3/17/2020 | 2 MINUTE READ

International Perspective: European Toolmakers Face a Rocky Road Ahead

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For many tool-, die- and moldmakers within the automotive supply chain time is running out, says Volker Schäfer, chairman of VDMA’s (German Mechanical Engineering Industry Association) toolmaking division.

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After record years, the automotive industry is facing difficult times with multiple market uncertainties and global production volume declines. Even without the coronavirus, which is rapidly spreading internationally and exerting a tangible effect on both processes and value creation in many companies in the supply chain, the German Association of the Automotive Industry (VDA) was expecting the Chinese market to contract by 2 percent in 2020, and is now expecting a decline of 7 percent. 

Mix that in with declining new car sales across the board globally, the ongoing transition to electric vehicles and the recent supply chain disruption from the coronavirus outbreak and you have a recipe for a long-term decline in orders and employment.

 

 

According to Volker Schäfer, chairman of VDMA’s (German Mechanical Engineering Industry Association) toolmaking division, many tool- and diemakers in the automotive supply chain have been running on empty for about a year now, since customers were reluctant to place orders in view of weaker demand from abroad, stricter emission rules and electrification. 

“The situation is starting to leave a wider mark on our business by pushing up unemployment, eroding job security and hitting pay,” Schäfer says. “Most toolmakers are facing a lack of liquidity forcing them to reduce staff, which in turn will have a negative impact on their future delivery capacity and global competitiveness.” Many suppliers will not survive the long lean spell until full-on production of hybrid or electric vehicles hits Europe, which will require new tools, Schäfer believes. OEMs would then have to turn to other suppliers in other countries like China, for instance.

China has established many state-subsidized, fully-automated toolmaking facilities, which in recent years have increasingly brought European toolmakers into dire straits through fierce price wars, he says. “Basically, competition is good – and if it is fair, we are happy to face it with our excellent products. With regard to China, I have my concerns about fairness. We demand a level playing field.” Schäfer warns that China’s political influence on these state-subsidized companies should not be underestimated. “I can imagine foreign competitors of Chinese OEMs ranking as B-customers behind the Chinese competition. It is therefore to be feared that European car makers will face severe competitive disadvantages in the global market in all vehicle segments. This could have consequences for other automotive-related jobs.”

While Chinese tools were not quite on the same technological level yet, Schäfer believes that in the long run Chinese companies will have greater staying power as a result of subsidies, a high degree of automation and low labor costs. Therefore, European tool-, die- and moldmakers have to be even more innovative, automate processes and receive short-term support from investors, banks and politics to stay afloat. “United we are strong.”

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