Modernizing metalwork

Engineering The Future

Produktion bei Volkswagen
Car workers make up a large proportion of IG Metall's members.
  • Why it matters

    Why it matters

    Germany’s engineering industry is at risk of being overtaken by rivals such as China if it does not modernize.

  • Facts

    Facts

    • Germany’s machinery and plant-engineering industry has sales of more than €220 billion ($232 billion).
    • IG Metall is the country’s dominant metalworkers union.
    • 48 percent of IG Metall members believe their employer is badly prepared to deal with its aging workforce.
  • Audio

    Audio

  • Pdf

With one million employees, sales of more than €220 billion ($232 billion) and global market leadership in 16 of 31 subsectors, the German machinery and plant engineering industry is in great shape.

Yet there’s no guarantee the future will be quite so rosy. In fact, if industrial policies in Germany are not put on the right track soon, the nation’s dominance in engineering is at risk.

An employee survey by IG Metall, Germany’s dominant metalworkers’ union, offers a nuanced view of the industry and its prospects. The report identified the aging workforce as a significant weak spot, with only a handful of companies developing plans to deal with it.

Asked how prepared their operations were to deal with the problem, 48 percent of respondents answered “poorly” or “not at all.” Asked if they could continue working until retirement age, 43 percent of workers answered no.

Those numbers highlight the necessity of lowering the average age with long-term personnel and recruitment planning. Companies must organize the transfer of knowledge from the old to the young and prepare an analysis of the qualifications required.

Many managers are now questioning Germany’s position as a production location.

According to the IAB Establishment Panel, an employer survey, two-thirds of Germany’s engineering companies currently expect shortages in personnel. Yet the number of trainees is at an historic low, an incomprehensible and counterproductive state of affairs.

Given the coming technical challenges, more education and advanced training is essential. The digitalized factory of the future is only possible with a highly qualified workforce, which makes some of the other responses to the IG Metall survey especially disturbing. Some 45 percent of those surveyed declared their workloads leave no time for advanced training, while only 7 percent reported that their employers give them sufficient opportunities for additional training.

Another weak link in the engineering industry is turning away from the high-tech segment. Generally, the industry has served both the average-priced mass market and the advanced technology sector, which builds custom-made machinery. Now, however, a number of works councils in the industry report business strategies are being oriented more toward the mid-market segment, leaving high-tech strategy neglected.

Emerging economies, especially in China, made a change in strategy necessary because the mid-priced segment is in demand in high-growth markets. With many executives arguing that the middle segment is cost-driven, many managers are now questioning Germany’s position as a production location. This business model is strongly opposed by IG Metall.

Germany’s “better-quality-instead-of-cheaper-prices strategy” also holds true for machinery and plant engineering. There is no reason to move away from the embrace of excellence. What is considered the mid-market segment today was cutting-edge technology yesterday.

We want to see research done in Germany with the aid of government funds, but also see that new, innovative products are produced.

Today’s mid-level prices and technologies will soon be at the low end. We need a multi-pronged business model: Continue to produce premium equipment using a highly qualified workforce, increase investments in research and development along with the local German value chain, and simplify equipment for higher volume markets with intelligently designed modular construction.

Meanwhile, take a close look at energy transition and electric mobility. Not everything is going well. Where are the investments in renewable energies and conversion programs for the worldwide modernization of power plants? Where are the investments in the car industry for new drivetrain and battery technology, control systems and new assembly lines?

The industry is heavily reliant on an active industrial policy driven by investments. The German ministry for economic affairs and energy recognizes this and has initiated an engineering industry dialog. IG Metall and its works councils are part of the conversation. We want to see research done in Germany with the aid of government funds, but also see that new, innovative products are produced.

In this way, German engineering can remain the best in the world.

 

To contact the author: gastautor@handelsblatt.com

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