German Automotive Industry Faces Major Job Cuts Amid Structural Transformation

The German automotive industry is currently grappling with a profound crisis, marked by large-scale job cuts and a pressing need for structural transformation. Key companies including Schaeffler, Continental, Volkswagen, and Bosch have announced plans for significant layoffs and potential plant closures due to declining sales and intense competition, particularly from China's advancements in electric vehicles. According to industry expert Martin Gornig, the sector must move beyond temporary measures such as tax relief or energy price discussions and embrace genuine, long-lasting reforms, including renewable energy infrastructure investments and optimized production processes.

In the first nine months of 2025, Dax-listed companies spent approximately six billion euros on restructuring efforts, heavily focused on workforce reductions. These layoffs often involve generous severance pay, particularly for older, higher-earning employees. Volkswagen, for example, is reported to offer six-figure severance packages, with a 50-year-old middle manager with two decades of service potentially receiving up to 400,000 euros. Mercedes plans to save one billion euros by 2027 and has already released 4,000 employees through severance arrangements offering high premiums. Other firms like Bayer have introduced incentives such as “Sprinterprämie,” rewarding employees for swift decisions to leave.

This downsizing trend has intensified since early 2024 amid ongoing economic weakness and a declining employment outlook, with the ifo Institute noting a broad drop in job opportunities across sectors. Industry leaders and government officials, including Chancellor Friedrich Merz and EU Vice President Stéphane Séjourné, convened in Stuttgart to discuss the sector's challenges, emphasizing that without meaningful transformation, some companies may not survive.

Gornig cautions that the German automotive sector must undertake fundamental changes rather than rely on temporary solutions. The transformation will be painful but is essential to maintain global competitiveness as the industry confronts shifting markets and technological disruption from electric vehicles worldwide.