MUNICH • BMW and Volkswagen want to plug into the future, but face difficult cost cuts needed to fund an unprecedented transition to electrifying their fleets.
BMW shares sank on Wednesday, dragging down its peers, after the luxury carmaker said it will embark on a US$14-billion (S$19-billion) efficiency drive to pay for future battery-powered cars.
Trade wars and an industry slowdown are sapping the profit margins essential to funding the shift, the company said.
Separately, Volkswagen's top labour leader demanded 10-year job guarantees and other concessions before the German automaker's powerful unions agree to go along with the aggressive cost-cutting plans of chief executive Herbert Diess.
The move away from combustion carmaking is challenging all traditional makers, but is a particular hurdle for Germany, where the shift is stoking uncertainty in an industry that is a backbone of the economy.
Electric cars have fewer parts and do not require as many workers, and many new jobs available require digital skills that most workers lack.
New, deep-pocketed competitors like Alphabet's Waymo are adding to the pressure with an advantage in areas like software development likely to determine winners and losers.
"I'm convinced we must modernise ourselves much faster," Mr Diess told some 20,000 workers at a town-hall meeting at Volkswagen's sprawling plant in Wolfsburg, Germany.
"It's not a done deal that we manage the transformation."
The 60-year-old, who took over the top job in April last year, is pushing to deepen Volkswagen's 2016 agreement with workers to reduce the workforce by 30,000 positions.
He sought to minimise his differences with labour boss Bernd Osterloh, who took the stage before him in Wolfsburg. While they argue, they ultimately often pursue the same goals to make Volkswagen - the world's largest automaker - a stronger company, Mr Diess said.
He added that he just returned from a trip to visit Seattle-based Amazon, where he concluded that Germany was not well prepared to face challenges posed by new rivals in the United States and China.
"I'm worried about that," Mr Diess said. "We don't want to be hardware providers for Google and Apple" or trail behind Tesla and Byton in China.
At BMW, pre-tax profit is expected to decline by more than 10 per cent this year. The company, second to Daimler among global luxury carmakers, is responding by stepping up its savings drive with plans to cull models, reduce development times by as much as one-third and hold the workforce steady this year.
BMW's weak outlook is a "troublesome" sign for the sector after the carmaker looked better placed than competitors with a number of strong new models and the luxury-car market in China holding up, Sanford C. Bernstein analyst Max Warburton wrote in a note.
"This warning will inevitably increase worries about weaker names in the sector."
Other carmakers are responding to the same stresses. Volkswagen is cutting as many as 7,000 more jobs, it said recently, while its Audi brand is scaling back management for savings and faster decision-making.
Audi is also in talks to determine the overall scope of job reductions beyond weeding out management ranks.
Mercedes-Benz-parent Daimler vowed comprehensive cost-cutting measures last month and PSA Group's Opel division said recently it reached an accord with its works council on 2,000 early retirements at its plant in Ruesselshim, Germany.
In addition to thinning ranks, carmakers are also looking to one another for savings.
BMW and Daimler have pushed aside rivalries to join forces in sharing and autonomous cars.
They are also studying a deeper cooperation on key components in conventional vehicles.
Volkswagen has been in talks with Ford to team up on e-cars and autonomous vehicles.
Before cutting more jobs, Mr Osterloh said management should first resolve problems like the costly delays of vehicle projects, and analyse mistakes made related to the stricter emission tests that also hurt profit to prevent them from happening again.
"This workforce has proved once again in 2018 that it delivers when it's getting difficult," he added.
"Now you must finally deliver as well," he told the management.