Volkswagen’s Crisis Is Germany’s Crisis

The German car industry is regularly beset by crisis, with each one worse than the last and the intervals between them growing ever shorter. That a transition is necessary hardly comes as a surprise at this point — and yet companies as well as governments have done little to adapt more quickly and take real social needs into account: to focus on manufacturing affordable smaller zero-emissions vehicles as well as production that would support the expansion of the public transport network. Now, as in 2009 and 2020, the car industry — and above all VW — may need to be rescued with public funds. But the Free Democrats (FDP) held firm to the maintenance of debt brake provisions, which ultimately resulted in the collapse of the traffic light coalition and the dismissal of Christian Lindner and the FDP from government.

At issue here is competition, markets, and market share, and the building up and then the destruction of capacity in a situation where markets are contracting and large segments of the population have seen their purchasing power dwindle. The German car industry is firmly oriented toward exports and highly dependent on the Chinese and US markets. There is also the fact that a number of new and technologically advanced players have established themselves in China and are expanding into global markets. After 40 years of doing good business in China, sales figures for Volkswagen, BMW, and Mercedes-Benz have all fallen dramatically.[1]

A Jobs Crisis

First and foremost, the crisis is one of jobs, not of profits. In the past five years, the car industry in Germany, together with its local suppliers, has shed 60,000 jobs. Ford is closing its plant in Saarlouis, VW its Brussels factory, and Stellantis its production facilities in Bielsko-Biała and Turin. Fresh reports of relocations or closures by Bosch, Conti, ZF, Schaeffler, and many other smaller suppliers are emerging almost daily. From 2016 to 2023, domestic car production dropped from 5.7 million to 4.1 million units.

Seemingly in contradiction with this excess capacity, profits have continued to rise — to the tune of 50 billion euro with respect to the Big Three in Germany, with retained earnings climbing to an incredible 250 billion euro. Luxury cars and high-powered SUVs generate less turnover than small, smart vehicles, but have higher profit margins. An example from Volkswagen illustrates this very clearly: unlike the line that the company publicly asserts and which journalists are only too happy to repeat, financial losses are by no means the issue. For the owners and managers, a profit margin of 3.5 percent for the Volkswagen brand is not sufficient; instead, they want 6.5 percent for the brand and 10 percent for the company — that is to say a good 30 billion euros in profit, rather than the 22 billion from the previous year.

Table 1: Profits and retained earnings from VW, Mercedes-Benz, and BMW in 2023

(Source: company reports)

Demand for cars in Germany and Europe more broadly has been falling since 2016. This has been strongly influenced by ongoing wars and global competition, a volatile international atmosphere, arms races, cuts to social services, the debate around switching to electric vehicles, and deteriorating infrastructure. From 2017 to 2020, worldwide automotive production fell from 73 million to 55 million units, before rising again to 67 million in 2023. The same year, 2 million fewer cars were sold than five years previously — which corresponds to the output of four large car factories or the global sales of Audi and Peugeot combined. This slump in turnover has a particularly severe effect on high-volume manufacturers like Volkswagen, whose balance sheet for Europe alone now has a hole the size of 500,000 vehicle sales.

The excess capacity that was built up was established at great expense. Until recently, VW was still aiming to mimic Tesla in building a “gigafactory” for new luxury vehicles, to be dubbed “Trinity”. The board of directors gave the go-ahead for it to be constructed in Wolfsburg in March 2022. Two years later, discussions are now focused on mass layoffs and factory closures. While the works council, trade union IG Metall, and the Lower Saxony state government all wanted to have the Trinity plant in Wolfsburg, it is partly thanks to the mobility transition movement that this bad investment, which would have cost over 2 billion euro, was ultimately called off in autumn 2023. At the works meeting in the Wolfsburg factory on 4 September, the head of VW said that “we are around 500,000 cars short in terms of sales, which is roughly the output of two factories. The market is simply no longer there.” Previously, excess capacity was always portrayed as a problem for other manufacturers; this was the first time that the existence of excess capacity at the company itself had been acknowledged.[2]

Tens of thousands of workers took part in the VW works council meetings that took place in September 2024 at all of the company’s locations. The mood was heated.

