Supply chains in Mechanical Engineering become more stable

The 5th VDMA flash survey shows that almost all machine manufacturers are suffering from the economic consequences of the corona pandemic. But there are also rays of hope.

  • 5th VDMA Flash Survey: Order situation increasingly tense
  • Liquidity bottlenecks still not an issue for many companies
  • Staff reduction intensifies

About 98 percent of the companies - and thus almost all mechanical engineering companies - are now suffering from the economic consequences of the corona pandemic, according to the results of the 5th VDMA flash survey among its member companies. 730 companies took part in this survey. "The demand side is still very tense," says VDMA Chief Economist Dr. Ralph Wiechers. "Already at the beginning of May, a good third of the affected companies recorded serious order losses or cancellations, by the end of May this figure had risen to over 40 percent," he explains.

However, the problems with broken supply chains are gradually being put into perspective. More than 80 percent of the affected companies now report no or only minor supply-side disruptions. At the beginning of May, this figure was still 61 percent. "Already at the beginning of May, there were signs that the supply situation along the value chains was easing. This positive development has continued, as the results of the latest flash survey show", explains Wiechers. More than 40 percent of the companies also expect supply-side problems to diminish further in the next 3 months.

Over 80 percent of the affected companies now report no or only minor supply-side disruptions.

The liquidity situation in the companies has not changed significantly compared to the end of March. About 70 percent of the affected companies have no or only minor and only 4 percent have serious liquidity bottlenecks. "The majority of companies have been able to build up reserves in recent years. This is now paying off," announced Wiechers. However, the VDMA chief economist views the employment situation in the companies with concern. It is often no longer possible to avoid capacity adjustments. "For more and more companies, the reduction of some of the core workforce is becoming unavoidable. The proportion of companies that already had to record a decline in 2019 and are now using this instrument is particularly high," says Wiechers.

Turnover expectations in the mechanical engineering sector have hardly changed over the past ten weeks. Furthermore, about 6 out of 10 companies expect a decline in turnover of 10 to 30 percent for 2020: "Not surprisingly, companies that had a decline in turnover in 2019 are somewhat more sceptical about 2020," concludes Wiechers.