Car plant stoppages pose existential threat to German steel firms: groups

German steel suppliers to the automotive sector are facing “existential threats” from production stoppages at European car manufacturers due to the coronavirus pandemic, associations told S&P Global Platts Tuesday.

Martin Kunkel, managing director of the German cold-rolling association FV Kaltwalzwerke, told Platts that cutting working hours will be unavoidable for companies as the automotive industry makes up two thirds of its customers.

German car manufacturer Volkswagen said Tuesday that it would halt all production in Europe for at least two weeks, with most plants to be shut by Friday. The world’s biggest carmaker followed the moves of Fiat Chrysler (FCA) and France’s PSA Group, which said Monday they would temporarily shut down most of their European plants. German carmaker Audi also said it would cease production at its plants.

“The effects of production stoppages at VW, PSA and FCA are going to be dependent on the duration and depth of the measures and the continued development of the [pandemic],” Kunkel said.

“A production stoppage is of course affecting us immediately and massively albeit with a bit of time lag,” he said. “Companies are therefore forced adopt reduced working hours.”

Kunkel called on the German government to support businesses.

“It is important for us that the German government ensures that liquidity is there in case of reductions to demand and in the case of sick employees,” he said.

The head of the German steel and metal processing industry, Christian Vietmeyer, told Platts that although the promised government aid in the form of reduced-hours pay and liquidity support would be positive, companies will be forced to increase debt capital.

“A lot of suppliers are facing existential threats,” Vietmeyer said. “If the government wants to avoid insolvencies because of the coronavirus crisis, then it has to look at financial support which is not disclosed under non-current debt.”

— Laura Varriale