Vorsprung durch technik, or rather progress through technology, has become a cliché when talking about German industry but it is also vital for Europe’s future
All eyes are on Germany at the moment. Europe’s biggest economy has watched its fellow members of the Eurozone systematically falter and collapse, leaving itself and France to prop up the rest.
When its leader Angela Merkel and her French counterpart Nicolas Sarkozy met to discuss the rescue of the ailing market in August, there were a few forced smiles and stern words as the pair told the world that Europe must invest in its industry to get itself out of trouble and not borrow to pay its way out.
Central to their plan to save the economies connected by the Euro currency will be the stabilising of the currency and its continued competitiveness against the US dollar and the Japanese yen.
It was no coincidence that the Euro fell against the dollar within minutes of the two leaders appearing in front of the world’s press to announce their strategy. Europe needs Germany to be able to keep on selling its goods to the world and a lot will be expected of German industry, if their plan is to succeed.
Even in the gloom of 2010, the sale of German products – machinery and vehicles among the most lucrative – were proving a success story.
By the end of the year, the construction sector was going through a miniboom, riding high on low Euro rates and demand for German technology in the emerging markets; with the Middle East featuring as one of the most important.
To a large degree this has continued into 2011 and a strong international performance meant sales of German machinery continued to rise in despite domestic demand faltering in the first six months of the year.
According to the German engineering association, VDMA, some sectors are even beginning to approach their record revenue levels of 2007/2008 again.
In 2010 the German construction equipment and building material machinery industries recorded sales of 10.6 billion euros (6.3 billion euros for the construction equipment sector and 4.3 billion euros for building materials, glass and ceramic machinery).
The VDMA estimates that “thanks to good developments in construction machines” the industry will exceed the 10% revenue growth it projected at the start of 2011. Although it’s worth pointing out that during the first half of 2011 sales in construction equipment were 38% below the record levels experienced in 2008.
“Although profits are being made in some sectors again, there are no grounds for excessive euphoria,” said Dr Christof Kemman, chairman of the VDMA at a recent board meeting in Schrobenhausen.
The debt crises in Europe and the United States and the unrest in the Arab world are causing plenty of uncertainty for the future. And the capacities which grew so much during boom times are still far from being fully used again.
The VDMA colourfully describes some sectors as going through a valley of sorrow in the first six months of 2011, and while Germany’s domestic market is developing very well, the VDMA said that the strong demand that “still pervaded the industry in 2010 and the first quarter of 2011 has come to a halt for the time being”.
“But it’s too early to say whether this downturn in new orders is actually indicating an end to recovery and pointing to a turnaround,” says Sebastian Popp, VDMA’s economic expert in construction equipment and building material machinery.
“The strong fluctuations in demand are still requiring companies to be highly flexible in their production with mastering this them coming close to their limits.”
Manufacturers of road construction equipment reported the greatest growth in demand although manufacturers are therefore expecting weaker growth for 2012. Growth markets include China and India as well as the US, and the Middle East.
Manufacturers are equally concerned about their suppliers who are apparently also struggling with fluctuations. Companies from all sectors are reporting bottlenecks in the delivery of components and problems with the quality of the delivered parties. Also, price increases are often far from plausible.
Building construction equipment is still taking the greatest battering within the industry. Business has been particularly weak in concrete engineering this year. This applies above all to the sluggish but nevertheless important markets of North America, Southern Europe and the MENA region.
The only area where those losses were compensated was India, where business has been developing brilliantly. Tower cranes continue to sell at a very low level. The only equipment that did not follow this negative trend was building hoists, where excellent growth was in evidence during the first half of the year.
There has been better news in areas where markets such as the Middle East and Latin America have been busy such as infrastructure. Road construction equipment are presently reporting the greatest growth in demand. The only sector that is lagging behind is that of asphalt mixers.
With the situation in Libya becoming clearer, Germany, like its fellow Euro zone members, will be relieved to see the an easing of tensions in the Middle East and Northern Africa.
German industrial companies such as Siemens were heavily involved in Libya, earning large sums from infrastructure projects financed by the Gaddafi regime.
Within hours of rebels entering Tripoli, Germany’s foreign minister said that it had a special role to play in ensuring that reconstruction led to “lasting stability.”
“Germany has experience and particular expertise in this area,” said Guido Westerwelle. “We will stand by Libya with advice and assistance if it wishes.”
Self-enlightened interest it may be, but Europe will rely on Germany to take a lead for years to come.
MAN-Power
David Van Graan on MAN Truck & Bus Middle East and Africa operation
“MAN Truck & Bus Middle East and Africa is part of the industrial giant, MAN Group – a DAX top 30 listed company. Under regional CEO Markus Geyer in Dubai, MAN Truck & Bus directly supports 14 countries including: Afghanistan, Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia, Syria, UAE and Yemen.
We support a network of 35 service points in this Middle Eastern region, in 10 active countries, with long-standing partners who act as private capital Importers. Generally on a constellation of one Importer who has the MAN Franchise rights for an entire country.
The Middle East is one of the most exciting and quickly evolving territories on the planet. It is impossible to make a sweeping general comment about the Middle East which would be fair to each individual country.Obviously, there are a few very interesting infrastructural development projects and also government supported social development projects which will be very exciting over the next decade.
Saudi Arabia is making very large investments on many fronts, Qatar has an ambitious and dynamic expansion plan, Oman is bringing long-awaited developments to fruition, Iraq is on a massive resurgence and the UAE has a variety of world-leading initiatives.
MAN Truck & Bus has a very long history in the region. The MAN Team believes rather in less talk and more action, so we make opportunities out of every challenge.”