Karl Haeusgen’s very lengthy remarks on Tuesday in Frankfurt on the situation in German mechanical engineering can be summed up as follows: “It’s okay.” In any case, the entrepreneur and President of the VDMA sees no reason to correct the previous forecasts for production, although the “sea is rough, rougher than expected and winds are blowing from different directions.” According to the VDMA, production is expected to increase by one percent in real terms in 2022. The orders lasted for twelve months. The order backlog for next year is “unusually high,” says Haeusgen. Nevertheless, the VDMA expects a slight decline in production of two percent for 2023.
“This is definitely not a crisis,” says Haeusgen. Although all the problems that he then lists smell a little like a crisis: supply bottlenecks, supply chain law, regulation mania in Europe, Russia’s war of aggression against Ukraine, energy prices and their brakes, high inflation, the Inflation Reduction Act of the USA, China , skills shortage. If he now had to rank the top concerns, which Haeusgen doesn’t like but then does, China would be pretty high up there.
The country is an important market and production location for German manufacturers of machines and systems. In the short and medium term, he is “not replaceable,” says Haeusgen. Change through trade no longer works under President Xi Jinping, but that was not foreseeable at the beginning of his government. Haeusgen rejects the fact that it generally doesn’t work: “That’s big crap.” It just doesn’t work anymore. The fact that many people in China are doing better today is not the result of “autocratic structures, but of economic openness.”
Beyond China
For the first time, the VDMA is presenting a position paper on China with requirements and facts. It is right and important that the federal government reassess the relationship with China, says Haeusgen. The “aggressive economic policy” of the People’s Republic poses major challenges for medium-sized industry. Preference for Chinese companies endangers the German export model. There are companies to whose sales China contributes 20 to 30 percent. With its funding instruments, German politics can help to open up markets “beyond China”. Haeusgen cites India as an example.
He doesn’t see any “decoupling” from China yet, but there are scenarios if it should come to that. This includes setting up the local units in China legally so that they can work independently and, if necessary, be “separated”. “If China attacks Taiwan, we have a whole new game and a cruel one at that,” says Haeusgen. For companies, that would be a red line. “If China attacks Taiwan, the business will be in the ditch,” said Haeusgen.
And then there is another “fundamental” problem that is at the top of the ranking: the lack of skilled workers, which is dampening production. Haeusgen prefers to talk about the labor shortage, because there is a lack of personnel, from low-skilled workers to engineers. 14,000 jobs are currently vacant in mechanical engineering. According to the VDMA, the industry will lose around ten percent of its employees over the next decade, when the baby boomers retire. According to Haeusgen, the labor market will no longer be an economic indicator in the future because it will be “sucked dry” by demographic developments. Immigration must be made easier, he demands, and the domestic potential of workers must be better used, for example by increasing the employment rate of women. Their share of the more than one million employees in mechanical engineering is almost 17 percent. The board of directors of Haeusgen’s company Hawe Hydraulics has five members, all men.