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Covid-19 disrupts mechanical engineering supply chain

A survey of 965 member companies of the VDMA – Germany's mechanical engineering industry association – has revealed that 84 per cent of participating firms have had their operations directly affected by Covid-19.

Almost one in two (45 per cent) of those surveyed even reported 'serious' or 'noticeable' disruptions along the supply chain.


Disruptions in supply chains were reported to be particularly prevalent in Italy (according to 75 per cent of those affected), Germany (55 per cent), China (51 per cent), France (36 per cent) and the US (25 per cent).

'Logically, as the virus spreads, the problems in the factories increase as well,' said VDMA chief economist Dr Ralph Wiechers. '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 and also German suppliers. This leads to noticeable production burdens and also production losses.'

However, the situation in China and South Korea appears to be easing slightly, Wiechers added, with many engineering companies reporting a significant increase in orders from their Chinese customers.

Reduced investment plans 

Mechanical engineering companies are also becoming much more sceptical about the expected sales losses, according to the VDMA.

Nearly 96 per cent of the surveyed 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 per cent of them estimate these declines to be in the range of 10 to 30 per cent.

In order to absorb these setbacks, three-quarters of the surveyed companies 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 per cent of the companies,' Wiechers explained.

Close to 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 per cent range and about a quarter will reach to the extent of more than 50 per cent.

'Helping to get the investments back on track will be one of the most urgent political tasks for the post-Corona period,' emphasised Wiechers.

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