The shining BMW headquarters in Munich have for long represented German engineering at its bestthe self contained, understated confidence that once resulted in European premium cars being the envy of the world. This week it seemed a little more insecure. The carmaker announced it is proceeding with plans to cut as many as 8,000 jobs by the end of 2027, (the overwhelming majority in Germany) as part of a voluntary redundancy process, which was struck a deal with its work force representatives. The trimming will be heavily concentrated in administration and research and development teams. Manufacturing will be First and foremost unaffected. The numbers are frightening.
About 40,000 of the 85,000 unionized permanent employees in Germany will be dismissed from October with a view to having an offer of a sacking package. BMWs total worldwide employee base of about 154,000. To lose 8,000 seats is an effective reduction of 5% of the total international headcount, an “meaningful” reduction for a “conventional” carmaker for whom natural attrition was a more characteristic event of organisational adaptation, unlike outright restructuring. This situation came after the company’s second quarter earnings stalled, with pre-tax profits down just over a third. Deliveries in China, still the world’s largest car economy, plummeted nearly 30 percent over the same period.
These production and sales figures were after an earlier profit warning issued in June, which required the company to face a different set of competitive issues. That landscape is now dominated by Chinese makers who have moved faster, priced more aggressively, and learned how to mass produce electric vehicles. Brands like BYD and others have not only won share in their home market but are now taking that into Europe, forcing incumbents to reappraise cost structures and new product development timelines. There have also been blows to margins on electric models from German car makers (partly due to the more recent effects of US tariffs, and the wider geopolitical uncertainty that has undermined consumer confidence). BMW’s new CEO, Milan Nedeljkovi, has referred to “speeding up in which previously rapidly escalating challenges do appear” and the need to “radically reshape the organisation to make sure we’re fit for being competitive again”.
The voluntary scheme is part of that process. Across the Channel the same forces are present but in a very different form. British car manufacturers are not making any final investment decisions on new factories until the government defines the zeroemission vehicle mandate which is becoming increasingly expensive, mandating that manufacturers sell a growing proportion of electric cars each year or pay billions of dollars in fines. Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders, stated that manufacturers who already own facilities in the UK are looking at new models “but there is a lot of uncertainty and they are waiting for a decision before putting any budget plans in place”. Industry officials complain that targets, which increase very steeply in these years, are far too demanding and anticipate that it would become ahead of market demand and could cause closures of UK factories.
