#Business
VDMA: New technologies and innovation lead to further growth in the German engineering industry
+VDMA confirms 2013 growth forecast – plus 2 percent
+Engineering exports have reached an all-time high
„Though the order inflow shows lateral movements the ifo business climate index suggests a general upturn in business activities among our customer countries worldwide. Again, we understand the Hannover Messe as further positive signal in the economic development", Hesse said.
Engineering companies showed positive results in 2012
For 2012, the engineering industry reported a real growth in output of 1.3 percent and generated a sales value of 207 billion euros, reaching nearly the record level of the year 2008 (208 billion euros). With total staff amounting to 978,000 employees in December 2012 engineering remained the largest industrial employer. Over the year 2012, the engineering industry created about 30,000 new jobs. „So, all we can say to those who keep telling that Agenda 2010 has only brought precarious part-time jobs is: no, on the contrary, Agenda 2010 still has positive impact." Hesse argues. Capacity utilisation achieved an annual average of 86.4 percent (2011: 88.7 percent).
Imports from the Eurozone climbed by 7.7 percent
Imports increased by nominal 4.1 percent to 56.2 billion euros in 2012, in particular to the benefit of the European partners: "Machinery imports from Eurozone countries climbed by 7.7 percent which demonstrates once again that Germany is a major driving force for the engineering industry." said the VDMA Executive Director. Italy was the most important supplier country, followed by Switzerland. China replaced Japan as fifth-largest market, a possibly historic change of positions. Currently, China makes up for 6.8 percent and Japan for 6.7 of German machinery imports.
Exports reached all-time high
„Despite reduced business with China exports saw a nominal plus of 5.1 percent thanks to the buoyant business with the USA", the Executive Director reported. According to Hesse, the absolute amount of 149.4 billion euros clearly exceeds the pre-crises level of 144.8 billion euros in 2008 and sets a new export record. German machinery exporters suffered a 9.6 percent loss in export volume on the Chinese market. The machinery market in the USA, by contrast, grew by 14.8 percent.
Russia fourth largest market
„With deliveries to Russia reaching a volume of about eight billion euros in 2012, the country ranked 4th as trading partner after China, USA and France." Hesse said. This makes up about five percent of Germany's total machinery exports. German companies play a major role on the Russian market. According to Hesse, 22 percent of all machinery imports are from Germany, followed at some distance by China with 13 and Italy with 11 percent. A recent VDMA survey among member companies about the Russian market has shown that business with Russia is still in the hands of the headquarters in Germany. Marketing and services are managed by the German departments. „We see, however, strong tendencies to transfer both elements, marketing as well as services, to Russia", Hesse announced. So far, only eight percent among the respondents are involved in assembling or production. For 2015, 19 percent are planning to set up assembling or production sites in Russia. Thus the German engagement is set to more than double. According to the VDMA Executive Director there are three decision supporting factors that need to be addressed in the process of establishing production in Russia: „Reliable framework conditions, the quality of staff training and the quality of domestic supply. In the field of framework conditions Russia has to catch up significantly, here we could well have seen much more progress. There are many opportunities to generate a win-win situation with our Russian partners. We finally should set sails and act together and not miss this opportunity. Perhaps the Hannover Messe will send respective signals." Hesse said.
Germany also needs reliable framework conditions
Framework conditions are a central issue in Germany as well", Hesse stressed. „In 2012, the industry reported a share of 22.3 percent in gross value creation, a share we are envied for by many other counties. We need stable and company-friendly framework conditions to establish a sustainable foundation for growth, prosperity and employment." Election campaign slogans that favour increases in taxes and contributions „are poison for this development and thus for the job market", said Hesse.
Particularly, the engineering sector that is characterised by medium-sized enterprises is facing „massive finance-intensive challenges", the VDMA Executive Director pointed out. According to Hesse the key issue of the Hannover Messe „Integrated Industry" or Industry 4.0" clearly shows the major investment needs for the next few years. Thus, every intervention in the substance of enterprises is a threat to the stability and the investment capability of the companies. To make it clear: The introduction of a green wealth tax or contribution would counter investments and thus be an attack on competitiveness and long-term stability of employment. All those who talk about further burdens for strong shoulders should know this. It would be wiser to use strong shoulders to pull the cart forward instead of squeezing the power out of them." Hesse said.
VDMA calls for intelligent solutions in the energy turnaround
Another area for action is the energy turnaround. „We have to integrate power plants with and without fuel costs, in particular solar and wind power stations, systematically into a new design of the electricity market. We must find solutions that establish competitive domestic production along the technology chain in Germany", the VDMA Executive Director underlined. According to Hesse it is absurd that renewable energy leads to declines in the trading price of electricity while consumers face an increase in the EEG levy. „What we need are quick solutions, what we get is an electoral campaign that puts a populist spin on the issue and hampers intelligent solutions." According to the VDMA, the recent, most curious, suggestions concerning the electricity price have had an extremely negative impact. The association sees it as an attempt to interfere in existing investments or in ongoing and mostly even completed projects. „ Still it is not fully clear what will happen but there can be no doubt: Any post-closing interference destroys the funding base of a project and thus all investment concepts. Ultimately, the mere suspicion of unreliable political framework conditions will lead to a stop of running or planned projects. It has also to be clear to us that this is not only about energy, such interferences would set a precedent for the investment security in Germany in general. And this would affect not only the German industry but also international investors – a very bad signal", Hesse said.
Lack of know-how protection causes major damage
A current VDMA study about „Know-how Protection in the Engineering Industry" has shown that seventy percent of the respondent companies feel that their trade and business secrets, their know-how concerning processes, products, markets and clients is "seriously threatened". More than 75 percent see competitors as the greatest threat, followed by former staff (74 percent). „According to the German Federal Bureau of Investigation the potential loss for the German industry amounts to annually between 30 and 60 billion euros, this means that a large number of cases remain unreported", Hesse said. „All in all, the VDMA must say loudly and clearly that know-how theft seems to become a far bigger problem than product piracy. This is made all the worse as 85 percent of the companies do not even know the existing standards that would support know how protection. Only seven percent use IT-security standards. That is why the VDMA has to take action – and we are starting right here at the Hannover Messe."
More academic success with the VDMA initiative „Maschinenhaus"
Innovation and high-end technology are of little use „if we run out of developers and people that are able to use the products", the VDMA Executive Director pointed out. The threat of skills shortages was one reason to launch the „Maschinenhaus-Initiative" of the VDMA. „Another reason was to show what is means to assume responsibility for young people. There are people who react like the three monkeys: hear no evil, see no evil, speak no evil. And the result: no action. Young people may continue to wander through the Curricula and mess up their studies. A highly narrow-minded, cynical and unacceptable attitude but all too often the reality. The VDMA adopts a different approach with the „Maschinenhaus Initiative": One part of our answer to the plight is a university award for good training and guidance projects at 32 universities. More success in your studies is possible – we will prove it." Hesse stressed.
