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Expert Article

 Johannes Messer

Johannes Messer

Owner, Johannes Messer-Consulting GmbH

Economic Situation

Transformation of the Foundry Industry

| Author/ Editor: Johannes Messer / Isabell Page

The foundry industry is undergoing an enormous transformation. A strongly volatile economic situation and increasing insolvencies are a major source of uncertainty for the industry. But what challenges will foundries face when and with what solutions can foundries prepare themselves?

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What are the challenges facing the aluminum foundry industry in these stormy times?
What are the challenges facing the aluminum foundry industry in these stormy times?
(Source: gemeinfrei / Pixabay)

Current Situation in the Foundry Industry

Over the last few months, the forecasts for the German gross domestic product 2019 have been repeatedly revised downwards by various sources. If one averages the current forecasts, the expected growth for 2019 is only 0.7 %, which is significantly lower than in 2018 and the average of recent years. Even though the year 2019 was not expected to be particularly positive in advance, many experts are "surprised" by the current situation. For some months now negative economic forecasts have been accumulating from the economy. First plan corrections and profit warnings were issued.

There are also clear signs of a cooling economy in the aluminum foundry industry. Some foundries are still reacting with the classic short-term levers, such as reduction of holiday and leisure accounts or short-time work. Other companies are already exploiting long-term capacity reduction by closing parts of companies or entire locations.

Since the fourth quarter of 2018, the foundry industry has also seen a significant increase in corporate insolvencies. One reason given by all companies concerned was the declining sales. In addition to declining sales, it is currently mainly postponed new projects, high investment and development costs, and the partial elimination of the previous "bread and butter" parts, that make many foundries additionally problems.

Where is the Need for Action?

The fields of action and challenges are complex and far-reaching, especially in the foundries. The solution approaches are individually different and depend on the starting position, as well as the strategic direction of the individual companies.

The task derived from the initial situation (short-term, long-term) is very different:

  • Short-Term: The top priority is the „rescue„ of the company. Liquidity comes into focus.
  • Long-Term: Only companies that take advantage of the opportunities offered by the crisis, correct mistakes and put their current strategic focus on the test bench will be successful in the long term.

To avert damage from the company in the short term, the first signs of the crisis must be taken seriously. The principle of hope is inappropriate. The existential meaning requires that the process be managed professionally and with first priority.

In addition to the short-term measures, the long-term aspect is often neglected. Based on the identified weaknesses and opportunities, the company's strategy must be revised, adapted and implemented.

Conclusion

Companies that recognize the first crisis indicators should act promptly and consistently. This article shows in a summary the eponymous study on the current situation in the aluminum foundry industry. Detailed assessments, expectations and recommendations can be found in the full study.

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About the author

 Johannes Messer

Johannes Messer

Owner, Johannes Messer-Consulting GmbH