Wave of German layoffs ‘not a sustainable concept’

Several German companies laid off thousands of workers last week, causing widespread controversy in the light of many of the companies' robust profit margins. Officials say they are baffled by the trend.

Several German industrial heavyweights have unveiled controversial combinations of strong earnings and sharp job cuts, feeding widening discontent amid a landmark tax fraud scandal. One after another, automobile parts group Continental announced 3,800 job cuts, followed by Siemens with 6,800, Henkel with 3,000 and BMW with 8,100, all within the space of a week.

The layoffs seem absurd because profits for these companies have been strong, allowing groups like Bayer on Thursday, following Daimler a day earlier, to justify increasing their bosses pay by 27 and 68 percent, respectively.

“It is not possible for a company to make (profit) margins of 20 percent and large-scale personnel reductions at the same time,” Social Democrat spokesman for economic affairs Rainer Wend told public television ZDF.

Net profit at BMW jumped by almost 80 percent last year, while at Henkel, the maker of Persil detergent, it gained eight percent. Results at Siemens were multiplied more than eight times, though that was in large part owing to one-off gains from the sale of a subsidiary.

After Finnish mobile telephone maker Nokia raised howls of protest by announcing in January it would close its plant in the city of Bochum, the cuts have pushed trade unions and some politicians beyond the breaking point. “Wanting to simply reduce the workforce is not a sustainable concept for the future,” said Werner Neugebauer, head of the IG Metall trade union chapter in Bavaria regarding BMW management.

The latest wave of cuts will also affect the job market. A continued fall in unemployment announced on Thursday could be slowed as a result, said Klaus Zimmermann, head of the research institute DIW. But strong demand for workers and the number, close to one million, of vacant posts, according to the national employment agency, offers hope to those who will lose their jobs, as long as they can satisfy the company’s needs.

“It’s the global trend. There are always job eliminations, but also hirings, and we hope the hirings will continue to dominate,” Zimmermann said. As businesses complained about a lack of skilled labour, in particular a serious lack of engineers, it was time to “to think in the long term about giving workers more skills” rather than eliminating them, the deputy head of the conservative CDU parliamentary group, Michael Meister, told the Berliner Zeitung.