European suppliers are increasingly concerned about the impact of COVID-19 on their businesses, a new survey has found.
The survey, conducted April 20-27 by the European suppliers' trade group CLEPA in conjuction with McKinsey & Co., found that more than 90 percent expect revenues to fall in 2020. That's an increase of 30 percentage points from a similar survey conducted by CLEPA just one month earlier.
The April survey also showed that more than half of respondents said they expected to have a loss before taxes in 2020.
Suppliers also are more pessimistic about a recovery, according to CLEPA. Seventy-five percent of the April survey respondents said it would take more than a year to return to normal business, and about a third said it could take two to three years to recover. In March, most suppliers believed six to12 months was sufficient for recovery.
The newest survey also found that 90 percent of suppliers see demand volatility as the most pressing issue for the automotive supply chain. They also expressed concerne 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 coordinated Europe-wide measures to stimulate demand, such as scrapping incentives.
With some factories beginning to restart, 85 percent of respondents said they were "well prepared" with health and safety measures.
Suppliers were also asked what steps they are taking to preserve cash and prepare for a recovery. Among their responses:
- 84 percent said they would cut investment;
- 74 percent said they plan to reduce their work force;
- Half said they would take cost-cutting measures in the next six months;
- About 40 percent said they have begun to cut R&D budgets; many others say they expect to do so.