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Germans Worry Volkswagen's Problems Could Drag Down Country's Economy


And in other news, as an employer in Germany, Volkswagen is about as big as it gets. And a big worry now is whether VW's emissions scandal will drag down Germany's entire economy. Here's NPR's John Ydstie.

JOHN YDSTIE, BYLINE: Already, VW has cut production at one of its engine plants, eliminating an extra shift. No layoffs have been announced, but the company has declared a hiring freeze. That's a blow to many Germans hoping to land a job at VW. We found Ahmed, who now works at a pizzeria, sitting with his girlfriend in the platz along Porsche Street in downtown Wolfsburg. He doesn't care much about the scandal, he says, but he's worried about his friends who work at VW and, now, his own prospects.

AHMED: (Speaking German).

UNIDENTIFIED WOMAN #1: The only thing he cares about is that other people are affected, and that, he doesn't like. But he would actually like to work at Volkswagen, but it's difficult to get in. And right now, it's even more difficult to get a job there.

YDSTIE: It's virtually certain Wolfsburg will feel deep pain from this scandal. The city was built around the massive VW plant and headquarters here. Together, they employ 60,000 people. VW plants and suppliers in other regions in Germany are likely to suffer, too. Whether the whole German economy downshifts significantly depends partly on what German car buyers do, says Martin Gronig, an economist at DIW, a think tank based in Berlin.

MARTIN GRONIG: (Through interpreter) If somebody doesn't buy a VW but buys a BMW instead, then there's no loss for Germany overall. But if it affects the entire auto industry, that can be tough for Germany. You know, here, every seventh workplace is connected to the car industry.

YDSTIE: And Gronig thinks the impact could be felt across the German economy because, he says, the made-in-Germany brand is likely to be damaged. It's a brand that Germany has nurtured since the Second World War.

GRONIG: (Through interpreter) There is a real danger. Image takes a long time to develop. And once it is broken, it takes a long time to rebuild.

YDSTIE: Uwe Jean Heuser, economic and business editor at Die Zeit, says the made-in-Germany brand is likely to be tarnished a bit, but he says he doesn't expect the VW scandal will hurt the broader German economy very much.

UWE JEAN HEUSER: The idea that what's good for VW is good for Germany hasn't been true for a while and is certainly not true today. And it's important to realize that.

YDSTIE: Heuser says, while the auto industry is very important to the German economy, other German auto companies could benefit from VW's stumble. And, he says, the real core of the German economy is the large number of small and medium-sized businesses. That sector employs 25 million people. That said, Heuser agrees a significant number of VW employees will lose their jobs.

HEUSER: Absolutely. They will have to cut costs. And although the unions will try to keep all the jobs, I think, in the long run, there's going to be less jobs than there would have been in Germany and probably outside of Germany.

YDSTIE: Heuser says that what happens to the German economy depends largely on how German consumers and businesses respond.

HEUSER: And I think they have to make it clear to themselves, in a way, that this is not a national disaster, but it's just one company. If we take this as a national matter, and if we identify ourselves too much with the car industry and with VW, then, of course, you know, it's going to have a major psychological effect.

YDSTIE: An effect that could cause German businesses and consumers to pull back, and that could undermine the German economy. John Ydstie, NPR News, Berlin. Transcript provided by NPR, Copyright NPR.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.