German engineers are filled with resentment or dissatisfaction.
Economic Bodies Voice Concerns, "No Action Taken Despite Warnings," Says Mechanical Engineering Association. Deindustrialization Is a Potential Threat. The industrial atmosphere is even bleaker than during the pandemic.
German mechanical engineers have raised the alarm over potential industrial exodus from the Federal Republic. "We're not yet deindustrialized, but if no immediate action is taken, this will become a reality. Deindustrialization is a genuine threat," stated Bertram Kawlath, the newly appointed president of the German Mechanical and Plant Engineering Association (VDMA), in an interview with "Welt am Sonntag." "Germany's investment levels remain low, and the current downward trend, which has become increasingly apparent in various regions, will only accelerate if this continues," he added.
Kawlath highlighted issues such as regulatory overload, bureaucracy, high costs, and inactive policy as major concerns. "Politics has squandered valuable time over the years. Now, it's becoming increasingly evident how far Germany has slipped in terms of location competitiveness," lamented the VDMA chief.
Instead of addressing these issues, the situation has only worsened. This has resulted in a negative sentiment within companies and a subsequent decline in the economy. "We need to swiftly emerge from this low point. There's a growing sense of impatience and fury in our industry as nothing seems to be progressing," continued Kawlath.
"Assumed to be Evil"
Companies and economic associations' concerns are often heard and understood within political circles, but no tangible action follows, he asserted. "Yet, nothing ultimately changes." The failure to implement location factor improvements is often due to political disputes.
"We're frequently viewed as inherently evil by some politicians and NGOs. This leads to excessive regulation and bureaucracy," added Kawlath.
According to German Chancellor Olaf Scholz, meetings with industry representatives, trade unions, and associations will take place in the Chancellery this month to address the challenges faced by the German industry. He pledged to share the results with the Bundestag for a decision thereafter.
Unprecedented Pessimism in the Industry
The German mechanical engineering sector has been grappling with challenges for some time now. Although orders improved in August, as per the latest industry data published by VDMA economist Olaf Wortmann, he described it as a mere "outlier increase" due to the incredibly low value from the previous year. The trough in order intake has yet to be reached.
PWC's industry survey revealed that an astounding 59% of decision-makers expect a recession in Germany within the next 12 months. This is the lowest recorded figure in all 10 years of previous surveys. The proportion of pessimists has risen by more than 20 percentage points within the last three months.
"The significant role of global risks such as trade tariffs, impending block formation, and crisis hotspots cannot be ignored," explained PWC industry expert Bernd Jung. "However, the current dismal outlook among managers for the coming months, which is even more pessimistic than during the pandemic, cannot be attributed solely to the geopolitical landscape. Rather, it echoes deeper-seated structural problems in the industry such as the escalating costs of location factors, the contraction in production, and innovation barriers in future topics like sustainability and digitalization."
Jung further noted a pervasive sense of future anxiety that is inhibiting innovations. Rising energy and labor costs, as well as regulatory hurdles, are among the factors contributing to this anxiety. Many companies are also operating below their full capacity utilization of only 84.1%. During the COVID-19 pandemic lockdown phase, this figure was even lower. Only a small portion of surveyed companies are currently operating near their capacity limits.
The economic concerns raised by the German Mechanical and Plant Engineering Association (VDMA) underscore the potential threat of deindustrialization to Germany's economy. Despite the ongoing concerns, no significant action has been taken to address these issues, leading to a decline in the industrial atmosphere and negatively affecting the economy.
The inaction of political bodies in addressing the concerns of economic associations like the VDMA has resulted in a growing sense of frustration within the industry. The German mechanical engineering sector is grappling with unprecedented pessimism, with many companies expecting a recession within the next 12 months due to various structural problems and geopolitical uncertainties.
