By Plasteurope.com staff

The situation for companies in Germany has become more difficult. “We are currently experiencing a toxic mix of higher energy and consumer prices, a global slump in demand, geopolitical risks, and national problems such as high labour costs and enormous bureaucratic and tax burdens,” said Jürgen Matthes, head of international economic policy at the German Economic Institute (IW, Cologne; www.iwkoeln.de), in an interview with the restructuring consultants of Falkensteg (Düsseldorf, Germany; www.falkensteg.com). This has a considerable negative impact on the competitiveness of the German economy.

It is therefore no wonder that the number of business bankruptcies is rising. In a recent report, Falkensteg registered a total of 87 major insolvencies in the first half of 2024 – i.e. insolvencies of companies with a turnover of more than EUR 20 mn. This is almost a third more than the average for the past five years. The number of insolvency applications was only topped in the first half of 2020 at the start of the global pandemic (110 at the time). 

Falkensteg’s figures do not indicate a development for the better. In the second quarter, the number of major insolvencies (43) exceeded both the five-year average (35) and the comparable figure for the previous year (39). In addition, self-administration and insolvency protection proceedings known as the “Schutzschirmverfahren” are being used less frequently. Falkensteg reports that the reorganisation instruments were only included in one third of the procedures that were applied for in the second quarter. A year earlier, the rate was 45%. 

In the industry analysis of large-scale proceedings, automotive suppliers ranked first in the second quarter of 2024 with six applications, ahead of companies from the retail, fashion, and building industries with five cases each. Falkensteg does not specifically list any major insolvencies relevant to plastics. However, the applications of mechanical engineering company Illig and two German Boryszew subsidiaries that belong to the automotive sector certainly belong in this category.

A small digression: from a plastics perspective, this sector was also hit hard in the first quarter of 2024. For example, Eissmann and the German subsidiaries of Auto-Kabel filed for insolvency and are classified as major insolvencies since their turnover exceeds EUR 20 mn. The negative trend in the automotive supply industry continued in the second half of the year, with the bankruptcies of seat manufacturer Recaro Automotive and injection moulding company Mürdter Metall- und Kunststoffverarbeitung in the third quarter. The crisis in the industry also dragged down panel manufacturer Epsotech, which primarily supplies customers from the automotive, caravan, construction, aerospace, and railway sectors. 

Back to the insolvencies in the second quarter. From a plastics perspective, the insolvency application by recycling company APK is certainly a major one. In contrast, the bankruptcies of smaller companies such as the two injection moulders WK Kunststoffteile and Franke Kunststofftechnik or the semi-finished product processor Kreideweiß Kunststoffe do not fall into this category. They do, however, also reflect the poor economic situation that the German plastics processing industry finds itself in. 

Related: West European companies under financial strain from late payments

To make matters worse, once a company is experiencing difficulties, it is harder to rescue it now than just a year ago. According to Falkensteg, five of the 87 major German companies that filed for insolvency in the first half of 2024 have now been rescued. This rate of 5.7% is two percentage points lower than the comparable figure for the previous year. By the end of June, asset deals had been agreed in a total of 28 proceedings, an insolvency plan had been submitted for nine, the outcomes of 27 were still open, and 23 companies had already ceased business operations.

The latter is a comparatively high figure. The 23 liquidations out of 60 proceedings to date correspond to a ratio of 38%. For comparison, of the 164 major German insolvencies in 2023, a solution had been found for 117, and only 32 of these had resulted in liquidation – a rate of 27%. 

Meanwhile, there is no sign of easing tension for the German economy or even a turnaround. Things will not be getting easier for companies anytime soon. According to Falkensteg, the number of non-performing loans is on the rise again. As a result, banks are tightening their credit guidelines. Liquidity or liquidation – this could become an essential question for many companies.

— Translated by Elspeth Lenhard