Volkswagen's announcement of plans to cut up to 100,000 jobs—roughly a sixth of its global workforce—and close plants has sent shockwaves through Germany and the European Union. The move, discussed at a supervisory board meeting last week, underscores the severe threat posed by Chinese competition and global trade tensions. According to a recent analysis by the Centre for European Reform, China's surplus in manufactured goods trade with the EU is now roughly equivalent to Italy's national income and continues to grow by about 30% each year. The paper warns that Europe, with Germany on the front line, risks 'deindustrialisation at China's hand.'
Automotive sector under triple pressure
The automotive sector, responsible for around 3 million jobs in Germany when accounting for direct and indirect employment, faces a triple bind. Within the EU, heavily subsidised Chinese electric vehicles are devastating the market despite the imposition of duties. Outside the EU, Donald Trump's tariffs have caused car sales to the US to nosedive, while China now imports a negligible proportion of vehicles for its domestic market. In other countries, the battle for market share with China is fought on a hugely unlevel playing field. Volkswagen also admits to high costs and technological missteps. Similar dynamics are playing out in industries such as chemicals and aircraft manufacturing, as Europe struggles to agree on an industrial strategy to protect key sectors.
EU's delayed response
Stéphane Séjourné, the EU's commissioner for industry, has described the potential Volkswagen job losses as a wake-up call, underlining 'the urgency to act decisively to protect our markets from unfair practices from our global competitors.' However, the EU's prospective Industrial Accelerator Act (IAA), which could release billions of euros in annual subsidies and public-procurement spending, is behind schedule and may not be signed off by the end of the year. The delay is partly due to reservations from countries like Germany, which relies heavily on exports and fears retaliatory responses to a robust 'Made in Europe' strategy.
Merz's approach criticised
German Chancellor Friedrich Merz, of the centre-right, is emphasising a more economically liberal approach. He recently unveiled a growth package dedicated to cutting red tape, diluting workers' rights, and raising the retirement age. However, critics argue these are the wrong priorities. As far-right parties continue to profit from growing resentment linked to declining living standards, Europe's future flourishing will not be secured by undermining its social model. The EU has cards to play in nurturing its own industries, just as China has done. No longer able to rely on easy access to the US market and suffering from weak domestic demand, it is ultimately in Beijing's interests to acquiesce to a fairer and more sustainable relationship. That discussion should begin in earnest alongside the passing of the IAA.
Protests across Germany
Last week, protests erupted at 18 Volkswagen sites across Germany as workers geared up for a struggle over the company's future that will resonate across the continent. The Guardian argues that Brussels and national EU governments can no longer afford to sit tight and hope that the new, harsher winds in the global economy will blow over. A reaction—one clearly visible to workers in Europe's threatened industries—is overdue.
