“The current crisis acts like a magnifying glass”

The Corona crisis has not only hit German auto suppliers hard. Consultants expect a sharp drop in sales – and consider a tough austerity course to be very likely in many companies.

A worker checks camshafts on a vehicle.

DAccording to a study, suppliers that are important to the German auto industry are at risk of significant losses this year. The consulting firm PwC Strategy & is assuming a global sales decline of large industry companies by 13 to 24 percent – depending on the further development of the corona pandemic.

Even at the beginning of 2020, the starting conditions were not easy after a difficult year 2019 for many companies. Now German suppliers have also come under greater cost pressure: “The current crisis acts like a magnifying glass.”

According to the industry observers, a number of companies will not be able to avoid taking a tough austerity course. “After the German supplier industry has shown continuous growth over several years, it is now clear how many companies actually need restructuring,” explained the author of the analysis, Henning Rennert. At Continental, among others, but also at numerous competitors, cuts are being made. In June, Conti boss Elmar Degenhart spoke of the biggest car market crisis since the 1930s and feared a possible series of bankruptcies.

Six out of ten suppliers are considering stepping up staff cuts

The consultants evaluated the situation of 83 large suppliers from different countries. In the case of the German representatives, sales in the previous year fell by 2 billion euros to a total of 223 billion euros compared with 2018, although their share of the world market increased slightly by one percentage point to 25 percent most recently.

Not only the pure business volume but also the profitability decreased in 2019. From 100 euros in sales, the German companies under review left an average of just 2.60 euros in profit – in the previous year it was at least 6.30 euros. In other regions, the industry was able to maintain a higher level of earnings. In 2020, a number of companies are expecting red numbers as a result of Corona.

In terms of sales, Bosch defended its position as the largest German automotive supplier in 2019 with 77.7 billion euros – ahead of Continental with 44.5 billion euros and ZF with 36.5 billion euros. Schaeffler (14.4 billion), Mahle (12.1 billion) and Hella (6.6 billion) followed.

Conti and the cable and wiring system manufacturer Leoni had already posted losses in 2019, but also because of conversion costs and special factors. The industry association VDA said that six out of ten suppliers are considering stepping up staff cuts.

Lower Saxony’s Prime Minister and VW supervisor Stephan Weil (SPD) recently warned that the consequences of the Corona could affect smaller suppliers in particular, who are already under pressure due to the change to e-drives and digitization: “I’m afraid that we will We have to be prepared for a lot of bad news in autumn, this topic will still occupy us massively. “