Profit Slumps and Job Cuts: A Reality for Many DAX Giants Amid Economic Struggles
German stock market stalwarts, represented by the Dax index, witness reduced earnings due to economic sluggishness
In stark contrast to the booming profits of Rheinmetall, many of Germany's leading companies are grappling with shrinking profits. As per EY's analysis, the first quarter of the year saw a considerable drop in the profits of the 40 largest listed German companies. The economic slowdown and increased competition on the global stage are major contributors to this financial downturn.
The automotive sector, in particular, is a hotbed of hardship, with heavy job loss weighing heavily on many employees' minds. Over 30,000 jobs were shed in the first three months of the year as companies scrambled to adjust to the challenging circumstances. Well-known automakers like BMW and Mercedes-Benz, along with chemical giants BASF and Bayer, are among the companies that witnessed a decline in turnover during this period. Silvely, Rheinmetall and MTU Aero Engines managed to buck the trend with impressive revenue growth of 46% and 28%, respectively.
The telecommunications giant Deutsche Telekom took the lead in the profit ranking, thanks to a whopping 19% increase in profits throughout the quarter. Volkswagen, however, slipped to second place, with a 37% decrease in operating profits compared to the previous year.
Despite the tough economic climate and difficult geopolitical and trade policy situation, many DAX companies have shown remarkable resilience in the first quarter, as per EY CEO Henrik Ahlers.
Wildfires Triggering Pressure on Reinsurers
The overall operating profit of the DAX companies decreased by 8%, as revealed by the report. 16 companies reported lower profits than in the previous year, including all car manufacturers and the two reinsurers Munich Re and Hannover Re, who were hit hard by extraordinary wildfire burdens at the start of the year.
Employment numbers have dipped slightly, with a reduction of approximately 32,000 jobs compared to the previous year, according to EY. 12 of the 27 companies that provided information reduced their workforce. Despite these layoffs, many large companies have ambitious cost-cutting programs in place, which may intensify in the coming months.
Trade Disputes Leaving Minimal Impact on DAX Companies
The ongoing trade and tariff disputes between the U.S. and its trading partners have yet to be fully reflected in the balance sheets of the DAX companies. Companies have reportedly built up their stocks in the U.S. in anticipation of high tariffs, and US customers have also made purchases to take advantage of lower prices. However, the true effects of the new tariffs will only become apparent with a certain delay.
EY anticipates that the job cuts will continue throughout the year, as many large companies have implemented extensive cost-cutting measures.
Sources: ntv.de, as/AFP
- Dax
- Dax Companies
- Profit Decline
- Laid-off Workers
- BMW
- Mercedes-Benz
- Volkswagen
- Rheinmetall
- Economic Stimulus
- Tariffs
- Economy
Additional Insights:
- Current global economic trends show a rise in job cuts, which may pose a challenge for companies navigating financial outlooks and strategies.
- Companies like Equifax and Multiconsult have demonstrated robust financial performances in Q1 2025, suggesting that some industries can successfully weather economic downturns.
- Company profits and layoffs can be influenced by factors such as market competition, technological shifts, and economic uncertainty.
- In line with the global trend of job cuts, 12 of the 27 DAX companies provided information that they reduced their workforce by approximately 32,000 jobs compared to the previous year.
- The employment policy of many DAX companies, including BMW, Mercedes-Benz, and Volkswagen, has been impacted by the economic slowdown and increased competition on the global stage, leading to job losses and cost-cutting measures.
