Volkswagen Shock – In Switzerland, 32,000 jobs on the front line of the auto crisis

The existential crisis facing the automotive sector in Europe now threatens to reach its nerve center – the assembly lines. Starting with that of the first of its buildersthe Volkswagen group. Employee representatives denounced on Monday the plan to close three of the ten production sites of its VW brand in Germany – with tens of thousands of layoffs as a result. The country’s largest industrial employer, which employs 300,000 people across the Rhine, unveiled a 10% salary reduction plan on Wednesday evening. Without confirming factory closures.

These difficulties portend even greater pressure on the galaxy of subcontractors supplying the 15,000 to 30,000 parts previously constituting a vehicle. “The impact of the recession in Germany and these structural difficulties is considerable – this summer, sales across the Rhine by our automobile supply companies plunged by 15% compared to a year ago,” warns Jean -Philippe Kohl, vice-director of Swissmem.

A tenth of the 320,000 employees in the machinery industry work for companies supplying the automotive sector. That is more than 30,000 people, approximately the number of UBS employees in Switzerland.

Crisis after crisis

Embarked on a forced electrification of its range – with tens of billions of investments – the brand at the heart of a conglomerate ranging from Audi to Skoda finds itself forced to operate in “low cost” mode, inevitable for which its leaders did everything to escape – successfully – for forty years.

In the eyes of the head of the Schmidt Automotive Research office in Berlin, the debate now boils down to one figure – car purchases in Europe. “Each year, their number is 2 to 3 million lower than the normal displayed before Covid,” says Matthias Schmidt. While the number of assembly lines has hardly decreased.

Factories south of the Rhine

“Swiss subcontractors are on the front line,” confirms Anja Schulze, director of the Center for Automotive Research (CAR) in Switzerland. “According to our latest survey, nearly eight tenths of orders go to Germany and this proportion has only seen a slight decline in recent years,” continues the latter.

This Nokia-like fate so feared for VW does not, however, take the approximately 500 companies in the sector by surprise. “In fifteen years, one crisis has chased another – great global recession of 2008, soaring value of the Swiss franc since 2015, Covid, shortage of electronic components in 2021, explosion in gas and electricity bills caused by the war in Ukraine in 2022, without forgetting the tectonic movement of the electric car… whose sales are not there,” lists the P^r Schulze.

Unforgiving sector

The major German manufacturers will therefore demand even tighter prices from their suppliers and those producing in Switzerland seem doomed – if only because of the handicap of the Swiss franc. “Nothing new there,” sweeps away the head of Swiss CAR. The latter has long said that it has been “stunned by the way in which these subcontractors have continued to manufacture, in Switzerland, components intended not for a few Lamborghinis but for mass-produced mid-range cars”.

The most surprising observation drawn from his meetings with the bosses of the sector? Those producing parts for classic gasoline, diesel or hybrid vehicles – these parts for engines and other gearboxes, offered by a good quarter of subcontractors – have “in no way seen their activity wiped out and continue to sell significant volumes,” reveals Anja Schulze.

No wave of bankruptcies yet

The report on the activity of the sector published six months ago (read below) does not show a wave of bankruptcies among subcontractors, like that observed in France. “The number of companies involved in the automobile industry does not really vary and the workforce in the sector must have fallen by 2,000 people in a decade – around 10% less while sales have… continued to increase », describes the woman who also teaches innovation management at ETH Zurich.

The cards are no less reshuffled. Thus, the number of manufacturers to whom “Swiss made” parts or equipment end up has doubled in the space of a few years. “This remains an indication – we do not have the details of the volumes – but it shows that they supply a growing number of new brands and subcontractors appearing in the electric car,” points out the head of Swiss CAR. The largest increases were recorded at Tesla, DS Automobiles and Volvo.

One in five subcontractors is entirely dedicated to the car

In which cars do the parts and components you manufacture end up? German manufacturers VW, Mercedes-Benz, Audi and BMW top the list of those cited by Swiss subcontractors surveyed in the latest survey of the Swiss automobile industry carried out under the direction of Anja Schulze of Swiss CAR, in partnership with Swissmem. More than half of the suppliers surveyed say they deliver to Volkswagen.

The majority of the sector’s half a thousand companies are located between the Rhine and the Alps – only around twenty being active in the canton of Vaud and six in Geneva. One in five is entirely dedicated to cars, with many also supplying other sectors, such as watchmaking.

The survey shows that more than 40% of these SMEs plan to expand their production capacities in Switzerland over the next five years. Despite the pressure on costs, the high level of wages, the strength of the franc.

At the end of the 2009 crisis, which had brought down entire sections of the sector – throughout Europe, and particularly around Cluses-Bonneville, in Haute-Savoie – “many of these companies asked themselves the question of whether if we should not let go of the sector, by far the most violent in terms of pressure on prices,” relates Anja Schulze. And yet, several managers told him that they had then decided to stay on these low-margin productions. Because of the efficiency it allows them to achieve in the rest of their activities.

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Pierre-Alexandre Sallier has been a journalist in the Economy section since 2014. Previously he worked for Timeas well as for everyday The Tribunein Paris.More info

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