German auto production employs around eight hundred thousand people — with a further 1.8 million jobs indirectly linked to the industry. But even these figures don’t convey quite how important it really is. Apart from the fact that brands like Volkswagen are known the world over, the sector drives industrial knowhow upon which the German economy’s strength relies.
Today, the industry faces severe crisis. Tens of thousands were laid off last year, and many small suppliers are struggling to survive. This doesn’t just owe to the pandemic; even beforehand, sales had been stagnating as excess capacity accumulated worldwide. The management consultant AlixPartners writes that “Darwinism” has taken hold: “Only the financially secure and innovative manufacturers will survive the upcoming market shakeout.”
For decades, German car companies made exorbitant profits — but failed to invest in electromobility. Now they need to make up for lost time. The speed with which the changeover will take place became clear when the EU again tightened its climate targets. Auto CO2 emissions are to be halved by 2030. China — German firms’ most important market — is planning for one quarter of all new registrations to be electric by 2025, but it is also massively promoting its own electric car industry. Berlin’s new Tesla factory also points to the tough competition faced — especially if Tesla, as announced, will accept neither collective bargaining nor works councils in its German plants.
But even if German companies can catch up with the switch to electric, it will cost numerous jobs; combustion engines were much harder to manufacture than electric cars. More than four hundred thousand jobs are at risk by 2030, according to a report for the German government by the National Platform for the Future of Mobility.
Yet this isn’t the only challenge facing German industry. IT is becoming an increasingly important part of passenger cars — a field in which German industry is comparatively weak. The big American tech firms are trying to capture ever greater shares of the value creation in car production.
Google, for example, launched the “Open Automotive Alliance,” which includes numerous car manufacturers that agree to use Android OS in their vehicles. Apple also offers its own car-tailed OS, while BMW is investing enormous resources to develop its own system. Moreover, Google, Apple, and Amazon are working energetically on the technology for self-driving cars. As early as 2018, the Federation of German Industries warned that German car companies could be “demoted to mere hardware suppliers.”
Such an increase in productivity can mean only one thing: even more workers will lose their jobs. In a 2017 study, MHP and Reutlingen University researchers calculated that nearly half of German automotive industry employees perform a job with a 70 to 100 percent possibility of being automated by 2030.
These are very high figures, and doubtful whether they will be entirely borne out. But it is widely thought that we are on the verge of a new wave of automation that will jeopardize a large share of jobs in the wider sector.
In his Automation and the Future of Work, economic historian Aaron Benanav refers to this debate as “automation discourse.” Benanav portrays convergence around the notion that automation will soon advance enough that entire sectors will manage almost entirely without workers. For some, this is a dystopian prospect, a looming age of “techno-feudalism.” For others, this development could pave the way toward an unconditional basic income, or even a “fully automated luxury communism.”
Benanav argues that these forecasts are exaggerated. The purported enormous productivity rise through automation is not taking place — in fact, in manufacturing it is growing more slowly than in the postwar period. In Germany, it rose by 6.3 percent annually in the 1950s and ’60s; between 2000 and 2017 it was only 2.4 percent, despite the introduction of industrial robots and digitalization.
Nevertheless, the trend toward deindustrialization can’t be denied. In the richest countries, this trend began in the late 1960s — and many emerging economies have also experienced “premature deindustrialization” in recent decades, according to Benanav. In Germany, the share of employment in manufacturing has not declined as rapidly as in the United States or the UK, but here, too, it has fallen from 29 percent in 1970 to 17 percent today.
This partly owes to the subsiding of the historically unique postwar boom, and partly to the fact that Japan and Germany has fully rebuilt from wartime damage and are now starting to flood the world market with their industrial products.
Since then, manufacturing has struggled with structural overcapacities. In the 1950s and ’60s, global industrial production grew at an average annual rate of 7.1 percent, but this fell to 4.8 percent in the 1970s and was as low as 3 percent between 1980 and 2007.
This stagnation has characterized developed economies for decades. The secure manufacturing jobs of the postwar era have gone away in favor of mostly poorly remunerated and precarious service sector jobs. One exception has been China — and, to some extent, Germany. It long maintained a relatively high level of industrial employment, primarily through an aggressive export strategy, through which Germany secured an ever larger share of the slower-growing market for industrial goods.
Since the financial crisis at the latest, Germany has also been said to have “exported” its unemployment: Through “wage restraint,” cuts in social security spending, a powerful industrial sector, and a relatively undervalued euro, it has outmaneuvered the rest of the world — and especially the European periphery.
This strategy is based on depressing consumption — and thus the living standards of the German masses. As a result, Germany tends to import less from other countries and export all the more, leading to enormous trade surpluses. Time and again, Germany has been called upon to consume more in order to reduce the imbalance — Trump probably did so most vehemently, but Obama called for the same thing, and in 2017 Emmanuel Macron termed Germany’s trade surpluses “unsustainable.”
