NewsGerman economy struggles: Mass layoffs hit major industries

German economy struggles: Mass layoffs hit major industries

Germany is experiencing economic difficulties.
Germany is experiencing economic difficulties.
Images source: © Getty Images | Pier Marco Tacca

5:43 AM EDT, June 8, 2024

Numerous indicators indicate that the German economy is in decline. Since the beginning of the year, many companies have decided to cut tens of thousands of jobs. The reasons for layoffs in Germany include energy costs, labor costs, and the necessity of transformation.

The economic slowdown in Germany is gaining momentum, and its symptoms are becoming increasingly visible. Economic indicators, such as PMI indices, signal a difficult situation in industry and services. Noteworthy signs of improvement only appeared in May. It's no wonder that since the start of the year, we have observed a wave of mass layoffs and the introduction of reduced working hours in many companies and sectors.

German industry pays the price for stagnation

The automotive industry is among the sectors most affected by job cuts. ZF, a leading automotive parts supplier based in Friedrichshafen, announced plans to close two factories and eliminate as many as 12,000 jobs, which is about 25% of the company's total employment in Germany. This move is part of cost-cutting efforts. According to media reports, ZF plans to relocate some research and development and production activities to countries with lower labor costs, such as Eastern European countries, India, or China.

Continental, a tire manufacturer from Hanover, announced the layoff of over 7,000 employees by 2025 as part of a cost-saving program. The goal is to reduce annual costs by approximately €400 million, or $420 million.

Meanwhile, Bosch, the world's largest automotive parts supplier based in Gerlingen, will reduce 4,000 jobs. The shift towards electromobility forces the company to undertake deep restructuring, and talks with trade unions have already begun.

Other sectors are also facing challenges. Bayer, the chemical-pharmaceutical giant from Leverkusen, plans to cut 4,500 jobs. Deutsche Bank intends to cut 800 jobs at its Frankfurt branch. Vodafone, a mobile phone operator, announced the layoff of 1,300 people in Düsseldorf.

The home appliance sector is also experiencing a difficult period. Miele, from Gütersloh, known for producing household appliances, will cut 2,700 jobs, including relocating 700 jobs to its factory in Poland. The industry suffers from a decline in demand after pandemic-induced purchases and rising production costs.

Job cuts are also affecting the steel industry. Thyssenkrupp Steel, part of the Thyssenkrupp conglomerate based in Duisburg and Germany's largest steel producer, announced plans to cut jobs and reduce production at its main plant. The reason is difficult market conditions, rising costs, and the overall weakness of the German economy.

Even the relatively young renewable energy sector has not escaped layoffs. Siemens Gamesa, a Spanish subsidiary of Siemens Energy from Munich, plans to cut around 700 jobs. The wind turbine manufacturer is struggling with profitability due to project delays and technical problems.

The wave of layoffs has also hit other well-known German brands. SAP, Europe's largest business software producer from Walldorf, is cutting 200 jobs. Evonik, a chemical conglomerate from Essen, and software producer Software AG from Darmstadt also plan group layoffs.

Company representatives explain the painful cuts by citing unfavorable market conditions, cost reduction pressures, and the need to maintain competitiveness. They indicate that the industry's transformation, including digitization, automation, and the transition to green energy, forces deep changes in employment structures. Job cuts should be conducted as socially as possible, using voluntary departure programs, early retirements, and similar solutions.

The image of Germany worsens

Experts warn that the rising scale of layoffs could threaten the image of German products and services associated with high quality. As jobs and key competencies are gradually relocated abroad, the "Made in Germany" brand may weaken. This is an especially worrying prospect, as unemployment in Germany is already at its highest level in three years.

Mass layoffs in large companies particularly impact regions where these plants are the main employers. For example, cuts in Thyssenkrupp's steel mills will strongly affect the Ruhr Valley, and reductions in the automotive industry will hit Baden-Württemberg. Local and federal governments will have to develop support programs for laid-off workers and promote investments creating new jobs in future-oriented sectors.

Although German conglomerates emphasize that restructurings are necessary to maintain global competitiveness in the long term, analysts warn against too hasty job eliminations. When the economic situation improves, companies may lack skilled personnel, hindering growth. Cost optimization should not lead to the dismantling of key competencies.

The wave of layoffs sweeps through Europe

Layoffs are also being carried out in other European countries. Forvia, a French automotive parts manufacturer, plans to reduce up to 10,000 jobs through natural attrition and hiring freezes. Stellantis, a car manufacturer, signed an agreement to reduce over 3,000 jobs in Italy. Volvo, a Swedish truck manufacturer, also plans to cut jobs at its factory in Gothenburg.

Barclays, a British bank, is preparing to lay off hundreds of employees in its investment banking division. Lloyds, the largest British bank, is reducing about 1,600 jobs in its branches. Societe Generale, a French bank, plans to lay off around 900 employees at its headquarters in Paris.

Sandvik, a Swedish mining equipment manufacturer, plans to lay off around 1,100 employees. Valmet, a Finnish engineering group, is in talks to lay off around 130 employees.

Ericsson, a Swedish telecommunications equipment provider, plans job cuts in Sweden. Telefonica, a telecommunications operator, reached an agreement with trade unions on layoffs in Spain. Telenor, a telecommunications group, announced layoffs in its Norwegian unit.

Kuehne+Nagel, a Swiss logistics group, is laying off workers and freezing hiring. Neste, a Finnish oil producer, announced job cuts both in Finland and abroad. Novartis, a Swiss pharmaceutical company, announced layoffs in its development organization. Roche, a Swiss drug manufacturer, also announced job cuts. Stora Enso, a Finnish forestry company, may lay off workers in 2024. Sky, a British media group, plans layoffs in 2024.

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