Layoff Worries

Germany's key heavy-machinery industry has not escaped the global economic downturn. Orders for machines sagged 40 percent in year-on-year terms in December, the VDMA trade association announced on Tuesday, Feb. 10.

Machine tools are a key German export, alongside automobiles. A slackening in demand bodes ill for Europe's largest economy, which is a world leader in exporting manufactured goods.

"The fourth quarter was the worst quarter since 1958," Manfred Wittenstein, president of the German Engineering Federation, or VDMA, said in a statement.

The group said as many as 25,000 jobs could be at risk.

Big declines forecast

In real terms, orders from German customers fell 39 percent while non-German orders fell by 41 percent compared to December 2007. In November, the year-on-year decline had been 30 percent.

The VDMA represents engineering companies that install plant and heavy machines and compiles the data from members' reports. The group, which had previously expected this year's sales to stagnate, forecast that machinery sales by the German industry would decline 7 percent in the course of 2009.

Last year, VDMA member companies sold 194 billion euros ($252 billion) worth of plant and machinery, up 5.4 percent.

Demand down worldwide

German machine tools, such as metal lathes, are used around the world in the production of other tools and parts as well as the manufacture of clothes and other consumer goods. Machine tools have been in high demand in high-growth developing countries such as Brazil, China, India and Russia.

But as the financial crisis has slowed production worldwide, the market for such machinery has contracted. Germany has officially been in a recession since the end of last year. German officials forecast that the economy, highly dependent on exports, will contract by a further 2.25 percent in 2009.