Concerns in the German mechanical engineering economy

It has almost become a habit to talk about Corona before the turnover. In a way, one is linked to the other, although business leaders in the industry are now more concerned. So on Tuesday, the seven members of the board of directors of the Swabian mechanical engineering company Trumpf will sit on the podium at the company’s headquarters in Ditzingen, a meter and a half away, and summarize in numbers what the epidemic affected the family business in the past financial year. They talk first about the corona cases, the quarantine and vaccination rates – then the numbers, the toll for the year.

As a result, Trump has weathered the pandemic well so far. Net profit increased in fiscal year 2020/2021 from around 192 to around 237 million euros at the end of June. Turnover amounted to 3.5 billion euros, an increase of 0.5% compared to the previous year. Order books are fuller than ever. Nevertheless, the Swabians are somewhat reluctant to look into the new fiscal year. “It is still too early to be too optimistic,” said Chairman of the Board of Directors Nicola Leibinger-Kammüller. For the current fiscal year, it expects a double-digit increase in percentage sales. But at Trumpf, as with the entire industry, there is great uncertainty about how things will turn out in the coming months.

Just like the family business from Ditzingen, many machine builders feel the same way. A few hundred kilometers to the east, in Berlin, is the Mechanical Engineering Summit – with almost 480 participants. They are really there, on site, physically, not virtually. That alone triggers joy. For Karl Haeusgen, the Bavarian entrepreneur, this is the first summit as president of the trade association. German machine and system manufacturers are increasingly experiencing global delivery problems, he said. According to Haeusgen, they will stand out for “a long time”. Sales from “still well filled order books” could therefore only be recorded with a slight delay. “But we don’t see any cancellations,” says Haeusgen. Many companies are reportedly reaching 2019 sales levels already this year.

The association confirms its predictions – in large part. In 2021, production will increase by ten percent in real terms, “to finish maybe slightly below”. He was more skeptical than four or six weeks ago, Haeusgen said. Without the delivery bottlenecks, growth would likely have been two to three percentage points higher. For 2022, the association expects an increase of 5% in real terms. In 2020, production fell by nearly twelve percent. With a million employees, the machine and plant sector considers itself the largest industrial employer in Germany. For 2021, the head of the association expects a “sideways movement”, and in 2022 “rather” an increase in the number of employees.

Entrepreneurs are never really carefree. The head of the association, Haeusgen, is worried, like the whole industry, that the two economic powers, the United States and China, “are separating”. Both countries are important export and import countries for German mechanical engineering. In the medium term, this geopolitical confrontation is one of the “very big risks for the business model of mechanics”. Almost half of companies buy components in the United States or China, “which are essential for their own production,” according to a VDMA survey. These are mainly electronic components and parts, but also raw materials such as steel and castings. Companies fear “of being put under pressure by China or the United States in the event of trade disputes”.

Companies want to make themselves “indispensable”

In the survey, companies also indicated how they want to avoid the pressure. One in two people want to make themselves “indispensable” by offering special solutions. Almost a third want to increase investments in the United States and China, for example by creating or expanding an assembly or production unit. For many midsize companies, this is a feat, says Haeusgen. This is perhaps one of the reasons why “more than two-thirds” of companies do not consider any immediate change in their strategy. You are still waiting.

At Trumpf in Ditzingen, too, they are worried about the development of the most important markets. Although Germany is still the largest single market, it will likely soon be overtaken by Asia. In China alone, Trumpf’s sales recently rose 50.7% to 525 million euros, while in Germany they fell from 612 million to 779 million (minus 5.9%). “We need China to secure our jobs in Germany,” said Nicola Leibinger-Kammüller. About half of all employees work in Germany; the number of employees recently reached over 15,000 worldwide for the first time. How to successfully maintain the values ​​of a Swabian family business and at the same time be seen as a local business in China – this is one of the challenges for which Trumpf has a great deal of respect.

The association wants China to be part of a climate club

In Berlin, the head of the association, Haeusgen, still has demands vis-à-vis the future federal government. They are not new: simpler and faster approval procedures, a “global CO₂ pricing system” which promotes investments in climate protection technologies and at the same time “abolishes the plethora of other taxes and energy royalties “, technological openness, a” first “class”, open markets and free trade, digital sovereignty in Europe, faster digitization. And of course, Haeusgen attaches a “key role “to mechanical engineering in the fight against global warming. A breakthrough for him would be an” international climate club of the ten to fifteen largest emitters “- with similar ambitions in terms of reducing greenhouse gases. That would be of course “super great if difficult candidates like China” also entered right away. Haeusgen does not expect that, “but without China we would have done a lot”.

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