Germany’s Industrial Crisis Deepens: Workers Accept Pay Cuts for Jobs, VW’s Plant Closures Loom
03.07.2026 - 03:56:10 | boerse-global.de
Germany’s labour landscape is fracturing on multiple fronts. A recent ruling by the Federal Labour Court (BAG) on 25 June added legal nuance to the wave of restructuring: minor errors in mass layoff notifications – such as a slightly inflated number of dismissals – do not automatically nullify the terminations, as long as the protective purpose of the notification remains intact. The decision provides some breathing room for companies executing large-scale redundancies, but it comes amid a torrent of bad news for workers across several industries.
At the automotive supplier Mahle, around 4,000 employees in Stuttgart and Kornwestheim have accepted a different bargain. They will forgo the 2026 tariff wage increase as well as portions of their Christmas and holiday bonuses. In return, the company has guaranteed their jobs until the end of 2029, with an exit clause available from the end of 2028. Mahle reported revenue of €11.26 billion for the 2025 fiscal year but only €20 million in profit – a slight year-on-year decline.
Volkswagen’s crisis remains the most dramatic. The supervisory board meets on 9 July, and expectations are grim. Company circles have flagged the possible closure of four German sites: Zwickau, Hannover, Emden, and Neckarsulm. Up to 100,000 jobs could be cut worldwide. Lower Saxony’s premier, Olaf Lies, floated an unusual proposal: produce models originally developed in China at German plants. The works council, led by Mike Rösler, insists instead on building the ID.9 Era model in Zwickau. Saxony’s premier, Michael Kretschmer, accuses VW of reneging on commitments – the state had funnelled around €1.2 billion into converting the Zwickau plant into an e-car factory by early 2022.
The pain has spread to Mercedes-Benz. Tariff talks escalated this week, with protests taking place on Friday in Sindelfingen, Bremen, and Berlin. The company postponed a special tariff payment equal to 18.4 percent of one month’s salary to 2027 – a delay affecting roughly 90,000 employees. The automaker’s first-quarter results fell 17.2 percent, underscoring the financial pressure.
Beyond the carmakers, the downturn is ravaging suppliers and tech collaborations. The Automated Driving Alliance, a joint venture involving Bosch, Volkswagen, and VW subsidiary Cariad, has been dissolved – VW alone had invested around €1.5 billion in the project. Smaller players are also retreating: Bohai Trimet announced the closure of its plant in Sömmerda, eliminating about 100 jobs.
The crisis has spread well beyond the automotive sector. In Austria, Stieglbrauerei is shutting down its logistics sites in Tyrol and Upper Austria; 48 employees are to be absorbed by new partners, as the drop in gastronomy business takes its toll. In the Ostwestfalen-Lippe region, Herforder Brewery faces closure at the end of August, while Paderborner Brewery is put up for sale. Elsewhere, the PCT Maschinenbau GmbH (Polar-Mohr) entered insolvency proceedings on 1 July. Its main customer, Heidelberger Druckmaschinen, will take over production and development, moving the site from Hofheim to Eschborn.
On the policy front, the federal government is preparing a suite of labour-market reforms. One proposal would allow fixed-term contracts without a specific reason to be extended to up to 48 months for new hires until the end of 2030. High earners – those with monthly salaries above roughly €15,000 – would become easier to dismiss. At the same time, the phone-based sick note is set to be abolished: employees will need a doctor’s certificate from the first day of illness.
A rare note of compromise emerged in Lower Saxony’s public transport sector. Mediator Bodo Ramelow announced a settlement on 2 July for around 4,550 employees, though union and worker committees still need to ratify the deal. The agreement heads off a looming escalation in a sector where strikes have repeatedly disrupted commuters.
