Summary
Analysis of more than 3,400 corporate restructuring events recorded by Eurofound's ERM database between 2002 and 2026, across 29 European countries, produces a clear picture: automotive lost 272,118 jobs over the full period, with nearly half of that (135,425) concentrated in the last five years, and 77% of that recent loss traceable to Germany alone — largely to the Volkswagen restructuring plan. Mirroring this, Defense/Aerospace is the only industry, among the seven tracked, to fully reverse sign: from a historically negative balance to +57,837 jobs in the 2022-2026 period alone. Three other industries (Construction/AEC, Energy, Rail/Naval) follow the same direction on a smaller scale, while Electronics/Semiconductors remains negative despite public investment under the European Chips Act. A central point of this report is that artificial intelligence — despite dominating media attention — cannot structurally offset this employment decline: on skill adjacency, labor intensity and pay level, the automotive-to-defense transition is more viable than a hypothetical automotive-to-AI one. The comparison with the United States further confirms that the concentration of Germany's decline reflects a specific case — the absence, in the US market, of an integrated group the size of Volkswagen — rather than a structural dynamic common to all Western economies.
The bigger picture
For twenty years automotive was the core of European engineering: Volkswagen, Bosch, Continental, Renault, Fiat were, throughout this period, the reference names of the industry, from the assembly line to the R&D department. That primacy had never been called into question, not even during previous crises.
The most recent data point to a reversal of this trend. The rest of this report reconstructs in detail how this reversal came about — country by country, company by company — and why artificial intelligence, the industry receiving most of today's attention, cannot structurally replace the jobs lost in automotive, as shown further below.
The two lines in this chart tell the story better than any headline: for twenty years automotive oscillated above and below zero following the economic cycle, while defense remained background noise, almost always slightly negative. From 2022 onward, the two have literally swapped places.
How large is the employment contraction in European automotive?
The numbers speak for themselves. Over the full 2002–2026 period, the net automotive employment balance across the 29 countries covered is −272,118 jobs — the worst figure among engineering industries tracked. A significant point concerns its distribution over time: almost half of that figure (−135,425 jobs, 49.8% of the total) is concentrated in the last five years, between 2022 and 2026.
This is not, therefore, a linear decline spread evenly over time, but a recent and marked concentration.
This figure is consistent with what has been independently documented by industry sources. CLEPA, the European association of automotive suppliers, has calculated that between 2024 and 2025 component suppliers announced more than 104,000 job cuts, against roughly 7,000 new positions created over the same period. A Eurofound report on the industry's crisis, published in late 2025, shows that automotive employment as a whole (production, sales, aftermarket) grew 12% between 2011 and 2023, but this aggregate figure masked losses of more than 7% in manufacturing and supplier segments alone over the same span, with the decline concentrated above all in France, Germany and Italy. Even Central and Eastern European countries, which until 2023 had seen automotive employment grow by absorbing production relocated from Western countries, have themselves begun losing jobs, as production has shifted further toward lower-cost non-EU countries.
Why is Volkswagen Group driving the employment contraction in Germany?
Breaking the figure down by country, Germany turns out not simply to be the hardest-hit country, but to represent 77% of automotive losses recorded between 2022 and 2026 (−104,320 jobs out of a European total of −135,425). No other single country comes close to this figure.
A more precise reading, however, requires breaking the figure down further by company, because the term "German decline" imprecisely describes what the data show: a single industrial galaxy accounts for most of the drop. Volkswagen, together with Audi and Porsche, alone accounts for more than 40% of all German automotive job losses over the last five years — a value roughly equivalent to that of all the country's other companies combined, including long-standing suppliers such as Bosch, ZF Friedrichshafen, Continental and Schaeffler, which work largely for the Wolfsburg group itself.
The most significant component of this figure is a single event: the "Zukunft Volkswagen" agreement, signed on 20 December 2024 between the group, the IG Metall union and the works council. It is a plan for 35,000 fewer jobs by 2030, alongside parallel agreements for roughly another 7,000 jobs at Audi and nearly 2,000 at Porsche. One point needs clarifying, because it affects how the figure should be read: these are not immediate layoffs. The agreement explicitly rules out forced redundancies and plant closures through 2030, and provides for the reduction to happen through early retirement, non-replacement of employees who leave voluntarily, and exit incentives. In exchange, workers accepted a wage freeze and a production capacity cut of about 734,000 vehicles a year — roughly the entire output of the Wolfsburg plant.
2022 and 2023 show an overall positive engineering balance (+11,200 and +11,389 jobs respectively); 2024 instead drops to −70,786, a decline explained almost entirely by the single Volkswagen announcement. Before that event, European engineering as a whole showed a relatively positive trend. This is therefore not a continuous aggregate decline, but a single large-scale event that explains the drop in one specific year — a distinction worth keeping in mind whenever an isolated spike appears in this data.
Which industries are growing, and which are lagging despite the announcements?
The automotive contraction is matched by growth in other segments. Defense/Aerospace shows the sharpest reversal: from a cumulative negative balance of −45,391 jobs over the full 2002–2026 period (including the last five years), to a positive balance of +57,837 jobs in the 2022–2026 period alone — the only segment, among tracked, to fully flip sign. The figure is consistent with what has been documented at industry level: in 2024 European defense revenue grew 13.8% to €183.4 billion, while direct employment rose 6.9% to 1,103,000 jobs, the highest level ever recorded — a rise matched by an expansion in the industry's operating margins, the widest among the engineering industries tracked — driven by the rearmament launched after Russia's invasion of Ukraine in 2022, the same geopolitical shock that drove the industry's stock-market reactions in the first half of 2026.
