As corona crisis approaches, so do the strikes. German automotive suppliers are reporting a growing number of scare stories at an ever faster pace. A collapse of the system is imminent.
Even major players like bosch and continental have been hit hard by the crisis. Image: bosch
The ideal world of automotive suppliers has come apart at the seams. Gone are the days of making billion-dollar deals with the oems on the basis of assured sales figures. in the wake of the corona crisis, fear is running rampant; even big companies like bosch, schaeffler or continental are wobbling. As if the transformation of the industry into electromobility were not enough, a pandemic has now been added to the mix, paralyzing global business and threatening to break the backs of some suppliers sooner or later.
Bosch struggles with structural change
The scare stories don’t stop. in june, bosch announced that its steering systems plant in bietigheim would close its doors at the end of 2021. Some 290 jobs on the line. the tier 1 supplier is still trying to mitigate the effects of the economic crisis and make the job cuts as socially acceptable as possible. However, it is crunching at all corners and ends. In schwabisch gmund, where steering systems are also manufactured, around 1.850 jobs to be cut.
employee representatives go to the barricades. It will make little difference. Business was already worse at bosch in 2019. The COVID 19 pandemic has only intensified the developments. "like other companies, bosch continues to face major challenges, particularly from structural change in the automotive industry. These are also intensifying in the course of the global "corona crisis", according to a spokesman for the company.
The carmakers’ IT is under pressure to act
The movers and shakers in the automotive industry must make overdue decisions. Only those who do their homework and initiate the digital transformation despite the home office will be prepared for a second wave of the corona pandemic. Learn more about the crisis in the automotive industry.
Continental faces massive job cuts
The Swabian supplier giant is not the only one to be shaken to its foundations by the crisis. Almost every day there is a fire in another place, even sacred cows are no longer safe. At continental, tire production in aachen is to be closed down. Black gold was actually considered to be the Group’s flagship product. Wheels are always needed, no matter what the vehicle or the drive system. If continental goes through with the plan, 1.800 jobs affected.
Even before the outbreak of the pandemic, it was clear that the switch to electromobility would not go ahead without major collateral damage. It was generally expected that continental would have around 30.000 of the 230.the company would have to lay off its 000 employees – 14 of them.000 in germany. As if that weren’t tough enough, a molotov cocktail called COVID-19 is now being added as an accelerant to the fire.
Insolvencies are foreseeable
The figures paint a frightening picture that is representative of the entire industry. Continental sales slumped by 40 percent in second quarter. elmar degenhart, chairman of the board of management, uses drastic words. "there has not been a market slump in the automotive industry like the one we are currently experiencing since the end of the second world war." schaeffler is also caught in the disastrous vortex and has announced that by the end of 2022 it will have cut a further 4.400 jobs to be cut. At mahle, 7 jobs are to be cut worldwide.600 jobs to be cut – of which around 2 alone.000 in germany.
"we have to make do, not spill the beans"
Franconian automotive supplier brose is in the midst of a profound upheaval. On the one hand, 2000 jobs are to be cut in germany by the end of 2022. on the other hand, up to two billion euros are flowing into the company’s investment program. Learn more about the situation at brose.
All those involved are still trying to keep the system going, with the support of the federal government. But state aid or the suspension of the obligation to file for insolvency during the corona crisis are just a drop in the ocean and do not solve the fundamental problems. It seems as if everyone is trying to row against the current when the roar of the hundred-meter-deep waterfall is already deafening.
The big end is only postponed. "the corona relief programs expire mainly at the end of september. Then managing directors of insolvent companies will once again be obliged to file for insolvency. I therefore expect that by the end of the year at the latest, more companies will have to file for insolvency again, certainly including automotive suppliers.", the specialist lawyer and insolvency law expert martin mucha explained to the wirtschaftswoche.
Tough years ahead
While the big players are still trying to stem the tide and keep the ship afloat with social plans and subsidies, smaller suppliers are running out of steam. Wafa germany, manufacturer of galvanized radiators and trim, is expected to cease production at the end of the year, thus eliminating around 200 jobs. This is probably just the beginning. The tone is already getting rougher and many smaller companies will probably follow wafa germany on the rocky road to insolvency.
The outlook for the entire industry is anything but rosy. ZF boss wolf-henning scheider speaks plainly: "we will have to deal with the aftermath of the corona pandemic at ZF for at least three years. It will take longer for the markets to return to their 2018 highs. In some markets I have doubts whether such peak values will ever be recorded again. things are going very well in china at the moment, but in europe, i’m not so sure that even by 2025 they can get back to 2018 levels. The entire auto industry has some tough years ahead of it."