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Business

Worries Mount as Germany's Car Industry Stalls

Even as the German government considers tax incentives and other bailouts for the ailing car industry, auto experts warn that the hard times will be felt far beyond manufacturers' assembly lines.

Man builds a BMW

Many German companies provide parts for the auto industry

Employees of Daimler and BMW aren't the only ones braced for layoffs as the demand for German cars drops. Workers who make the axles and transmissions that go into the luxury sedans and sporty convertibles are also worried about their jobs.

Just weeks after German carmakers warned that they would temporarily halt production due to falling demand, companies such as Bosch and Continental have begun planning similar moves.

Continental said it plans to have shut downs around Christmas at its plant in Regensburg that will mean a loss of income for about 1,500 employees. Bosch said it was idling a key plant and sending 400 workers home.

Germany's venerable ZF, which specializes in driveline and chassis technology, said it was doing everything possible to protect permanent staff during the slowdown, including stopping all overtime, abolishing flex time and planning temporary closures.

BMW und Mercedes-Benz logos

Both BMW and Mercedes will temporarily halt production

Unless the government steps in, up to 20 percent of auto suppliers will go bankrupt in the next two years, endangering 50,000 jobs, Ferdinand Dudenhoeffer, director of the Center of Automotive Research (CAR) in Gelsenkirchen, told the Bild newspaper on Tuesday, Oct. 28.

He suggested that the government set up a credit assistance program specifically for the car suppliers industry, which would make it easier for companies to get the credit they need to continue operating.

Entire economy will hurt

The pain will likely be felt beyond the automobile industry and suppliers, warned Bremen economist Rudolf Hickel.

"When the auto industry coughs, engineers, artisans and retailers all get pneumonia," Hickel said.

He criticized the approach of the car industry to the difficult economic times, criticizing their decision to lay off workers and stop production at the first sign of economic distress, which he said sets a bad precedent.

Carmakers look for bailout

Carmakers have said that they, like ailing German banks, should get a bailout.

VW Passat

Will tax breaks make people want to buy new cars?

On Tuesday, German Economy Minister Michael Glos announced a plan for tax incentives aimed at encouraging Germans to buy new cars. The proposed tax breaks will be part of a package aimed at strengthen the economy during the current financial crisis, the Christian Social Union (CSU) minister said.

The industry needs "our backing and very concrete help to stimulate the demand for new cars," European Union Industry Commissioner Guenter Verheugen said.

If demand continues to lag, it will lead to a massive reduction in jobs in the European auto industry and beyond, Verheugen told Hannover's Neuen Presse. Unless the situation changes quickly, "massive job reductions will be unavoidable," he said.

While Germany has not yet agreed to any specific bailout measures, the United States is reportedly considering making around $10 billion available to General Motors so that it can merge with Chrysler.

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