Loßburg (Germany) (AFP) – Facing a slowing German economy, high energy bills, onerous bureaucracy, and the threat of US tariffs, a Black Forest-based factory equipment maker is issuing a plea for help to the country’s next government. Arburg’s woes highlight a crisis gripping Germany’s small- and medium-sized “Mittelstand” firms as Europe’s biggest economy struggles, a key challenge for election winner Friedrich Merz as he readies to take over as chancellor.
“We are feeling the effects of the crisis — our turnover fell by around 15 percent last year,” said Armin Schmiedeberg, chairman of the advisory board of the company located in Lossburg in the southwest. He urged German leaders to swiftly come up with new ways to help business, saying: “There are few recognisable advantages here for manufacturing companies and no strategic approach from politicians.”
The family-owned firm makes machines that produce plastic parts in sectors from the auto industry to electronics and packaging — so-called plastic injection moulding machines, hulking high-tech marvels that weigh up to 40 tons. Companies like Arburg, which form the backbone of Germany’s economy, have been hit hard by the slowdown at home as well as falling demand in key export markets like China. Merz, whose conservatives won Sunday’s election, has vowed a barrage of measures to revive the recession-ravaged economy, although he first faces the tricky task of forming a working coalition.
Faced with declining sales, Arburg has had to cut the hours of some of its staff. And now the company, which has about 3,700 workers worldwide, is facing the threat of US tariffs after Donald Trump’s return as US president.
It is not yet clear if Arburg will be hit with new duties, but Schmiedeberg acknowledged it could cause problems. “Tariffs would result in additional costs that the customer in the United States would have to bear,” he said. “This would, of course, also limit our sales opportunities.” The firm is getting ready — it is speeding up plans to shift some production overseas, either to North America or Asia, where demand for its products is growing.
With Germany facing storm clouds on the horizon, business groups have wasted no time in calling for the swift formation of a coalition. They demand rapid steps to boost the ailing economy, which shrank for the past two years and is expected to eke out just meager growth this year. Germany has faced political paralysis since the government of Chancellor Olaf Scholz collapsed in November. Even before then, constant feuding in Scholz’s three-party coalition hindered efforts to enact major economic reforms. Merz’s CDU/CSU bloc is seeking talks with Scholz’s centre-left SPD, which crashed to defeat in Sunday’s poll, about forming a coalition.
A coalition of the two parties would likely enact pro-growth reforms to “ease the regulatory and tax burden on businesses somewhat, and pursue a more rational immigration and a less inefficient and costly energy policy,” said Berenberg bank economist Holger Schmieding. Such moves couldn’t come too soon for Arburg. Among Schmiedeberg’s chief complaints is a heavy bureaucratic burden. “We have to employ the equivalent of 40 full-time employees to meet requirements and regulations and comply with laws,” he said.
He also complained about electricity costs that are “unsustainable for a site in Germany” and poor road infrastructure. Arburg has to transport its vast machines on narrow country roads before they are shipped to the world. Despite the challenges, Schmiedeberg said the company’s main base will remain where it has been since its founding in 1923. “Arburg has remained loyal to its home region for 100 years and will continue to do so,” he said. “We have no plans to relocate.”
© 2024 AFP
