Sharp drop in orders and cancellations hit mechanical engineering hard

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The mechanical engineering industry is feeling the consequences of the corona pandemic ever more acutely. A fifth VDMA survey, which was answered by 730 member companies, paints an oppressive picture.

The situation in the mechanical engineering industry has recently worsened due to the consequences of the corona pandemic. At the end of March, 84 percent of the member companies surveyed by the VDMA were already reporting adverse effects, and this figure has since risen to 98 percent (end of May). In addition, the relative shift in problems has continued: towards demand-side disruptions, i.e. order losses or cancellations. "Overall, 39 percent of the companies report a noticeable drop in orders or cancellations, 44 percent of those surveyed even serious ones. The recently indicated easing of the supply chains has fortunately continued. Over 80 percent of the companies report no or only minor disruptions," says VDMA Chief Economist Dr. Ralph Wiechers. The epicentre of the disruptions is still in Europe. More than 90 percent of the affected mechanical engineering companies reported demand-side disruptions from Europe. In the USA, too, there is an increasing number of order losses and cancellations (54 percent).
Around 45 percent of the companies expect a further easing of the disrupted supply chains in the next three months. Most of the respondents continue to view the development of the order situation more critically - on the demand side, 80 percent expect that the tense situation will not ease for the time being. In addition to supply and demand-side disruptions and liquidity bottlenecks, companies cited travel and accommodation restrictions (87%) and machines delayed or not accepted by customers (65%) as their biggest problems at present.

"Overall, 50 percent of the companies report noticeable, 35 percent of those surveyed even serious order losses or cancellations. Fortunately, the easing of the supply chains has continued. More than 80 percent of the companies report no or only minor impairments here".

Liquidity bottlenecks in most companies not an issue
The supply of liquidity to companies is virtually unchanged compared with the end of March. More than 70 percent of the companies have no or only minor liquidity concerns. However, about a quarter of the companies report noticeable and 4 percent even serious liquidity problems.
A total of 730 companies from the mechanical engineering sector took part in the fifth VDMA flash survey on corona consequences. The proportion of companies making capacity adjustments has risen from 75 to 82 percent in the last ten weeks. "More and more companies are sending their employees on short-time work or are considering staff reductions - even of parts of the core workforce. Companies that have already had to record a decline in sales in 2019 use these instruments for capacity adjustment particularly frequently," explains the VDMA chief economist.