Structural change causes rescue rates from insolvencies to fall

According to surveys conducted by restructuring consultancy Falkensteg, significantly more companies in the foundry industry filed for insolvency in the first half of 2025 than in the same period last year. The number of companies affected in Germany has almost tripled compared to 2024. Sixteen companies had to take this step by June 2025.

There is no sign of relief in sight for the year as a whole either: there is a growing gap between sustainable locations and uncompetitive companies, says Jonas Eckhardt, partner at Falkensteg, in an interview with EUROGUSS 365.

Structural overcapacity

The causes lie less in short-term shocks than in profound structural change. Eckhardt is convinced that in many cases the decline in order intake is not cyclical but permanent: 

‘We simply have massive overcapacity.’ The background to this is the transformation of the automotive industry. Electrification is reducing the demand for traditional cast parts, such as gearbox housings and engine components. Many companies are facing declining orders.

The situation is exacerbated by decades of investment backlog, explains the expert. Many foundries have hardly been modernised recently – often because the funds are lacking due to low margins. Today, this is proving to be a serious disadvantage: outdated machinery and inefficient processes are not only hampering productivity, but also the willingness of potential investors to get involved in such businesses.

The result: the ability to restructure is declining. 

‘In the past, around two-thirds of companies across all industries could be rescued from insolvency. Today, the rate is one-third – and in the casting segment, it is significantly lower,’ says Eckhardt. Currently, it is exactly 0 percent. In 2023, all insolvent companies in the industry were still able to be rescued.

Perspectives through transformation

Companies that invested in modern equipment, digital processes and long-term customer loyalty at an early stage are considered stable pillars of the industry. Some are specifically taking over volume from insolvent locations – often at the request of customers. This targeted consolidation can open up new opportunities for individual players.

The die casting industry is at a turning point. The previous business models of a number of companies are no longer viable – but the demand for high-quality cast products will not disappear. It takes courage to change, investment in future viability and new partnerships. For those who actively shape this transformation, there are prospects – even if the road ahead remains rocky.

Mr Eckhardt, how do you assess the current insolvency situation in the foundry and die-casting industry?

Jonas Eckhardt: Insolvency rates rose again in the first quarter of 2025. What we are seeing is enormous overcapacity: there are simply too many plants for too little volume. Ultimately, that is the main reason. Many companies are also not up to date technologically – no automation, no modern machinery, no efficient layout. And the problem is not new – it has only been exacerbated by the transformation in the automotive industry.

What role do location factors such as energy prices play?

Jonas Eckhardt: It is often said that it is due to energy prices. But that is not true. We see it very clearly: it is a volume problem. The plants are no longer receiving orders, or far too few to operate economically. Demand has simply collapsed and will not return. If no investments have been made, then energy consumption can indeed play a role and it becomes very difficult to make such companies fit for the future.

What role do OEMs play in this situation?

Jonas Eckhardt: They look very closely at who is active in the market and who can deliver reliably. There are isolated cases where OEMs tell us directly: Please save this company, we need the parts. Then they also help – with volume commitments or investment commitments. But that is the exception. In most cases, it's the other way around: if the OEM pulls out, the company can no longer be saved. Whether a business can be restructured depends largely on whether the customer stays.

There is often talk of alternative markets such as aerospace or defence projects. Do you see opportunities for casting there?

Jonas Eckhardt: This is often mentioned, but in my view it is not relevant. Of course, there are individual projects – but the volume is low, the approval hurdle is high, and the competition is very intense. These markets are not an alternative for traditional die casters. The missing volumes cannot be replaced there. In the defence industry, you don't build tanks out of aluminium.

How should China's significance for the current market situation be assessed?

Jonas Eckhardt: Firstly, when a car comes from China, the parts for it are not usually cast in Germany. Secondly, competitive pressure is also increasing dramatically in China. German foundries have set up plants there. They are modern and well positioned, but that is precisely where the volumes are now lacking. Until now, it was possible to support each other – the Chinese location was profitable and, in case of doubt, stabilised the plant in Germany. Now the location in China needs support – and the German plant cannot provide it because it also lacks capacity utilisation. The pressure is coming from both sides at the same time. This makes the situation extremely tense for foundries.

How do you assess the prospects for the industry in Germany?

Jonas Eckhardt: In the past, we were able to save two out of three companies, but today it is more like one in three. The main reason is that there is often no robust business model. I also see opportunities – but not for everyone. Demand is falling steadily, but casting will continue to exist. The question is: who will do it in the future – and how many suppliers will be needed? We are seeing a differentiation. Companies that are modern, automated and have a stable customer portfolio are now taking over the capacities of others. Business is shifting to those who can deliver. Ultimately, this is also an opportunity to shape the future.