Germany's Industry is Ailing

The symbolic image of the "sick man of Europe."

Almost 25 years ago, the British economic magazine "The Economist" labeled Germany as the "sick man of Europe." The combination of reunification, a calcified labor market, and declining export demand were troubling the economy at the time. Numerous reforms in the early 2000s ushered in a golden age. Germany was envied by other industrial nations. Not only did the trains run on time, but the country also made its mark with its world-leading technology as an export hit.

However, as Germany flourished, the world kept turning. As a result, Germany has fallen behind again. In 2023, Germany's gross domestic product decreased by 0.3 percent compared to the previous year. The outlook for 2024 also does not look particularly good. Federal Minister of Economics Robert Habeck is looking at the situation of the German economy with great concern. The Green politician announced that the federal government would significantly lower its economic forecast for this year. Only 0.2 percent economic growth is now expected. This is "dramatically bad," said Habeck. In the autumn forecast, the government had still expected growth of 1.3 percent for the current year. Federal Finance Minister Christian Lindner even described the low growth forecast as "embarrassing."

Numerous chemical companies are currently planning job cuts.

The German Chamber of Industry and Commerce (DIHK) warns that the German economy could shrink for the second time in post-war history in two consecutive years. The last time this happened was in 2002 and 2003. After evaluating over 27,000 companies from various sectors and regions, the association again predicts a decline in economic performance this year. The DIHK expects a decrease of 0.5 percent based on this survey.

Crisis in the Chemical Industry

The chemical industry is Germany's third-largest industrial sector after the automotive industry and mechanical engineering. In the EU, Germany ranks first as a chemical site, and fourth globally behind China, the USA, and Japan. However, a look at the news in the industry raises doubts about the ongoing significance of German chemistry: At the end of February 2023, BASF, the world's largest chemical company, announced a drastic cost-saving program. The company plans to save around 500 million euros annually, half of which will be at its traditional home base in Ludwigshafen. Here, BASF plans to close nine plants and cut 700 jobs. Worldwide, 2,600 positions are to be eliminated.

The reason: "The competitiveness of the Europe region is increasingly suffering from overregulation. It also suffers more and more from slow and bureaucratic approval procedures and especially from high costs for most production factors," explained CEO Martin Brudermüller. "All of this has already slowed market growth in Europe compared to other regions for many years. Additionally, high energy prices are now putting pressure on profitability and competitiveness in Europe."

The German industry is also faltering in exports.

And BASF is not the only company that wants to restructure and reorient itself. The specialty chemicals company Lanxess also wants to cut costs and reduce its global workforce by 870 jobs, including 460 in Germany. The US company Dow is also dissatisfied with costs in Europe and announced comprehensive cost-saving measures at the beginning of 2023. To achieve cost savings of 1 billion US dollars, the company plans, among other things, to cut about 2,000 jobs worldwide. Germany is Dow's third-largest production site globally, with the company employing about 3,600 people at 13 locations in the country.

The US company 3M is also retreating: The German subsidiary Dyneon, located in the Gendorf Chemical Park, is to be completely wound down because the parent company wants to withdraw from the production of the PFAS manufactured there—preemptively, to avoid a potential ban on the so-called "forever chemicals" and the associated bureaucracy. Various solutions to save Dyneon have been rejected by 3M.

German Economic Weakness Also Noticeable in the Industrial Valve Industry

Many industries in Germany are currently suffering from the impact of poor economic figures. But what is the situation like for manufacturers of industrial valves and seals? The trade magazine Industriearmaturen & Dichtungstechnik conducted an online survey and found some surprising results.

A considerable majority of respondents rate the economic situation as bad or even very bad, while only a small minority view it positively. Despite this negative assessment, there still seem to be enough orders. Nearly three-quarters of the participating companies report that they currently have an average or even good order situation. This diversity in order situations could be due to internal and external factors affecting the industrial valve industry.

Mona Neubaur and her party colleague Robert Habeck are jointly committed to promoting renewable energies.

It is concerning how the support from the federal government is rated. An overwhelming majority of the respondents show dissatisfaction, with almost half assessing the support as very poor. This dissatisfaction indicates that the political measures and regulatory environment may not be sufficient to address the needs and concerns of the industrial valve sector. The majority of respondents also express that the current economic situation is a cause for concern, underscoring the existing challenges and uncertainties facing companies in the industrial valve industry.

Overall, the survey shows that the industrial valve sector in Germany is confronted with a multitude of challenges, ranging from the general economic condition to order situations and state support.

The government wants and must help

Mona Neubaur, the Minister of Economic Affairs for North Rhine-Westphalia, calls for further measures to support the German industry amid the current tense economic situation. "The federal government's agreement on an electricity price package is an important signal, but its overall effect is still somewhat insufficient," says the Green party politician in an exclusive interview with the trade magazine Industriearmaturen & Dichtungstechnik. "We continue to advocate for the federal government to find ways to further relieve energy- and trade-intensive companies in the coming years, even though the production costs for renewable energies have already reached a competitive level."

Neubaur specifically cites the dual transformation towards climate protection and digitalization as important challenges to overcome the current crisis. "We are committed with all our might to making North Rhine-Westphalia the first climate-neutral industrial region in Europe by 2045," says the Minister of Economic Affairs, Industry, Climate Protection, and Energy. Despite weak economic forecasts, the Deputy Prime Minister of North Rhine-Westphalia looks optimistically at the economic development this year: "The year 2024 must be a year of change and action. In North Rhine-Westphalia, we are making significant contributions to reducing energy costs with a vigorous expansion of renewable energies. More personnel and digital processes help to accelerate approval procedures. There is still a lot of work ahead, but we continue to proceed boldly."