German Industry in Crisis: Fears of an "Open-Air Industrial Museum"
BERLIN: Auto industry jobs have long been the lifeblood of the German town of Luedenscheid, but now a trade union official says the sector’s woes have sparked fears it will turn into an "open-air industrial museum".
Old Model Not Working
German industry has been battered by high energy prices sparked by Russia’s war in Ukraine and rising Chinese competition. The sector’s woes have sparked fears of widespread job losses and a decline in the country’s economic prosperity.
Luedenscheid in Crisis
In Luedenscheid, a town of 70,000 in Germany’s Ruhr industrial heartland, the mood is glum after auto parts maker Gerhardi filed for bankruptcy in November, threatening its 1,500 employees with redundancy. Another supplier, Kostal, which makes electronic components, has already relocated hundreds of jobs to eastern Europe, and the future is uncertain for those who remain.
Fear of Mass Layoffs
"I’m too young to retire but too old to find another job," said Petra Baensch, 60, who has worked for 20 years as a quality control technician at the firm. "It’s a terrifying situation," Baensch said.
Union Leader’s Warning
The IG Metall union’s local representative Fabien Ferber said that the region’s industry "has been promising prosperity to workers for generations" but that this is "collapsing like a house of cards". He said last year about 1,000 jobs were lost among the region’s car suppliers, which make everything from electronic widgets to plastic body parts. Ferber said many workers fear the town could be "transformed into the world’s largest open-air industrial museum".
Wider Economic Concerns
Some have voiced similar concerns about the wider German economy, rattling off long lists of both cyclical and structural problems. German industry has been battered by high energy prices sparked by Russia’s war in Ukraine as well as rising Chinese competition, even as demand for German exports has fallen in the world’s second-biggest economy.
Growth Stagnation
Germany’s flagship auto industry has been hit hard as its world-famous brands have been slower than Chinese newcomers in the electric vehicle (EV) race. Industrial titan Volkswagen announced plans in December to cut 35,000 jobs in the coming years after a months-long industrial dispute. Critics also blame years of underinvestment in German infrastructure for trains that no longer run on time, patchy internet connectivity, and a dearth of EV charging stations.
Aging Society
An ageing society has caused a shortage of skilled labour and threatens a growing pension burden for the country of 82 million. There are bright spots – global corporate giants including Allianz, Deutsche Telekom, SAP, and Siemens helped push the blue-chip DAX stock index to an all-time high this week. But deeper fears grip a country that has been dominant in 20th century sectors such as combustion engine cars and machinery but has few big players among the world’s electronics, internet, and AI giants.
Election Frenzy
The "dire state of the German economy" is a key election issue, said ING analyst Carsten Brzeski, who pointed out that it was now the same size as in early 2020, when the Covid-19 pandemic started, "marking five years of de facto stagnation". "Ten years of underinvestment, deteriorating competitiveness, and China’s shift from export destination to fierce industrial competitor have taken – and will continue to take – their toll on the German economy," he said.
Trump Jitters
Angry discord on how to fix the economy and a tight budget helped break up Chancellor Olaf Scholz’s three-party coalition, paving the way for the snap elections. As the campaign race heats up, candidates are offering rival visions on rebuilding the "Made in Germany" brand. Looming over the race is the return of US President Donald Trump, who has voiced ire about the German trade surplus and threatened tariffs. German officials fear his protectionist policies could theoretically slash Germany’s GDP by 1% and destroy 300,000 jobs.
Conclusion
The German economy is facing unprecedented challenges, from high energy prices to rising Chinese competition, and critics are calling for urgent action to turn things around. As the country heads towards elections, the fate of its industrial heartland will be a key battleground. Will the "Made in Germany" brand be able to weather the storm, or will it succumb to the pressures of the global economy?
FAQs
Q: What is the main concern facing the German economy?
A: High energy prices, rising Chinese competition, and growth stagnation.
Q: What has been the impact on the auto industry?
A: Job losses, insolvencies, and relocation of jobs to eastern Europe.
Q: What are the main concerns about the economy?
A: Cyclical and structural problems, including underinvestment in infrastructure and an ageing society.
Q: What is the impact of the US election on the German economy?
A: German officials fear a potential 1% GDP reduction and 300,000 job losses if Trump’s protectionist policies are implemented.
Q: What is the role of the "Made in Germany" brand in the election?
A: Candidates are offering rival visions on rebuilding the brand, with some calling for increased investment in infrastructure and others advocating for a more export-oriented strategy.