German companies are cutting jobs
German companies are responding to the toxic economic climate with cost-cutting measures. According to an analysis by consulting firm EY, Dax-listed corporations have reduced their workforce by around 1% within a year, and cut research spending by the same proportion. Jobs were lost primarily in the automotive, chemicals, and pharmaceutical industries. The outlook is equally bleak for Germany’s medium-sized machinery sector: figures released simultaneously by the Mechanical Engineering Industry Association (VDMA) show employment there shrank by 2%.
„The very difficult political and economic environment is increasingly taking its toll,“ said Henrik Ahlers, CEO of EY Germany. „Above all, highly export-oriented industrial groups are struggling, suffering from problems in their two key foreign markets, the US and China.“ The European home market has not been able to compensate.
Johannes Gernandt, chief economist at the VDMA, pointed to the „considerable pressure“ facing machinery manufacturers. Companies, he said, are suffering particularly from the investment restraint caused by global uncertainties. His conclusion: „Job cuts are likely to continue in the coming months – even though at a slower pace.“
Further job losses in Dax companies
EY sees no signs of a turnaround in employment among Dax companies. The cost-cutting programmes now under way, including severance packages, will only take effect with a time lag. „The decline in headcount will continue and even accelerate,“ said Ahlers. „Large industrial groups in particular need to slim down. Administrative jobs are being cut, management layers reduced. On top of that comes the increasing use of artificial intelligence.“
Many companies have lowered their forecasts and launched or expanded savings programmes during the current reporting season. Chemicals group Lanxess recently announced production cuts or restructuring at several sites in Europe and the US.
The agreement on 15% import tariffs into the US also represents „a massive deterioration compared with the previous situation,“ explained Jan Brorhilker, Managing Partner of EY’s Assurance division. „This will lead to revenue losses running into the billions.“
Sales and profits are shrinking
In the second quarter, total revenue of Dax-listed companies had already declined by nearly 2% compared with the same period a year earlier. Operating profit (Ebit) fell by more than 3%. However, there are also companies that have been little or not at all affected by the trade disputes, said Brorhilker, specifically „industrial firms with production facilities in the US, or service providers that are barely dependent on cross-border trade.“
And then there are those companies that benefit from the political environment, particularly in the defence sector. Engine manufacturer MTU Aero Engines, tank and munitions producer Rheinmetall, and aircraft maker Airbus all increased their revenues and, in some cases, significantly expanded their workforces. At Rheinmetall, headcount was up 17% year on year at mid-year, at MTU Aero Engines 7%, and at Airbus 2%.
