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Corona Crisis Hard Times for the Mechanical Engineering Industry

Editor: Nicole Kareta

The mechanical engineering industry is increasingly feeling the effects of the corona pandemic; orders are reduced or even cancelled. According to the VDMA flash survey, many companies are making capacity adjustments.

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"Overall, 45 percent of the companies report noticeable order losses or cancellations, and 32 percent of those surveyed even serious ones."
"Overall, 45 percent of the companies report noticeable order losses or cancellations, and 32 percent of those surveyed even serious ones."
(Source: gemeinfrei / Pixabay )

The situation in the mechanical engineering industry has worsened further due to the consequences of the corona pandemic. At the end of March, 84 % of the member companies surveyed by the VDMA were already reporting adverse effects, and this figure has since risen to 89 % (mid-April). In addition, the main problems have shifted more towards demand-side disruptions, i.e., a drop in orders or cancellations. "Overall, 45 % of the companies report noticeable order losses or cancellations, and 32 % of those surveyed even serious ones. However, the supply chains are also still under strong pressure," says VDMA Chief Economist Dr. Ralph Wiechers.

The epicenter of the disruptions continues to be in Europe. More than 90 % of mechanical engineering companies reported supply-side and demand-side disruptions from Europe. On the demand side, there is a strong negative impact coming from the USA (47 %). In China, on the other hand, the situation appears to be stabilizing.

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More than three quarters of the companies do not yet see any easing of the disrupted supply chains for the next three months, 28 % of the companies even expect the situation to deteriorate. Most of the respondents are even more critical of the development of the order situation - 43 % expect the situation to worsen on the demand side. With regard to expected sales, the companies' assessment has not changed significantly: Similar to March, about 60 % of the companies expect a decline in turnover of between 10 and 30 % for the whole of 2020.

Capacity Reduction in Large Companies

A total of 790 companies from the mechanical engineering sector participated in the third VDMA flash survey on corona effects. The proportion of companies making capacity adjustments has risen from 75 to 83 % in the last three weeks. "More and more companies are sending their employees on short-time work and are arranging for production stops and staff reductions - even of parts of the core workforce. Large companies with annual sales in excess of 1 billion euros are using these instruments for capacity adjustment more frequently than medium-sized companies," explains the VDMA chief economist.

If the measures to contain the corona pandemic are eased in the foreseeable future, one third of the companies expects to need 1 to 3 months and another third expects 3 to 6 months respectively to return to normal capacity utilization. More than 20 % of the companies surveyed even expect 6 to 12 months for this step.

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