German car industry crisis: Špicar has never seen such pessimism

The crisis in the German car industry is unprecedented, Špicar believes. After talks with managers at car plants in Stuttgart, he said he had not heard such pessimistic forecasts even once in recent years.

Tariffs, China and expensive energy

Managers name US tariffs as the main problem: they complicate access to the American market, where premium brands in particular sold very well. The second problem is China. For decades it brought in huge revenues that paid for development, salaries and the whole system of employee care that carmakers had grown used to.

On top of that come crises hitting the whole economy: high energy prices, inflation, a slowing German economy and European regulations that are not always well judged. Manufacturers admit they are lagging behind in the new economy — in software development, driverless systems and the use of artificial intelligence.

The main problem is slowness

In private conversation, rather than at official meetings, managers talk about something else: they are weighed down by the sluggishness of life inside their companies, complicated decision-making, hierarchy and low flexibility. Much is done the way it has been for the last half century, and it is hard to change when everything worked for so long.

What comes next

Everyone knows the solutions, but corporate culture makes them hard to carry through. Špicar believes the crisis is so deep that Germany will see measures nobody expected in previous years. Layoffs, which used to be very difficult because of trade unions and politicians, will most likely begin, along with the closure of unneeded plants.

Carmakers will cut the number of model lines: Chinese and American competitors often have fewer, and they do not offer customers dozens of variants to choose from, which is a heavy burden for production. They will also have to look for new markets and accept that China will no longer finance their work.

Volkswagen has already announced mass layoffs and the possible closure of four plants in Germany. Will that be enough? According to Špicar, it is a necessary but not sufficient condition: key technologies must be tackled too. The pride of the German auto industry was its ability to fit body panels superbly and a fantastic internal combustion engine, but today that is no longer the main value of a car.

Around Prague, based on reporting by novinky.cz