The European automotive industry is bracing for a challenging 2025, characterised by declining sales, rising emissions regulations, and employee unrest. Analysts have described the situation as a "perfect storm" for major manufacturers such as Volkswagen and Stellantis, which is under significant pressure from multiple fronts.
Recent developments have drawn attention, particularly the unexpected resignation of Stellantis CEO Carlos Tavares. The company has seen a marked decrease in sales, particularly for the electric Fiat 500e, which has undergone several production halts this year. Tavares’ resignation, occurring shortly after an announcement of his planned retirement in early 2026, has raised concerns about the company’s immediate future. Stellantis stated that the process for appointing a new CEO is underway, with expectations to conclude the search in the first half of 2024. “The market will inevitably ask why the Stellantis board considered that not having a permanent CEO for some months was preferable to keeping the current CEO in situ,” commented Bernstein analyst Daniel Roeska, reflecting ongoing investor concerns. The company has reaffirmed a dismal operational forecast, projecting an adjusted operating income margin between 5.5 and 7 percent and industrial free cash flow losses between 5 billion and 10 billion euros, contributing to a 43 percent decline in share value since the beginning of the year.
Meanwhile, Volkswagen is confronting significant labour unrest as it contemplates closing up to three factories in Germany. CFO Arno Antlitz highlighted the urgency of taking "decisive action" to reinvigorate factory operations. He stated, “Our aim is for our factories to be humming with activity. The alternative is highly detrimental.” The situation has escalated as nearly 100,000 workers participated in walkouts over job cuts which have been deemed necessary for competitiveness. With further negotiations set for December 9, the outlook for a mutually agreeable resolution appears bleak, as tensions between management and employees escalate.
Industry analysts caution that the situation could worsen, especially amid fears of a potential trade conflict with the United States. UBS Group noted the presence of "pricing pressure, market share losses in China, tighter CO2 regulation, tariff risk, and continued lacklustre demand" could erode sector earnings further, despite ongoing restructuring efforts.
The broader automotive industry has been underperforming in Europe, with the sector experiencing significant downturns this year. According to the Ifo Institute, feelings within Germany’s auto industry are worsening rapidly. Following a period of strong order backlogs prompted by pandemic-related supply chain issues, demand for electric vehicles has plateaued, leading to surplus production capacity across the sector. Manufacturers, including Ford and high-end brands like Mercedes-Benz and Porsche, are increasingly compelled to cut costs and reduce workforce numbers in response to dwindling demand.
The ramifications of this downturn extend through the supply chain, with key automotive parts suppliers such as Robert Bosch and Continental announcing approximately 20,000 job cuts. Germany's economy has continued to stagnate, marked by falling factory orders and a shrinking manufacturing sector, raising concerns about a long-term industrial recession.
As Volkswagen prepares for critical negotiations with its labour union IG Metall regarding its planned job cuts, the ramifications of their decisions may influence the company’s trajectory in the months to come. Daniela Cavallo, VW’s chief labour representative, indicated that the outcome of the meeting could lead either to compromises or further escalation of unrest within the workforce.
The automotive industry is a vital part of Germany's economy, and the cascading effects of workforce reductions may not only impact economic stability but also potentially influence the political landscape, as disaffected workers seek accountability from their leaders in an increasingly challenging environment.
Source: Noah Wire Services