After the 1992/93 recession, German mechanical engineering went through major restructuring. In the following years, the industry achieved new strength and was able to regain world market shares. The business efficiency of most firms has fundamentally improved, and the establishment of international production and distribution networks has made considerable progress. Nevertheless, the industry still has a sluggish, “old economy” image, despite a long phase of growth. Hence, the BMWi asked the Ifo Institute to evaluate the industry and to examine whether its current strength is attributable to the favourable international demand for mechanical engineering products or whether the restructuring in German mechanical engineering, especially among its small and medium-sized enterprises, has enabled it to face the challenges of globalisation and to take advantage of the opportunities resulting from the use of new technologies in products and processes.
The study will form the basis for a conference on “Mechanical Engineering 2010” conducted by the BMWi in Berlin on 22 November 2001. One important issue is how SMEs will face and master the challenges from globalisation and the New Economy. The deficits that emerge from the study in this area will lead to recommendations for policy-makers in government and industry.
The investigation of the international competitiveness of the German mechanical engineering was based on the impact of market requirements on companies with regard to the domestic framework conditions. The first part of the investigation utilises the efficient-structure approach of industrial economics. The second part focuses on an evaluation of Germany as a location for production and its impact on the structural change caused by micro-economic decision making.
The Ifo Institute heads this research project. Work packages for determining the diffusion of modern information and communication technology in the functional areas of mechanical engineering companies and for measuring the state of the art of the industry in Germany in relation to the main competitors were subcontracted to the Fraunhofer Institut für Systemforschung und Innovation (ISI) in Karlsruhe, since internal Ifo resources are lacking for technology evaluation.
The employment of technical qualified personnel is a necessary prerequisite to provide mechanical engineering products and its share on total employment is higher than in most other manufacturing industries. In Germany the share of highly qualified technicians comes up 16% in mechanical engineering whereas on average of all manufacturing industries it only reaches 10%. Small batch-size production is of outstanding importance for mechanical engineering, therefore the companies’ opportunities to utilize scale effects is limited. Therefore in comparison with the manufacturing industries on average labour productivity is low.
A satisfying supply of qualified personnel in the labour market provided an advantage to German companies until the early nineties. But at the end of the decade there is a bottleneck in the supply. Although the number of graduates in natural sciences and technologies is growing now, nevertheless in particular in technologies with high progress momentum there will be a scarce supply in the long-term.
Mechanical engineering companies need a broad range of technically outstanding intermediary products, and enjoyed a comprehensive supply in Germany. During the nineties the domestic delivery networks became looser, an internationalization of the procurement took place and a new cluster has emerged. An analysis of trade and foreign direct investment shows this development. In particular it comprises neighbouring countries in CEE and has the potential to create more competitive German companies, although Germany as a location for production has not improved and further domestic workplaces in production will be lost.
RSS