The Volkswagen automobile company made a historic announcement last month when its CEO warned of the need to shutter plants in Germany due to flagging sales and high production costs. A week later, the company announced it was exercising a three-month exit clause from a labor agreement that had prevented it from laying off its workers in order to allow for the plant closures. If Volkswagen follows through on its plans, it will be the first time in the company’s history that its workers in Germany will have faced such a downsizing.
While Volkswagen attempts to scuttle its long-established social contract with labor unions, Germany is playing the lead role among European Union member states to scuttle or weaken the imposition of EU tariffs on made-in-China electric vehicles, or EVs. As a result, Volkswagen now finds itself in the position of defending both its layoffs of German workers and the Chinese imports that are threatening their jobs.
Volkswagen’s domestic challenges are ultimately bound up in its economic dependency on China. But if German workers are forced to accept layoffs and plant closures to make up for the mistakes of Volkswagen executives in China, the popular discontent that has roiled the German government and business elites for the past year is likely to grow stronger still. The crisis in Germany is yet another example of how China’s rise continues to shock the domestic political foundations of many industrialized democracies.