German car parts suppliers fret over combustion engine phase-out

Automotive Industry

Source: EURACTIV, 2021-07-30

The European Commission’s Fit for 55 package will rapidly tighten emission standards for cars, effectively banning the sale of vehicles fitted with internal combustion engines by 2035. German carmakers had preempted the move, but parts suppliers and employees are worried. 

“This is hostile to innovation and the opposite of technology-neutral,” said Hildegard Müller, president of the powerful German automotive manufacturer association VDA, adding that the impacts on jobs in the industry would be significant.

Her reaction to the Commision proposal lays bare the differing interests the VDA is beholden to: on the one hand, the companies like Volkswagen that assemble the cars, on the other the interest of the manifold parts and engine suppliers like Bosch.

Volkswagen has embraced electric vehicles and has pledged to stop selling combustion engines in Europe by 2035. “Our electric offensive is picking up momentum,” CEO Herbert Diess said on 29 July, as VW posted larger than expected profits.

The picture is less rosy for Germany’s large parts suppliers, which feel underrepresented in the political discourse due to the dominance of the car manufacturing giants, a source told EURACTIV on condition of anonymity.

An end to the combustion engine means an end to the decades of technological expertise and process accumulated by highly specialised suppliers, many of which are SMEs, recent reports have warned.

The schism between car assemblers and parts suppliers is further complicated by the worries of their employees. In 2020, a report by Germany’s National Platform Future of Mobility (NPM) predicted a worst-case scenario that would see the car industry lose 400,000 jobs, prompting trade unions to demand a say in how the transformation should occur.

The report is much disputed, and most experts agree that in the event, job losses will not be that bad. The mechanical engineering association VMDA predicted a loss of 180,000 jobs if the combustion engine were to be banned in 2040. 

“A few smaller Detroits are currently looming,” Roman Zitzelsberger, regional chief of metalworker trade union IG Metall, warned in an interview with Kontext, and added that suppliers concentrated in a few places now face sweeping cuts with possibly disastrous results for regions.

Jörg Hoffmann, chair of IG Metall, took the example of the western German state of Saarland in a 7 June interview. He noted that the region had four large suppliers working in the combustion engine industry: Bosch, ZF, Eberspächter and Festo, all of which stand to lose out big from the phase out of the combustion engine.

These clusters must adapt to the changing circumstances and co-operate, for example by creating a regional fuel cell cluster, he added.

Works councils, which represent employees’ interests within the company and in tandem with trade unions, also have a say in the transition of Germany’s car industry.

They have a legally mandated role to play in the reeducation of employees as their learned skills are made obsolete by the combustion engine phase out. IG Metall called for a fund to assist SME works councils in order to ease their role in its Fit for 55 position paper. 

The transformation of Germany’s car industry runs much deeper than Volkswagen’s enthusiastic embrace of electric mobility, and suppliers are worrying that their largest source of income is set to vanish. 

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