Germany Passes Major Labour Flexibility Law as Auto Crisis Wipes Out Thousands of Jobs
02.07.2026 - 19:25:35 | boerse-global.de
Germany’s industrial engine is sputtering. Since 2019, the metal and electrical sectors alone have shed around 320,000 positions, and the trend is accelerating. In June 2026, a string of household names—Evonik (1,850 jobs), Bosch (510 through plant closures) and Alstom in Kassel (800 roles tied to a sale)—announced deep cuts. The data from the Stuttgart region’s Chamber of Crafts shows the bleakest second-quarter business climate in more than two decades, with nearly one in four craft firms planning to reduce headcount and 42% slashing investments.
Against that backdrop, the federal coalition of the CDU/CSU and SPD pushed through a labour-market reform package in early July 2026. Its centrepiece: the maximum duration for fixed-term contracts without cause doubles from 24 to 48 months. Such contracts can now be renewed up to six times. At the same time, the rules for dismissing high earners—anyone with a monthly salary above €15,000—were loosened. The government also scrapped the phone-in sick note; as of the reform, employees must present a medical certificate from the first day of illness. Tax incentives for severance payments tied to job switches are meant to nudge workers into new roles.
Reactions vary sharply. Employer associations welcomed the new flexibility. The services union ver.di and the German Confederation of Trade Unions (DGB) attacked the tougher sick-leave rules. Marcel Fratzscher, president of the DIW think tank, called the package “an inadequate symbolic measure.”
The reform lands at a moment when Germany’s car industry is convulsing. Volkswagen is mulling the production of China-developed models such as the ID.9 Era at its German plants to keep factories running. Yet company circles say up to 100,000 jobs globally could be at risk, with the domestic sites in Zwickau, Hanover, Emden and Neckarsulm seen as most vulnerable. Lower Saxony’s state premier Olaf Lies backs the technology transfer from China; the works council in Zwickau demands a clear roadmap.
Meanwhile, the IG Metall union has called for protests at Mercedes-Benz on 3 July 2026, targeting the Sindelfingen and Untertürkheim sites. The automaker pushed a contractually agreed special payment—equal to 18.4% of one month’s salary—back to 2027. First-quarter earnings had already slumped by more than 17%.
Suppliers are also bleeding. Valeo, the French parts group, closed its electric-mobility research centre in Bad Neustadt at the end of June, eliminating over 180 jobs. Its research in Ebern is scheduled to shut by end-2027. Andritz subsidiary Schuler plans to cut 500 more positions in 2025, on top of the 2,000-plus it has already lost over the past five years, citing chronic underinvestment by carmakers. In Rheda-Wiedenbrück, Westfalen-Mobil reduced its permanent workforce to about 200 on 1 July; a transition company has taken over.
Not every plant accepts the cuts without a fight. At Mahle’s sites in Stuttgart and Kornwestheim, workers agreed to salary reductions in exchange for special protection against dismissal running through the end of 2029.
