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

Germany's car industry is grappling with a severe crisis, driven by rising manufacturing costs, US tariffs, competition from China, and the shift towards electric vehicles. Major automakers like Volkswagen, Mercedes-Benz, and BMW are slashing production and laying off workers to cut costs. VW aims to eliminate 15% of its workforce by the end of the decade, while BMW plans to cut up to 8,000 jobs by 2027. Even auto suppliers such as Bosch and ZF Friedrichshafen are reducing headcount to remain competitive.

The industry has employed around 830,000 people in 2018, but this number has since dwindled below 700,000. By 2030, it could plummet to 500,000. Regaining competitiveness and safeguarding jobs will necessitate measures like lower production and energy costs, improved logistics infrastructure, and favorable tax conditions, according to Ferdinand Dudenhöffer, director of the Center for Automotive Research.

Labor costs in Germany are significantly higher than in other countries, averaging $3,307 (€2,882) per vehicle, compared to $769 in Japan and $597 in China. To reduce these costs, carmakers propose extending the workweek from the current 35 hours to 40 hours without a pay increase. However, trade unions like IG Metall strongly oppose this move, arguing that workers have already endured wage cuts and concessions without further concessions being justified.

The union contends that automakers are struggling due to weak demand and underutilized factories, not a lack of labor hours.

Dudenhöffer contends that if the workweek were extended to 40 hours, personnel costs would drop by 13%. He insists that this adjustment would not reduce employee wages but would create conditions conducive to maintaining jobs in the automotive sector. Meanwhile, Stefan Bratzel of the Center of Automotive Management argues that the 35-hour workweek is a significant achievement for unions and that longer hours would lower labor costs per hour.

However, he emphasizes that merely working longer hours will not help Germany compete technologically with China. To regain its competitive edge, German manufacturers must produce attractive and affordable electric vehicles, invest in software and AI, and enhance their development and manufacturing processes' efficiency. At the same time, Germany needs to address competitive framework conditions regarding energy, taxes, bureaucracy, and infrastructure.