German Carmakers Face a Bumpy Ride

As the Automechanika industry fair for automobile suppliers kicks off in Frankfurt, Germany, many in the branch will be looking to the country's eastern neighbors for a sign of the future. Recent studies indicate that the traditional German industry is outsourcing more and more of the business to Eastern Europe and China in search of cheaper manufacturing conditions.

Is Germany's car industry at risk? As more and more carmakers contemplate moving abroad where wages are lower and the labor market flexibler, many say Germany could lose its position as a leading automobile manufacturing center if politicians and economists don't do more to counteract the trend.

The problems for the struggling industry are many faceted -- they include stiff international competition, a weak dollar-euro exchange, a clining domestic market, high personnel costs and inflexible labor laws. In the last year, two of Germany's leading carmakers, DaimlerChrysler and Volkswagen, have watched sales fall while fighting bitter battles with unions over contract negotiations. In both cases, the companies threatened to slash jobs and move production abroad.

DW-WORLD takes a look at the ups and downs of the German car industry in the last year and examines the issues of outsourcing, labor market reforms and job cuts as they relate to the future of one of the country's largest manufacturing sectors.