A Man-made Tsunami Hits Germany’s Industrial Economy
The Purchasing Managers’ Index (Markit PMI/S&P Global) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector, below indicates contraction. The PMI for Germany has been below 50, with ups and downs, for the last twelve months. Now, data released at the beginning of December are even worse than the forecasts, confirming that German industry remains deep in recession.
Manufacturing industry: 43.1 (forecast of 43.2; previous month at 42.6); Services: 48.4 (forecast of 49.8; previous month at 49.6). Overall index: 46.7 (forecast of 48.2; previous month at 47.8).
The government-sponsored German Institute for Economic Research has also corrected downward its prognoses for next year. In detail, they now forecast a 0.6 % growth instead of 1.2 %, which is a 50% plunge. But the worst is still to come, failing a 180% inversion of economic policy.
The news of industrial activities being terminated in Germany as a result of the sanctions-induced energy crisis and of green policies sound like a war bulletin. The victims are often tradition-rich companies, that are leaders in the world market. Particularly hit is the automotive industry, which today produces 40% less than in 2019. A sample of the news from the first two weeks of December paints a clear picture.
Volkswagen, the largest world car manufacturer, is now cutting several hundred jobs in Saxony. A spokesperson for the company announced that the employment contracts of more than 500 employees will not be extended. Temporary employment contracts had already expired in the previous year. The reason given by VW was the discontinuation of production of electric car models Cupra Born and ID.3. Sales were so poor that they are no longer being produced.
Bosch, the world’s largest automotive supplier, is planning to cut at least 1,500 jobs over the next two years, at two sites in Baden-Württemberg. Bosch, like other companies in the automotive sector, has invested huge capital in e-mobility technologies, and now faces losses due to the weak demand for e-cars.
ZF, the automotive transmission and components giant (150,000 employees worldwide), has announced the closure of its Gelsenkirchen plants by the end of the year. Two hundred jobs will be cut, and several thousand more are at risk.
Heinze Group, the automotive supplier from Herford is insolvent, due to cutbacks in production by Porsche, BMW and Co.
Yanfeng, the automotive supplier’s factory in Lüneburg will lay off over 200 of its 570 workers.
Umeta, world market leader for manual lubricating equipment and parts, is under the supervision of an insolvency administrator. Parts for machines have been produced there for almost 100 years. Umeta was receiving fewer and fewer orders.
Beuttenmüller, the traditional model constructor and prototype developer will cease business operations at the end of the year. Bitter news for the workforce,. 70 of whom will be made redundant in the next few days (liquidation team excluded).