Japanese Auto Parts Supplier Plans to Close Two German Facilities Amid Crisis

The automotive supplier Musashi, based in Japan, has announced plans to close two of its facilities in Germany, raising concerns about the future of hundreds of employees. The affected sites are located in Hannoversch Münden, in the Göttingen district, and Leinefelde, within Thüringen. The company cites a significant decline in sales--approximately 40% since 2018--attributable to a sluggish European automotive market and competitive pricing pressure from Asian manufacturers offering forging components at lower costs.

Since 2021, Musashi has reported losses totaling around 100 million euros. As a result, the company's executives have declared the closure of these two plants as 'inevitable.' The company specializes in manufacturing vehicle parts, including transmission gears, and operates nine production facilities across Europe, six of which are situated in Germany.

The labor union IG Metall has expressed strong opposition to the closures, highlighting a transformative social contract signed in 2019, which guaranteed that all six German sites would maintain a stable workforce until at least 2030. In exchange, the union had agreed to a job reduction program and accepted deferrals on previously negotiated wage increases, which reportedly saved the company around 12 million euros.

IG Metall contends that the impending layoffs will affect employees of all ages, including young families who now face uncertainty regarding their mortgages. The works council has warned that, given the current crisis in the automotive sector, finding alternative employment may be challenging for affected workers. Many may have to consider positions in the defense industry, which some employees reject on ethical grounds.

Musashi is facing potential insolvency, with the works council accusing the company of mismanaging its financial situation, citing insufficient investment in modern machinery that has hindered the acquisition of new contracts. The broader geopolitical climate has also placed additional strains on the automotive industry.

Despite this, Musashi has asserted that it initiated discussions with the union in late 2022 and provided detailed documentation regarding its struggles. The company claims that IG Metall has not proposed any viable solutions. Conversely, the union alleges that Musashi has resorted to intimidation tactics, suggesting that employees could leave without severance if the company goes bankrupt--a situation they argue does not constitute a genuine negotiation basis.

Compounding the situation is a solidarity demonstration planned for September 10, which Musashi claims violates the contractual peace obligation that prohibits industrial action during the agreement's term. Union representatives, however, argue that they aim to increase pressure to protect the jobs of affected workers.

As both parties are required to continue negotiations, key topics may include the number of positions at the Lüchow site, assurances for the remaining plants, and severance packages for departing staff. Should discussions fail, the tariff arbitration board may be convened, potentially under the leadership of the governors of Niedersachsen and Thüringen.

If a resolution is not reached, the situation could exacerbate. The Musashi management could terminate the collective agreement and proceed with closure plans, prompting possible strikes from employees, which would further compound the company's financial losses. The outcome of these negotiations remains uncertain.