In the past few years, the simultaneity of the climate crisis and the battle for the future of the car industry and hundreds of thousands of jobs has proven to be an explosive combination. The overall shift to the right and the far-right Alternative für Deutschland (AfD)’s high polling averages in the car-manufacturing regions of Saxony, Baden-Württemberg, Hesse, and Lower Saxony is extremely concerning. There is a danger that there may be a transport-directed backlash that exacerbates the climate crisis, leads to billions being squandered on bailouts, and puts even more jobs at risk.

The construction of new highways and the absurdly high subsidies that flow into the car industry’s coffers constitute a redistribution from the bottom to the top. Although people are still reliant on cars due to a lack of good public transport options, car density and emissions are decreasing markedly, as are household incomes. Instead of engaging with the demands of the majority of the country — such as speed limits and the reduction of subsidies — the government is instead seen cozying up to the car industry and further strengthening car-centric policies. Even the transition away from the combustion engine is once again being called into question by anti-ecological forces such as the FDP, the Christian Democrats (CDU), the AfD, and the Sahra Wagenknecht Alliance (BSW), all of whom seem intent on throwing both the climate and the mobility transition under the bus.

Scrapping Collective Bargaining Agreements

In the past five years, the German auto and supplier industry has shed around 60,000 jobs. VW production facilities, such as the Brussels plant, have closed. VW factories in Emden, Zwickau, Wolfsburg, Hanover, Salzgitter, Chemnitz, Osnabruck, and Dresden are also running below capacity, resulting in squeezed margins and reduced profits.

In September 2024, the VW board scrapped the collective agreement on job security in order to be in a position to respond to the overproduction crisis with mass layoffs and factory closures. This threatening stance is not about avoiding losses, but achieving bigger profits. Anyone concerned about the hardship faced by VW shareholders can rest easy: 4.5 billion euro of the company’s 2023 profits was paid out as dividends, with almost half going directly to the Porsche–Piëch family. This corresponds almost exactly to the amount that the measures just described are supposed to save. The announcement of mass layoffs and factory closures represents a suspension of the previous practice of social partnership.

VW has scrapped the following collective bargaining agreements:

• The collective agreement on job security — in order to facilitate mass layoffs and factory closures;
• The collective wage agreement — with the goal of reducing wages by 10 percent across the board;
• The collective agreement mandating the hiring of apprentices who successfully complete their training;
• The collective agreement concerning temporary employment, which governed the payment of temporary workers;
• The agreement guaranteeing the works’ council’s right to participate in decisions concerning pay for highly qualified staff not covered by a collective agreement.

Pitting the old against the young, the office against the assembly line, Emden against Zwickau — this is the management’s plan. VW CEO Oliver Blume attempted to adopt a sentimental tone in his messaging: “We are leading VW back to where the brand belongs — that is the responsibility of us all. I come from the region, and have worked for the company for 30 years. You can count on me, and I count on you. We are Volkswagen.” Thousands of workers in the hall at the works meeting, however, responded with an audacious chant: “We are Volkswagen – but you are not!”

Historic Responsibility vs. Greed

The announcement of mass layoffs and factory closures at VW led many thousands of workers across all locations to voice their displeasure. Daniela Cavallo, chair of the general works council, announced that they would resist the moves and asserted that the workers had a claim to ownership of the company: “Volkswagen doesn’t just belong to its shareholders! Volkswagen also belongs to its staff.” She made reference to the company’s history: VW was created by the Nazis using profits from the sale of assets confiscated from unions. After 1945, the unions did not assert their ownership rights because expanded worker participation rights were secured during the company’s partial privatization in 1960 through the Volkswagen Act. It is from this that VW workers’ entitlement to economic co-participation and global social rights are derived, as Cavallo emphasized:

130 million Reichsmarks corresponds to … a current purchasing power of almost 700 million euro. Taking average interest rates into account, this capital that the Nazis stole from the labour movement back then would have long since grown to be worth well over 1 billion euro. This money — our money — is now contained within VW. Therefore, it is clear that turbo capitalism will never have a place at Volkswagen. Instead, at Volkswagen, its workers, their families, and the regions where they are located will always have a strong voice.

