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Machinery exporters face plummeting orders

(Keystone)

The mechanical and electrical engineering industry has painted a bleak picture of falling orders, evaporating export markets, currency problems and credit jitters.

Swissmem, the sector's umbrella body, said on Tuesday that sales and profits remained stable last year, but warned that the industry faces mounting challenges and future uncertainties in 2009.

Demand from abroad for the export-driven industry fell 20 per cent last year and 34 per cent in the last quarter alone.

Swissmem director Peter Dietrich told swissinfo that companies are facing up to a difficult period as the global recession cuts into budgets and profits.

"The future outlook is quite a difficult one and we are flying blind. People are pessimistic because they just don't know how long this will last - they can't see the end of the tunnel," he said.

The latest figures do not show any job cuts among Swissmem members, but layoffs are expected in the next few months. As a result, the organisation has set up an information sharing job platform to would allow firms that fare better to mop up redundancies.

Credit crunch

One of the industry's biggest fears is that lines of credit will begin to dry up, hampering production and research. So far, very few of the group's members have reported difficulty in obtaining loans, but Dietrich is fearful that banks may start to pass on risks to firms in the form of tougher credit conditions.

"Some 20 per cent of our companies are very afraid that the credit crunch is coming soon and for some it has already arrived. Without credit, we would not have the means to conduct business even if we have the opportunity to do so," he said.

"We need to solve this situation. If the banks hand their risks straight over to us it would create a vicious circle that would damage the whole economy."

Another problem facing the industry is the continued strength of the Swiss franc that has been hovering at unprecedented highs of SFr1.50 against the euro (Switzerland's biggest export market) for the last few months. The strong national currency is contributing to the downturn in foreign demand.

"If the franc stays like this for many more months then it would really harm company profits," Dietrich commented.

Not all bad news

However, Swissmem president Johann Schneider-Ammann did see some bright patches on the horizon. He welcomed measures by the Swiss government to make the job market more flexible, beef up export insurance provisions and inject more funding into research and development.

Switzerland, along with other countries, has also promised to invest in infrastructure projects in an effort to kick-start the economy. And earlier this month, Swiss voters agreed to extend open borders to European Union workers.

Dietrich added that companies are currently in good health thanks to several years of buoyant trading conditions.

"Our companies are in good shape. They have done their homework to prepare them to get through these tough times," he told swissinfo.

swissinfo, Matthew Allen in Zurich

The big picture

Swissmem represents around 1,000 companies working in the machinery, precision tools, textiles, electrical engineering, metals, plastics and automotive sectors. Some 290 firms responded to the group's survey of 2008 results.

Orders in 2008 fell 17% in total (19% foreign orders, 7.5% domestic demand). In the last three months of the year, orders declined 34% compared to same period in 2007.

Sales remained stable in 2008, increasing 5.8% from 2007. However sales grew by 14% in 2007. Last year, exports totalled SFr80 billion – up 2.3% from 2007.

Job count at the end of September 2008 was 355,690 – up 5% year on year and an increase of 16% in the last five years. Job capacity within the industry declined 2.9% to 88%, reflecting both the growth of the sector and the shortage of skilled labour.

Swissmem's members account for 356,000 employees and represent some nine per cent of Swiss gross domestic product. The sector exports around 80 per cent of its goods, representing some 40 per cent of all Swiss goods sold abroad.

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