The industry association VDMA has corrected its forecasts slightly upwards for both 2020 and 2021. The new mechanical engineering president Haeusgen values the opportunities higher than the risks. Employment fell only slightly during the crisis.
Stuttgart – While there is heated discussion in politics about tightening the corona rules in business, the mechanical engineering association VDMA is correcting its forecasts upwards. Instead of a 17 percent drop in production, the newly elected VDMA President Karl Haeusgen now “only” expects a decline of 14 percent in the current year to 194 billion euros. And for the next year, “we are now expecting a production increase of four percent instead of the two percent previously expected,” said Haeusgen in an online press conference. He justifies this with the better than expected third quarter. In addition, the economic situation has brightened slightly for 2021. For comparison: In the global financial crisis of 2008/09, the production of mechanical engineering companies collapsed by almost 25 percent.
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The VDMA President justified his current confidence as follows: “We are seeing the economic acceleration from the Corona valley on the one hand and an acceleration of technological change on the other. This double acceleration holds exciting potential in European mechanical engineering for all those who find the right answers to the challenges ”. VDMA chief economist Ralph Wiechers is not worried that the recent rise in the euro is making machines more expensive in third countries. However, the earnings level of the companies will suffer as a result.
The uncertainties are great
Haeusgen admitted, however, that the increase in the forecasts was associated with greater uncertainties than in previous years. He referred to the volatile situation in the global economy – and that “is poison for the capital goods economy”. In addition, there is still protectionism. Haeusgen: “Liquidity bottlenecks during an upswing will be the real challenge in 2021,” he explained. The reason for this is that customers only pay in full for the machines ordered after delivery, until then the machine builders have to partially pay in advance. But he does not expect a wave of bankruptcies among the mechanical engineering companies.
In his first press conference as VDMA President, Haeusgen praised his own industry. “What is more remarkable is that the companies were able to maintain their production and service and keep the downsizing within narrow limits,” he said. This played an important part in keeping the economy going. At the end of the year, it is estimated that around 1.025 million people will be employed in mechanical engineering, which would then correspond to a decrease of 38,000 jobs compared to the previous year. This means that mechanical and plant engineering continues to be the largest industrial employer in Germany. In the next year, employment should remain constant overall – positive effects from an increase in employment, for example in new technologies, would be offset by a possible reduction.
At times up to 300,000 machine builders on short-time work
However, this is only possible thanks to government support such as short-time work benefits. In the spring, 300,000 mechanical engineers were temporarily on short-time work, and the number has fallen since then, according to Wiechers. According to calculations by the Federal Employment Agency, there were still a good 200,000 in August. Nevertheless, Haeusgen insisted on changes “if only to prevent structural adjustments from being postponed”. “There must still be no industry lockdown. Daycare centers and schools must remain open as much as possible, and business trips must again be possible with little bureaucratic effort, ”emphasized the VDMA President.
Political demands are the permanent expansion of the loss carry-back, that is, that losses of one year are offset against profits of previous years. The period for applying the loss carry-back should be extended to five years and increased to a volume of at least ten million euros, Haeusgen demanded. Because this instrument can only be used by those who have previously made profits, it would not protect companies that have to do with problems.
Free trade agreement called for
And last but not least, the new mechanical engineering president calls for new free trade agreements between the EU and the most important trading partners – especially with the USA. In return, he rejects the Federal Government’s planned tightening of foreign trade law for investments from third countries. According to an estimate by the VDMA, around 35 percent of exports from Germany to third countries are now affected by trade barriers.