Along with an unprecedented human toll, COVID-19has triggered a deep economic crisis. The global economic impact could be broader than any that we have seen since the Great Depression. The big difference now is that unlike the financial crisis of 2008, which could be surmounted by creating demand, here we have an issue of both demand and supply which is a unique situation.
The virus has shut down production and disabled critical components of the supply chain as a result of which production halts – which will lead to layoffs occurring and in turn would lead us to a vicious cycle. In fact, global trade is predicted to see a huge fall ranging from 20% to 35% as per current projections of OECD.
The GDP growth in India is expected to shrink to around 1.5% to 2.0%. COVID impact has resulted in tighter credits and cash flow constraints. It is a question for survival for many. Manufacturing companies will have to take steps to recover after this challenging period and be ready to take a leap when the situation starts returning to normal
At the present moment, the balance has to be struck between the imperatives of preserving the importance of health, economy, and society. Naturally, the overriding consideration has to be that of the health of the population, which should be followed by the economic requirements, such that the impact on social conditions is not of a negative nature.
VDMA India organized a webinar on Friday, 17th April 2020 on the topic “CEO Panel Discussions on Rebooting the Manufacturing Sector post-Lock-down” with an aim to provide some insights into how to prepare for the present challenge and future requirement.
The discussion was moderated by Rajesh Nath, Managing Director, VDMA India. We were privileged to have the following VDMA members as our esteemed panelists: Rashmikant Joshi – Managing Director, FESTO India Pvt Ltd, Vivek Bhatia- Managing Director and CEO, Thyssenkrupp Industries India, K.V. Suresh – Managing Director, ZF India Pvt Ltd, Sriram Kannan – Managing Director, CLAAS India Pvt Ltd, and Nitin Vyas – Managing Director, Beumer India Pvt Ltd.
The negative effect of COVID19 pandemic on business globally and in India is clearly visible as industrial activities have come to a complete standstill. When the panelists were asked what is the present scenario at their company and manufacturing units, the panelists mentioned that due to the lockdown presently, the manufacturing is shut and the supply chain is disrupted, except in some essential cases, as for ThyssenKrupp they are working on some orders catering to the power sector from one of their plants with necessary permissions. Also, Festo is working with a skeletal staff, as they are catering to the essential sectors like Food and Biopharma. Here social distancing and necessary safety and health precautions are being followed. Otherwise, most of them are working from home and are utilizing this time for training sessions on products and technology to their customers.
When asked what are the near-term and long-term implications of the lockdown for their organizations, the panelists are looking forward to reopening of activities. They are gearing up and would follow guidelines for the health and safety of the workforce. In fact some like Claas mentioned the guideline from their Head office is much more stringent. For the panelist's sectors like construction and infrastructure are important, for example, ZF mentioned that as they cater to the automotive and OHV sector, their business is in a standstill, they seek to partly restart their manufacturing operations after 20th April with necessary permissions and proper safety precautions. In the long term, they see that issues of supply chain and logistics will persist and that of cash flow and liquidity will arise and need to be addressed properly.
When asked how they to recover loss of Man Days and what is their stand regarding wage payment to the blue and white collared workforce during this lockdown, the panelist mentioned that they have been keeping in line with the government guidelines and have been paying the wages and salaries to their employees. However, since it is perceived that liquidity is going to be a challenge in the time to come, some panelists mentioned that they may ask their workers to work overtime or on Saturdays or apply for earned leaves.
When the panelists were asked if they feel that this crisis has given vent to the feeling that globalization may pave the way for regionalism, they said that due to supply chain disruption, this is a possibility, however only for the short term. Moreover, the crisis has taught us the risk of dependence on other countries, and may thus give way to more localization.
MSME contributes 6% to Manufacturing GDP and 34% to India’s Manufacturing Output. With lockdown several MSMEs survival is at stake, the panelists were asked that as large organizations how do they support MSME suppliers. In reply to which most of the panelists mentioned that they have not kept any payment of their vendors outstanding and have cleared them upfront thus helping the SMEs fighting liquidity and hoping that they will support their supplies after the operations restart. However, they foresee that many SME and MSME suppliers would have a tough time staying afloat and would face challenging times.
The million-dollar question on everyone’s mind is how to reorganize and reboot post lockdown. When the participants were asked that how you are planning to take the organization forward with reference to manpower, demand creation, and cash flow management, they said that the government here has an important role to play in demand creation.
Investment in sectors like infrastructure will infuse demand in related sectors and subsectors. The impact of COVID-19 as mentioned by Beumeris not going to be uniform across industries. Further, this can lead to the adoption of new technology and would give impetus to sectors like healthcare, infrastructure, Information technology, Pharma, E-Commerce, Medical equipment, Agriculture, Food Processing, and Packaging amongst others.
Finally, Mr. Nath concluded the discussion saying that every big crisis is a test of leadership. We must have faith that a V-shaped recovery is plausible. Hence we should retain our confidence, keep calm, communicate with our people and our partners. Foresee and try to understand the risk and readjust our businesses. VDMA India wishes all to stay safe, stay healthy, and stay optimistic.
The webinar received an overwhelming response as the maximum registration limit of 100 participants from the industry and German engineering fraternity was attained within two minutes of starting the webinar. For more details, visit www.india.vdma.org
