October 22, 2021

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Parts shortages dampen mood among German businesses

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“The problems with obtaining raw materials and intermediate goods is holding back the German economy,” the Munich-based institute sai.

FRANKFURT: Shortages of computer chips and other raw materials are continuing to hit Germany’s manufacturers, as bottlenecks leave companies struggling to fill orders from a rebounding global economy.

The supply chain frictions sent a closely watched index of German business optimism lower for the third month in a row in September. The Ifo institute index fell to 98.8 points from 99.6 in August.

“The problems with obtaining raw materials and intermediate goods is holding back the German economy,” the Munich-based institute said on Friday. “Industry is experiencing a bottleneck recession.”

The German economy, Europe’s largest, has rebounded sharply from the depths of the pandemic shutdowns in the first part of 2020 with gross domestic product in the second quarter marking a 9.4% increase over the same quarter last year.

But major manufacturers such as auto firms Daimler, BMW and Volkswagen have all experienced trouble getting the computer chips they need for today’s cars stuffed with electronic features such as advanced driver assistance. Other materials needed by businesses such as steel, construction materials and plastics are also in short supply.

Truck maker Traton Group, majority owned by Volkswagen, said this week that sales in the third quarter would be “significantly lower than planned” as the company had to resort to steps such as pulling control units out of unsold vehicles and installed in vehicles that are on order.

Traton cited rising COVID-19 cases in Malaysia and the lockdown that followed. Malaysia is an important hub since several chip companies that supply the auto industry have the production there, the company said.

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A shortage of semiconductors is just part of the problem, Alixpartners said in a new forecast. High prices and tight supplies of commodities such as steel and plastic resin are driving up costs and forcing automakers to curtail production.

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A global semiconductor chip crunch, driven by rising demand for electronic consumer goods and coronavirus-related disruption in supply chains, has had an acute impact in export powerhouse Germany. Like other countries, Germany is also struggling with shortages of key raw materials including plastics, steel and lumber.

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