BASF, VW and Thyssenkrupp: Struggle for Germany as a business location

Wenn der Abstich ansteht, steigt noch einmal die Umgebungstemperatur. Denn dann wird der Hochofen geöffnet, durch ein Loch fließen Roheisen und Schlacke heraus, es rauscht und glüht und stinkt. Im Stahlwerk am Hochofen zu stehen ist kein Vergnügen. Aber Deutschland kann sich glücklich schätzen, solche meist gut bezahlten Arbeitsplätze zu haben.

Jeder fünfte Euro wird hierzulande nach wie vor in der Industrie erwirtschaftet. In Europa ist das ein Spitzenwert, im Nachbarland Frankreich ist es nur noch jeder zehnte Euro. Entscheidenden Anteil an dieser jahrzehntelangen Wohlstandsgarantie haben Industrieunternehmen mit Ikonenstatus: VW, BASF, Thyssenkrupp. Autos, Chemie, Stahl – drei Zutaten für Deutschlands Geschäftsmodell.

Doch nun fließen immer weniger Roheisen und Schlacke, stattdessen fliegen die Fetzen. Die Umgebungstemperaturen steigen, wenn Konzernchefs und Arbeitnehmervertreter aufeinandertreffen: VW droht mit Werkschließungen und bekämpft sich mit seinem Betriebsrat. In Thyssenkrupps Stahlsparte TKSE kam es nach einem Teilverkauf zum Zerwürfnis über Zukunftsfragen, das Aufsichtsräte und Top-Manager ihre Posten kostete. Und im Chemieriesen BASF geht die Angst vor dem nächsten Sparprogramm um.

Das steht sinnbildlich für den Zustand der gesamten deutschen Industrie. Sie wird in diesem Jahr schrumpfen, im verarbeitenden Gewerbe arbeiten heute 300.000 Menschen weniger als vor fünf Jahren. Verstehen lässt sich das besser, wenn man die Krisen bei VW, BASF und Thyssenkrupp übereinanderlegt: Was sind die gemeinsamen Ursachen für die Turbulenzen? Wo schlummert ein Ansatz, damit es wieder aufwärts gehen kann?

The first and most important common stress point in Wolfsburg, Ludwigshafen and Duisburg is the need for a green transformation. In the fight against global warming, Germany is committed to becoming climate neutral by 2045. This can only be achieved if industry radically changes its products and production. This alone is difficult and expensive enough, but politics is exacerbating the pain of change.

Take VW, for example: The European Union wants to phase out the combustion engine by 2035, putting the automotive industry under considerable pressure. Customers are not accepting the electric models as hoped; many find the range too low and the price too high. At the same time, it is clear that diesel and petrol-powered cars will continue to dominate in many regions of the world for a long time to come, if only because the charging infrastructure is lacking.

Even China, where electric cars are rapidly gaining in importance, wants to hold on to the combustion engine for decades to come and still become cleaner, for example through alternative, low-emission fuel. VW is now facing a real dilemma. The group decided early on to focus everything on electric cars in order to position itself as a pioneer in clean mobility, also as a result of the diesel scandal. Hastily developed models such as the compact ID.3 or the ID.4 urban SUV, however, failed to meet customers’ tastes.

Similar efforts are also needed in Ludwigshafen and Duisburg. In order to become climate-neutral, BASF must electrify production. The board of directors estimates that the plant’s electricity requirements will therefore double or triple by 2030 alone. The company still operates three power plants in Ludwigshafen, but this self-sufficiency will no longer exist in the future.

The electricity demand can simply no longer be covered by wind turbines and PV systems on the factory premises. BASF is therefore investing considerable sums in the construction of wind farms in the North Sea. Without large quantities of green electricity, the future for Ludwigshafen would look bleak. The climate-friendly conversion of the plants and the development of battery chemical production, which may be vital in the future, are consuming billions that are not initially generating any return.

And in Thyssenkrupp’s steel division, which accounts for 2.5 percent of Germany’s CO₂-emissions, a direct reduction plant (DRI plant) is to usher in the green turnaround. The state has pledged two billion euros in funding, but it is already becoming apparent that the plant will probably exceed the budget. The project is a key concern of the Greens’ economics minister Robert Habeck. But it is by no means the case that the transformation of the industry is a project of green daydreamers.

Thyssenkrupp would not be able to produce its steel as it has done so far for much longer simply because in the European Emissions Trading System it now costs almost 70 euros to produce one tonne of CO₂ Forecast: rising. The hunger for green steel is also growing on the demand side, according to steel trader Klöckner & Co. “We would like to sell more green steel than is currently available,” says a spokesman, adding: “Demand will probably exceed supply for at least another 10 years.” The reason behind this is that steel customers are also reducing their supply chains to CO₂-poorer, and steel is used in many products – from cars to washing machines.

