December 4, 2019 / 12:05 PM / 11 days ago

German car industry expects more job cuts in 2020

BERLIN (Reuters) - Germany’s main automobile industry body said on Wednesday it expects global car sales to fall by 5% this year, the steepest drop since the financial crisis, and warned of more job cuts in 2020 as a result.

FILE PHOTO: The logo of Volkswagen is pictured at the LA Auto Show in Los Angeles, California, U.S., November 20, 2019. REUTERS/Lucy Nicholson

“The competition is getting tougher, the headwinds are getting stronger,” Bernhard Mattes, president of industry association VDA, told reporters. The association expects global car sales to fall by 4.1 million to 80.1 million vehicles this year, driven by a slump in China, he said.

Germany’s export-dependent car industry is struggling with weaker foreign demand, tariff disputes sparked by U.S. President Donald Trump’s ‘America First’ policies and business uncertainty linked to Britain’s decision to leave the European Union.

The sector, an important driver of overall growth in Europe’s largest economy, is also having trouble adjusting to stricter regulation following an emissions-cheating scandal and managing a broader shift away from combustion engines toward electric cars.

“Capacity utilization has declined, limited-term employment contracts are not being renewed, and the instrument of short-time work is being employed once again,” Mattes said. This meant that the number of permanent staff at car factories was likely to fall further.

Mattes said employment in the sector had fallen this year and this trend would worsen in 2020, though he gave no figures for the predicted layoffs.

In 2018, employment in the car industry in Germany reached 834,000, its highest level since 1991.

MASSIVE LAY-OFFS

Volkswagen’s (VOWG_p.DE) luxury car unit Audi (NSUG.DE) said on Tuesday it would cut up to 9,500 jobs, or 10.6% of its total staff by 2025, freeing up billions of euros to fund its shift towards electric vehicle production.

Germany’s largest car supplier Robert Bosch Group said last month it plans to slash 1,600 jobs in Germany over the next two year in areas related to combustion engine technology.

This followed an announcement by rival Brose Group to reduce staff in Germany by 2,000 over the next three years due to a slump in earnings, blaming a declining Chinese market, changes in the car industry and global price pressure.

VDA expects car sales in Germany to fall by 4% to 3.43 million in 2020 and to drop by 2% to 15.3 million in Europe.

The U.S. market for light vehicles is seen shrinking by 3% to 16.5 million next year while car sales in China are expected to go down by 2% to 20.5 million, VDA said.

Mattes called on German Chancellor Angela Merkel’s shaky ruling coalition to get its act together and help companies to better master the structural changes in the car industry that also include trends like digitisation and autonomous driving.

FILE PHOTO: A Volkswagen I.D. Space Vizzion concept is displayed at the LA Auto Show in Los Angeles, California, U.S., November 20, 2019. REUTERS/Lucy Nicholson

“Now it must be all about improving the framework conditions in Germany as an industrial business location,” Mattes said. “What we need right now, therefore, is a stable government capable of taking action.”

Mattes called on Berlin to cut corporate taxes, reduce electricity and labour costs and do more to solve international tariff disputes.

U.S. President Donald Trump has threatened to increase import tariffs on cars from Europe to up to 25%. U.S. Commerce Secretary Wilbur Ross warned on Tuesday such a move was still possible after a review period ended in November with no action.

Reporting by Michael Nienaber and Jan Schwartz; Editing by Madeline Chambers and Susan Fenton

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