By Stefanie Baumer Apr 24, 2009, 10:04 GMT
Gerlingen, Germany - The world recession and the plunge in sales of cars is stretching German auto-parts suppliers to breaking point as they try to fund ongoing losses in a tight-margin business.
At the Hanover Fair, a five-day annual expo for the machinery industry this week, the crisis among manufacturers has been the main talking point. And the collapse in new orders is worst of all among suppliers of automotive components.
Many of those manufacturers in Germany expect to end the year in the red and there has already been a growing toll of insolvencies.
The big car companies have intervened to help some key suppliers, either temporarily taking over castings makers and other units, or setting aside funds to keep independent suppliers in business should they have to file for protection from their creditors.
Hundreds of thousands of workers at suppliers have taken paid leave, accepting shorter working weeks and lower pay with income top-ups from the government. Most of the companies see no other recourse than to slash spending and hope the crisis ends soon.
Those with funds left to invest are trying to undo their dependence on the automotive industry alone and seek new lines of business that utilize their tried-and-tested design and manufacturing skills.
Germany's biggest components group, Robert Bosch, which supplies everything from sunroof motors to generators, has taken a heavy hit, predicting that 2009 will see its first loss since the company got back on its feet after the Second World War.
Chief executive Franz Fehrenbach suggests that the news in the second half may not be all bad, with a 5-billion-euro (6.5-billion-dollar) scrappage scheme funded by the German government helping to sustain sales.
'However, several months are likely to pass before all that evolves into stable expectations of a turn for the better,' he warned.
Stefan Bratzel, head of the Center of Automotive Research, forecasts that a recovery will not happen till next year, with the German components business likely to suffer a one-fifth slide in its sales in 2009.
The industry federation warned Monday as the Hanover Fair began that up to 100,000 jobs might be lost. It said components companies reported new orders in the first quarter had dropped 40 per cent in annual terms.
Even before the recession, the components industry, mainly made up of medium-sized enterprises, was glum at its poor profits.
Automotive researcher Bratzel said car manufacturers have more negotiating muscle when dealing with their suppliers than other industries do. The brands have squeezed the parts makers so that they must exist on tiny margins.
At the same time, suppliers such as Bosch have had to invest billions of euros in new green technologies, such as electric propulsion systems for the battery-driven and hybrid cars of tomorrow, though the payoff will not come till the cars are built.
'Many of the suppliers have not been able to build up a comfy hoard of capital out of running operations,' said Bratzel. The onset of the recession leaves them vulnerable, with a shortage of own funds.
'The trend now is to diversify,' added Bratzel. The suppliers are on the lookout for other industrial customers that might be able to use their products. But an expansion into new products does not work from one day to the next.
'Those are processes that take at least two or three years to accomplish,' Bratzel said.
Bosch, which has its main office near Stuttgart, has been demonstrating for several years how an automotive-oriented company can diversify, and has so far managed to reduce its car components range to 59 per cent of overall sales.
Its long-term aim is to depend on the car trade for less than half its sales.
Its principal area of expansion has been the regenerative-energy industry, which has a strong need for the type of mechanical and electrical products that emerge from Bosch factories.
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You know?May 4th, 2009 - 16:24:16
The best thing for the United States...........is for it to STOP being a United States. When it breaks up, the smaller parts will be run more efficiently as separate countries. After all it has become a failed state with a failed financial system and economic model. A country with a huuuuuuhe budget deficit and a gi-normous trade deficit. Where individual citizens have NO savings and huge amounts of personal debt. It also has become a danger to world peace and stability and must therefore be brought under international control.
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