Mechanical engineering: Slowed down by politics in Germany, energy costs are crippling and a shortage of skilled workers is inhibiting innovation

The mood in German mechanical engineering is currently depressed. Uncertainty about the future development of world trade and a tense order situation are weighing on the industry. There are also geopolitical risks and location disadvantages. Many companies are expecting declining sales. The Association of German Mechanical and Plant Engineering (VDMA) is therefore calling on politicians and collective bargaining partners to take action.

Here we analyze the current situation in mechanical engineering, highlight the challenges and trends in the industry and finally identify measures that could contribute to improving the mood. The perspectives of companies, employees and politicians are taken into account.

Current mood in mechanical engineering

Various reports and analyzes paint a negative picture of the current mood in mechanical engineering:

• PwC's mechanical engineering barometer shows that sentiment is at an all-time low and sales forecasts are slipping into the red.
• According to a survey by the VDMA, 37 percent of companies rate their situation as bad and only 28 percent as good.
• Almost 60 percent of the decision-makers surveyed expect an economic weakness in Germany.
• The expansion investments of German mechanical engineering companies in Asia are losing traction.
• Order intake and production in the industry have declined sharply compared to the previous year. What is particularly worrying is that the mood is currently worse than during the corona pandemic.
• But there are also positive signals: the sales opportunities in the USA are rated as good or very good by around one in three companies.

Challenges in mechanical engineering

The German mechanical engineering industry is currently facing a variety of challenges:

Economic framework conditions

• Energy costs: Rising energy costs are putting a strain on companies.
• Laws: Stricter laws and regulations make doing business more difficult.
• Location disadvantages: Rising energy and personnel costs as well as the regulatory environment in Germany are worsening competitiveness in an international comparison. The importance of China as a sales market is decreasing.

Global competition

• Competitive pressure: German mechanical engineering companies have to reinvent their business models and products in order to survive in international competition, especially against Asian competitors.
• Country-specific factors: The competitiveness of German mechanical engineering companies is also influenced by country-specific special factors among competitors. For example, Japan is suffering from the consequences of the Fukushima nuclear disaster and Swiss exports are being hampered by the strong franc.

digitalization

• Digital transformation: Many companies have not yet fully implemented digital transformation and are stuck in old structures. There is a lack of consistent digitalization of processes and a data-driven orientation.
• Opportunities and challenges: Digitalization poses challenges for the industry, but it also offers opportunities to increase efficiency and develop new business models.

More challenges

• Shortage of skilled workers: The shortage of qualified specialists is a major problem.
• Supply chains: Disrupted supply chains lead to production delays and higher costs.

These diverse challenges, in particular the combination of economic conditions, global competitive pressure and slow progress in digitalization, contribute significantly to the negative mood in the industry. To maintain competitiveness and improve morale, these challenges must be addressed.

Trends and innovations in mechanical engineering

Despite the challenges, there are also positive developments and trends in mechanical engineering:

• Industry 4.0: Advancing digitalization and networking in production offers new opportunities.
• Sustainability: Sustainability and environmentally friendly materials are becoming increasingly important.
• New technologies: Hybrid lightweight construction, multi-material design and additive manufacturing are promising fields.
• New business models: In addition to the classic sale of machines, new business models such as leasing or subscription models are becoming increasingly important.

Best practice examples

Some mechanical engineering companies show how to successfully deal with current challenges. Here are some examples:

• Brückner Maschinenbau: The company was recognized at the Hannover Messe as a “best practice example” for energy efficiency in industrial processes.
• Burkhardt+Weber: The mechanical engineering company relies on individual solutions and high flexibility in production in order to meet the requirements of its customers. Aichelin: In collaboration with ROI, the company has structured the throughput and processing times for assembly and commissioning on the construction site through a structured system Planning and optimized processes significantly reduced.
• Krones AG: The mechanical engineering company is relying on shifting transport from road to rail in order to plan transport optimally, relieve road traffic and reduce CO2 emissions.
• IMRO Maschinenbau: The company uses state-of-the-art technologies such as 3D planning and simulation to optimize plant processes and deliver quick results to its customers.

These examples show that companies can be successful through innovation, customer focus, digitalization and sustainability. They offer valuable suggestions for other companies in the industry.

Successful companies in mechanical engineering

There are a number of mechanical engineering companies that are successful despite the difficult conditions.

More about it here:

• Successful mechanical engineering companies in Germany include Bosch, CLAAS, Dürr, Exyte, Festo, Krones, Voith, Zeiss and others

These companies are characterized by various factors, such as innovation, customer focus, digitalization and sustainability. They have recognized the challenges facing the industry and have successfully developed strategies to overcome them. For example, they invest in research and development to bring new technologies onto the market and use the opportunities of digitalization to optimize their processes and develop new business models.

In a global comparison, 33 percent of global mechanical engineering sales come from China, 32 percent from Europe, 18 percent from Asia (excluding China) and 14 percent from North America.

Measures to improve mood

In order to sustainably improve the mood in mechanical engineering, coordinated action by companies, employees and politicians is required. The most important measures are:

Pursue

• Drive innovation: Companies should invest more in research and development and bring new technologies and products to market.
• Use digitalization: Digitalization offers opportunities to increase efficiency and develop new business models.
• Promote sustainability: Sustainable production processes and products strengthen competitiveness.
• Securing skilled workers: Companies should invest in the training and further education of their employees and create attractive working conditions.
• Promote internationalization: Opening up new markets, such as Turkey, can help reduce dependence on individual regions.

workers

• Show flexibility: Employees should be prepared to adapt to new requirements and continue their training.
• Involve collective bargaining partners: The collective bargaining partners should be moderate when it comes to wage and salary developments.

politics

• Improve framework conditions: Politics must improve the economic and political framework conditions for investments and innovations. These include a competitive tax system, modern infrastructure and a more flexible labor market.
• Reduce bureaucracy: Reducing bureaucracy relieves the burden on companies.
• Modernize infrastructure: Investments in infrastructure strengthen Germany as a business location.
• Reduce taxes: Lower corporate taxes and tax incentives for investments improve competitiveness.
• Establish funding programs: Targeted funding programs can support innovation and digitalization.

Suitable for:

• What is the reason for the current success of some companies in mechanical engineering despite the economic crisis in Germany?

The mood in German mechanical engineering is currently clouded

The industry is facing major challenges, such as the global economic downturn, rising energy costs, increasing competitive pressure and the shortage of skilled workers. At the same time, trends such as Industry 4.0 and sustainability offer opportunities for the future.

In order to improve the mood and ensure competitiveness, companies, employees and politicians must pull together. Companies must drive innovation, use digitalization and promote sustainability. Employees should react flexibly to new requirements and continue their training. Politics must improve the framework conditions for investments and innovations, reduce bureaucracy and invest in infrastructure.

Only through a joint approach can German mechanical engineering emerge from the crisis stronger and maintain its position as one of the leading industrial sectors worldwide.

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