German car crisis hits Swiss manufacturing industry

Volkswagen crisis hits Switzerland too Keystone-SDA

The closure of a Swiss factory that manufactures precision components shows that the crisis in the German car industry is also having an impact in Switzerland.

The St Gallen-based industrial group SFS has decided to close its plant in Flawil by the end of 2027, resulting in the loss of 110 jobs. The decision took the staff by surprise, according to a report in the Sunday paper NZZ am Sonntag.

SFS manufactures precision components at the site for German cars, for which production is falling. Volkswagen, in particular, is facing a slump in demand in China, overcapacity in Europe and an uncertain strategy regarding electric vehicles. According to media reports, it may have to cut up to 120,000 jobs.

The repercussions for the Swiss market are significant. According to a study by the Swiss Centre for Automotive Research at the University of Zurich, the Swiss automotive supply industry employed around 32,000 people in 2023.

However, the institute’s director, Anja Schulze, estimates that the figure has already fallen since then, emphasising that “many suppliers have had extremely difficult years”. The main problem is clear: fewer cars produced mean less demand for components. But it is the car manufacturers who are suffering the most, as their business depends on setting up new production lines.

Swiss suppliers, however, are not only struggling with falling volumes but also with shrinking margins. “As German car manufacturers have been earning less and less, they have sought to secure better terms from suppliers,” Martin Hirzel, president of the Swissmem industry association, told the NZZ am Sonntag.

Despite the gloomy outlook, Hirzel nevertheless sees Volkswagen’s restructuring – which he describes as “long overdue” – as a potential opportunity.

If German manufacturers manage to return to profitability, they could once again pay more appropriate prices for components. “In recent years, we have helped to fund Volkswagen’s inefficiencies,” Hirzel argues.

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Translated from Italian, reviewed by an English Department journalist.