Chair of the Kassel works council Carsten Büchling had this to add:

The fact that operational layoffs and plant closures are currently hanging in the air is grist for the AfD’s mill. … If we had more influence over strategic decisions concerning production, then such … escalations … could be avoided. … Our goal must be for workers to have decision-making power concerning production. Workers must become co-owners of the factories.

Tens of thousands of workers took part in the VW works council meetings that took place in September 2024 at all of the company’s locations. The mood was heated. A worker from Emden recounted that “Manni [Manfred Wulff, works council chair] was hopeful that sales volumes would increase again soon. I have no idea where this optimism comes from.” Meanwhile, a worker in Zwickau reported that “brand boss Schäfer was received with whistles and booing. The atmosphere at the works meeting was at boiling point. People suspect that VW only held it to collect more subsidies.”

It is up to the Left to resolve the apparent contradiction between protecting the environment and preserving jobs, and to connect workers’ justified interest in good jobs and a good quality of life with the mobility transition.

Volkswagen CEO Oliver Blume told the Bild am Sonntag that he saw no alternative to tough cuts. Weak demand in Europe and declining revenues from the Chinese market had revealed decades-long structural issues at VW. For this reason, he argued, costs in Germany had to be drastically reduced. VW board member Gunnar Kilian, a Social Democrat and once a member of the works council in Wolfsburg himself, explained that there was a “historic change in direction” ahead, one which meant that staff must be prepared “to accept cuts”. The FDP loudly claimed that the Lower Saxony state government wanted to withdraw from VW’s supervisory board. Lower Saxony’s state premier Stephan Weil (SPD) expects alternatives to plant closures to be presented.

In contrast, IG Metall chair Christiane Benner sees reduced working times and the four-day week as possibilities: “We should not discount any ideas concerning how we can safeguard jobs and production facilities”.

The “Privilege of Working at VW”

Many German newspapers and magazines, including Die Zeit, Stern, and Fokus, have been quick to write obliging articles claiming that workers at Volkswagen live in luxury and are overpaid, and that IG Metall is detrimental to both workers and companies.

The facts, however, tell a different story: in the years 2022 to 2024, inflation was at between 4 and 7 percent a year, and the price of food increased at an even higher rate. Between 2019 and 2021, wages at VW were frozen. From 2022 to 2024, they were raised by 2.3 percent for a period of 17 months, and for shorter periods by 5.2 percent and 3.3 percent respectively — taken together, these rises do not even match the rate of inflation.

Wage growth at VW over the past ten years has at best only kept pace with that of collective agreements in other areas of the metal and electrical industry. The introduction of the 28.8-hour week and the 1994 job security agreement came at the cost of a thirteenth month’s salary, Christmas bonuses, and shift allowances. Ten years later, the working week had been increased to 33 hours — without additional payment. Instead, staff received dividends calculated based on VW’s level of profit.

An assembly line worker has this to say: “Over the past few years, we’ve made nothing but concessions. The assembly lines are regimented to such an extent that you can’t even blow your nose without getting behind. Everything we do for around 27 euro per hour times 140 hours per month only results in around 3,700 euros gross a month, which depending on your tax bracket means you take home between 2,200 and 2,700 euros net.”

Across the same time period, shareholder dividends amounted to around 20 billion euro; the emissions scandal, meanwhile, cost the company more than 30 billion.

Alliances for Climate Protection, Good Jobs, and a Good Life for All

Ver.di and Fridays for Future have adopted a united front in fighting for the expansion of the public transport network as well as better working conditions for public transport workers. Unions and environmental and social organizations have joined together to found the Socially Responsible Mobility Transition Alliance, while climate justice activists have disrupted events such as the International Motor Show Germany. Such efforts demonstrate that demands for a restructuring of the industry and a mobility transition can be complementary, allowing for new alliances in favour of socio-ecological transformation to form.

