WDK: German supplier industry warns of “deep structural crisis”

Duesseldorf, Germany – The German supplier industry “remains in a deep structural crisis” with no economic recovery in sight, warned sector body the ArGeZ.

ArGeZ represents around 9,000 companies with about one million employees and combined revenues of €244 billion.

Members include sector associations across metals, plastics and textiles, as well as the WDK representing Germany's rubber industry.

Weak order intake, rising costs and increasing international competitive pressure continue to “weigh heavily on companies and jeopardise industrial resilience and the stability of value chains,” said ArGeZ.

The downturn persisted through 2025, marking the fourth consecutive year of declining production, according to a 20 April statement from the industry group.

Supplier sales fell 1.1% year-on-year while production dropped by 1.0%, extending what ArGeZ described as a “structural downward trend” since 2019, excluding a temporary rebound in 2021.

The impact on employment is “increasingly profound,” with the workforce in 2025 down 3.4% year-on-year.

“The reduction in staff is thus becoming more and more widespread and underlines that the continuing weakness goes on to attack the substance of the German suppliers,” the group said.

According to the association, there have been no signs of improvement in early 2026, with the Middle East conflic negatively impacting current business assessment and expectations for the next six months.

Employment declined by a further 3.4% year-on-year in the first two months of the year, while production was down 0.4%.

ArGeZ noted that the 'ifo business climate index for suppliers' fell sharply to -24.1 points in March from -14.4 in February, marking the 'lowest level in a year' and ending a “hesitant stabilisation at a very low level.”

“Only about one in 10 suppliers rates their current situation as good, while only 16% of the industry expect an improvement in the next six months,” said Christian Vietmeyer, spokesman for ArGeZ.

“The mood thus remains clearly in negative territory,” he added.

ArGeZ said weak demand from key customer industries remains the main driver, with incoming orders “too volatile to enable sustainable stabilisation.”

At the same time, geopolitical tensions, trade uncertainties and rising energy prices are increasing cost pressure and holding back investment.

The association also pointed to growing international competition, noting that imports of iron and steel goods rose by around 10% in 2025, with even stronger growth for automotive parts.

ArGeZ called for a “courageous and forward-looking economic turnaround,” warning that high labour costs are forcing suppliers to relocate production abroad.

Measures proposed include reducing non-wage labour costs, increasing working hours and curbing absenteeism, alongside faster reforms to social insurance.

Energy costs remain a key concern, ArGeZ stating that the promised reduction in industrial electricity prices has “not yet been noticeably received.”

Furthermore, it said, many suppliers are excluded from electricity tax relief.

The association said current measures are “too little” to ensure competitiveness, with local suppliers burdened by high gas prices and a national CO2 tax.

These pressures are driving what ArGeZ described as “a new wave of globalisation in the supplier industry,” with companies increasingly investing abroad.

On EU policy, ArGeZ said the European Commission’s “Made in Europe” approach “basically points in the right direction,” but warned that implementation must avoid additional bureaucracy.

It also called for technology openness beyond 2035 in automotive policy.

The group raised concerns about the proposed End-of-Life Vehicles Regulation (ELVR), warning that recyclate quotas could be difficult to meet due to limited availability of post-consumer materials.

It also criticised the exclusion of production waste as a recyclate source.

“The politically desired cycle must be supported… but the competitiveness of secondary materials must be guaranteed,” said Michael Weigelt, managing director of TecPart – association of technical plastic products.