Engineering Summit in Germany: "Ten Lost Years"

"At the Berlin meeting of the key industrial sector, there is a lot of agreement - but also an unpleasant discussion. Has mechanical engineering overslept the digitization?

The German machine builders use their second national stage as well as they can. After the Hanover Fair has either failed or only been possible in a reduced form in recent years, the key branch of German industry used its mechanical engineering summit in Berlin for self-assurance and for tolerably good news. For example, that, despite all the crises, the expectations for the production level no longer need to be tinkered with.

Karl Haeusgen, President of the VDMA industry association and host of Chancellor Olaf Scholz, Economics Minister Robert Habeck and EU Commissioner Valdis Dombrovkis at the multi-day summit, confirmed the expected increase of one percent this year and a two percent decrease for 2023. The message: It is running modestly, but at least it's not getting any worse.

According to the Federal Statistical Office, production in mechanical and plant engineering fell by 0.8 percent in the first seven months of this year. But there is a "slight relaxation in the material bottlenecks," as Haeusgen said. Together with the high order backlog, which will secure employment for companies for around a year, this could result in the estimated production growth for 2022.

This confidence coincides with the personnel plans of many companies. A VDMA survey of 640 of its more than 3,000 member companies showed that half want to increase their workforce in the coming year. 30 percent plan to increase jobs by up to 5 percent, and almost 20 percent want to hire even more employees. 15 percent of the companies expect job cuts, mostly up to 5 percent. "We assume that the machine and plant manufacturers will do everything they can to keep qualified specialists and hire new ones, because good people are scarce and will remain so," said Haeusgen.

"Zero productivity gains after ten years of Industry 4.0"

Apart from these developments and the benevolent speeches by Scholz and Dombrovkis on Tuesday, however, the question was also raised as to whether the industry is making appropriate use of its technological expertise. In Michael Finkler, it was an insider who positioned himself so clearly that is rare for representatives of the association. Finkler is managing director of the Pro-Alpha group of companies from Weilerbach in Rhineland-Palatinate, which specializes in software for medium-sized companies and has more than 2,000 employees with an annual turnover of around 270 million euros.

He is also Chairman of the Board of the VDMA Software and Digitization Association. As such, he puts forward pointed theses. 

 

For example: There is "zero productivity progress after ten years of Industry 4.0"; today's level of productivity in industry is at the level of 2011; productivity in mechanical engineering has even fallen despite high capacity utilization; the broad mass of companies had made little progress; instead of organizing and standardizing, “the waste has been digitized”.

 

There was often talk of developing new, digital business models, creating added value through digitization, possibly setting up platforms. But in many places there is nothing to see. Finkler recognizes "ten lost years". Germany has "lost the connection in the industrial platform economy", while corporations such as Google, Microsoft or Amazon are pushing the development of industrial platforms.

 

"It's not about criticism for me," said Finkler in an interview with the F.A.Z. “Rather, the topic and the association with its members are very important to me. But it is not enough that we have a few flagships, but that the topic of digitization does not reach the breadth of the industry.” The flagships mean companies such as Trumpf, Feste, Homag and a few medium-sized companies. Much too little. "The attitude of the management is the most important thing, it's not a question of the size of a company, but of the will," he says. When it comes to digitization, medium-sized companies can “quite shift up a gear”.

The fact that IT companies could take on German mechanical engineering was initially considered a major threat, but over the years the assessment that Google, Amazon and Co. probably did not think so small-scale and were not interested in machine data prevailed. Finkler outlines their situation like this. “Companies like Google or Microsoft will not play the same role as in retail, where they have exclusive access to customers – but they also want their piece of the pie in mechanical engineering.” Deputy General Manager Hartmut Rauen spoke for the VDMA. Even the chancellor credited the machine builders with their skills praised in digitization. This is everyday. And with "Manufacturing-X" an alternative to the central platform solutions is being developed."