Corona pandemic hits mechanical engineering increasingly hard

24 Apr 2020 00:00 Economy

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.

The situation in the mechanical engineering industry has worsened further due to the consequences of the Corona pandemic. At the end of March, 84 percent of the member companies surveyed by the VDMA were already reporting adverse effects, and this figure has since risen to 89 percent (mid-April). In addition, the rmain problems have shifted more towards demand-side disruptions, i.e., a drop in orders or cancellations. "Overall, 45 percent of the companies report noticeable order losses or cancellations, and 32 percent 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 percent 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 percent). In China, on the other hand, the situation appears to be stabilizing.

More than three quarters of the companies do not yet see any easing of the disrupted supply chains for the next three months, 28 percent 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 percent 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 percent of the companies expect a decline in turnover of between 10 and 30 percent for the whole of 2020.

"Overall, 45 percent of the companies report a noticeable drop in orders, and 32 percent of those surveyed even serious order losses or cancellations.

Large companies increasingly use instruments for capacity reduction

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 percent 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 per cent of the companies surveyed even expect 6 to 12 months for this step.

Corona pandemic hits mechanical engineering increasingly hard

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