Volkswagen decline a blow to car powerhouse Germany

Country at inflexion point amid waning competitiveness and political challenges

On a Monday afternoon in mid-August, workers at Volkswagen's (VW) electric vehicle factory in Zwickau shuttled stony-faced between car frames and platforms. The plant was eliminating night shifts after letting go of hundreds of temporary workers.

A sense of foreboding was already in the air.

"The mood is tense, I have to be honest," said Mr Ronnie Zehe, the assembly manager at one of VW's newest and most efficient factories.

Three weeks later, the future of those men and women is at risk after the manufacturer that built the iconic Beetle issued a warning that it will need to shut plants for the first time in its 87-year history.

Just before the corporate bombshell came a political wake-up call as the far right notched big wins in two state elections in the former East, coming second in Saxony - where Zwickau is located.

Germany is confronting the most symbolic moment yet in its story of industrial decline, as its biggest manufacturer is poised to cross the Rubicon of factory closures.

VW's announcement is more than a belated acknowledgment of commercial reality. It is a body blow to the country's self-image as an automotive powerhouse and an economy that was the world's largest exporter earlier this century.

The reverberations are cultural and economic too in a nation that was hastily sewn together after the fall of the Berlin Wall but faces the reality that the reunification project has come at a cost. The anti-immigration Alternative for Germany, known as AfD, and left-wing populists have thrived by preying on the east-west divide, and the mainstream political establishment has been powerless to stop it.