Germany Plans Aid for Struggling Auto Industry, Government Says

(Bloomberg) --

Chancellor Angela Merkel’s government is preparing measures to aid workers in Germany’s struggling auto sector, according to the labor ministry.

Labor Minister Hubertus Heil plans to introduce wage subsidies for car producers and their suppliers to prevent possible job losses if the downturn in the sector continues, his ministry said in response to questions from Bloomberg News. A similar mechanism was used successfully during the financial crisis of 2008 to prevent mass layoffs.

The government is hosting talks with labor union and company representatives on Wednesday to discuss the plans, which would still require parliamentary approval. The meeting is not expected to produce a final decision, as the government itself can’t agree on the timing. While the Social Democrat Heil is pushing for a swift implementation, Merkel’s ruling Christian Democratic party wants the Bundestag, the lower house in parliament, to have the final say on a time line.

Carmakers in Europe’s largest economy had a turbulent 2019 as an economic slowdown coincided with a transition to electric and self-driving cars. Additionally, concerns about higher tariffs caused by the U.S.-China trade war stoked fears of a deteriorating environment for the industry. PSA Group’s German car-making division Opel said on Tuesday that it will cut up to 4,100 jobs, joining rivals around the globe in retrenching amid a sales slowdown and technological disruption.

“The car sector is undergoing a difficult transition phase and needs more flexibility to respond to a slowdown,” SPD deputy leader in the Bundestag, Carsten Schneider, told reporters Wednesday in Berlin.

Wage subsidies allow companies to keep employees on their payroll during a downturn, but under current legislation are only allowed if the labor market as a whole is in trouble. Heil wants to introduce subsidies for specific sectors in trouble, such as the car industry.

Under his proposal the government would pay social security contributions if a worker cuts back their working hours to take on vocational training.

For January, the labor ministry expects 113,500 workers on a reduced workload program. During the financial crisis, the number peaked at 1.4 million in 2009.

To contact the reporter on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Raymond Colitt, Andrew Blackman

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