Interview Switzerland: The swiss industry will not die out
The Swiss mechanical electrical and metal industry (MEM) falls on hard times. How does the situation of the industry exactly look like and which other developments are to be expected, reveals Peter Dietrich, Director of the organisation Swissmem, in an exclusive interview with MM MaschinenMarkt.
What is the actual position of Swiss MEM industry and where is the industry heading?
The situation is tense. The Swiss mechanical, electrical and metal industry (MEM industry) exports around 80% of its products. Of these, almost 60% are sold in the EU nations. Due to the renewed massive appreciation of Swiss Francs, the turnovers reduced in Swiss MEM industry in the first quarter of 2015 by 8.1 % as compared to the same period last year. Especially high is the drop in the orders received which reduced by 17.1% A lot more irksome for the companies is the massive pressure on the margins. Almost two-third of the companies are counting on margin break of at least four percent points on account of the overvaluation of Francs. As a result, some companies are anticipating an operative loss. I am afraid that the new increase in the value of Francs shall leave behind visible traces in the Swiss MEM industry. I, however, do not believe that it would lead to a deindustrialisation of Switzerland. I am rather expecting an accelerated structural change. But I am confident that the great majority of companies shall successfully cope with this new challenge.
Which effects did the release of Franc exchange rate have on 15th January 2015?
Allow me preliminarily a brief retrospect in order to visualise the extent of exchange rate change in previous years. Between 2008 and 2011, the Swiss Francs were valued against Euro from 1.59 to 1.12 CHF. In August 2011, the slide of Euros reached the parity briefly, on which the Swiss National Bank fixed the minimum rate of 1.20 CHF per Euro in September 2011. On 15th January 2015, a new shocking appreciation of Swiss Francs against Euro by almost 20% followed with the elimination of this minimum rate. In the final outcome, Euro has lost one third of its value against Francs within a few years. This means that the products of MEM industry have become expensive by one-third times in the Euro zone because of being completely constrained by currency. This is a massive competitive disadvantage. The Swiss companies have reacted quickly in the previous weeks and are trying to compensate this disadvantage gradually in the coming months.