Zero Growth Is a Wake-up Call to Politicians

Relative change of German machine production vs. prvious year, respectively (Source: Destatis / VDMA)

Relative change of German machine production vs. prvious year, respectively (Source: Destatis / VDMA)

The mechanical engineering industry in Germany is set to end 2015 at a high level, but with zero growth. In the first ten months, real production of machinery and equipment fell by 0.5 percent. For 2015, the VDMA expects a nominal production volume of 199 billion euros. The association also anticipates no real growth in the mechanical engineering industry next year. However, in nominal terms, the production figure in 2016 could just pass 200 bn for the first time. Given the many current problem areas that are also having a global impact on the mechanical engineering business and the investment restraint in Germany, the German Engineering Association firmly regards this as a success, but not an encouraging sign, stressed VDMA President Dr. Reinhold Festge at the association’s annual press conference in Frankfurt in December.

“We are very concerned to see too much complacency and too little preparation for the future in Germany. Therefore, instead of putting a positive or negative spin on this zero-growth forecast. we are using it as a wake-up call to the government to finally do something!”, explained Festge. Measures he deems necessary are expansion of the digital infrastructure, a more flexible labour market, tax incentives for research and a trade policy for new markets.

Mechanical engineering remained Germany’s biggest industrial employer in 2015. Since the beginning of the year, over 10,000 more new jobs have been created in Germany. In September, the country’s mechanical engineering industry employed 1.019 million people – up 0.3 percent on the previous year. “Companies have built up knowledge-intensive service departments, and demographic change is creating incentives to retain proven employees and secure qualified specialist staff as early as possible”, explained Festge.

Focus on China, Iran and Russia

In view of generally weak global economic growth, the mechanical engineering industry is monitoring developments in three key countries very closely. Exports of the mechanical engineering industry in Germany increased by 0.8 percent (adjusted for price changes) to EUR 116 billion in the first nine months of this year, However, for China, the VDMA expects exports to fall by 5 percent to EUR 16 billion this year. Even so, the country continues to provide considerable opportunities for German mechanical engineering, which can meet the growing Chinese requirements in terms of productivity, quality and resource efficiency with its products and solutions. Around 750 subsidiaries or cooperations of VDMA member companies are currently active in China.

In Iran, mechanical engineers from Germany aim to revive their traditionally strong business relationships as soon as sanctions are eased on “Implementation Day”. However, if business is to pick up in this way, the VDMA believes that the German federal government must increase staffing levels at the German Federal Office for Economic Affairs and Export Control. “In our view, this body is already overstretched,” warned Festge. The association now expects the banks to quickly change their restrictive business policy for payments relating to Iran. The VDMA will support its members locally by setting up a VDMA office in Tehran in the first half of 2016.

Business with Russia has fallen sharply by 27 percent to just under EUR 3.6 billion in the past year, although the German mechanical engineering industry maintained its market share and remains the main technology supplier. In contrast, Chinese competitors have lost market share. “We obviously know our place in relation to politicians. However, we hope to see them make greater efforts to gradually lift sanctions,” said the VDMA President.

Industry 4.0 and “the future of work” go hand in hand

“Industry 4.0 is crucially dependent on mechanical engineering,” emphasised Festge at the press conference. “We are both providers and users. Digitisation of production – by companies and their customers – gives mechanical engineering the opportunity to remain ahead on the global market in ten or twenty years’ time.”

While admitting that some less skilled jobs could be lost, he stated that increasing automation meant better-quality jobs and had always delivered extra employment in the past. “We firmly believe that this conclusion will also apply to Industry 4.0 a decade down the line,” emphasised the VDMA President. However, he pointed out the importance of allowing sufficient flexibility of work and service contracts.

VDMA has recently set up a labour-market competence centre focused on “the future of work”, “because we firmly believe that this field is also a key factor in the future success of mechanical engineering,” said Festge.

According to the mechanical engineering industry in Germany, integration of refugees in the labour market is a task that requires particular patience. First of all, qualifications have to be gained in several areas. In particular, the issue of language skills cannot be resolved by business, stressed the VDMA President. “We also need a legal framework that makes active integration in the workplace easier for us.” This includes: Vastly accelerated asylum procedures, exempting placements from the minimum wage for six months, giving refugees with qualifications in Germany the opportunity to find subsequent employment with no time limit, and completely lifting the employment ban on refugees in part-time work.

The recent climate summit in Paris once again highlighted the need for an ambitious global climate policy. The VDMA firmly believes that this is technologically feasible and that mechanical engineering is part of this solution. The mechanical engineering industry is confident that use of its products and solutions is growing worldwide, and is therefore continuing to invest heavily in developing climate-protection technologies. (Source: VDMA)

Links: Verband Deutscher Maschinen- und Anlagenbau e.V., Frankfurt/Main, Germany

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