After losing cheap energy from Russia and facing uncertainty over its once-lucrative trade ties with China, big German business is now facing a critical moment for the third ingredient in its long-standing formula for success - consensual industrial relations.
The Reuters agency writes that German industry leaders, unions and politicians have been jointly seeking and finding an agreement on production and labor relations for decades, which provided the basis for the country's post-war economic development.
The threat of Volkswagen (VW) closing German factories for the first time directly tests whether that consensus model can survive and continue to function in a global environment that some see as existentially challenging, according to a Reuters analysis.
"De-industrialization is happening in Germany," Volkswagen works council chief Daniela Kavalo said this Sunday, demanding solutions to ensure "there will be industrial jobs in Germany in the future."
Manufacturing still accounts for 27 percent of total employment in Germany - down from 32 percent 20 years ago, according to International Labor Organization data, but still a far higher share than in most advanced economies.
Reuters reports that about 120.000 of VW's 200.000 workers are employed in Germany.
The same consensual labor relations structures that have brought industrial peace and job security for years will now be used in negotiations between management and unions that begin next week.
Those negotiations are taking place as Volkswagen and other European car giants, including Stelantis and Renault, struggle with high labor and energy costs, as well as increasing competition from cheaper Asian rivals who are sending more and more cars to the region, he points out. are in the analysis.
The fact that worker representatives have half the votes on VW's supervisory board makes it difficult for that group to impose closures. Union leaders want a negotiated solution, but management says the scale of the challenge means something has to be sacrificed.
"If we continue like this, we will not succeed in the transformation," Chief Financial Officer Arno Antlic told workers at the company's headquarters in Wolfsburg.
"It is our joint responsibility to improve the economy of German plants".
"IG Metal" stated that it could consider moving to a four-day work week as an alternative to closures. The move was introduced in the 1990s and lasted more than a decade as part of an earlier cost-cutting drive that included smaller pay cuts. Volkswagen has not commented on whether this could work in today's environment.
As a separate segment, Reuters mentions the role that the state should play.
There is a lack of public investment to help develop the market, said Olaf Liz, the economy minister of Lower Saxony, where Volkswagen is headquartered and most of the factories affected by the end of the job security program are located.
The state is also the second largest shareholder of "Volkswagen" and has two of the 20 seats in the company's supervisory board.
"This puts many companies, and therefore Germany as a business destination, in a very difficult situation," Liese told Reuters.
This did not escape Chancellor Olaf Scholz's coalition in Berlin. "Everything related to industrial production that is leaving will not come back," a source from the coalition told Reuters.
Both Economy Minister Robert Habek and Finance Minister Christian Lindner acknowledge that Germany as a business location has structural problems, but they disagree on what should be done - even on the role of electric vehicles (EVs) in Germany's future.
While Habek, of the environmentalist Green party, says politicians must offer state guarantees to support the transition to EVs, Lindner, a pro-market Free Democrat, this Sunday described the EV "fixation" as a mistake and rejected government measures to help the sector.
Scholz's unpopular coalition, whose parties have just suffered defeat to the far-right in East Germany's regional elections, faces a general election next year. The move by "Volkswagen" puts pressure on them to finally set a clear policy, some believe.
"If such an industrial heavyweight really has to tighten its austerity program and close factories, it may be a too late wake-up call that the economic measures adopted so far need to be significantly strengthened," said Karsten Brezki, global head of macroeconomics at ING Corporation.
Reuters writes that "Volkswagen" is not alone and that "Thyssenkrupp", which for decades avoided a major restructuring of its steel sector due to strong resistance from workers, has also changed course.
New CEO Miguel Lopez abandoned the strategy of his predecessors who maintained stable relations with “IG Metal” to demand a comprehensive reform that he says was long overdue.
Similarly, chemical giant BASF's chief executive Markus Kamiet said a number of factories were having competitive difficulties. "Therefore, we have to consider the further closure of the plant".
For now, however, even those who argue that German companies saw trends in the global economy too late to react quickly, insist that it is too early to declare the doom of "Deutschland AG" and its industrial heavyweights. "We need innovative ideas," Christian said. Bener, president of "IG Metal" at the national level. "VW has survived difficult situations before."
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