In practice, however, too little emphasis has been placed on joint demands from unions and the Left. It is up to the Left to resolve the apparent contradiction between protecting the environment and preserving jobs, and to connect workers’ justified interest in good jobs and a good quality of life with the mobility transition.

The mobility transition is both the cornerstone and outcome of such a transformation while also providing a democratic path out of the worsening crisis of employment that we find ourselves in, with all of its political and social consequences.

A number of recent studies have shown that a genuine mobility transition holds great potential for providing good jobs. Hundreds of thousands of jobs could be created through train manufacturing as well as the railways and the operation of the public transport network if these sectors receive planning certainty. If the need for workers to fill positions in the care, health, and education sectors — all of which require expansion — is also taken into account, and the labour-related and social potential of a shortening of the work week to 28 hours or “abbreviated full-time employment for all”, as former Die Linke leader Bernd Riexinger calls for, is taken into account, then it becomes clear that there is much that can be gained: good jobs, a good quality of life, and a worthwhile future for subsequent generations. Through this process, it is important to give workers security, including through legally guaranteed training and further education, job guarantees, and so-called “transformation allowances”.

This requires that unions and Die Linke get serious about tapping into the energy provided by the climate justice movement and mobility transition initiatives. It requires that unions fulfil their mandate in support of a socio-ecological transformation. And it requires that the many useful approaches and considerations that car industry workers from various locations have themselves come up with are no longer ignored by management but are instead taken up by academics, unions, and left-wing politicians, consolidated, and forcefully injected into social and political debates.

A Programme for Ecological Reconstruction

Naturally, something must be done with existing excess capacity — preferably through conversions enabling production for sustainable public mobility. Taking rapid and large-scale steps towards a shortening of work times — to a four-day week or a 28-hour week — could help in this regard.

Collective bargaining agreements are an expression of the balance of forces between capital and labour. This means that what is required is union-led resistance, across company lines, against simply upgrading production facilities while cutting social services, together with joint efforts from unions, the climate justice movement, and transport initiatives to fight for participation and co-determination concerning strategic business decisions and the conversion of the car industry.

In a wealthy country such as ours, the money required for the conversion of the car industry is available. Such a conversion provides an alternative to increased global competition, cuts to social services, mass layoffs, and plant closures. Our central proposals are as follows:

1. An increase in public investment is both possible and necessary. Instead of giving the car industry billions in subsidies, profits should be redirected by being earmarked for the mobility transition. The federal government can create a special fund of 200 billion euro for investing in infrastructure and the development of production capacity for public transport vehicles (ranging from train carriages to smart buses) if it dispenses with the debt brake and removes obstacles to innovation.
2. The creation of regional transformation councils, with members drawn from unions, regional politics, environmental and transport associations, and energy and mobility transition initiatives, which initiate social forums and exert direct influence on the socio-ecological transformation of the entire mobility industry. Funding for these regional transformation councils will come from the Automobile Industry Future Fund.
3. Accelerating and supporting local initiatives and alliances for the socio-ecological transformation of the car industry and mobility.
4. The creation and expansion of (public, democratic) companies that fill gaps in the existing mobility industry around smart bus and train transport as well as freight: this would provide reasonable compensation for job losses in other areas. Additionally: the socialization of companies that attempt to block the mobility transition, in accordance with articles 14 and 15 of the German Basic Law.
5. Reforms to traffic regulation and laws that empower local municipalities to adopt and implement socio-ecological measures such as speed limits and bus lanes.
6. A Europe-wide industrial policy for the creation of a European mobility industry to facilitate the necessary construction of buses and trains. The possibility of the public transport network having a public service obligation must be preserved.

The resulting transport and mobility transition would form part of a transformation of production and service provision in our country that redirects them towards people’s needs. It is necessary to turn the economy on its head, do away with economic activity that is socio-ecologically harmful, and put human creativity and social resources in the service of high living standards. The mobility transition is both the cornerstone and outcome of such a transformation while also providing a democratic path out of the worsening crisis of employment that we find ourselves in, with all of its political and social consequences.

Translated by Ryan Eyers and Marc Hiatt for Gegensatz Translation Collective.