Germany’s Auto Industry Restructuring May Redefine EU Industrial and Security Policy
Work News | New Stardom
Stellantis / media.stellantis.com
Germany’s auto industry is entering its most challenging period in decades. Industrial output has dropped to its lowest point since 2005, driven by an 18.5% fall in automotive production this summer. Major manufacturers have announced thousands of job cuts at German plants in recent months, with Ford alone cutting 1,000 positions in Cologne. Midsize suppliers are also reducing staff as demand for both combustion and electric vehicles continues to weaken.
Chancellor Friedrich Merz convened automotive executives and senior ministers in early October to discuss the escalating crisis. The German cabinet is divided over the EU’s 2035 ban on new combustion engine cars. Some officials and industry leaders warn that a rapid phase-out risks accelerating job losses and plant closures, arguing that Germany’s industrial base could be permanently damaged. Others say delaying the transition will leave Germany behind in the electric vehicle market and jeopardise climate targets.
Berlin has announced €3 billion in new incentives for electric vehicles, but sector analysts and company leaders see little chance of a quick recovery. Suppliers like ZF have posted large losses, with restructuring and job cuts affecting all tiers of the industry.
With falling demand and growing overcapacity, parts of the auto sector are shifting focus to defence manufacturing. Rheinmetall and other defence firms are converting car factories for the production of tanks, drones, and munitions. The Franco-German group KNDS has repurposed industrial sites for military vehicles, and Volkswagen has signalled openness to joining defence supply chains. This shift is aimed at preserving industrial jobs and utilising existing capacity as the automotive market contracts.
The process is complex. Defence manufacturing requires retooling, certification, and substantial investment. However, with Europe increasing military procurement, especially in response to the war in Ukraine, demand for new defence production is rising. Policymakers and unions are closely monitoring the impact on jobs, regional economies, and Germany’s industrial profile.
Germany’s automotive sector, once the backbone of the country’s manufacturing economy, faces prolonged restructuring. Policymakers are balancing the need to meet EU climate commitments with the realities of declining global demand and increased competition from abroad. The sector’s future will depend on the government’s ability to negotiate with Brussels for more flexibility on the 2035 deadline and to manage the transition for workers and suppliers.
Meanwhile, the shift to defence manufacturing is accelerating, with both opportunities and risks for Germany’s industrial base. The coming months will be critical in determining whether Germany can stabilise its auto industry or if deep contraction and transformation will continue.
Follow global work and job trends. Subscribe to The Monthly Work Roundup newsletter.
Have insights on work and the future of work? Submit an opinion piece to New Stardom. Love work and career books? Explore our fun workplace book collection.
New Stardom is an independent magazine covering the Future of Work, AI, and emerging job trends.
