Fri Sep 20 05:51:18 UTC 2024: ## German Manufacturing Crumbles as Energy Crisis Bites, US Policies Bite Harder
**Berlin, Germany** – In a dramatic turn of events, Volkswagen, the iconic German carmaker, is set to close factories and break labor contracts, a move unprecedented in its history. This desperate measure comes after the company’s profit margins plummeted to an unsustainable 0.9% in the second quarter, driven by declining global sales. The move will result in the layoff of tens of thousands of employees and aims to save €10 billion over the next two years.
This drastic action underscores a wider crisis engulfing Germany’s once-mighty manufacturing sector. The country is facing a wave of deindustrialization, driven by soaring energy prices and labor costs. Other industry giants, including chemical giant BASF, Siemens Energy, and whiteware manufacturer Miele, are shifting production offshore to China and Eastern Europe in search of lower costs.
The war in Ukraine has exacerbated this situation. Germany’s decision to sever ties with cheap Russian energy and rely on expensive US liquefied gas has tipped the scales against its energy-intensive manufacturing sector. The car industry, in particular, relies heavily on energy, with a single car requiring 60,000 megajoules – equivalent to two years of electricity consumption for a household.
Adding insult to injury, the US Inflation Reduction Act (IRA), a massive subsidy scheme aimed at re-industrializing America, is sucking the lifeblood out of European manufacturing. Companies, including VW, are lured by the vast subsidies offered to build electric vehicle industries in the US.
Meanwhile, China is exploiting the situation, capturing Russia’s market and winning the technological, price, and quality war. This combination is leading to a waning demand for European brands, further fueling the crisis.
The consequences of this economic decline are palpable. The working class in Germany is losing faith in its leaders’ ability to maintain jobs and livelihoods, leading to a resurgence of the far-right. The recent state elections in Saxony and Thuringia saw the BSW, a conservative left party, and the right-wing AFD gain significant traction, reflecting a deep-seated distrust of the governing elites.
Analysts warn that this situation is a microcosm of a broader global trend, where economies and national security are being sacrificed on the altar of American global hegemony. The relationship between Germany and the US is facing growing scrutiny, with many Germans feeling that they have been placed in a precarious position by their ally.
This unfolding crisis serves as a stark reminder to other Western countries that their economic and national security are not immune to the unpredictable consequences of geopolitical maneuvering. The once-unshakable dominance of the German manufacturing sector stands as a cautionary tale for the world.
First Piper 