According to a recent report by online news-provider swissinfo.ch, engineering industry leaders fear the effects of the strong franc may be even greater in 2011 than they were in what was already a challenging 2010.
Hans Hess is president of Swissmem, an umbrella organisation for Switzerland's mechanical and electrical engineering sectors. He warns that this year, continued currency pressures could drive many of Switzerland's small and medium-sized (SMEs) engineering companies to the wall. "Many companies--in particular SMEs--face great challenges. The long-term survival of many firms is in danger," he told swissinfo.ch.
Although orders in 2010 were up by over 16 per cent on the previous year--with revenues climbing by 6.5 per cent to SFr 67.5 billion--the strength of the Swiss currency eroded margins and drove overall profits down by one percentage point. A Swiss-mem survey revealed that nearly half of the 280 participating companies had seen their margins fall by at least six per cent: in a sector, where profit margins are typically between six and eight per cent, such a situation is unsustainable.
"It is possible to survive for two or three years by breaking even and having few investments. But there is a fine line between zero and negative profit...