to lay off more than 6 thousand employees by 2027, while Audi will downsize by 7 thousand 500 people by 2029. Volkswagen announced that it will lay off 1,600 people in the Cariad software department. While Porsche announced a cut plan of 3,900 people, Bosch is expected to lay off a total of 5,500 people in the automotive department, 3,800 of which are in Germany. Mercedes-Benz also announced that it would reduce its workforce.
ELECTRIC VEHICLE GOALS WITHDRAWED
The crisis in the automotive industry also negatively affects electric vehicle investments. Ford announced that it has stepped back from its ambitious electric vehicle plans due to increasing costs and financial losses. The company is shifting its investments to fuel engines and hybrid models. Ford stated that it has lost $13 billion in electric vehicle activities since 2023, and there is a risk of additional losses of $19.5 billion in the fourth quarter of this year alone.
GOVERNMENT: THE ECONOMY CONTINUES TO REMAIN TENSE
In the monthly report published by the German Ministry of Economy and Climate Protection, it was stated that the German economy continued to display a tense outlook. In the report, it was stated that weak foreign demand, decreasing competitiveness and bottlenecks in some intermediate products pressured the economy. In addition, it was noted that corporate bankruptcies remained at a high level, and in the January-September period, bankruptcy applications increased by 11.7 percent compared to the same period last year, reaching 18 thousand 125.
FAITH IS IN DECLINE IN THE BUSINESS WORLD
Economic expectations are also deteriorating in the German business world. According to the December survey conducted by Economic Research Institute Ifo with approximately 9 thousand companies, Ifo Business Environment Confidence Index decreased from 88 points to 87.6 points. While it was stated that new orders decreased in the manufacturing sector and companies planned to reduce production, confidence in the construction sector continued to remain at low levels.
HISTORICAL FACTORY CLOSING DECISION FROM VOLKSWAGEN
One of the most concrete steps of the crisis came from Volkswagen. The company decided to close a factory in Germany for the first time in its 88-year history. It was announced that the facility located in Dresden, the capital of the state of Saxony, will stop production completely at the end of this year. Volkswagen had previously reached an agreement with the unions to reduce employment and reduce capacity by 35 thousand people throughout Germany.
GLOBAL PRESSURE IS CHALLENGING COMPANIES
Weakening sales in the Chinese market, falling demand in Europe and customs duties imposed by the USA are suppressing the cash flow of German automotive giants. Despite this, Volkswagen needs an investment of approximately 160 billion euros in the next five years. Experts evaluate that it is difficult for the sector to recover in the short term under current conditions.
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