Opel, Mercedes and Volkswagen are planning to cut close to 29,000 jobs in Germany. But what at first looks like a crisis, is really just the result of bad management. While the layoffs hurt, the future may not be so bleak after all.

Germany’s political establishment this autumn has all the trappings of a suddenly capsized ship. A virtual electoral dead heat between Chancellor Gerhard Schröder and challenger Angela Merkel has resulted in both claiming the right to become the next leader of Germany. No dry land has yet been sighted.

But while the political foundering may have come out of the blue, the truth is that the whole of Germany has long been sinking under the weight of its slow economic growth and, even more worrying, mass unemployment. And it’s becoming increasingly clear that the captains of the ostensible rescue boats — the managers of the German auto manufacturers, which provide fully a seventh of all German jobs — have not only been slow to relieve the needy, but have managed to nearly sink their own vessels.

This didn’t always seem the case. Only two years ago, Chancellor Schröder confidently announced that the auto industry would be Germany’s economic saviour. Signs did, in fact, look good at the time; BMW, Volkswagen, Daimler-Chrysler and Porsche had recently committed to the creation of 10,000 new jobs — a seeming endorsement of Germany as a manufacturing location.

Since then, though, the picture has looked decidedly grimmer. This year the manufacturers had little in the way of good news to contribute to Schröder’s re-election campaign: Indeed, as last week’s International Motor Show came to a close, the most prominent announcements were not of job creations but of job losses. VW — even if it is planning to manufacture its new mini-SUV, the Marrakesh, in Germany — announced the impending layoff of 10,000 workers; Opel has likewise decided to cut 10,000 jobs; and Mercedes, after widespread speculation that 5,000 jobs were endangered, may — according to Wednesday’s Bild Zeitung — actually be preparing to get rid of 8,600 employees.

Many conclude that the hemorrhaging of jobs proves that, with globalization in full swing, Germany — with its high salaries and powerful unions — simply can’t compete as a site of manufacturing. The problem with that theory is that there are two prominent exceptions to the rule: namely, BMW and Porsche. Both companies have successfully negotiated Germany’s high-wage, generous-benefit-package landscape. And despite the rising price of oil, the sinking value of the US dollar and increasing global competition, both are planning on creating new jobs in Germany.

In actuality, while globalization certainly plays a role, the crisis faced by German auto manufacturers’ — including sinking profits and slow sales — is more a consequence of poor management.

Indeed, BMW and Porsche have always focused on the basics: making sure that their factories were efficient, that the quality of their products remained high and that their new models were well received. Meanwhile, Volkswagen in recent years has been following a different, altogether less disciplined strategy, the results of which were unveiled last week, when top managers announced the 10,000 German job cuts.

In many ways, the layoffs came as atonement for VW’s recent spending spree, during which it doled out billions of euros on a high-tech automobile theme park in Wolfsburg, a fancy new factory in Dresden and the buyouts of several struggling auto manufacturers (including Bentley, Lamborghini, and Bugatti). Meanwhile, the company has spent far too much time and energy re-inventing the Passat and the new Golf. Engineers have shown an urge to carry such redesigns to extremes, rethinking every small detail and coming up with “improvements” — such as the new rear axle for the Golf — that only professional test drivers are able to notice.

This engineering-heavy strategy is in direct contradiction to the principles of industry-leading Toyota. The Japanese manufacturer wagered that the consumer would often not bother to ask the details of minute technological improvements under the hood, but was always likely to get excited about a new design. Toyota was content to recycle proven technology from previous models, but would never release a new line without carefully considering its styling. The result has been less expensive final products, content consumers and fewer quality slip-ups resulting from complex new technologies. VW on the other hand, opted for improvements that were noticeable for the average consumer in the sticker price — but nowhere else. Unsurprisingly, sinking profits were the result.

The company does, though, seem to be learning its lesson: CEO Wolfgang Bernhard recently announced that, in order to begin solving the problems, production costs for the new Marrakesh would have to be cut immediately by €2,000 per car. As of last week, that left €850 worth of fat to trim.

Which fat to trim, though? The prime target was labor costs — German VW workers are the highest paid in the industry. Bernhard talked about moving the new Marrakesh plant to Portugal, until an agreement was reached this week to use lower-cost workers who don’t fall within the in-house wage agreement.

Those successful negotiations, though, won’t save VW from other painful decisions in the near future. The company simply isn’t selling enough cars to justify the continued employment level of over 100,000 Germans. The top brass at the company has announced that productivity will have to increase by 6 percent over the next decade. When the euphemism is unpacked, the prognosis doesn’t look great for VW auto workers: year for year, VW will either have to sell 6 percent more cars, or let go 6 percent of its workforce.

Over at Mercedes, CEO Dieter Zetsche is facing similar problems, though for different reasons. Mercedes was once one of the auto world’s greatest success stories, cornering a sizable niche of the luxury market. The company lost its way, though, after purchasing the struggling American auto manufacturer, Chrysler. Focused on bringing its new possession up to speed, Mercedes diverted too much attention from its own line.

Zetsche has made clear that he recognizes the problems faced by Mercedes. “A lot of hard work is ahead of us,” he has emphasized. And he is likely to prescribe short term remedies similar to those put in effect by Bernhard at VW. In addition to the 8,600 jobs Mercedes is now eliminating, Zetsche also wants to focus on returning the line to the quality and attention to detail of years previous. Customers in the luxury market have high expectations and Mercedes needs to again begin the process of earning their trust.

The German public, though, continues to hold its breath. Although there are signs of slow improvement, the country’s economy continues to stagnate. And one of the reasons that it has not entirely run aground has been the traditional strength of its auto industry. Experts say, though, that there’s no reason to panic. The industry is still fundamentally strong, especially if the stalwarts, BMW and Porsche, smooth out their occasional hiccups, Porsche’s recent announcement — considered reckless by some — that it would purchase 20 percent of VW, is a troubling case in point.

And the possibility that VW’s and Mercedes’ problems are the result of poor executive decisions is oddly encouraging. With more competent leaders at the helm, the industry seems likely to return, if not to dominance, at least to respectability.