FRANKFURT: Germany is at a crossroads, and nowhere will that be more evident than at the Frankfurt auto show this week.
Despite sleek new electric models like the Porsche Taycan, the traditional showcase of German automotive excellence risks becoming a platform for protest rather than preening, drawing attention to a generation of young consumers more likely to demonstrate against the car’s role in global warming than shop for a new VW, BMW or Mercedes-Benz.
Autos have made Germany into a global manufacturing powerhouse, but pollution concerns - intensified by Volkswagen AG’s 2015 diesel-cheating scandal - have sullied the reputation of a product that once embodied individual freedom. More recently, trade woes and slowing economies have hit demand. The consequence is Germany’s car production slumping to the lowest level since at least 2010.
“Investors have been fearful about the industry’s prospects for a number of years, and the list of things to worry about doesn’t seem to be getting shorter,” said Max Warburton, a London-based analyst with Sanford C Bernstein. “There is a general sense that things are about to get worse.” The end of the combustion-engine era and car buyers more interested in data connectivity than horsepower threaten Germany’s spot at the top of the automotive pecking order.
Signs of trouble abound.
In addition to numerous profit warnings this year, Mercedes maker Daimler AG delayed a plan to expand capacity at a Hungarian factory, parts giant Continental AG has started talks to cut jobs, and automotive supplier Eisenmann filed for insolvency.
Germany is teetering on the brink of recession, and the auto industry is pivotal to the economy’s health.
Carmakers such as Volkswagen, Daimler and BMW AG as well as parts suppliers like Robert Bosch GmbH and Continental employ about 830,000 people in the country and support everything from machine makers to advertising agencies and cleaning services.
With factories from Portugal to Poland, the importance of the sector radiates across Europe as well.
With emissions regulations set to tighten starting next year, concerns are mounting that companies across the country’s industrial landscape are ill-equipped to deal with the technology transition resulting from climate change and increasing levels of digitalisation.
IG Metall organized a demonstration in June, with more than 50,000 people rallying in Berlin, to draw attention to the risk of widespread layoffs from what Germany’s biggest industrial union calls “the transformation.” Far too many companies stick their heads in the sand and rest on their laurels,” IG Metall chairman Joerg Hofmann said. “If companies continue to act so defensively, they’re playing roulette with the futures of their workers.”— Bloomberg