The market research institute Verian has conducted a survey of 200 German companies from the automotive, mechanical engineering, consumer goods and retail sectors. The companies were asked by telephone about current economic prospects and topics such as restructuring, insolvency risks, refinancing and other structural challenges.
The turnover of each of the participating companies is at least 50 million euros, with around a quarter of them generating annual turnover of over 500 million euros. 26 percent of the companies from the mechanical and plant engineering sector are currently in a restructuring phase and a further 24 percent are planning such measures in the near to medium term. Many of the companies that have decided to restructure are aiming for far-reaching changes. A total of 58% of those surveyed intend to fundamentally reorganize their business strategies.
In addition, 42 percent of companies plan to relocate and reduce staff, while a quarter intend to reduce production and service capacities. This data comes from a survey conducted by Verian on behalf of the consulting firm FTI-Andersch. 43% of participants anticipate a significant loss of turnover due to customer insolvencies, and 28% of respondents expect a reduction in staff of more than 20% by 2030. The assessments of location factors are also predominantly negative.
First companies reduce staff
Of the companies that have already started restructuring, 31% have already reduced their workforce and 23% have cut their production capacities. Only eight percent have so far started to relocate. In addition, 70 percent of respondents see geopolitical instability as the biggest challenge facing their industry. However, when comparing industries - including automotive, mechanical engineering and consumer goods - geopolitical instability is only ranked as the sixth biggest challenge overall.
“This data not only reveals the mood, but also shows what concrete plans the companies surveyed are pursuing and where they are already taking action,” says Karsten Schulze, CEO of FTI-Andersch, the consulting unit of FTI Consulting in Germany that specializes in restructuring, business transformation and transactions. “They underline the significantly reduced attractiveness of Germany as a business location and at the same time show that the previous export-oriented economic model has reached its limits. Minorities are still cutting jobs, planning relocations and removing capacities from the market. However, these minorities are so significant that they will have a considerable impact on our economy and the people working in it.”
Germany faces numerous insolvencies
Of the companies surveyed, 40% are observing a significant increase in insolvencies in their sector, while 14% even expect a wave of insolvencies. In preparation for this, 43% of companies are preparing for a loss of sales due to insolvent customers and 29% assume that their supply chains could be affected. Against this backdrop, 80 percent of machinery and plant manufacturers are planning to enter new markets and 58 percent intend to expand their customer base beyond their current target industries.
“If the geopolitical situation were not so uncertain, more machinery and plant manufacturers would probably have already started relocating,” says Schulze. “However, many are aware that the situation could be complex and they still have to act. Once the decision to plan relocations has been made, they have a high chance of being implemented. And once the relocation has taken place, the respective capacities will not return for years, as these investments must first be amortized. It is also questionable whether the attractiveness of the location will improve again in a few years' time.”
