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Corona: Is the industry moving its production back to Germany?

2020-12-28T06:01:42.022Z


The corona crisis and Brexit show how vulnerable global supply chains are. Will the production of important goods actually be relocated back to Germany?


Icon: enlarge

Tablet production (archive image): Suddenly, active ingredients became scarce

Photo: Frank Rumpenhorst / dpa

When everyone suddenly wanted disinfectant because of Corona, Thomas Büttner felt it.

He is the managing director of PharmChem, a company that manufactures active ingredients for chemotherapy in Mannheim.

Due to the disinfection boom, there was suddenly a shortage of certain alcohols.

"I've been in professional life for almost 40 years now," says Büttner.

"It was the first time that I was only supplied in installments."

An experience that not only Büttner had.

At the beginning of the pandemic, many pharmaceutical companies suffered from delivery restrictions in China and India, where more than 80 of the common active ingredients come from.

In other industries, too, supply chains were severely strained or even ruptured by the pandemic.

Corona therefore also brought a discussion about the question of whether parts of the highly globalized industrial production should be relocated back to Germany.

At the end of the year, this debate is getting new food: In Great Britain there are delivery bottlenecks due to a new Corona variant and the upcoming Brexit, supermarkets are rationing their goods.

And there is a shortage of corona vaccines across the EU.

This was caused by a chaotic ordering policy, but also by insufficient production capacities.

The German vaccine manufacturer Biontech is currently working flat out on a new factory in Marburg.

"I think it is right that you need domestic production for certain products in order not to be completely dependent on deliveries from all over the world," Monika Grimm had already told the Handelsblatt in April.

There, the economist Bert Rürup also prophesied that the production bottlenecks would “cause a rethink in the industries that are organized according to the division of labor;

Parts of value chains are likely to be renationalised «.

During the first Corona wave, some companies seemed to be doing their job right away: Underwear or mattress manufacturers switched to the production of respiratory masks because the goods produced in China in particular were becoming scarce in Germany.

But will there also be a broader trend towards renationalization?

Opinions on this vary and also depend on how much companies are themselves involved in the world market.

"In the discussion about relocating production, everyone is now rowing back a bit," says Han Steutel, President of the Association of Research-Based Pharmaceutical Manufacturers, in which many global players in the industry are organized.

»Because once investment decisions have been made, they cannot be turned back.

Politicians will see that too. "

The Federal Association of the Pharmaceutical Industry, which is more medium-sized, advocates increasing production in Europe again.

"If a provider cannot deliver due to technical difficulties, there are other companies that can step in."

This is currently "increasingly rare" due to the concentration on a few providers in Asia.

Pharmaceutical company Büttner believes that the discussion has only been postponed.

“As long as we're looking for a vaccine, there's no time for the subject.

But it will come back on the agenda in the first or second quarter to avoid bottlenecks and dependencies. "

"Aha experiences and shock moments"

The federal government obviously wants to avoid the impression that the long-time world export champion is now isolating itself.

"The answer to the pandemic can certainly not be to renationalise all international supply chains now," said Chancellor Angela Merkel (CDU).

"Then everyone would pay a very high price." Dieter Kempf, President of the Federation of German Industries (BDI) also warned against renationalization: "That would be bad for us as an exporting nation."

On request, however, the BDI can find out that the pandemic has given many companies some thought.

This applies particularly to just-in-time production, which is widespread in the automotive industry, in which parts are only delivered when they are needed.

"There were already some aha-moments and shock moments, especially in February and March," says a representative of the association.

The long-term consequences for foreign trade and investments cannot yet be predicted, but: "For many companies it will come down to more warehousing, more sources of supply and regional diversification."

Very few companies will therefore bring their entire production home.

But many try to reduce their dependency on individual suppliers in the distance.

In a DIHK survey of German companies abroad in July, 38 percent said they were increasingly looking for new suppliers.

Of these, 63 percent were looking for local suppliers at their respective locations.

In this case, regionalization can also mean that German companies with production in China are increasingly working with local suppliers.

On the other hand, economists warn against a general return to “Made in Germany” because of the strong ties with the rest of the world.

"In Germany, renationalization and the return of production would have enormous negative consequences on economic strength," write Ifo researchers Lisandra Flach and Marina Steininger.

According to their calculations, the impact of the corona pandemic would have been "somewhat less in a deglobalized world".

"At the same time, however, the German gross domestic product would be thrown back to 1996 levels due to deglobalization and the Covid-19 shock."

Can it be a little more expensive?

But the costs are not always decisive - a look at France, which is traditionally more protectionist, shows.

In a survey by the Odoxa Institute, 89 percent of those questioned supported a relocation of industrial production even if this were to increase prices for consumers.

The mood fits with President Emmanuel Macron's announcement that he will strengthen the country's economic independence.

In Germany, too, the price is not everything - at least when it comes to drugs and protective materials.

In a Forsa survey for the Robert Bosch Foundation, 92 percent were in favor of increasing the production of such medical devices in Germany and Europe - even if prices should rise as a result.

A slight tailwind for such a course comes from Brussels.

According to the recently presented drug strategy of the EU Commission, Europe should reduce its dependencies in the health sector - possibly by diversifying production and supply chains, securing stocks of strategically important goods and promoting production and investments in Europe.

If it were up to entrepreneurs like Thomas Büttner, this commitment could be even stronger.

So far, the price for very cheap drugs has been "that at some point in a crisis we don't have any," says the PharmChem manager.

The state can specifically promote domestic research and production of important drugs - as it has now done with the development of the corona vaccine.

"That showed me: If the political will gives it, a lot can be done."

Icon: The mirror

Source: spiegel

All business articles on 2020-12-28

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