No industry is more important to the German economy than cars. And no car-maker is more important than Volkswagen.
Now, as the 87-year-old automaker is floating the prospect of job cuts and factory closures as it seeks to return to profitability, Volkswagen's struggles are being reflected in the overall troubles facing the country, which is grappling with a shrinking industrial sector and an economy that is forecast to contract for a second consecutive year.
"The fact that Volkswagen, Germany's largest car manufacturer, largest industrial employer and the world's No. 2 behind Japanese car-maker Toyota, is no longer ruling out plant closures and compulsory redundancies shows how deep the German industry is now in crisis," said chief economist Carsten Brzeski at ING Germany.
The issues dragging on profitability at Volkswagen's core brand - high-priced labour, cumbersome organisational structures and an inability to keep up with advances by Chinese carmakers - mirror those facing Germany's overall economy.
On Oct 7, the German government said the economy would contract 0.2 per cent in 2024, down from a previous projection of 0.3 per cent growth.
Dragging output down is the industrial sector, which has failed to recover from the shocks of the coronavirus pandemic and Russia's invasion of Ukraine in 2022.
Germany also appears to have lost some clout in the European Union, which voted on Oct 4 to impose higher tariffs on electric vehicles imported from China, a key trading partner of Germany.
Some economists trace the root of the problems, both at Volkswagen and in Germany as a whole, to a missed opportunity to invest in the future during what many call the "golden decade", when the country's output expanded 14 per cent after the global economic downturn of 2008.
"The German economy did really well, and so did Volkswagen," said economist Jens Sudekum at Heinrich Heine University in Dusseldorf.
Bu hikaye The Straits Times dergisinin October 14, 2024 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye The Straits Times dergisinin October 14, 2024 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
Jung Ho-yeon takes on Hollywood in Disclaimer
The drama series marks the Squid Game star's first English-speaking role
French pianist Helene Grimaud plays with time
Acclaimed French classical pianist Helene Grimaud, who has earned a reputation for playing by her own rules, thinks there should be no contradiction between freedom and fidelity.
Eisner Award winner submitted her comic as practice
Erica Eng submitted her web comic Fried Rice for the Eisner Awards on a whim in 2020.
Two-time Booker Prize nominee almost gave up writing
Acclaimed Canadian novelist Esi Edugyan has had first-hand encounters with the vagaries of the publishing and book-selling worlds.
A frank, and funny, work about the female body
Cat Bohannon wrote her best-selling non-fiction debut Eve: How The Female Body Drove 200 Million Years Of Human Evolution (2023) while also having two children, completing a doctorate and surviving the Covid-19 pandemic.
SILAT WILL MOVE 'UPHILL'
SSF chief plans to improve governance, selection process and coaching quality
One C'ship lets go of 'a few dozen employees'
Mixed martial arts (MMA) organisation One Championship has laid off a number of employees - including those from its Singapore headquarters - on Oct 16.
EPL pays highest price for injuries
Players in Germany's Bundesliga are most likely to be injured among Europe's top five domestic leagues, but the English Premier League bears the most injury-related costs, according to a report published on Oct 16.
Cantona slams 'scandalous' decision to axe Ferguson
Manchester United's most successful manager Alex Ferguson will step down as a global ambassador after the club's part-owners Ineos ended his multi-million pound contract.
PROFLIGATE PORTUGAL LACK MAGIC: COACH
Martinez's men can't find way past stubborn Scotland, but have one hand on q-final spot