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FRANKFURT — In Germany, where one-in-four jobs depend on exports, the crisis that has strained the world’s supply chains is taking a heavy toll on the economy, Europe’s largest and the cornerstone of global trade.
Recent surveys and data point to a sharp slowdown in the German power plant, and economists have begun to predict a “bottleneck recession.”
Almost everything German factories need to run is short of not only computer chips, but also raw materials such as plywood, copper, aluminum, plastic and cobalt, lithium, nickel and graphite, which are crucial components of electric car batteries.
NS automobile industry hit hardest. Opel, a unit of Stellantis, which owns Jeep and Fiat, said in September it would close a factory in Eisenach by next year due to a shortage of semiconductors. 1,300 workers of the factory will be on leave.
More than 40 percent of German companies said they lost sales in August due to supply problems. questionnaire By the Association of German Chambers of Industry and Commerce. Without supply bottlenecks, exports across Europe would have been 7 percent higher in the first six months of the year. European Central Bank.
While every economy in the world suffers from famine, Germany is particularly vulnerable due to its dependence on manufacturing and trade. About half of Germany’s economic output depends on exports of automobiles, machine tools and other goods, compared to just 12 percent in the United States.
“The impact is dramatic,” said Oliver Knapp, senior partner at Munich-based consulting firm Roland Berger, as Germany is a country of factories.
The country is also facing a period. political uncertainty. There was no party with a clear majority in last month’s elections, and whatever coalition government those that emerge will lack sufficient cohesion to act decisively.
The slowdown has turned the German economy into a test case of how companies can become less vulnerable to risks. power outages On ships stranded in China or the Suez Canal.
Many companies are already ramping up parts stocks, pre-ordering raw materials, and finding creative—some might say desperate—ways to get products out of the factory doors. Volkswagen’s truck unit, Traton, said last month that it shredded hard-to-find components from trucks that were built but unsold and reassembled them into trucks with firm orders.
In the longer term, companies have thought of ways to bulletproof their supply lines, for example by purchasing parts and raw materials closer to home than from subcontractors on the other side of the planet. Some political leaders have suggested that the pandemic may have a silver lining, as it will inspire companies to bring production back to Europe and the United States and create well-paid factory jobs.
But some economists and business executives say it’s not that easy and perhaps not a good idea to unravel the networks that move products around the world.
The common assumption that suppliers closer to home are more reliable isn’t always true. During the turmoil caused by the epidemic, some German companies have had more trouble sourcing supplies from France or Italy than from Asia due to tight lockdowns.
“If we weren’t dependent on China, we would have gotten through the crisis without any problems,” said Alexander Sandkamp, an economist working on supply chains at the Kiel Institute for the World Economy in Kiel, Germany.
Evidence is accumulating that famines suppressed German growth. Ifo Institute’s latest Survey of German business managerspointed to a marked slowdown, which is considered a reliable predictor of the economy’s direction. More than three-quarters of German companies told the Munich institute that they had problems in supplying raw materials and parts.
Prices rise in accordance with the law of supply and demand. The annual inflation rate in Germany was 4.1 percent in August, the highest level in nearly three decades. While most economists think the rise is temporary, inflation is always a sensitive issue in Germany, a reminder of the hyperinflation and poverty after the First World War.
Businesses are caught in a vicious circle. Robert Ohmayer, head of global purchasing at Voith, a Heidenheim-based company that builds and equips paper mills and hydropower plants, calls it the toilet paper effect.
Just like panicked consumers hoarding toilet paper at the start of the pandemic, companies fearing running out of essential supplies order more than they need and store them in warehouses. This created even more famine.
Companies had little choice. “We order more to protect our business,” said Mr Ohmayer.
Supply issues are doubly frustrating for companies because many have bloated order books that they can’t fill.
Get the bike shops. Malaysian factories producing gears, shock absorbers and other bicycle parts have been locked down due to the pandemic. Additionally, shipping containers suffered from shortages and events such as the closure of Chinese ports as dockers tested positive for the virus disrupted the movement of cargo ships.
Problems hampered the supply of things like brake pads that bike shops needed to fix. But demand is booming, in part because many Germans have turned to cycling as an alternative to public transport during the pandemic, or have decided to take a bike holiday close to home rather than fly to a beach in Spain.
“Everything in the global market hits us at the same time,” said Tobias Hempelmann, owner of a bike dealership in Lage. “High demand, no containers, and people want to cycle.”
Mr. Hempelmann said one of his employees does nothing more than collect parts, scan eBay or Amazon for scarce items, or barter with other sellers.
The strains on the system were evident even before the pandemic. Tensions and growing protectionism between China and the United States have prompted many companies to reconsider their dependence on suppliers far away.
An added complication for German companies is a new law that will come into effect in 2023, requiring them to make sure they don’t buy from suppliers who use them. child or slave laborer.
“Before we got caught by Covid, we knew global supply chains were risky,” said Mr Ohmayer, chief purchasing officer at Voith. “The Covid crisis is an accelerator but not a new trend.”
Companies are now trying to understand what lessons they need to learn and how to renew their supply networks to be less impacted by crises.
As political leaders hope, Voith buys from suppliers closer to its factories in Germany and the United States. Mr. Ohmayer said China’s cost advantage has been eroded by rising wages, and sometimes a small machine shop in Wisconsin is more cost-effective.
But what works for Voith, which buys a small number of custom components, may not work for an auto company that buys millions of the same parts. They still have a strong incentive to buy from suppliers who can mass-produce a component of appropriate quality and at the lowest price. Only 8 percent of German companies participating in the survey conducted by the Association of German Chambers of Industry and Commerce in August said that they plan to start production.
“You can try to bring production back, but you have to expect that these products can only be produced at higher prices,” said Mr Sandkamp of the Kiel Institute. “We will lose our competitive power”
The shortage of supply will decrease as suppliers expand their factories to meet demand. Last month, German chip maker Infineon, which specializes in the automobile industry, opened a factory it had planned ahead of the pandemic. Peter Schiefer, head of Infineon’s automotive division, said the plant in Villach, Austria, could produce enough chips to equip 20 million electric vehicles.
Numerous other chip manufacturers have announced plans to expand production. Noting that it took a year and a half to get the necessary machines, however, Schiefer said, “This will not happen immediately.”
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