The competitiveness crisis that impacts German industry spreads throughout the continent. Without the massive layoffs having yet reached Spain, countries like France have already been affected by the adjustments announced in German territory. What began as a blow to a specific business, strongly affected by Chinese competition, is already affecting sectors due to high energy costs and affecting steel, renewables and the aerospace industry.
According to calculations made by elEconomista.esin Europe there are at least twenty collective dismissal procedures in the industry that affect around 130,000 people. Only those with more than 1,000 workers have been selected. And the final amount is practically impossible to calculate because the losses spread like an oil spill throughout the entire production chain.
The origin of the crisis seems clear to be located in Germany, with the end of access to Russian gas as the first blow to its competitiveness, which sent energy prices up in addition to straining supply chains, already affected by the crisis. coronavirus. Now, the problems are worsening with the electric vehicle crisis, which does not meet sales expectations, and the arrival of Chinese competition on the continent.
Thus, the country’s manufacturing PMI index was 43.2 in November, far from the barrier of 50, which marks the balance point between growth and recession. In addition, the Federation of German Industries (BDI) said two weeks ago that it expects a 3% drop in production by 2024, which would become the third consecutive year of declines and no signs of improvement for 2025.
But the bleeding is not local. The continental PMI fell to 45.2 from 46. The collapse was strongly marked by the weakness of France, whose expected result was 44.6 and marked 43.2.
“The environment in the sector remains deflationary. Good news for purchasing departments, but it seems that companies are forced to fully pass on price reductions to their customers. This indicates fierce competition, which weighs on margins benefit of companies. We assume that Chinese competition plays an important role,” said a Hamburg Commercial Bank report published at the beginning of the month.
With activity and prices falling, both countries are leading the wave of layoffs in the continent’s industry; an underlying trend that has worsened with the start of the school year. The name that has focused the spotlight: Volkswagen and the possible closure of three factories, with the consequent layoff of up to 10,000 people.
The general weakness of the continent is added to the automaker by two other factors: the unfulfilled expectations of the electric car and Chinese competition. For example, this November, S&P lowered its expectations for the connected vehicle in Europe and from 27% to 21% its market share forecast for 2025. For 2030, UBS reduced its sales forecast from 9.6 million to 8 .3 million units.
The arrival of Chinese brands, such as BYD or Chery, heavily subsidized by the Chinese Government, is another setback for European automobile companies. Asian cars have an average discount of 30% compared to their European counterparts, according to Accenture. The EU’s response has been the imposition of tariffs, although there have already been companies like Cupra that warn that these taxes put their future at risk, since they also produce in the country.
Volkswagen is followed by Audi, with a planned package of 4,500 layoffs, and Ford, with 4,000 planned dismissals in Europe.
And behind the manufacturers are component brands such as ZF (14,000 layoffs), the Swedish batteries Northvolt (1,600 layoffs) and Bosch (5,500 departures). In total, the German companies in the Fortune 500 index have already announced 60,000 departures – not all of them from the industrial sector. The figure is much higher, since we would have to add Schaeffler with 4,700 casualties, or the trail of small adjustments in companies throughout the chain.
The crisis also crossed the Rhine into France, being the second country most affected by layoffs. The auxiliary automobile industry concentrated a good part of the cuts. Forvia, the old Faurecia, for example, has already made public its willingness to shrink its global workforce by 13% with 10,000 departures. They were followed in recent weeks by Valeo, which is negotiating 1,100 cancellations, and Michelin, with another 1,250.
Away from four wheels, Airbus – with facilities spread across the continent – is also preparing a layoff plan for 2,500 people due to “a complex business environment” marked by challenges such as rising costs and “rapid changes in war.” .
The layoffs also impact the British economy. Although the automotive sector bears its share of responsibility due to the closure of the Vauxhall factory in Luton (1,000 layoffs), the largest industry hit by the macroeconomic situation is steel, with 2,500 departures from Tata Steel and up to 2,000 dismissals on the table for part of British Steel.
The steel company faces a problem similar to that of the automobile. Added to the high energy costs and environmental restrictions in a context of low demand is the arrival of Chinese production at much lower prices. For this same reason, the German company Thyssenkrupp made public a plan to reduce its workforce by 11,000 people until 2030.
Spain is free, for the moment, from major adjustments
The large EREs are so far concentrated in Germany, France and the United Kingdom. In fact, the Spanish manufacturing PMI stood at 54.5 in October, solidly based on growth. The layoffs have not yet affected the Spanish market, although the union sources consulted by elEconomista.es They admit that they will arrive sooner rather than later.
In the country, the cuts of 430 people at Siemens Gamesa (framed within an adjustment of 4,100 people), the ERE for 108 people at Antolin due to the closure of its factory in Navarra and the adjustment for 67 people at Solideo stand out. In the automotive sector, Seat maintains that the Volkswagen crisis will not affect it because it has already reduced its fixed costs by 30% in recent years and Ford’s Almussafes (Valencia) plant is not impacted by the ‘snip’ of 4,000 jobs announced at continental level.
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