The climate neutrality project of the century would be easier to manage if companies had to contend with fewer uncertainties. In Duisburg at Thyssenkrupp, a lot of questions remain unanswered: Where will the immense amounts of green electricity come from that are needed for hydrogen electrolysis, and which is also quite expensive in this country? Is direct reduction the only conceivable way, or would other options be possible, such as importing green sponge iron – perhaps with a view to the two blast furnaces in the south of Duisburg, in which the steel division has a half stake? And what actually happens to the three other blast furnaces in the north of Duisburg, for which there is still no green perspective?

In Wolfsburg, they were caught off guard when the traffic light government abruptly canceled the purchase premium for electric cars at the end of 2023 due to budgetary difficulties. This also contributed to the fact that VW locations such as Zwickau, Emden and Hanover are underutilized and the group is threatening factory closures and layoffs. The fact that the end of combustion engines in the EU in 2035 is now in jeopardy again does not increase planning security.

The 40,000 people who work in Ludwigshafen on the world’s largest chemical site also have to contend with geostrategic uncertainties. The Russian state has cashed in billions of dollars from the former subsidiary Wintershall. BASF is far from facing existential problems, but write-offs of more than seven billion euros on the formerly lucrative Russian business are causing the company problems. Added to this is the uncertainty in the most important growth market, battery chemicals: Because fewer electric cars are being sold than forecast, everything is being reconsidered at BASF.

The third problem, in addition to transformation and uncertainty, which all three companies share, are the hard location factors. These have never been particularly cost-effective in Germany, but now they are becoming a millstone. In Wolfsburg, it has been clear for years that the costs in the European VW plants are too high. In Germany in particular, generous collective agreements apply, and energy is also expensive. This is another reason why the Wolfsburg core brand’s return is low, while the group brand Škoda makes a lot of money with its vehicles manufactured in the Czech Republic. The union also plays a crucial role at Thyssenkrupp. Production reductions could perhaps alleviate the problems in the difficult situation for the time being, but the workforce, which is well organized in IG Metall, is fighting tooth and nail against this. No wonder: even a little reduction is hardly possible in steel – a blast furnace is either on or off.

In Ludwigshafen, too, many plants are not being used to full capacity, and the costs for gas and energy are so high that some production is no longer profitable. The site is already not making any money. It is said to have caused the group a loss of 1.5 billion euros last year. Since the beginning of 2023, the board has already launched two savings programs, cut jobs, and closed smaller parts of production. The impact on employment is still small: management has cut 2,600 of the 112,000 jobs across the group, but more are still being negotiated. “The old days will not come back,” said outgoing CEO Martin Brudermüller when presenting the savings measures.

As if all that wasn’t bad enough, China is now on the scene. In just a few years, the People’s Republic has gone from being the life insurance of the German export industry to being a growth killer. Take VW, for example: For a long time, the problems were glossed over by successes in China, where VW had risen to become the market leader for decades. But the tough competition in the People’s Republic has changed everything. Local rivals are pulling ahead in electromobility, and profits are falling.

“There will be no more checks from China,” warned VW boss Oliver Blume at a company meeting this week. The pressure continues to grow because the Chinese are now bringing their electric cars to Europe and have also built up an overwhelming position in battery technology. Their cost leadership is almost impossible to shake, and the dependence on Chinese technology is difficult to reduce.

Chinese dominance is also causing problems for the steel industry. Wages, environmental regulations and energy costs are lower there. Manufacturers also have economies of scale: China’s largest steel company produces around twelve times as much as Thyssenkrupp. Because domestic demand in China is currently weakening, manufacturers there are currently selling even more steel abroad – if not to Europe, then at least to third countries, where the competition is intensifying.

And what about BASF? The chemical company’s business in China is doing better than VW’s, but not as well as hoped. Now that the company is building a new site in southern China – at 10 billion euros, the largest investment in the company’s his
tory – overcapacity is growing there too. However, the board does not fear a dependency on China like VW. On the contrary: BASF management has so far countered critics by saying that the company generates just 15 percent of its sales in China. As the world market leader, BASF must expand its business in what is by far the largest chemicals market in the world. “Where will the volume come from to pay for the transformation in Germany if not from China?” Brudermüller told the FAZ in March when he left.

The public accusation that the company is closing plants in Germany and investing in Asia instead regularly causes red faces in the board of directors. The one has nothing to do with the other. The chemical industry in Germany has not yet received generous state aid for the upcoming transformations like the steelmakers. That could change at the latest when the development of a European value chain for battery chemicals threatens to fail. Because without battery chemicals from Europe, independence from China will not be possible.

Transformation, politically generated uncertainty, locational disadvantages and China – it is this mixture that is eroding the foundations of German industry and making hundreds of thousands of employees sleep more restlessly. Political activism like that now at VW, constantly changing funding programs and targets and an energy policy that does not consistently reduce costs are the last thing that those affected need right now. The opposite would be true. Then there will be no green economic miracle for a long time. But almost certainly there will still be industrial icons in 20 years that will contribute a good piece to the prosperity pie.