Three other industries show the same turnaround, on a smaller scale: Construction/AEC (+12,872 jobs in 2022–2026), Energy (+10,581) and Rail/Naval (+5,913). None of these come close to defense's volumes, but the direction is the same. Dedicated deep dives: Defense/Aerospace industry page and Energy industry page.
Why hasn't Electronics/Semiconductors seen the expected growth?
A notable case worth reporting for completeness is Electronics/Semiconductors, which remains negative even in 2022–2026 (−11,213 jobs), despite the public investment announced under the European Chips Act. This number is also likely to understate the real scale of the problem.
The reason is structural to how ERM works: the database records restructurings of existing employment, not the cancellation of future hiring plans that were never launched. A notable case is that of the €30 billion mega-fab Intel had announced in Magdeburg, Germany, together with a satellite facility near Wrocław, Poland — a project that would have brought about 21,000 direct and indirect jobs, intended for producing latest-generation chips (sub-5nm nodes, the same used for artificial intelligence). The project was officially cancelled in July 2025, for lack of sufficient customer orders. Those promised 21,000 jobs that were never created do not appear in this dataset, since they never existed as employment to be restructured. The gap between European expectations for the semiconductor supply chain and the results actually achieved is therefore wider than these numbers, on their own, can show.
The only major project still moving forward — the TSMC-Bosch-Infineon-NXP joint venture in Dresden — targets mature production nodes (28/22nm, 16/12nm) for automotive and industry, not AI chips. The European Court of Auditors has already declared it "highly unlikely" that the EU will reach its target of a 20% global market share by 2030 (realistic projection: about 11.7%).
Does the lag in the AI supply chain explain the industry's missing growth?
One possible reading of European engineering's problem is that the delay in AI development is due to slow and fragmented political execution — a hypothesis partly confirmed by the Intel episode. This is, however, an incomplete reading: even if Europe had built its advanced chip production capacity in time, the employment numbers at the companies leading AI development — Nvidia, OpenAI, Anthropic — would still be unable to offset automotive's employment decline. There are at least three reasons for this, structural in nature rather than reflecting a reversible policy choice.
The first concerns skill adjacency, and is why the automotive-defense transition is more workable than a hypothetical automotive-AI transition. A mechanical engineer who has worked on engines, transmissions and active safety systems in a car has a technical base — systems mechanics, materials, embedded electronics — that transfers reasonably well to a military aircraft or a naval platform: it is the same type of engineering, physical and safety-critical. The move toward the AI supply chain, by contrast, is different: chip design is highly specialized electronic engineering, while model training is largely software engineering and applied mathematics, disciplines that share little with powertrain mechanics. The one area of real overlap (power electronics for batteries, transferable to data-center power supply) concerns a specific niche, not the bulk of the departing automotive workforce.
The second reason is economic: AI pays double or triple what classic engineering industries do — an AI/ML engineer in Germany earns on average €72–92 thousand a year, in the United States the figure rises to $147–160 thousand, and at leading labs such as Anthropic and OpenAI senior roles exceed $200 thousand — but hires in much smaller absolute numbers. The reason is not a corporate choice, but the very nature of the industry: AI is capital- and skill-intensive and scales without needing labor proportional to output — a small team builds a model used by hundreds of millions of people. Automotive manufacturing, by contrast, is labor-intensive and scales almost linearly with volumes: more cars produced require more workers, more suppliers, more quality-control staff.
The third reason is less immediate: the very AI tools in question make the work of those developing artificial intelligence more productive, reducing over time the number of engineers needed per unit of growth in the industry itself — an industry that, by its technological nature, tends to produce more with a proportionally smaller headcount.
The conclusion that emerges from these elements is that AI drives revenue and market value, but is not able to structurally replace the employment mass that automotive is shedding. Defense, by contrast, remains physical, labor-intensive manufacturing, with an employment intensity per unit of output comparable to that of the automotive industry it is partly replacing — a factor that helps explain why it is defense, not electronics, that flips sign in this data.
How does Europe's employment picture compare with the United States?
A useful comparison for assessing whether this dynamic is a specifically European phenomenon or reflects broader trends comes from Eurostat data (employment by NACE activity, EU-27) and FRED/BLS (employment by NAICS industry, USA) — official sources on both sides of the Atlantic, even though conceptually different from the ERM event-based net balance, since here what is measured is the annual change in the employment stock, not restructuring announcements. A notable pattern emerges: US automotive shows much more contained swings than its European counterpart, without the sharp 2022–2024 drop observed in Germany. The most plausible explanation is not that American automotive is in better shape overall, but that it has no single vertically integrated group of Volkswagen's scale whose crisis can hit the entire national segment in one wave.
The electronics comparison also confirms, from another angle, the point discussed above about AI: US employment in semiconductor manufacturing (NAICS category 3344) has stayed essentially flat — around 370–395 thousand units from 2010 to today — despite the growth in revenue and market value of American AI companies. The reason is the same one that emerged earlier: physical production of advanced chips remains largely in Taiwan (TSMC) and Korea (Samsung), while US AI companies focus on design, a low-labor-intensity activity relative to the value it generates. Any AI-related employment growth would therefore need to be sought elsewhere: in the construction and operation of data centers, a segment that falls outside the traditional definition of "engineering" adopted in this analysis.
Notes
Methodology: analysis of 31,427 corporate restructuring events from Eurofound's European Restructuring Monitor (ERM) database, 2002–2026 period, 29 countries (EU-27, Norway, United Kingdom). Industry classification by company-name recognition, spot-checked. International comparison based on Eurostat data (employment by NACE Rev.2 activity) and FRED/BLS (Current Employment Statistics by NAICS), both official statistical sources. External sources cited: CLEPA, Eurofound, EY, ASD (Aerospace, Security and Defence Industries Association of Europe), European Court of Auditors.