ZURICH Dec 2 Two years after the Swiss franc
shock brought Switzerland to the brink of recession, Roland
Goethe is still fighting for the future of the sheet metal
company his grandfather set up 86 years ago.
Goethe AG is one of many manufacturers coping with the
aftermath of the Swiss National Bank's decision in January 2015
to scrap a long-standing limit on the franc against the euro.
The decision rocked currency markets and sent the franc
rocketing against the euro, the currency of Switzerland's main
export market. Swiss economic growth slowed to 0.8 percent in
2015, its lowest since the financial crisis year of 2009.
While Switzerland's overall economy has in some parts
started to recover, many small and mid-sized manufacturers are
still struggling with falling sales and profit margins.
"We've been battling the strong franc for years," said
Goethe, whose company makes metal components for air
conditioning units, lighting installations and machine tools.
"But it was really was a shock when it went to 1-1 versus
the euro last year. We can struggle through at the moment ...
but the situation is bitterly difficult."
The strong franc not only hurts companies now but also
reduces their ability to invest in technology to improve
"We are not earning enough to invest in the future," Goethe
added. "Trends like digitalisation, robotics, intelligent
manufacturing are passing us by nearly untouched."
Swiss companies have lost sales as customers chose to buy
products from the cheaper euro zone, while some have shifted
Margins tumbled when they cut prices to remain competitive,
while the franc's rise has meant they earn less in francs from
Goethe's sales fell by a fifth last year as it cut prices to
limit lost orders, while its profit margin has shrivelled to 3
"This year hasn't improved," said Goethe. "If it stays like
this, there will be major problems for not just us, but for many
companies across Switzerland."
A study by industry association SwissMechanic revealed half
of the companies surveyed said earnings were unsatisfactory,
while a third said they were not making enough sales.
Swissmem, another trade association, reported that sales in
the first nine months of 2016 were down 3.4 percent from last
year's already low figures.
"Many businesses - particularly SMEs - are having to contend
with heavy pressure on their prices and margins," said Swissmem
head Peter Dietrich. "A number of these companies are fighting
Although the Swiss economy is forecast to grow 1.6 percent
this year, double last year's rate, industry has lagged behind.
"Much of the growth has been driven by pharmaceutical
exports and improvements in the consumer-orientated services
like education and health," said Jan-Egbert Sturm, director of
the KOF research institute at the Federal Institute of
"Many parts of manufacturing will continue to struggle."
KOF forecasts that industry will contribute 0.6 percentage
points to GDP growth in 2016, falling to 0.2 percentage points
in both 2017 and 2018.
Traditional manufacturing companies are among the last to
recover because unlike the pharmaceuticals and medical
technology sectors, their products are often highly
price-sensitive, said Credit Suisse economist Oliver Adler.
"There is a restructuring under way in the Swiss economy,
with small manufacturers the ones most damaged by the franc's
increase in value," he said.
Companies are responding by developing new products and
seeking new markets so they depend less on the euro zone.
Maprox, a maker of specialised "chuck" clamps used in the
watch, medical, optical and automotive industry, said there are
only two ways to survive - globalisation and innovation.
It is seeking new clients in China, Russia and Iran, and
trying to increase orders in the medical and aerospace sectors.
"Making a chuck may not be rocket science, but we can
develop them and make better and more individual ones," said
managing director Adrian Zwirner.
It can now make an 800mm diameter chuck from aluminium,
weighing less than a third of the 50 kg steel version and thus
easier to use.
Tecnopinz, which makes components for machine tools, has
increased its emphasis on smaller production volumes and
advising clients on projects.
"You have to compensate with new projects - doing smaller
batches of more complex projects, which need more know-how and
development," said co-owner Nicola Tettamanti. "You can't afford
to stand still."
(Editing by Catherine Evans)