Chancellor Scholz promises entrepreneurs relief – economy

The choice of words is important. Olaf Scholz doesn’t say “double boom” this time. He knows who he’s talking to, who’s sitting in front of him at the mechanical engineering summit in Berlin on Tuesday: family entrepreneurs, managers, medium-sized companies. They don’t like some words. Entrepreneurs like Bertram Kawlath, for example, aren’t just bothered by the “infant name Doppelwumms”. It’s disrespectful to talk about citizens’ wealth like that. Kawlath is one of around 700 participants at the summit. Scholz therefore speaks of the “defense shield” when he speaks of the 200 billion euros in the relief package.

The Chancellor speaks for almost half an hour. He also avoids the words “excess wins” or “chance wins”. The fact that an entrepreneur makes profits randomly or excessively does not go down too well in this circle. So Scholz says “special profits” when he talks about how the profits of those electricity suppliers who now generate electricity cheaply, such as renewable energy suppliers, should be “skimmed off” and can sell it at high prices because the most expensive generators are the gas-fired power plants , which determines the price of electricity.

Scholz promises entrepreneurs relief. “Everyone must be sure that they can continue their production activities at prices that do not fall to the level before Russia’s war against Ukraine, but are lowered enough that production and employment are possible and that the citizens can pay their bills can pay,” says Scholz. For this he gets applause, not long and loud, but applause. Scholz promises a “gigantic expansion” of renewable energies. According to Scholz, German mechanical engineering plays a central role in climate protection. “We’re the ones who can develop the technologies and skills to create affordable products that make carbon-neutral industry possible and economic prosperity possible.”

The audience in the hall likes such sentences, as does Scholz’s clear commitment to globalization. It was a success, “it made prosperity possible for many”. Scholz doesn’t believe in decoupling either. “We don’t have to detach ourselves from individual countries. We also have to continue doing business with China,” said the Chancellor. However, the relationships would have to be diversified, for example to Africa or South America and other parts of Asia. Scholz also questions the way the EU concludes free trade agreements, whether all 27 state parliaments, sometimes also regional governments, really have to agree for it to come about. “We have to think about whether EU-only isn’t a better concept for such free trade agreements,” said Scholz.

Mechanical engineering is one of the most important sectors in Germany

Such statements are also new for Karl Haeusgen, the president of the mechanical engineering association VDMA. He agrees with much of what the Chancellor says. Mechanical engineering, with a good one million employees, is one of the most important sectors in Germany. Business is still “solid,” Haeusgen said at a press conference this afternoon. For 2022, the VDMA is sticking to its forecast production increase of one percent in real terms. For next year he expects a minus of two percent. But even if that happens, it will not be a crisis year. Mechanical engineering has experienced worse. In the pandemic year 2020, production fell by almost twelve percent compared to the previous year. But Haeusgen is not euphoric. “We sense skepticism. There is potential for setbacks.” The higher energy prices hit mechanical engineering directly and indirectly because they endangered suppliers, such as foundries. If a foundry with a few hundred employees can no longer deliver cast parts, companies with several thousand employees would also come to a standstill.

The world of entrepreneurs like Bertram Kawlath is currently full of contradictions. “The order books are full and new orders are still coming in,” said the entrepreneur from Ingolstadt on the phone a few days ago. He and his siblings own the company Schubert & Salzer: around 70 million euros in sales, 450 employees, three production sites. SMEs, at least that’s what it feels like, because the company has already exceeded some of the usual criteria. But entrepreneurs like Kawlath feel like medium-sized companies, that class of companies between micro-enterprises and large corporations that politicians say are the backbone of the German economy.

The chancellor says he admires German mechanical engineering

Chancellor Scholz says he is “full of admiration” for German mechanical engineering, its tradition, its skills, the structure, the medium-sized companies: “They are the ones who do everything we need so that we can continue to create value in the future . You are an important contribution to the future of our country.”

Kawlath’s company makes valves and castings from fine and stainless steel. The valves are in beer dispensers, kilns, wind tunnels and hydrogen tanks. The portfolio includes “tens of millions” of different valves. “We also supply batch sizes of one, two or four. No mass-produced goods. This is the opportunity for the small company,” says Kawlath: “If someone needs 20,000 valves, we’re not the right ones.”

Kawlath is a historian, which is perhaps why he thinks far beyond the confines of his own company. Small and medium-sized businesses are a kind of hobby horse for him, he says. He is one of three Vice Presidents of the VDMA. He is a member of the SME Advisory Board of the Ministry of Economic Affairs. The ministers came and went – Sigmar Gabriel (SPD), Peter Altmaier (CDU) – and now it’s Robert Habeck’s turn (Greens). Some were more interested in the middle class, others less. He’s seen Habeck a few times, says Kawlath. “He was very pleasant, compact, concise. There was little chatter.” Habeck also comes to the summit – this Wednesday.

“But the situation is still tense because a lot of crises are overlapping.”

Kawlath knows his own business anyway, but he also knows how other mechanical engineering companies are doing. “The order books are full, for almost everyone,” says Kawlath: “But the situation is still tense because a lot of crises are overlapping.” He lists them: there is a shortage of skilled workers. According to the VDMA, around 8,000 training positions could not be filled this year alone. Russia’s war of aggression against Ukraine. The supply chains are rumbling. It is difficult to draw a uniform picture of the situation for mechanical engineering, says Kawlath: “It does not affect everyone equally.” For companies like Schubert & Salzer, these risks are more like a flash of lightning on the horizon.

“But there are also some companies where it’s already raining,” says Kawlath, for example at foundries. On average, the proportion of energy costs in mechanical engineering is less than one percent, but in foundries it is in double digits. Kawlath was careful. “At the end of 2021 I signed contracts for gas and electricity until 2026. Energy prices were already rising and I couldn’t imagine that they could go down again so quickly.” However, this puts Schubert & Salzer in a minority. More than half of the manufacturers of machines and systems do not yet have a follow-up contract, they now have to buy on the spot market. It may be that one or the other company does not make it, goes bankrupt. “But we shouldn’t panic. Crises sometimes develop a momentum of their own.” Speculating about a wave of bankruptcies in mechanical engineering is far from reality.