Small signs of slight recovery

By David Shaw, ERJ staff

Nuremberg, Germany - Delegates to the IRC event in Nuremberg noted that demand improved slightly in May and June. The German rubber federation, the WdK said June had been the best month for the German non-automotive rubber industry since the disastrous month of January 2009.

The WdK compiles data on headcount, industrial output, orders and hours worked each month, collected from its members. This data is compiled into a rubber industry barometer.

While the specific data remains proprietary, WdK chairman Dr Thomas Barth told delegates to the IRC event in Nuremberg that, “We see a positive trend in the industrial rubber goods sector, with conditions now better than in Jan 2009.” He said January 2009 was one of the worst months the industry has ever seen.

This view was confirmed by a series of executives at the exhibition who noted a slight uptick in demand starting from the middle of May and running through June. It was not clear if demand would decline once more during the summer holiday months, or if it is the beginning of a sustained recovery. Most observers were inclined to think the former, while hoping for the latter.

Suppliers to the truck industry have been worst affected by the recession, while those in the non-automotive sector have seen demand fall by a relatively modest 15 - 20 percent

Companies based in Germany have taken advantage of government help to fund short-time working and have balanced short hours worked in 2009 against over-time worked in the first nine months of 2008. Furthermore, the vast majority of contract staff have been released, and voluntary redundancies and early retirements have reduced headcounts. These measures have allowed many companies to adapt to the current economic conditions with costs roughly matching current revenues. Almost everyone ERJ spoke to at the IRC event would like to see revenues up by a further few percentage points before the end of the year, to make their financial position a little more secure.

Outside Germany where government support has been less generous, some suppliers have had to let core staff go, while others need a further increase in revenues before they can reach even the break-even level.

Rep SA has had to reduce its workforce by 69 people, or 40 percent of the workforce across the board. Management, sales and administration staff were cut as well as the shopfloor staff. The company said this has been to adapt to the market need, which is down by around 40 percent from a year ago.

While no-one could predict the future, few (see story below) were prepared to forecast any real end to the bad times before the third quarter of 2010.