International markets France: Mechanical Engineering Industry has a Reason for Optimism

The prospects for French mechanical engineering industry have improved: The economy in the home market and primarily the corporate investments are rising again. Moreover, the politicians are focussing more on the industry again and have started an ambitious support program.

Even if the French economic growth appeared to be rather weak in the previous years, the prospects have improved. Most of the forecasts anticipate a GDP-increase of approximately 1.1 % in the current year and 1.5 to 1.8 % in the following year. In the previous years, the economic growth was only 0.2% according to the reports of the statistics authority Insee (Institut National de la Statistique et des Études Économiques).

The corporate investments in France increase

Thus, the attractive corporate investments are positive for mechanical engineers: As reported by Insee, there is an increase by 3 % in the previous years. On the contrary, the gross capital investments have declined by in all 1.2 % to 462.5 billion Euros in 2014 and thus even more than in the year 2013, which was only by 0.6 %. Primarily, the public investments were reduced, which were lower by considerable 6.9% than in the previous year; even the investments of private households were declined by 5.3 %.

However, the French company managers again appeared to me more cautious in the latest quarterly survey of statisticians. They wanted to invest on an average 7% more in April 2015; however, this increment is amalgamated in July to 2 %. Only the food industry is an exception to this trend: Here, the corporate leaders expect an average increase by 9 % in their investments; in April, the expectation was still 5 %.

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French mechanical engineering industry reported increasing turnover

Even French mechanical engineering industry could profit from the willingness of the companies to invest in 2014. As reported by the association FIM (Fédération des Industries Mécaniques), the turnover of the sector increased by 1.7 % to 114.8 billion Euros. Thus, even the increase in the home market achieved 2 %. The sectors aviation, automobile and railway vehicles particularly reported a major increase. On the contrary, agricultural mechanical engineering, metal engineering and construction machinery industry experienced a decline. For the current year, the association appeared to be optimistic and expects a revenue increase of approxiamtely 2 %.

Germany important international customer for French mechanical engineering industry

With a share of 15.4 %, Germany remains the most important customer for the French mechanical engineering industry in export. With a share of almost 55 %, the customer dominated in the year 2014 from the European Union; 2.5 % more than the previous year. For the markets outside EU, the exports in Turkey, Russia and Ukraine particularly suffered according to FIM. Even the export to South America would have developed less favourably due to the economic weakness in Brazil and Argentina.

Hence, the French mechanical engineering industry had reduced the number of its employees in the previous year. The number of employees was reduced by 1.4% from 617,000 to 608,000 according to the reports of FIM, which corresponds to approximately 21 % of the industrial workers. The association justified this decline as a result of worsening of the incoming orders forecase. If required, the companies would prefer temporary employees or fixed-term employment contracts. FIM expects a rise in employment only for 2015 or 2016. The association estimates the number of companies in the sector to 30,192.

Industry in France suffers from outdated equipment

The French industry had shown a downward trend over a long period of time. Only one in ten employees is employed in this sector; in the year 1980, the share was more than 21 %. And the share of manufacturing industry of gross value added is just about half as high as in Germany with 11 % in France. Thus, the smaller companies dominate in the mechanical engineering industry; the average is approximately 20 employees.

Even the equipment of the companies is considered outdated. In case of industrial robots, France had an asset of just over 31,600 as compared to 58,400 in Italy and 1,75,200 in Germany in the year 2014 according to the assessments of the International Federation of Robotics (IFR). According to FIM, in all 200,000 units have been sold in the machine tool industry in Germany; in France jus over 25,000.

France supports its industry with focussed support program.

During the financial crisis 2008/2009, even the policies paid attention to the problem and had launched different programs. In the meantime, Paris focused on ten sectors with the program "Industrie du futur" (the future industry). However, the nature of the cooperation should primarily change: The French ministry of economics plans a merger of specialized organizations and research institutes to pool the maximum resources, since the industrial companies were primarily cooperated and trained under the leadership of industry representatives as a part of the previous program.

The alliance for the revival of French industry (l’alliance pour la relance de l’industrie française) has been founded as a platforn for the program implementation. The French president François Hollande said in the presentation of the plan "Factories of the future must integrate all new technology". And he gave the following justification for this: "If an indutry no longer invests, it loses the market shares."

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France enhances support for small and middle-scale companies

The place of persons in the factory, industry robots, 3D-printing, non-destructive examination, visualization and internet of things and composites remain the focus of the research. Hollande said "We can not only make up for the deficits, but also can get a head start with the help of the new technology".

Moreover, support for small and middle-scale companies should be enhanced. By next year, the alliance wants to implement 15 lighhouse projects; the country has already sanctioned 300 million Euros for the same. With this project, in all 15,000 companies should be sensitized for the necessity of digitalization according to plans; 2000 out of these want to provide support to the alliance for modernization. The country provides a new fiscal instrument for financial support: Up to 140% of the investments, which shall be implemented up to 15th April 2016, are depreciated as a part of an "additional depreciation" (suramortissement) subject to specific conditions. The development bank BPI France provides 8 billion Euros on favourable terms.

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