This week, Audi announced it has embarked on a major restructuring that will see the company’s workforce reduced by about 10%. That translates to a reduction of about 9,500 jobs between now and 2025. In a statement, the company said, “The resulting savings of around 6 billion euros will secure the strategic operating profit margin corridor of 9 to 11% and will be invested in projects of the future such as electrification and digitalization,” according to Reuters. Audi says the savings are expected to accrue between now and 2029.
On Friday, November 29, Daimler, the parent company of Mercedes-Benz, announced it would be laying off 10,000 workers between now and 2022. That number represents 3% of the company’s global workforce. 10% of management positions will be affected.
According to Forbes, the company says it is undergoing “the biggest transformation in history” as it pivots to new emissions rules in the European Union and confronts a slowdown in the new car market both domestically and globally.
The company says the cutbacks will save more than $1.54 billion by 2022 and will be done “as socially responsible as possible,” wrote Wilfried Porth, a labor management board member for Daimler, in an email to Forbes.
The pain in the German auto industry affects more than just Audi and Daimler. Forbes reports that BMW announced last Wednesday it has reached an agreement with employees to reduce bonuses and other perks to fund its electric car push. Continental and Osram, two German parts suppliers, have also announced layoffs and other cost-cutting measures in the past two weeks.
Some EV critics are jumping on the news to crow that electric cars are killing employment opportunities in the auto industry but the truth is more complicated. EVs are not causing a global sales slowdown and they are the car companies’ only hope of meeting strict new regulations in Europe and China. Without EVs, those companies would be saddled with punishing fines that could run to billions of dollars.
Daimler is correct. The auto industry is facing a sea change. Gone are the days when companies could roll out next generation versions of the same cars, using tooling and factories that were amortized long before the current decade began.
While Daimler is cutting 10,000 jobs, Tesla expects to have around 8,000 employees at its new factory outside Berlin within a few years as it ramps up production on the Continent. Creative destruction is a central tenet of capitalism. What is happening in the German auto industry is as predictable as the sunrise and should be welcomed, not bemoaned.