- High backlog and global transformation processes provide confidence
- War in Ukraine and lockdowns slow output growth to 1% in 2022
- VDMA survey: complete cessation of business with Russia
- Further efforts are needed for climate neutrality and security of supply
- VDMA shows the way to tomorrow’s production at Hannover Messe
Hannover, 05/30/2022 – The economic recovery in the machinery and plant construction sector will continue on a slower course in the current year despite all the difficulties – provided there is no sudden interruption of energy supply. “The war in Ukraine and the ongoing supply chain issues, which are repeatedly exacerbated especially by lockdowns in China, are of course a huge burden on our industry. But at the same time, we can still consider a very high command cushion. currently 11.6 months. We therefore continue to expect real production growth for 2022, but we have to reduce our forecast compared to the previous one from plus 4% to plus 1%,” said VDMA President Karl Haeusgen during the meeting. the association’s press conference at the Hannover Messe. For turnover, VDMA economists expect nominal growth of 8% this year. This would mean a peak of 239 billion euros.
Despite the prevailing risks, the mechanical engineering industry derives confidence from numerous business opportunities in many important sales markets. “These include, above all, the continued impact of government economic stimulus and infrastructure programs around the world and the growing efforts of many countries to combat climate change. And in many places, significant investments are needed to realign value and supply chains, all of which can only be achieved with state-of-the-art technologies from mechanical and plant engineering,” Haeusgen emphasized.
Business in Russia is largely at a standstill
However, the Russian invasion of Ukraine remains a risk for the mechanical industry. In the meantime, this has resulted in a complete downturn in business with the region. This is the result of a recent VDMA survey of member companies active in the Russian market with production, sales or service. Ninety-five percent of the nearly 300 companies participating in the survey indicated that their business activities in Russia have now been significantly restricted or have come to a complete halt. Mutual sanctions, travel and transport restrictions as well as the general uncertainty due to the war play a decisive role here.
“Sanctions against Russia are having an effect, and they are completely justified. »
Karl Haeusgen, President of VDMA
“The extent to which the war changed everything can be seen in the fact that four out of five companies still described their business prospects with Russia as good or satisfactory before the invasion,” Haeusgen explained. Today, three-quarters of companies expect their business with Russia to deteriorate further over the next six months or be scrapped altogether. Another 20% dare not make any predictions for war. “Sanctions against Russia have an effect, and they are completely justified,” Haeusgen stressed. “The Russian market is traditionally an export market for mechanical engineering companies. Investments in local production and assembly are relatively small compared to the size of the market. Nevertheless, the loss of this market can be very painful for individual companies; there are often close, long-standing relationships, and companies also rightly feel an obligation to their employees in Russia. Even if, as we all hope, there is an end of the war and the restoration of the territorial sovereignty of Ukraine – it will be many years before business with Russia can again be based on a real relationship of trust, “predicted the VDMA Chairman.
The Minister of the Economy is efficient, the government coalition has weaknesses
What is important for the mechanical engineering industry in this situation is that the German government and the EU pursue a clear sanctions policy to which the companies can adapt. However, the concerns of small and medium-sized enterprises in particular, which account for the vast majority of jobs in Germany and Europe, must also be taken into account. “There is currently a very good exchange between industry and politics, the Ministry of Economy and its Minister act very professionally with regard to the war in Ukraine and its consequences. Robert Habeck shows understanding for the industry and pursues a responsible policy”, greeted the president of the VDMA. Haeusgen.
In contrast, the machinery and plant engineering industry sees weaknesses in the policies of the so-called “traffic light coalition” as a whole. These concern the hesitant attitude of Chancellor Olaf Scholz and his party to move away from their previous ideas on Russia, but also the role of the FDP within the government. “We expect the FDP to keep the government on a clearly liberal path. However, the back and forth on the purchase bonus for mobility, for example, or the fight for petrol vouchers show that the party is losing his compass.” Haeusgen criticized. At the moment, he said, the CDU/CSU was taking advantage of this, because it was surprisingly quick to come back with a big chest and was doing good opposition politics. “However, especially in the current tense geopolitical situation, the CDU/CSU must continue to assume its responsibilities and must not become an opposition purely focused on blocking issues,” warned the VDMA chairman.
EU must continue to show unity – ‘Fit for 55’ remains top priority
The EU, for its part, showed a unity in its response to the Russian war of aggression that was not necessarily expected. “The EU adopted the five sanctions packages so far quickly and effectively. This could not be taken for granted. The unity of Europe is one of the few positive lessons of the terrible war in Ukraine” , Haeusgen said. But this EU unity is also expected by the business community, he added. On the other hand, the mechanical engineering companies are ready to make their contribution to this common task.
“The unity of Europe is one of the few positive lessons of the terrible war in Ukraine.”
Karl Haeusgen, President of VDMA
However, the VDMA considers it important for the way forward that the Russian war of aggression does not push the debate on climate protection into the background in Europe as well. The “Fit for 55” package is still being negotiated in the European Parliament and the EU Council of Ministers. “Progress is urgently needed here now – both for climate protection, but also to reduce dependence on Russian energy,” Haeusgen demanded. Much more emphasis should certainly be placed on increasing energy efficiency now. The technologies for this are available and they could reduce Europe’s dependence on Russia in the short term.
Climate neutrality and security of supply
The war in Ukraine is also a painful reminder to all actors in the mechanical and industrial sector that the energy supply must be reorganized and that additional efforts are needed to eliminate dependence on Russian energy as soon as possible. At the same time, the fight against climate change must be vigorously pursued. “Climate protection and security of supply must be thought of together,” Haeusgen stressed. “There are different concepts to achieve the two goals together. A new design of the electricity market can support both. The refinancing of power plants is an important key here,” said the VDMA chairman.
In addition to the accelerated expansion of renewable energies, the use of green hydrogen for flexible power plants is gaining importance. Power plants take on the important task of reserve capacities in transformation. “In a way, they act as insurance when wind and sun are not available in sufficient quantities,” Haeusgen explained. “Mechanical and plant engineering makes this transformation possible in the first place and has the corresponding technologies ready for the transformation.”
“Industrial transformation” as a central task
In addition to the topic of security of supply, this year’s Hannover Messe emphasizes “industrial transformation”. The manufacturing industry is increasingly being forced to go beyond optimizing its plants and processes to also employ smart communication and software and use its data accordingly. To this end, VDMA is pioneering the development of the global production language based on OPC UA. This is done not only for industry-specific information, but also for information relevant for the entire machine and plant construction sector, such as identification, condition monitoring or – newly launched – energy monitoring. “With this, the VDMA is laying the foundation for future-proof production worldwide,” Haeusgen emphasized.
“Under the umati label, we have created a unique global community for this purpose, which is committed to interoperable data exchange from the workshop to the cloud. We enable a direct exchange between the areas of mechanical engineering and plant and with its users, software providers and other stakeholders,” he summarizes.
The VDMA is the largest engineering industry association in Europe and represents more than 3,400 German and European companies. The industry stands for innovation, export orientation and medium-sized companies. The companies employ around four million people in Europe, more than one million of them in Germany alone. Mechanical and industrial engineering represents a European turnover volume of approximately 800 billion euros. In the manufacturing sector as a whole, it contributes the largest share to the European gross domestic product with an added value of around 270 billion euros.