After a summer in which Germany’s generous Kurzarbeit furlough scheme largely shielded the country’s 810,000 auto workers from the industry’s economic meltdown, September has brought a slew of bad news.

Dax-listed supplier Continental almost doubled the number of jobs it deemed “at risk” in Germany to 13,000, while Munich-based truckmaker MAN said it would cut up to 9,500 roles, or a quarter of its workforce, blaming the “technological change” manufacturers are grappling with. 

Bavarian partsmaker Schaeffler added to the gloom, announcing a further 4,400 cuts, mostly in Germany, because of the downturn precipitated by the pandemic. 

Yet last week, despite persistent pleas from the politicians in charge of “car states” Baden-Württemberg, Bavaria and Lower Saxony, Berlin flatly refused to give the sector direct financial aid.

After a marathon online summit with auto execs and unions, Angela Merkel’s administration would commit only to considering limited help for struggling suppliers before meeting again in November. The prospect of a stimulus package to encourage people to buy combustion engine cars — which still account for roughly 90 per cent of those sold in Germany — looks further away than ever.

Ms Merkel is not known for her displays of closeness to the auto industry, which accounts for approximately 5 per cent of the country’s GDP. Early in her premiership, when asked if she would inherit the title of “car chancellor” from her predecessor, Gerhard Schröder, she reportedly replied “he can keep it”. 

She has also maintained a distance from the sector’s powerful lobby and kept joint public appearances with chief executives to a minimum. 

But as job losses mount, the outgoing German leader will find it harder to fend off appeals from companies that say they are on the verge of collapse. 

A temporary law allowing firms to put off filing for insolvency during the pandemic partially expires on October 1, and a wave of bankruptcies among smaller, specialised car parts suppliers is likely to follow. 

Nonetheless, politicians should be wary of indiscriminately bailing out an industry that is facing three separate crises, of differing durations.

The immediate effects of the pandemic have exacerbated existing margin pressures caused by the shrinking of the car market over the past three years as the global economy has slowed, and the costs of developing lower-emissions vehicles.

But according to Thomas Puls of the German Economic Institute in Cologne, an industry-wide bailout “will create zombie companies that have no sustainable long-term business model”.

“We should take a look at who could be saved but we must also answer the question of who should be saved,” he said. “We need to acknowledge that there is no single automotive industry; instead we have several clusters.”

Recent announcements underline the varying causes of the sector’s problems. MAN has struggled to keep up with rivals since it was taken over by VW almost a decade ago, while Continental has lagged behind on investing in electric vehicles.

Much of the industry is also more resilient than those raising the alarm would suggest. 

In August, data from the VDA industry lobby found that more than 80 per cent of suppliers “currently have access to sufficient sources of finance and . . . feel sufficiently supported by their principal banks”. Just one in five said their liquidity was only secure for two to three months.

If specific suppliers that are crucial to the industry are in trouble, one option could be for Germany’s largest car manufacturers, who found the means to pay billions of euros of dividends in the midst of the crisis, to come to their aid.

After all, “if suppliers are in bad shape it’s perhaps because big car manufacturers have pushed them to their limits”, said Monika Schnitzer, who sits on the government-appointed Council of Economic Experts.

Berlin’s firepower could perhaps be better deployed in establishing a large-scale retraining scheme to counter job losses, and accelerating investment in electric vehicle infrastructure.

But if it is to do so, Ms Merkel’s government would have to face down an industry that believes its decline would have broader economic and psychological significance than just a slump in employment.

“Germans have only two things to be proud of postwar: football and cars,” one industry lobbyist told the FT. “You can’t take away the latter.”

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