What GM's crisis means for German automakers – companies

• German automakers are not as bad as General Motors, but they are also fighting for margins and sales.
• Global trade disputes, rising commodity prices and high innovation spending are disrupting the entire sector. The German manufacturer has also put the burden of the diesel scandal to the test.
• The advantage of German manufacturers: many plants are now very variable depending on the model.

The US president did what he likes to do on Tuesday: he threatened. Just one day after the Detroit-based automaker General Motors announced the removal of 15,000 jobs, Donald Trump expressed his anger on Twitter and warned of the financial consequences. He was very disappointed by the leaders of the company. Let's see if GM subsidies could be reduced, including those granted to electric cars, said Trump. "Nothing is closed in Mexico and China, the United States has saved General Motors and that's what we thank!" A little less than 24 hours earlier, General Motors announced the closure of several plants in the United States and Canada. The reasons given for this are the low sales but also the rising costs of steel or aluminum, which, as the experts say, is also related to Trump's tariffs. The clean cut is reminiscent of a time when society was on the brink. After the financial crisis, the US state had to step in to save GM, which cost $ 51 billion. And now, the new bad news. What does this mean for the automotive industry – and especially for German manufacturers and suppliers? Can we deduce anything from the 110-year-old group crisis soon? Yes and no, that says in the industry. Some problems at GM, including its other brands Cadillac, Buick and Chevrolet, are homemade. But there are also many challenges in the competition. Although the total turnover of the 16 largest automakers increased by 2.3%, the consulting firm EY compared the first nine months of 2017 with those of 2018. The number of of vehicles sold decreased by 3.7% – for the first time since 2009 – and operating profit to the same extent.

Particularly affected: GM. From seven percent margin, it has returned to just five percent. Twelve percent fewer cars sold to Americans. The Germans are not that bad, but they are also fighting for their margins and their sales. BMW and Daimler had to adjust their profit expectations.

General causes? On the one hand, global trade disputes, punitive tariffs between the United States and China, for example, as well as a possible tightening of relations between the United States and Europe. Donald Trump could impose tariffs on imported cars as early as next week, according to a magazine. "The report of the Ministry of Commerce is on the table of the president," reports the Wirtschaftswoche in advance, citing the circles of the EU. The proposed tax is 25% on car imports from all countries except Canada and Mexico. There should be no exceptions for certain types of cars.

German manufacturers have also increased the diesel scandal

The report pushed German car prices Tuesday into the depths. Add to that rising commodity prices and high innovation costs: electric cars need to be developed, factories built for them. The development of driver badistance systems up to robotic cars costs several billion euros, without this leading to an increase in sales or profits in the short term. During the first six months of the year, German companies increased their spend on new technologies by about 10%, reaching 12 billion euros. At the same time, the treatment of the diesel scandal has again put pressure on German automakers, costing more than 30 billion euros to date. "The reorganization of the sector will take a lot of business and will cost a lot of money," said Peter Fuss, an badyst at EY. "Now it's about relying on the right technologies and partners and having a long breath." It may be that these manufacturers have more profits, keeping the traditional stores. But these would then have a long-term disadvantage.

Many German factories are versatile

In Germany, this process has so far been a constructive struggle between managers and staff representatives. Everyone knows the pressure to change, knowing the costs. And agree austerity measures needed in the old to fund the new. That's precisely what Volkswagen does with its orchestrated conversion to electromobility.

In the United States, on the other hand, there is no coexistence and therefore less flexibility. For example, it is mostly limousines that exclude GM from its program, as more and more SUVs are purchased. This development is also known to German manufacturers BMW, Daimler or the Volkswagen Group with all its subsidiaries. But the difference: many factories of German manufacturers are now very variable. A combination with a diesel engine, a sedan with gasoline, a hybrid-powered SUV – there are now bands on which such a mixture pbades.

Incidentally, despite the advance in planning and innovation, the Germans are simply afraid of GM. In times of trouble, a company can make difficult decisions faster, and Opel's divestment to the French PSA group has recently shown that chief executive, Mary Barra, did not ignore it. "The one who shot injured attacked more aggressively," he said to a German competitor.