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

Germany's renowned automotive industry is grappling with a severe crisis, driven by soaring manufacturing costs, stiff US tariffs, fierce competition from China, and the transition to electric vehicles. Major players like Volkswagen, Mercedes-Benz, and BMW have announced plans to scale back production and cut costs. Volkswagen aims to shed about 15% of its workforce worldwide by 2030, while BMW plans to reduce up to 8,000 jobs by the end of 2027.

Industry heavyweights concede that labor costs in Germany are excessively high compared to competitors. Labor costs in the country average $3,307 (€2,882) per vehicle, versus $769 in Japan and $597 in China, according to the Oliver Wyman consulting firm. To reduce expenses, automakers seek to extend the workweek from the current 35 hours to 40 hours without wage increases.

The 35-hour workweek has been standard across Germany's automotive sector since collective bargaining agreements in the 1980s and 1990s, reflecting a competitive era that has long since passed.

However, workers' unions vehemently oppose longer hours. The influential IG Metall trade union, led by Christiane Benner, argues that the industry's struggles stem from weak demand and underutilized factories, not a lack of labor hours. The union asserts that extending the workweek will not generate additional sales, as a single additional car would not be sold merely because workers put in more hours.

Ferdinand Dudenhöffer, director of the Center for Automotive Research (CAR), estimates that if carmakers shifted from a 35-hour week to a 40-hour week, personnel costs would decrease by 13%. Nevertheless, Benner maintains that this would not alleviate the industry's fundamental issues. The union is holding demonstrations across Germany on September 21 to protest job cuts and other working condition changes in the automotive sector.

Experts concur that lowering labor costs in German production sites is crucial to regaining competitiveness, but they emphasize that addressing structural problems—such as delivering innovative electric vehicles, investing in software and AI, and improving efficiency—will be equally essential. To secure Germany's automotive industry's future, comprehensive reforms addressing labor, energy, taxes, and logistics infrastructure are necessary.