European suppliers are feeling increasingly concerned about the impact of COVID-19 on their businesses, a new survey has found. The survey was conducted April 27-20 by the European suppliers’ trade group CLEPA. More than 90% of surveyed suppliers expect revenues to fall in 2020, compared with 60% who said the same in late March. More than half of respondents said they expected to show a loss before taxes in 2020.
Suppliers are also more pessimistic about a recovery; 75% said it will take more than a year to return to normal business, up from a timeframe of six to 12 months in the March survey. One third of respondents said it will take two to three years to recover.
The survey, the results of which were aggregated by McKinsey and company, also found that 90% of suppliers said that demand volatility was the most pressing issue for the automotive supply chain. Suppliers are also concerned that production will restart at a very low level, which means that fixed costs increase much faster than turnover. “Their future perspective depends very much on consumer sentiment and demand picking up substantially”, CLEPA said in a note published at the same time as the survey. The group has called for coördinated Europe-wide measures to stimulate demand, such as vehicle-scrappage incentive schemes.
Suppliers were also asked what steps they are taking to preserve cash and prepare for a recovery. Among their responses:
• 84% said they will cut investment, and 74% will reduce their workforce
• 50% said they will take those measures in the next six months
• 40% have already started to cut R&D budgets.