Volkswagen and Its Effect on the German Economy

Volkswagen, one of the world's largest automobile makers, was recently exposed as having cheated on diesel emissions tests as far back as 2009. The Environmental Protection Agency said that Volkswagen could face penalties of up to $18 billion for their wrongdoings. Potentially worse is the fall out from a class-action lawsuit, as anyone who bought one of the affected cars now owns a vehicle that is illegal to drive in the United States.  Along with severe repercussions to Volkswagen itself, there could also be difficulties that the German economy faces.

The German economy could be affected by several factors related to Volkswagen. First, a concern for the German government is that other car companies such as BMW and Daimler could suffer fallout from the Volkswagen scandal.  Second, there is the worry about layoffs of employees. Volkswagen is one of Germany’s largest employers, with more than 270,000 jobs in its home country and even more working for suppliers. In 2014, roughly 775,000 people worked in the German automobile sector. This is nearly two percent of the whole workforce. Lastly, automobiles and car parts are Germany’s most successful export. Customers overseas had purchased more than $225 billion worth of exports in 2014. This was nearly a fifth of total German exports. If sales were to decline for the entire German automobile industry, it could sincerely hurt Germany’s economy. Experts caution that such high dependency on the automobile industry could become a threat to Germany’s economy, which is projected to grow at 1.8 percent this year. 

There are many people, however, who say that the German economy will not be impacted too heavily. The thought is that there wouldn’t be a recession because of one single company. Experts also say that customers wouldn’t lump together all German car companies. There are no signs that customers overseas are starting to doubt the quality and reliability of German companies.