Nevertheless, Germany continues to cling to this arrangement, because it is extremely profitable for its major export-oriented corporations. The price is also paid by the German workforce, as Michael Pettis and Matthew Klein describe in their Trade Wars are Class Wars. Germany’s success, they write, is based on “its relentless focus on the competitiveness of its [exporting] industries … massively shifting the balance between workers and capital owners.”
The automotive industry is a key aspect of the German export strategy. In 2018, 75 percent of cars manufactured in Germany were sold abroad. That same year, the auto industry accounted for 18 percent of all German exports. With the global demand for passenger cars stagnating, there is only one way to keep employment numbers stable: to steal a march on international competitors. As a BMW chairman once said, “There are too many cars in the world, but too few BMWs.”
To beat the competition, the German auto industry has resorted to the usual tactics. For one thing, working conditions were worsened and personnel costs cut. It is true that the German car industry probably still boasts the best industrial jobs in the world, but only for the core workforce. Increasingly, it relies on precarious and temporary workers, too. As Oliver Nachtwey describes in Germany’s Hidden Crisis, subcontracted workers sometimes work shoulder to shoulder with their full-time and still-protected colleagues. When jobs are cut, they are the first to lose out.
To reduce labor costs, entire components of the production process have been relocated abroad, especially in Eastern Europe. Components are produced under much harsher working conditions in countries like Hungary, before being sent for final assembly in German factories. Despite its nationalist rhetoric, Viktor Orbán’s government caters to German capital’s every wish. A 2019 law to extend working hours has been called a “slave law,” “Lex Audi” and “Lex BMW” by Hungarians.
The third step toward increasing its competitiveness is the current digitalization of the work process. This is nothing new in the history of capitalism — and machines that increase productivity ought to be a welcome development, saving pointless toil. Yet in the hands of the bosses, they become an instrument that condemns workers to superfluity or relegates them to mere appendages of complex machinery.
All these measures aim to secure German corporations’ relative superiority. This is also a fierce competition between production sites, with the leading industrial nations struggling to remain on top. According to researcher and trade unionist Peter Schadt, the United States “is focusing above all on autonomous driving and, by law, is allowing its capital the most test kilometers for the new technology,” while also creating uniform standards for the digitalized industry through the Industrial Internet Consortium.
The United States’ primary rival in this regard is China, whose rise it is seeking to stymie through trade policy. China is striving to be on par with the US by 2035. To this end, the Chinese state is investing enormous sums in R&D and digital infrastructure. In the automotive industry, China is focusing on electric – partly for environmental reasons, and partly because Chinese officials believe it can become a world leader in electromobility more quickly.
The German state, too, is doing everything possible to equip its domestic industry for global competition. While it is still doing well in traditional production, the centrality of IT competencies will only increase over the course of digitalization — and other countries are well ahead of the Germans in these areas. For this reason, Berlin is promoting digitalization under the slogan “Industry 4.0.” Angela Merkel warned that it must be mastered quickly, as “otherwise those who are leading in the digital field will take industrial production away from us.”
The auto industry is also being supported in the switch to electric, through purchase premiums for consumers and the publicly funded expansion of battery-charging infrastructure. One major problem is the production of batteries, where Asian competitors dominate the market.
To catch up, Germany is cooperating with other countries in the EU-initiated “Battery Alliance,” in which private firms are joining forces under government guidance to form huge, massively subsidized industrial consortia. In parallel, the EU launched a raw materials alliance last October, involving hundreds of European companies.
The state is likewise giving German firms a helping hand by ensuring that their continued favorable access to international markets, especially the crucial and growing Chinese market. A study by the Center for Automotive Research shows that VW, Daimler, and BMW sold 14.16 million cars last year; of these, 5.6 million went to China. Commenting on the results of the study, the center’s head said that “the Chinese share of German carmakers’ sales has never been so high — and it will continue to rise.”
But China is a double-edged sword: it is not simply a low-wage staging location like Hungary. The Chinese state is scrupulous in ensuring that Western companies that produce there also contribute to strengthening Chinese industry, for example, by obliging them to enter into joint ventures with Chinese companies.
Thus, while the West has earned handsomely from China in recent decades, it has also strengthened tomorrow’s competitor. The United States has now adopted a confrontational course and tends to rely on “decoupling” to exert pressure on China. The EU, however, finalized a comprehensive investment agreement with China at the end of last year — with Germany a primary driving force in securing the deal.
The German auto industry’s business model continues to be predicated on expansion — with the active support of the state. Clearly, this is not compatible with effectively combating climate change, even if there is a rapid switch to electric.
This is a discouraging realization at first. Many in the climate movement focus on the “ignorance” of conservatives — and try to persuade the public and policymakers of the urgency of responding to climate change. While surely important, this does little to challenge the huge business interests behind German auto and other comparable sectors. Growing awareness of the problem is only half the battle.
There are certainly many in Germany — including SPD and Green voters — who do not want more precarious working conditions in the industry, who would like to address climate change forcefully, and who are skeptical of the German state’s efforts at defending the global position of German manufacturing. But as things stand, there is not the slightest prospect of this changing, or of the auto industry’s own crisis being resolved in a better, progressive way.
