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VDMA says 60% of members feeling corona supply chain disruption

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Almost 60 per cent of German mechanical engineering firms are already feeling the effects of disrupted supply chains caused by the coronavirus pandemic, according to a flash survey by the VDMA.

More than 1,000 companies answered the survey, which classified the effects from the disruption as 'low to medium' at the present time.

The VDMA has collated information about the coronavirus pandemic and how it could affect its members.

'The disruptions of supply chains are becoming increasingly noticeable, with Italy and China so far causing the greatest concern,' said VDMA chief economist Dr Ralph Wiechers.

The VDMA stated that the disruptions can only be partially averted by alternative suppliers, and that three-quarters of the companies that have not yet been affected expect disruptions in the next three months.

'This makes it all the more important that goods can continue to flow freely within the EU and that commuters, especially service staff, can also cross the borders to work,' Wiechers added.

European governments have now closed many of their borders to restrict movement and try and slow the spread of the virus, which puts strain on transporting goods.

VDMA executive director, Thilo Brodtmann, said: 'The European countries are so closely intertwined that one cannot exist without the other. EU Commission president Ursula von der Leyen is therefore right: despite corona, everything must be done to keep the internal market functioning. This includes not only the unhindered transport of goods, but also, for example, the cross-border deployment of service staff.

'Goods and commuters still need free movement within the internal market,' von der Leyen continued. 'Particularly in industries such as the food industry, which are essential for supplying the population in times of crisis; a machine in France must not be allowed to stop because German service personnel are prevented from carrying out necessary repairs. This also applies vice versa, of course, to French machines in Germany. Those who believe that they can protect themselves at the expense of the European internal market are wrong. The president of the Commission knows this, and hopefully the German government is also aware of it.'

With regard to the announcement of production stops in the automotive industry, Wiechers said: 'As long as the factories are not completely closed, our companies can theoretically continue to deliver the machines and systems or carry out their service. But the more restrictions in our customer industries are announced, the more severely we as equipment suppliers are hit.'

The VDMA flash survey also shows that all branches of mechanical engineering are affected by the effects of the pandemic. There is uncertainty in many companies as to whether they will be able to make up the production losses in the months to come, according to the VDMA.

Around 70 per cent of the companies surveyed expect sales to fall in 2020. Out of this group, almost half (45 per cent) expect sales to fall by more than 10 per cent.

As a result, 40 per cent of the mechanical engineering companies surveyed have already made capacity adjustments, mainly via working time accounts, but also using short-time working, the VDMA said.

'Staff reductions are also increasingly becoming an issue in the medium-sized mechanical engineering industry,' Wiechers warned.

At the same time, about half of the companies are considering cutting back their investment plans for 2020.

The VDMA has developed a check-list for preparing an emergency plan, available only to its members. The organisation's legal department has published a brochure on labour law aspects of a pandemic. Here, VDMA members can find information about the legal aspects of employees working inside and outside Germany during the pandemic.

The VDMA has also released information for its members about aspects like short-time working, business management issues such as working capital management, and information about insurance.

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