BMW to cut 6,000 jobs in Germany to save costs

German automaker BMW has confirmed it will cut roughly 6,000 jobs in Germany in an effort to cut costs as the automotive sector continues to struggle to recover from the Covid-19 outbreak.

The outbreak has been paired with relatively low demand for new cars, which have resulted in extreme losses for the auto giant.

The German automaker and its works council agreed the workforce reduction will be achieved via a mixture of redundancies, early retirements and not renewing temporary contracts, on top of not filling new vacancies.

This marks the first time the company has had to downgrade since the 2008 financial crisis.

"We are on the right track," said a company spokeswoman on Thursday. Operational layoffs, of which works council chief Schoch had warned a few weeks ago, are initially ruled out. The company agreement is due to be signed this Friday.

The company heads to want to avoid losses altogether by the end of the year. BMW’s CEO Oliver Zipse and CFO Nicolas Peter said that so long as BMW remains in the black for the full year, operational layoffs are impossible.

However, business is sluggish in Germany, and still completely grounded in their European neighbours.

BMW similarly announced its intent to cut roughly 6000 jobs by 2022, back in September 2019.

Although currently employing some 126,000 people globally, the Bavarian automaker had recently put roughly 34,000 staff on short-hour contracts to make up for their entire production line grinding to a halt at the end of March as the pandemic spread across the continent.

Even before the corona crisis, the German automotive industry was starting to stagnate. The return on sales for cars at the end of 2019 was less than 5% and the first few months of 2020 will be entirely within the red for the automaker due to the lockdown restrictions imposed.

BMW’s total car sales are expected to drop from 2.5 million to under 2 million according to those within the corporate circles.

However, several of BMW's main competitors, such as Volkswagen and Daimler, recently began ramping up production towards the end of May. Their issues are the same across the entire industry as demand for cars reaches an all-time low.

Last November, Audi, owned by VW, announced its intent to cut roughly 9,500 jobs by 2025 in its factories to make way for an electric car push in something of an overhaul for the company. Daimler is planning something similar, with jobs cuts of up to 15,000.

New car registrations across the EU were slashed by roughly 52% in May compared with the same month in 2019. That was a slight improvement over the 723% drop in April, but no consolation to carmakers desperate to get their production lines running to full capacity again.

According to the German Automotive Industry Association, only 1.18 million cars were produced between January and May – a drop of 44%, or nearly a million units – compared with the same period the year before.

Ferdinand Dudenhöffer, director of the Center for Automotive Research in Germany, has hinted that key global car markets may take several years to recover, which is set to stifle German car production and could mean the loss of as many as 100,000 jobs across the automotive sector over the next five years.

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