By Tom Fairless 

FRANKFURT -- Coronavirus infections are rampant in Germany but most of the country's factories are still humming, sketching a blueprint for countries seeking to support economic activity through the pandemic.

Nonessential businesses sit idle across swaths of Europe, and attempts by manufacturers in the U.S. to keep plants open have caused tensions with workers. Germany could show the way for badly hit countries like Italy, which are considering how to restart production when the worst of the crisis has passed.

German factories were quick to get workers on board, and to impose strict cleanliness measures and organizational rules, often imported from their operations in China. In some cases, they brought in their own medical staff.

Keeping plants running isn't important only to protect jobs and soften the economic shock caused by the closures of entire sectors. Executives say it is also a matter of survival for individual businesses.

"[It] is important for various reasons: customer relations, supply chains, but also worker relations," said Andreas Peichl, an economist with the Ifo think tank in Munich.

German manufacturers are running at as much as 80% capacity, according to estimates from bankers, economists, and industry representatives. Manufacturing in France and the U.K. contracted much more sharply in March than it did in Germany, according to surveys of business managers published on Wednesday by Markit.

Exactly how many factories are open is unclear. Flagship auto makers like Volkswagen AG and BMW AG closed their German plants in recent weeks. Yet in other sectors, these people say closures are the exception, even though few plants are running at full capacity.

Closures "are not a phenomenon widely spread among our 3,300 member companies," said Holger Paul, a spokesman for the German Mechanical Engineering Industry Association, a trade body.

Many plants may eventually have to close if the lockdown extends for much longer, further depressing demand in Europe and cutting off crucial international supplies; or if more workers become infected, forcing authorities to clamp down. But for now, a solid backlog of orders and a nascent rebound in demand from China means it makes sense for many businesses to maintain some activity.

To limit the risks, executives say they moved early to implement hygiene measures first introduced at their operations in China, where even smaller German companies frequently invest. Now they are introducing these measures in their U.S. factories.

In February, when the coronavirus still seemed a distant threat to Americans and Europeans, ebm-papst Group -- which makes electric motors and fans -- started adopting such practices globally, said its chief executive Stefan Brandl. These included measures to restrict travel and gatherings of staff, and to encourage managers to work from home.

In the U.S., where the company has around 400 staff at factories in Connecticut and Tennessee, workers wear face masks, and social-distancing measures such as staggered shift times help to minimize contact.

In Germany, no visitors are permitted, and teams of cleaners sterilize doorknobs, machine handles and other equipment around the clock. Break rooms are organized so that workers don't have to stand next to each other. Management staff alternate between working at the office and from home. In-house doctors administer coronavirus tests to at-risk workers.

Kion Group AG, which builds forklift trucks and warehouse equipment, is still producing at its German factories despite disruptions in its international supply chains, chief executive Gordon Riske said.

The company, which has five factories and around 4,000 employees in China, set up a crisis team early this year to develop health and safety strategies that it later applied in Europe, Mr. Riske said. Measures included removing workstations to increase distances between staff.

"It's extremely important to keep factories running. Perhaps this won't go away so quickly," Mr. Riske said.

Robert Schullan, chief executive officer of HAWE Hydraulik SE, a Munich-based manufacturer of hydraulic pumps and valves, says new working methods mean the company is operating its six German plants at near 100% capacity. It is now working through a backlog of orders, and receiving new requests, mainly from Asia.

Among other measures, the company has created new shift patterns to ensure the same workers always work together. A minimum distance of 1.5 meters between workers is closely monitored by medical staff and management, Mr. Schullan said.

"Our international customers are requesting proper supply," he added.

At chemicals giant BASF, factory staff are provided with contactless delivery and pickup services for catering, said Christian Zeintl, a spokesman.

Germany's corporate governance system, which gives workers a strong say in management decisions, has helped keep staff and unions on board.

"The protection of the health of employees is the highest priority, [but] not all activities can be done from home," said a spokesman for IG Metall, an industrial union with more than two million members.

Oliver Simon, a factory worker and employee representative at engineering group Robert Bosch GmbH said some workers were concerned about reporting back to work in the thick of the pandemic. But they also saw the benefits of keeping factories running, he said.

He estimated that around half of staff are currently at work in Bosch's local factories in the west German Saarland region, which manufacture car parts. Other staff are tapping short-time work programs.

Businesses are also wrestling with stalled global trade and a devastating decline in demand for consumer goods such as cars. A shortage of parts from international partners could force some businesses to mothball plants unless Europe's strict isolation measures start lifting in coming weeks.

European aircraft manufacturer Airbus SE, which has large factories in the U.K., France, Germany and Spain, is operating its factory in northern Germany only four days a week because it is reliant on parts from the U.K., said Justin Dubon, an Airbus spokesman.

Like others, ebm-papst has sought to adapt to the new reality by shifting to ventilators and other medical products after a crunch in supply and demand for its fans and motors used in cars, Mr. Brandl said.

The company's German factories are running at 80% capacity, and it has yet to ask production workers to work shorter hours, Mr. Brandl said. It has increased its ventilator-building capacity by 50% despite shortages of supplies.

HAWE Hydraulik is conducting virtual fairs to advertise its products, and focusing more strongly on the medical and renewable-energy sectors.

Economists say manufacturers are generally better equipped than services companies to stomach a lull in activity because they can work overtime to produce goods that customers have put off buying but will need in the future. Hotels and restaurants can't recoup lost business in the same way.

Still, each week of shutdown costs the German economy around 1% of gross domestic product, or about $40 billion, said Lars Feld, chairman of the Council of Economic Experts that advises the German government. Even well-funded manufacturers would struggle to survive an extended lockdown.

"We cannot afford a shutdown beyond May," Mr. Feld said.

--William Boston contributed to this article.

Write to Tom Fairless at tom.fairless@wsj.com

 

(END) Dow Jones Newswires

April 03, 2020 05:45 ET (09:45 GMT)

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