Monday, March 27, 2023

German machine builders are hoping for the US market

The China business of many medium-sized companies is shaky, the energy costs at home are exploding: German mechanical engineering companies are now pinning their hopes on the USA.

When Karl Haeusgen talks about the USA, at some point he begins to enthuse about the horse treadmills in the picturesque derby country of Kentucky. The gallopers are trained on the oversized exercise machines in a way that is easy on the joints, whereby the load can be shifted to the hindquarters of the animal by sloping the track. “Our components are in there everywhere,” reports the majority owner of a Bavarian hydraulics manufacturer proudly.

It is far more than sentimentality that makes medium-sized companies like Haeusgen – in an influential part-time job as President of the Association of German Machine and Plant Manufacturers (VDMA) – currently look longingly across the Atlantic. “Our member companies see the USA more positively than they have for a long time,” reports the lobbyist: “Three quarters want to expand their business activities there.”

Over 80 percent of companies expect US sales to increase

A current survey by the association, in which around 350 mechanical engineering companies took part, reveals just how strong the urge to go west is: two-thirds of them currently offer service and sales in the USA, and one-third already have their own assembly or production facilities on site. More than 80 percent expect US sales to increase in the current year – half of them in the double-digit range. Two-thirds of companies want to increase their workforce in the United States. The industry already employs more than 100,000 people there.

The reasons for the growing enthusiasm for America are obvious: The situation in China, the second-largest non-European export market for the industry after the USA, is becoming increasingly unpredictable economically and politically more and more delicate. “You need a plan B,” says Haeusgen. The USA is pushing itself because of the size of the market and the billions of euros in investments that are being made loose there by the infrastructure law.

Electricity in Europe is often more expensive than in the USA

With the war in the Ukraine and the exploding energy costs in Germany, a further argument has been added: the price of electricity here is now many times higher than in the USA. The machines manufactured here are correspondingly more expensive. For exporters, this is “a dramatic competitive disadvantage compared to the American competition,” says Haeusgen. At the same time, the Biden government is demanding an ever-increasing domestic share in state-funded projects under the slogan “Buy American”. Both developments speak in favor of local production.

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But even in the New World there are no paradisiacal conditions. For example, there is the problem of personnel. Skilled labor has always been scarce in the United States. The wave of retirements in the corona pandemic has greatly exacerbated the problem. “That’s the main bottleneck,” complains Haeusgen. Added to this are the complex certification requirements of the Americans for foreign machines and systems. This results in up to 18 percent additional costs and months of waiting: “That really slows down innovation.”

Uncertain prospects if Donald Trump returns

Elsewhere, too, the optimism of the medium-sized company could be put to the test. So far, his association is not expecting a recession in the USA, although the economic clouds are also darkening there. And Haeusgen does not want to be deterred by a possible return of Donald Trump in 2024. The Republicans, he believes, have learned their economic lesson and will not resort to extreme protectionism against the competition again. In Aschheim, Bavaria, the headquarters of Haeusgen’s own company Hawe Hydraulics, which to date has done well over 20 percent of its business in China, the company is heading west. The medium-sized company currently employs 100 people in the USA. “It will grow,” announces the head of the company with determination.

Nation World News Desk
Nation World News Desk
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