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Corona Crisis Survey Damaged Supply Chains in Mechanical Engineering

Editor: Nicole Kareta

The mechanical engineering industry is feeling the consequences of the corona pandemic with increasing force. The current survey by the VDMA, which was answered by 965 member companies, clearly shows this.

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Disruptions in supply chains are particularly prevalent in Italy, Germany, China, France and the USA.
Disruptions in supply chains are particularly prevalent in Italy, Germany, China, France and the USA.
(Source: gemeinfrei / Pixabay )

The proportion of companies whose operations are affected by the corona crisis rose from 60 % to 84 % within two weeks. Almost one in two affected companies (45 %) suffers from "serious" or "noticeable" disruptions along the supply chain. Only 5 % have been spared so far. "Logically, as the coronavirus spreads, the problems in the factories increase as well. Parts and components that were ordered in Asia a few weeks ago have not arrived at the local plants. In addition, there are failures of European, also German suppliers. This leads to noticeable production burdens and also production losses", says VDMA chief economist Dr. Ralph Wiechers.

According to the latest survey, disruptions in supply chains are particularly prevalent in Italy (75 % of those affected), Germany (55 %), China (51 %), France (36 %) and the USA (25 %). "However, the situation in China and South Korea seems to be easing slightly. In addition, many engineering companies are reporting a significant increase in orders from their Chinese customers," explains Wiechers.

Investment Plans are Reduced

Meanwhile, mechanical engineering companies are also becoming much more sceptical about the expected sales losses. Nearly 96 % of the companies are expecting a decline in sales in 2020, which they will not be able to compensate for in the course of the year. A good 60 % of them estimate these declines to be in the range of 10 to 30 %. In order to absorb these setbacks, three-quarters of the mechanical engineering companies surveyed have already made capacity adjustments, mainly via working time accounts, but also in the form of hiring freezes and short-time work. "Staff reductions - even of parts of the core workforce - are already an issue for 12 % of the companies," explains Wiechers.

Almost under three-quarters of the companies are considering cutting back their investment plans for 2020 due to uncertain business prospects and liquidity bottlenecks. Half of these adjustments are in the 10 to 30 % range and about a quarter will reach to the extent of more than 50 %. "Helping to get the investments back on track will be one of the most urgent political tasks for the post-corona period", emphasizes the VDMA chief economist.

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