The social consequences of the twin transition: Transition and crisis in the German automotive industry

Abstract:

German carmakers are struggling to make their transition to electrification and digitalisation successful. Electric vehicle sales of German Original Equipment Manufacturers (OEM) have been particularly weak in China, their most important market. In light of the current developments, the following questions arise: What measures have been prepared, negotiated, and implemented among companies, trade unions, and political actors regarding electrification and digitalization? How are production capacities and employment at domestic facilities being transformed in response to these changes? This section focuses on the developments at Volkswagen (VW) and Mercedes-Benz (MB) as case studies to illustrate the broader trends impacting the automotive industry in Germany. It assesses how VW and MB are adapting their German operations in the current situation, which necessitates further investment in the development of electrification and digitalization, while simultaneously grappling with declining global market shares and decreasing profits.
Despite globalization and the relocation of manufacturing activities, around 800,000 workers have been employed in the German automotive industry , producing up to 5.9 million vehicles per year in the first two decades of this century. However, since 2019, against the backdrop of the dual transition to electric vehicles and digitalization, as well as the COVID-19 pandemic, a decline in automotive production and employment has become evident. If this trend continues, the German automotive industry could see a reduction of nearly 190,000 jobs by 2035—approximately a quarter of which has already been cut (prognos, 2024).
Germany is still the second-largest manufacturer of electric vehicles after China and ahead of the United States. However, in light of the current downturn in the electric vehicle market, the shift towards electrification does not seem to be a blessing but rather a source of new uncertainties impacting production sites. This is exemplified by the uncertainty surrounding the future of VW’s Zwickau plant and the announcement of job reductions at Ford’s Cologne facility, which have both been fully transitioned to electric vehicle production. The German automotive industry is characterized by a high level of union organization and co-determination, representing around 36% of 2.13 million metal union workers. Collective company agreements and so-called “future agreements“ have so far prevented company-specific layoffs and plant closures. However, as evident with VW, these agreements can be revoked. Therefore, it is hardly surprising that, in early December 2024, 100,000 employees at VW participated in a warning strike across the different plants in Germany.
As part of the Global North's evolutions, we conduct a case study on Germany to gather insights that can inform subsequent processes in the Global South. The aim of this report is not only to provide an empirical stocktaking of the rapidly changing evolutions. It also intends to indicate lessons learned from the previous and current approaches of involved stakeholders, to suggest which measures have proven effective, and to point to fundamental issues that remain unresolved. Despite the current pessimistic outlook – can sustainable models for social partnership, co-determination, and employment be derived from the German automotive industry that could also be applicable to other locations?