Situation at suppliers remains very tense: Corona accelerates relocation of production and job cuts

    Berlin, August 24, 2020

    Half of all automotive suppliers do not expect to return to pre-crisis levels until 2022; one tenth expect to do so in 2023. Six out of ten suppliers also plan more job cuts owing to the corona crisis. These are the findings of a survey of supply firms by the German Association of the Automotive Industry (VDA).

    The corona crisis continues to have marked impacts on supply companies in the automotive industry. Around two thirds of the firms surveyed by the VDA report capacity utilization of only 50 to 75 percent. But only around one quarter of suppliers have more than half of their staffers on short-time work.

    Roughly 60 percent of the companies report that they are planning to shed more staff owing to the corona crisis. Around half of these firms intend to cut five to ten percent of their workforce. And about one third of all companies surveyed have plans to axe more than 10 percent.

    Around 40 percent of the companies had already planned (before the corona crisis began) to relocate production to other countries as part of the transformation process. Over two thirds of them now indicate that these plans are being accelerated due to the corona crisis.

    “The political measures to support businesses are indeed taking effect. However, we now expect a longer period of difficulty. Most suppliers expect to return to pre-crisis levels starting in 2022 at the earliest,” says VDA President Hildegard Müller. “We support the policy of extending relevant measures, such as the short-time work allowance. But the pressure to adapt remains high. Politicians, companies and trade unions must now work together and do everything they can to prevent production from being moved out of Germany and avert further jobs cuts due to corona.”

    In addition, over 80 percent of companies indicate that at present they can access sufficient sources of financing and that their banks are providing sufficient support. Twenty percent of respondents have received assistance from the Economic Stabilization Fund, and 10 percent have made use of bridging schemes for small and mid-sized enterprises (SMEs) or are planning to do so. Around one fifth of companies (nearly 20 percent) report that under the current conditions, their liquidity is secure for only two to three months at most unless they undertake greater adaptation measures.

    “The economy will recover more quickly if no more additional burdens are introduced. That applies to taxes, bureaucracy and further climate-policy regulations. Many of the suppliers surveyed who had already reduced their workforces before the corona pandemic did so for reasons such as their high costs and the transformation,” says VDA President Hildegard Müller. “Policy-makers and society in general should use the corona crisis as an incentive to make reforms that relieve the burdens on the companies and thus strengthen Germany as a business location. In Germany and in Europe we need a proactive industrial policy committed to climate protection.”