DAX Giants Struggling Amidst Profit Dip and Layoffs
Sluggish Economy Dents Earnings of DAX Companies
The biggest listed companies in Germany are grappling with a significant drop in profits at the start of 2025, as per an evaluation by consulting firm EY. The Estado Grande (DAX) corporations are dealing with the blow through job cuts - over 30,000 job cuts in the first three months of the year alone.
Why the Profit Slump?
The economic slowdown and heightened global competition are key contributors to the profit decline of these blue-chip German businesses. Although the DAX companies' total turnover increased by 3.3% in the first quarter, a worrying 10 companies experienced a decrease in turnover, among them major automakers BMW and Mercedes-Benz, and industry titans BASF and Bayer. On the flip side, Rheinmetall recorded a turnover surge of 46% and MTU Aero Engines reported a 28% growth.
The Profit Ranking
Deutsche Telekom emerged as the most profitable company in the first quarter, boasting an operating profit of 6.8 billion euros, overtaking Volkswagen, which recorded a 37% decrease in profits, resulting in an operating profit of 2.9 billion euros in Q1 of 2025.
Fires Fanning the Flames
The total operating profit of the DAX companies dropped by 8%, with 16 companies experiencing a fall in profits compared to the previous year. This includes all carmakers and reinsurers Munich Re and Hannover Re, which faced extraordinary burdens due to wildfires around Los Angeles at the beginning of the year.
Employment Trends
The number of employees dropped by 1% to 3.17 million, equating to around 32,000 jobs lost compared to the previous year. Twelve of the 27 companies that disclosed data trimmed their employee count.
An Uncertain Future
Despite a chronically weak economy and complex geopolitical and trade policies, many DAX companies displayed commendable resilience in Q1, according to EY CEO Henrik Ahlers. However, the true impact of the trade disruptions and new tariffs will only be apparent in the second half of the year.
EY predicts that the job losses will continue throughout the year, with many large corporations pursuing aggressive cost-cutting initiatives. This could lead to a further intensification of job cuts.
Insights:
- Sector-specific Impact: The automotive sector, namely BMW, Mercedes-Benz, and Volkswagen, is bearing the brunt of the economic slowdown and trade disputes, with a substantial 42% decline in profits[1].
- Inventory Challenges: Forward planning by many companies to stockpile in the U.S. or accelerate sales to pre-empt tariff hikes has led to inventory management challenges and impacted profitability[1].
- Resilience in the Face of Adversity: Despite the mounting challenges, many DAX companies have demonstrated remarkable resilience[1].
- Tariff Delay: The actual effects of the new tariffs will only be fully realized in the second half of the year, providing a more accurate picture of the situation[1].
- Unemployment Worries: Deep-rooted job cuts are likely to persist throughout the year, driven by ambitious cost-cutting programs implemented by large corporations[1].
Source: ntv.de, als/AFP
- Dax
- Dax Companies
- Profit Drop
- Layoffs
- BMW
- Mercedes-Benz Group AG
- Volkswagen
- Rheinmetall
- Economic Stimulus Package
- Economy
- Economic Forecasts
- Tariffs
- The struggling DAX giants, including BMW, Mercedes-Benz Group AG, and Volkswagen, are attempting to alleviate their profit slump through vigorous cost-cutting measures such as vocational training programs and re-evaluating their community policies to foster a leaner and more competitive workforce.
- In an effort to maintain financial stability and bolster business growth, some of these companies are considering financially supporting vocational training initiatives in their communities, which could potentially lead to a skilled workforce that benefits both the companies and the local economy.
