Germany's auto crisis: Can the 35-hour workweek survive?

Germany's famed automotive sector is facing a deep crisis, squeezed by high manufacturing costs, punitive US tariffs, intensifying competition from China and a difficult transition to electric vehicles.  

Industry heavyweights such as Volkswagen, Mercedes-Benz and BMW have announced plans to scale back production and reduce costs.

The branch is shedding jobs faster than any other industrial sector in the country.

Volkswagen, for instance, is looking to cut about 15% of its workforce worldwide, or 100,000 jobs, by the end of the decade. BMW announced it will cut up to 8,000 jobs — about 5% of its workforce — by the end of 2027.

Auto suppliers such as Bosch and ZF Friedrichshafen have also announced thousands of job reductions amid tough market conditions and global competition.

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Germany's automotive industry is losing competitiveness as costs rise and production shifts abroad, said Ferdinand Dudenhöffer, director of the Center for Automotive Research (CAR) in the German city of Bochum.

"In 2018, the industry employed around 830,000 people. Currently, that number is below 700,000," he told DW. "We project that by around 2030, it will be 500,000."

Regaining competitiveness and securing jobs in the future will require an array of measures including lower production and energy costs, better logistics infrastructure and favorable tax conditions, he added.

Labor costs too high in Germany?

Auto industry executives agree that labor costs in Germany are too high compared to international rivals.

Labor costs in the country average $3,307 (€2,882) per vehicle, compared to $769 in Japan and $597 in China, according to a reportpublished by the consulting firm Oliver Wyman.

To trim labor costs, carmakers want employees in Germany to work 40 hours a week instead of the current 35 hours, without any increase in pay. 

The 35-hour workweek has long been standard across much of Germany's automotive industry, having emerged from collective bargaining agreements negotiated in the 1980s and 1990s.

It reflects an era when Germany was highly competitive, said Dudenhöffer, adding: "That time is over."

Workers' unions, however, vehemently oppose longer working hours.

Christiane Benner, the head of the influential IG Metall trade union, said workers had already accepted wage cuts and other concessions worth several billion euros, yet were now being told that this was still not enough.

The union argues that German automakers are struggling with weak demand and underutilized factoriesnot a shortage of labor hours. "Not a single additional car will be sold just because the workforce works longer hours," the union announced.

IG Metall is holding demonstrations at more than 200 locations nationwide on September 21 to oppose job cuts and other measures affecting working conditions in the automotive sector.

VW is bringing out the axe

Can longer working hours save jobs?

The union is "fighting for relics from 20 years ago, forgetting today's reality," Dudenhöffer said.

The expert estimated that if carmakers were to move from a 35-hour week to a 40-hour week, personnel costs would decrease by 13%.

"We wouldn't be taking money away from employees, but we would be creating conditions that would make jobs possible in Germany, in the automotive industry, in the future," he underlined.

Stefan Bratzel, head of the Center of Automotive Management (CAM) in Bergisch Gladbach, said the 35-hour week represents a key achievement for trade unions in their collective bargaining history, so "conflict is inevitable" between management and unions.

On the other hand, more working hours for the same pay would mathematically lower labor costs per hour, he added.

"Ultimately, this raises the question of how the burdens of the current transformation are to be distributed between companies and employees," said Bratzel.

How can Germany's auto industry recover?

Experts say improving labor costs at German production sites is necessary, but it alone will not solve the industry's deeper structural problems.

"Working five hours more per week alone will not win the technological race against China," said Bratzel.

He stressed that, to restore their competitive edge, German carmakers need to deliver attractive and affordable electric vehicles, invest heavily in software and AI, and improve the efficiency of their development and manufacturing processes.

"German manufacturers must be at least as innovative and high performing in technological terms as they are expensive by international standards," said Bratzel.

At the same time, he explained, Germany requires competitive framework conditions regarding energy, taxes, bureaucracy and infrastructure.

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Dudenhöffer echoed this view, saying that Germany must pursue difficult but necessary reforms.

"Germany can only be considered a viable option for its automotive industry and jobs if we regain our competitiveness," he said.

And for that, action is required on multiple fronts, including lowering labor and energy costs, adjusting taxes, and creating better logistic infrastructure, he added.

"But the coming years will be very tough," Dudenhöffer warned. "And they will become even tougher if we stick to the status quo and believe we can simply rest on the prosperity we enjoyed 20 years ago."