Munich The German machine builders started the new year with a lot of momentum. “Many manufacturers are already fully booked for the whole of 2022,” said Karl Haeusgen, President of the VDMA industry association, to the Handelsblatt. Despite all the economic and geopolitical risks, the association expects production to increase by seven percent again.
According to the new VDMA figures from Thursday, incoming orders rose by 32 percent in real terms last year. The companies even surpassed the economically good year 2018. “Things went even better than we had expected,” said Haeusgen.
The result is a record order backlog. On average, this was 10.9 months at the end of November, when it was last surveyed. The VDMA has so far not been able to identify any abating of the boom. In December, new orders from machine and plant manufacturers increased by 21 percent despite the already good level of the previous year.
There is good news across the board at the moment. For example, machine builder Dürr started the new year with a record order backlog. “The prerequisites for a significant increase in sales in 2022 are good, specifically we want to exceed the pre-corona level of 2019,” Dürr boss Jochen Weyrauch told the Handelsblatt.
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Gea CEO Stefan Klebert also says: “With well-filled order books and our growth levers – such as sustainability, innovations and digital solutions or new food – we are optimistic about 2022.”
“It went even better than we expected.”
(Photo: Teichmann/VDMA)
There are a number of drivers for the industry. Because of the trend towards electromobility, the need for production technology in the automotive industry is great, said Dürr boss Weyrauch.
In addition, large production capacities for battery cells are to be created in Europe as part of the electric boom. “With our production lines for cell coating, we have an efficient key technology for the new battery factories,” says Weyrauch. Another important driver is the issue of sustainability.
But at the same time there are more challenges than ever before.
Component shortages and delivery difficulties
This is how the industry is hit by the global shortage of parts. “Machine builders are usually less affected than the car industry, for example, but individual companies are just as hard hit,” said Haeusgen. Medium-sized companies in particular often need smaller quantities – and could then organize parts on the spot market. In addition, many member companies have taken measures and, for example, diversified their supply chains.
Availability also remains a problem for Dürr CEO Weyrauch. “We are working flat out to limit the impact of this and expect the situation to improve in the second half of the year.”
Gea CEO Klebert is also cautiously optimistic that the problems will be under control. With “corresponding risk minimization in the case of delivery bottlenecks as well as countermeasures to cope with the increase in costs”, the issues are being addressed proactively.
According to Haeusgen, many machine builders can pass the increased purchase prices on to customers. However, it is important that the social partners agree on only moderate wage increases in order to get inflation under control.
The increased energy prices, on the other hand, are a manageable problem for many machine builders. “On average, energy costs only account for one percent of gross value added for companies,” says VDMA economics expert Olaf Wortmann.
risk China
Machine builders are currently looking closely at China. “It used to be said that China is a great opportunity for machine builders with small risks,” says Haeusgen. “Today it’s rather the other way around.” Growth has weakened in the country, and in the fourth quarter of 2021 the Chinese economy grew by only four percent. That was the weakest reading in a year and a half.
The rigid corona policy could weaken growth further. “For 2022 we expect a flatter development in China,” says Haeusgen. In the construction industry, for example, one notices the consequences of the problems of the real estate group Evergrande. “Demand for excavators and concrete pumps has fallen.”
In addition, more and more German companies are suffering from the isolation of the country. In a survey by the German Chamber of Commerce Abroad (AHK), more than a third of German companies doing business in China stated that they were disadvantaged compared to domestic companies. A year earlier it was only 20 percent. VDMA President Haeusgen appealed: “We absolutely have to push for open markets and free trade. This is existential for our company.”
demands on the federal government
In view of the major challenges, the industry is calling on the federal government to strengthen the innovative power of the economy. “We need good framework conditions for the development and marketing of sustainable technologies,” said Dürr boss Weyrauch.
German industry is strong in developing energy-saving and low-emission production facilities. “We have to seize this opportunity, and for that we need what the traffic lights promised in the coalition agreement: more speed, more digitization, more innovation support and less bureaucracy.”
VDMA President Haeusgen hopes that the new federal government will speed up planning and approval procedures. “It seems to me that the will is there to get into conflicts.”
When it comes to labor market policy, however, he lacks the willingness to do so. Machine builders often have to react quickly to market fluctuations. This also requires flexibility in personnel policy. Temporary work and fixed-term employment relationships should not be made more difficult.
Gea boss Klebert also sees major challenges for politicians. “On the one hand, the lack of young talent and the shortage of skilled workers could put the brakes on the growth of our industry and, on the other hand, Germany must catch up as soon as possible in terms of digital transformation and infrastructure.”
With a view to climate change, too, one must act “decisively in the interest of a future worth living in.” However, the economy – and especially mechanical and plant engineering – can also make contributions to more sustainability through innovative technological solutions.
More: China’s industry is growing more slowly.