Staying strong in a challenging landscape
For most of us 2022 started on a reasonably optimistic note. Although far from over, the Covid-19 pandemic did, at last, appear to be under control and, while the scale of the fallout was yet to be fully understood, there was light at the end of the tunnel.
Chain of events
Of course, the geopolitical events that have occurred during the last year have created significant supply chain issues such as increased freight charges, container shortages and reduced availability of warehousing space. Schaeffler relies on a steady supply of metals in this situation, so this is proving to be a challenge. However, thanks to our ability to react to forecasts and put in appropriate mitigation strategies, production has managed to remain resilient and continuous.
In fact, we are succeeding in proactively and prudently managing the significant cost impacts, the increasing inflationary pressure and the strains in the supply chains. We are more than pleased with the solid financial results that Schaeffler is delivering in this tumultuous environment
The production of new cars has been hit hard by the current economic situation, with LMC Automotive cutting its forecast of light vehicle sales in Europe by two million units a year over the next two years. Automotive material costs are especially vulnerable. For example, palladium – a critical component of catalytic converters – has climbed as much as 80 per cent in price since the conflict started.
With rising energy prices people are now far more hesitant to invest in hybrid and/or fully electric vehicles, despite governments promoting their use. At Schaeffler, we believe that the future is still electric though and we continue to develop solutions as part of the e-mobility portfolio, with our new electric motors considered a major advancement.
Although we have seen an impact on the products we manufacture for new vehicles, our automotive aftermarket division continues to thrive. With the average age of the vehicles on the UK’s roads increasing, as a balanced business we are set up perfectly to react to the growing demand for replacement parts. It also means we have been able to train our existing staff to in new areas within our aftermarket business to give them the skills they will need through 2023 and beyond.
Knowledge is power
Although it is easy to get drawn into dealing solely with the perfect storm of issues that we currently face as an industry, things will improve and we know that when they do we will still need the next generation of engineers to come through. Automation certainly has its place in manufacturing and is helping to manage the costs of production, though robots can’t take over the thinking behind it – for that we need smart people.
Just 14.5 per cent of those working in engineering are female and the need for greater diversity within the engineering sector is an issue that Schaeffler is also working hard to address. One of the highlights of the year for me and the team at Schaeffler has been our involvement with the New Model Institute for Technology and Engineering (NMITE) and sponsoring a student for the duration of her Master’s Degree in Integrated Engineering (MEng) course. The engineering sector as a whole needs to drive change and promote itself as a creative, problem solving and inspiring discipline and Habiba is paving the way for others like her.
The problems that the engineering sector is experiencing are likely to remain throughout 2023. While they will certainly present significant operational challenges for all companies, those that are flexible, dynamic and proactive will be best placed to navigate these choppy waters. I’m delighted that Schaeffler is demonstrating its ability to ensure a positive future and has proven that it can successfully cope with difficult environmental and market situations.