Reasons to be optimistic

Martin Drasch, Chairman of the Management Board of Schuler Group GmbH, continues to believe in the strength of mechanical engineering despite the structural crisis in the automotive industry and its suppliers.

It has been just over 100 days since I took over as Chairman of the Management Board of the German machinery and plant manufacturer Schuler—so it is time to take stock and look cautiously to the future. Schuler made my start easier, thanks to the ongoing support of incredibly competent employees worldwide. However, the economic climate was difficult when I took up my new position, and it still is. But there are reasons to be optimistic.

The situation is well known: the downturn in automotive sales means that car manufacturers cannot operate their factories at full capacity and are therefore reluctant to invest, for example, in the purchase of press lines. Global installed production capacity is sufficient to manufacture around 130 million vehicles, but last year, only 90 million units left the factories. In Europe, as well as in North and South America, production has still not returned to pre-pandemic levels—except in Asia, where it has now surpassed them.

However, the number of electric cars produced in each of these regions has risen sharply in recent years and will continue to grow. It would be incorrect to claim that e-mobility has failed in Germany: admittedly, a quarter fewer electric cars were registered in the country last year compared to the previous twelve months. In addition to other factors of uncertainty that are still causing reluctance among customers, this is also due to the abrupt end of public subsidies at the end of 2023. On both a local and global scale, however, electric vehicles cannot yet fully compensate for the decline in the number of combustion-powered cars produced.

This is why the automotive industry and its suppliers, both in Europe and globally, are currently facing a major structural crisis that is putting immense pressure on the entire value chain. Many companies in the sector are fighting for their survival, while others have already lost the battle—and unfortunately, this development is not yet over. Like other suppliers, Schuler must respond to this situation with a major restructuring program. These measures are painful but necessary to align our capacities and cost structures with market conditions and ensure our economic survival.

What gives us hope in such a situation? Quite a lot. The current crisis may seem unprecedented in scale, but looking back, crisis management has always been a part of the automotive industry, its suppliers, and mechanical and plant engineering. A brief look at history makes this clear: in 2009, in the wake of the financial crisis, passenger car production dropped to around 60 million units. However, from that point onward, figures steadily climbed until 2020.

At that time, the pre-crisis level was already exceeded by 2010. However, overcoming the current structural crisis will take much longer and require deeper adjustments. The year 2025 will be a critical transition period. We must therefore be prepared for a highly competitive and largely stagnant market. Schuler will focus on the opportunities that arise and concentrate on the growth sectors within our markets.

For suppliers like us, this means focusing on Asian companies that continue to invest in new plants and factories worldwide. In regions where existing facilities are being operated for longer periods, service will become increasingly important, as will solutions for optimizing production processes—including the many digital applications that mechanical engineering customers are now paying greater attention to.

At the same time, we must not lose sight of the development of innovations and new business areas. Since acquiring the Italian machine manufacturer Sovema, Schuler has also become a supplier of battery production equipment. The market for battery cell manufacturing equipment—which we now offer as a press manufacturer—is expected to grow tremendously worldwide. This positions us well to expand into new high-growth markets.

The increasing market share of electric mobility in Europe, Asia, and North America is already underway, and many forecasts predict that this trend will continue. The production of body and structural parts is independent of the propulsion system, as electric cars require the same hoods, doors, and other stamped components as conventional vehicles.

We have also expanded our portfolio with innovations in rotor and stator manufacturing, such as Backlack technology. In this process, magnetic laminations—used in electric motor drives—are stacked and bonded under high temperature and pressure in a specialized curing station. This creates a uniform, full-surface connection that reduces vibrations and noise in the motor. The denser layering of sheets prevents coolant leakage and infiltration. Additionally, Backlack has higher thermal conductivity compared to air, offering significant advantages for cooling. Furthermore, the sheets are perfectly insulated from one another.

With our production facilities for battery cells, we will be able to generate additional revenue in the future. I am well aware that not all companies in the mechanical engineering sector find themselves in this favorable position. And it remains uncertain which companies will emerge stronger from this deep crisis.

However, the crises we have overcome have shaped Schuler and made us more adaptable and aware of future challenges. We must continually reinvent ourselves, recognize and seize new opportunities, remain customer-oriented, flexible, and innovative, and work tirelessly on improving our efficiency. That is why I am confident that we will emerge from this crisis stronger and better prepared for the challenges ahead.