German car industry suffering September 19 14:08

On the 12th of this month, the European Central Bank decided to make additional monetary easing, including all monetary easing measures, such as a rate cut for the first time in three and a half years. “Monetary easing” is a policy to support the economy by making it easy for money to go to the market. Germany has been sluggish due to the slowdown in the European economy. What is happening in the largest economic power in the region? The interviews highlighted the struggles of the German automobile industry, which has pulled the country's economy like Japan. (London reporter Teruyuki Kurihara)

Central bank crisis

The headquarters of the European Central Bank in Frankfurt, a German financial city. Here, on the 12th of this month, a board meeting was held to decide monetary policy.

The European Central Bank is responsible for monetary policy in 19 countries that use the euro, such as Germany, France, and Italy. The board decided on additional monetary easing.

One is the first rate cut in three and a half years. The interest rate for depositing funds from financial institutions has been reduced from -0.4% to -0.5%. In addition, “quantitative easing”, in which various assets were purchased and a large amount of money was supplied to the market, was resumed from November. In addition, we have confirmed a policy to hold interest rates over the long term.

A combination of possible measures packed into a “money easing package”. Why is the European Central Bank so upset now?

The background of the slowdown is the US-China trade friction and the EU withdrawal

The background is the slowdown in the economy that is growing in the euro area.

Looking at the GDP of the major countries in the second quarter from April to June, the growth rate of France was only 0.3%, and Italy showed zero growth.

The shock was the fall of Germany, which has driven the eurozone economy in the world's fourth largest economy after Japan. The growth rate during the same period was -0.1%, which led to negative growth.

Germany is as much about the automobile industry as Japan is. The suffering of the automobile industry has led to the economic downturn of the entire country. The main reason is that China's economy is slowing down due to trade friction between the United States and China.

Volkswagen, the world's best by volume, sold 4% in the first half of the year. Exports also declined. In June, however, exports of passenger cars from Germany to the world fell by a significant 25% year-on-year due to the decline in the number of passenger cars in the UK, which was shaken by the withdrawal of the EU.

Responding to a decrease in orders by "savings" withdrawal

We visited an engine parts manufacturer in the outskirts of Stuttgart, southwestern Germany, to see what the car industry really is like.

Previously, it was normal to work on holidays, but orders declined, and the performance of this manufacturer in the first half was in the final deficit. Under these circumstances, work hours are being shortened.

In Germany, there is a system that saves overtime hours during busy periods like savings. Now that production has declined, the company is demanding that employees use this “savings” to reduce working hours.

This system is used not only in production departments but also in marketing departments, and some employees take one or two days off on weekdays. Even if you reduce your working hours, your salary will be maintained, so there will be no confusion associated with reduced working hours, but this is not a way to continue.

“We will have“ saves ”until the first quarter of next year, but if the economic downturn continues beyond that, we have to think about another way.”

There are also movements seeking support for reduced working hours

If there is no “savings”, it will be difficult to survive just by the efforts of the company.

In fact, nowadays, in Germany, there is a rapid increase in the number of companies seeking support from the country to implement shorter working hours. The government subsidy is a mechanism that compensates 60% to 67% of the reduction for employees whose salary has been reduced due to shortened working hours due to the recession.

In the state of Baden-Württemberg, in the southwestern part of Germany, where the manufacturing industry gathers, the number of employees covered by salary has risen to about 5,000 people last month, more than five times a year.

The director of the state's labor bureau, Christian Lauf, explained the background of companies seeking subsidies:

“There are many companies that have trouble quitting their employees. It's very difficult to secure once again if talented personnel are lost as the electrification and car IT progress.

The automobile industry is in the midst of a major reform called once every 100 years. No matter how hard it is, if you lose the human resources who can handle the new technology, there is a serious situation that you will eventually get stuck even if the economy goes up

Is there a recession right there?

If the economy recovers quickly, the human resources remaining in the company will be the driving force for growth. Germany's strong recovery from the Lehman shock was due to the fact that excellent human resources remained at each company. However, if the economic downturn still continues, the plan will collapse.

What will happen to Germany in the future? Timo Bolmershauser Senior Economist, head of corporate research at the ifo economic research institute in Germany, talks about the prospect of a recession since 2009.

“The downturn in the manufacturing industry will continue to extend to the service sector and consumer spending. The German recession is inevitable.”

Will it recover only by monetary easing?

Can the manufacturing industry slump spread to other fields?

At a board meeting after deciding on additional monetary easing, President Draghi of the European Central Bank clarified the idea that there could be further rate cuts.

However, what impressed me at this press conference was that Dr. Draghi reiterated that “countries should do their own fiscal spending to support the economy” and argued that monetary policy alone was not enough. I felt that I was aware of the limits of monetary easing.

The headquarters of the European Central Bank will be transferred to Mr. Lagarde, who served as Managing Director of the IMF = International Monetary Fund from November. The skill of the Eurozone economy will be questioned.

Teruyuki Kurihara, reporter from London

Joined in 1999.
After working in the Economic Department and International Department, he is now in charge of the European economy