Weak order situation causes problems for companies in the supplier industry

The supplier industry in Germany is currently facing major problems. According to the ifo business climate survey from August, the last time the situation was this bad was in the coronavirus summer of 2020. Reports of difficulties seem to be on the rise and established foundries and casting-related companies are not spared: the AE Group in Gerstungen and Schlote GmbH & Co. KG in Harsum consider themselves to be fundamentally healthy and want to free themselves from the situation through provisional insolvency proceedings under self-administration.

Machine user interface from the industry.

Reduced demand from the automotive industry

On August 12, the AE Group filed an application with Meiningen Local Court to open insolvency proceedings under self-administration. The reason for this is the reduced demand from the automotive industry. “We very much regret having to take this step. Although we have already intensified our efforts to restructure our company in recent months, the slump in demand from car manufacturers continues to cause us great difficulties. We are confident that the insolvency proceedings will enable us to restructure our company and save jobs,” explained Christian Kleinjung, CEO of AE Group AG. Founded in 1980, the company manufactures die-cast aluminum parts, including transmission housings, engine components and battery housings.

“The AE Group's business operations will continue without restrictions as part of the court-ordered restructuring proceedings. Our aim is to preserve the company,” emphasizes lawyer Martin Mucha from the law firm Grub Brugger. Together with his team, he has joined the company as general representative for the duration of the proceedings and is supporting the management in the restructuring process.

Major order unexpectedly withdrawn

Just a few days earlier, Schlote Holding GmbH had announced that the local court in Hildesheim had ordered provisional insolvency proceedings under self-administration for its wholly-owned subsidiary Schlote GmbH & Co. KG in Harsum. Stefan Liese from Görg Insolvenzverwaltung Partnergesellschaft von Rechtsanwälten mbB has been appointed as the provisional administrator for the proceedings. The company's business operations will continue.

Schlote specializes in metal processing - including the processing of cast parts, such as cleaning, deburring and leak testing. The reason for the situation that has arisen is that a major order was unexpectedly withdrawn and awarded to a Chinese competitor.

The provisional self-administration proceedings are limited to the plant at the Harsum site and Schlote GmbH & Co. KG. Schlote Holding GmbH and its other seven subsidiaries are not affected. For support, Schlote GmbH & Co. KG has commissioned BBL Brockdorff Rechtsanwaltsgesellschaft mbH and appointed Justus von Buchwaldt and Dr. Rouven Quick as general representatives of this KG.

Business operations discontinued

According to media reports, Castwerk, a specialist in magnesium die casting from Frankenberg in Hesse and a supplier to the automotive and e-bike industries, has had to cease business operations. Insolvency proceedings have failed, reports the Hessische/Niedersächsische Allgemeine (HNA), referring to information provided by insolvency administrator Michael Lojowsky. The 140 employees have been given notice as of October 31.

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The chart shows the development of the business climate in the supplier industry over the last fourteen years.

Business climate continues to deteriorate

The seasonally adjusted ifo business climate for German suppliers deteriorated by 3.5 points to a value of -27.7 in August, according to the Arbeitsgemeinschaft Zulieferindustrie (ArGeZ). The downward trend in the assessment of the current business situation is therefore continuing. And the trend in business expectations has now also turned negative: the more than 500 companies that regularly provide their assessments report a seasonally adjusted decline in expectations for the next six months of 6.0 points. At the end of August, they stood at -23.1.

According to the ArGeZ, companies are losing hope that the growth initiative announced last month will provide any stimulus. There are too many fears that the government coalition will block the open points regarding the exact structure.

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