Germany’s industrial leadership is essential, both for German prosperity and for many Germans’ patriotic self-image. The success of the automotive sector and export industry as a whole benefits not only its shareholders, but indirectly, almost every wealthy person in Germany. That is why there is a political consensus, even in the Green Party, that German corporations’ success must not be jeopardized. And that means regulatory measures that could seriously threaten car companies’ profits are a priori off the table.
Moreover, the new spirit of capitalism is decidedly green. The conversion to a climate-friendly economy is certainly not being pursued fast enough to avert climate catastrophe. But it would be delusional to think that the German state isn’t interested in ecological transformation.
In an op-ed last year even Wolfgang Schäuble pleaded for a “Green Deal” in Europe. For the business-daily Handelsblatt, he wrote, “Climate technologies could turn into big business for big business.” Particularly in the likely case of a Christian-Democrat/Green coalition government, there are signs of a modernization of German capitalism under the banner of climate protection.
Unless we want to be cheerleaders of this process, we must seriously confront the capitalist interests currently driving it. For there can be no adequate solution to climate change as long as capitalist competition makes it impossible to limit production. It is simplistic to believe that the dark side of the German automotive sector is entirely a result of the attitudes of conservative car chauvinists, and would be overcome if enlightened Greens were given a turn behind the wheel. Change will take more than good intentions.
Production must be radically reoriented and reduced. Die Linke cochairman Bernd Riexinger called for a Green New Deal that also envisages a “turning away from the ‘car society.’” Yet setting out such a program isn’t the hard part. The over one million workers employed in the auto industry have an understandable interest in seeing their companies remain profitable, in order to retain their jobs.
This explains why some unions are skeptical about ambitious climate measures. IG Metall, the German metalworkers’ union, has joined forces with environmental associations to advocate for a “climate and mobility turnaround.” But demands “for a radical dismantling of the automotive industry, a ban on certain types of vehicles or a general renunciation of consumption” are rejected outright, even by well-meaning trade unionists, because the concrete “focus on work, employment and production” are lacking.
Climate activist Tadzio Müller wrote last year that the “anti-car” movement is, on the one hand, a global struggle for justice, and on the other, evokes “the fierce resistance of precisely those actors who, in the history of the social left … have usually been associated with advances in the struggle for justice: the major trade unions.” To take a recent example, during the pandemic, IG Metall vehemently pressed for a new cash for clunkers scheme, which was supposed to boost car sales by encouraging consumers to ditch their cars for brand-new ones — a reckless move, from an ecological point of view.
The reason is not that industrial workers are against environmental protection per se. But so long as capitalist competition decides where production take place, unions are interested in seeing German industry prevail. Thus, the unions’ skeptical attitude toward tough environmental regulations is, in a narrow sense, rational.
The situation is similar with automation. Jobs may be lost, but workers’ representatives cannot fully reject the measures associated with it either, as jobs can only be preserved if a company’s operations can hold their own in the face of global competition.
If the Left demands only the weakening of the German export industry, it is unlikely to find a hearing among industrial workers. In fact, the crisis in the auto sector could represent an opportunity for right-wing extremists. The right wing of the Alternative for Germany (AfD), centered around Björn Höcke, propagates a “solidaristic patriotism” by which it tries to appeal to industrial workers.
In 2018, Höcke tried to appear at a labor protest at an Opel plant and declared that Germany “finally needs the restoration of a patriotic economic policy.” Workers threw him off the premises — and attempts to establish AfD-affiliated works councils in the auto industry have failed miserably so far. But if the crisis worsens and the costs are entirely passed on to the sector’s employees, it could provide the right with new momentum — scapegoating “green” policies, even if the real causes of crisis lie elsewhere.
The contradiction between the demands of the environmental crisis and employment and economic security for the industrial working class and the distribution of its social harms cannot simply be wished away; it arises from the capitalist economic order, in which people are dependent on the success of their own companies and nations in order to continue to be able to reliably sell their labor-power. A way out of this contradiction is promised by a “Green New Deal with job guarantees,” because it “does not play off the concerns of working people and their unions against those of the environment.”
But there’s no room for illusions: a Green New Deal in favor of the working class would require preconditions that are not even close to existing today. It will be particularly difficult to win the support of workforces in the industrial sectors affected. The utopian horizon is missing: barely anyone today believes that capitalism can be changed for the better, let alone be overcome. One can hardly blame industrial workers for not believing in the Green New Deal’s social promise, but instead focusing on the risks.
Even if there were broad support for a Green New Deal in Germany, one would have to ask whether reconciling ecological concerns and full employment is possible under capitalist conditions. Fierce competition in which no technological possibilities are allowed to go unused is an inseparable part of capitalism — and those who put limits on themselves risk falling behind. As long as these basic conditions do not change, an ecological transformation of German manufacturing would weaken it in international competition.
For workers, an exit from the global capitalist rat race would be a boon, as it would allow us to switch a gentler, more tolerable mode of production. But at present there is nothing to suggest that Germans are ready to take such a course. No point of view in Germany is as uncontroversial and firmly anchored in all political camps as the conviction that the country must remain a leading industrial power at all costs.