This year will be even more difficult than expected for the German mechanical engineering industry. In addition to the burdens that have been noticeable for some time, such as trade conflicts, a weakening global economy and structural change in the automotive industry, the coronavirus pandemic is now adding to the mix. The consequences of the latter for the economy as a whole are far from foreseeable.

Last year was already worse than forecast towards the end: The 7 percent drop in the final quarter was not expected and caused production in the mechanical engineering sector to fall by 2.8 percentage points in real terms in 2019 as a whole. Incoming orders remained 9% below the previous year's figure last year. "The spread of the coronavirus has set us back noticeably. Even assuming that the situation eases in the second half of the year and business picks up again, we will not be able to make up for the additional declines this year. As far as can be predicted today, we expect a real decline in production of 5 percent for 2020," says VDMA President Carl Martin Welcker.

Urgent appeal to politicians

In the current difficult situation, the government's swift action is essential. The VDMA considers it right and important that short-time work can now be introduced much more quickly in companies and that the social contributions for lost working hours can be fully covered by the Federal Employment Agency without any further conditions. "But the new short-time working regulations must of course apply to all companies. The mechanical engineering sector has been forgotten so far. Many companies have been struggling with underutilization for months and urgently need a practicable solution for an extension of short-time work, which is necessary not least because of the pandemic," demands VDMA President Welcker. Accordingly, the "Work of Tomorrow Act" must not link short-time work to comprehensive further training. "We have completely different concerns at the moment. Forcing people to undergo formalistic further training completely ignores reality," emphasizes Welcker. The medium-sized mechanical engineering companies themselves are interested in continuous further training for their approximately 1.3 million employees. "There is no need for government compulsion that would burden us with even more bureaucracy," emphasizes Welcker.

Other urgently needed measures

The VDMA also shares the opinion of leading economists that the aid now being provided for companies will not be sufficient and is calling for further measures that could also be implemented within the constitutional debt limits:

• an interest-free deferral of payments due for income tax, corporation tax and VAT,
• an extension of the loss carry-back,
• significant reductions in depreciation.

In addition, it is now high time to implement the repeatedly promised relief for SMEs. "The restructuring of our economy is not being prevented in the short and medium term by financing problems. Rather, we are suffering from a policy that keeps proclaiming new goals without having a clear implementation strategy," warns Welcker.

In addition: "The Posting of Workers Directive, trade barriers and perhaps even a supply chain law - legislators are constantly imposing new bureaucratic burdens on SMEs, which reduce our international competitiveness and increasingly overburden smaller companies in particular," he says. In contrast, incentives for innovation are needed, such as an expansion of tax incentives for research. "The pandemic will pass, but the fundamental tasks remain," summarizes the VDMA President.