BMW Brake Recall and VW Job Threat Deepen German Crisis

Luxury car-maker finds faulty brakes in 1.5 million vehicles

VW confirms plan to end three decades of German job guarantees

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German carmakers are sinking deeper into a crisis undermining the future of the country’s most important industry, via Bloomberg#autoindustry #germany #evhttps://t.co/JoG6fAj58J

— The_Journalbiz (@the_journalbiz) September 10, 2024

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BMW shares plunged after the company disclosed the spiraling cost of a recall affecting 1.5 million vehicles due to faults with their Continental AG braking systems. VW confirmed plans to end the employment guarantees in Germany, lamenting the nation’s loss of competitiveness.

The one-two punch on Tuesday dealt a further blow to the German economy, which has been reeling since Russia cut off cheap gas supplies. The country’s carmakers have struggled with the transition to electric vehicles, and BMW said tepid demand in China poses a further threat to sales and profits.

VW last week shocked workers in Germany with plans to potentially shut factories in the country for the first time in its near nine-decade history. The corporate bombshell came a day after a political wake-up call from state election results in which populist parties made big gains.

Ending job security agreements sets VW up for lengthy clashes with labor representatives. Cutbacks at the Wolfsburg-based company are harder to push through than elsewhere. Half the seats on its supervisory board are held by labor representatives, and the German state of Lower Saxony — which owns a 20% stake — often sides with trade union bodies.”

Now BMW, a rare bright spot among Germany’s industrial stalwarts, has had its wings clipped by Continental, another example of a century-old company struggling through the transition to EVs. The carmaker expects earnings to fall significantly below last year’s €17.1 billion ($18.9 billion) while forecasting its auto-making operating margin would be as low as 6%, compared to a previous low of 8%.

BMW’s shares closed 8.7% lower in Frankfurt, cutting the company market valuation by roughly €5 billion. Continental shares fell 10.5% and VW fell 3.4%. Continental said it supplies the system to other carmakers, though only BMW is affected by the problem because of a specific configuration it uses.

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Source: Bloomberg

Image:VW