Slovenian partners of the German automotive industry begin to falter, Croatian companies have not yet felt the consequences

The crisis in the German automotive industry has begun to take its first victims. So far, it is Slovenia where Unior has announced the suspension of its engineering program and the closure of its production facility in Zreče. However, the consequences are also being felt elsewhere in the region, including Croatia, although fortunately not as visibly as in Slovenia. Although a large number of companies, predominantly reliant on the German automotive industry, that we contacted did not wish to respond to our inquiry, which may also be significant. In any case, the development of the situation with German partners and the market in general is being closely monitored.

Hahn Automation from Sveta Nedelja, owned by the German Hahn Group, which produces automated lines for manufacturing automotive parts, is significantly exposed to the German market. About three-quarters of Hahn Automation’s revenue comes from the automotive industry, amounting to approximately 220 million euros for the group and 10 million for Hahn in Croatia. So far, they do not notice enough signs for alarm, but certain changes in the market atmosphere are evident.

– In the last five years in our business segment, we have noticed that decisions regarding investments are becoming increasingly difficult and are being postponed for longer periods, that there is increasing pressure on project timelines, and that payments to suppliers are taking longer. Additionally, my personal opinion is that due to these parameters and other influences on business beyond production itself, the buyer-supplier relationship is no longer at the same friendly level as, for example, before the pandemic and these numerous global changes in recent years – responded Petar Krznar, the director of Hahn Automation in Croatia, to Lider’s inquiry.

Given these parameters and the state of the German automotive industry, Hahn Automation is considering short-term and long-term adjustments in its operations, aiming to ensure cash flow and optimize production processes and administration, and subsequently to diversify products more strongly towards other industries.

– Global demand for cars continues to grow, albeit more slowly, but the concept of motorization and the use of cars and transportation in general is changing. I believe that over time there will be ‘insourcing’ of production operations that were once ‘outsourced’ by OEMs because they will have to adapt to the simpler design of electric cars compared to conventional ones, and they will want and need to retain resources and people. In the long term, this could impact ‘small’ firms that will not be able to keep up with such trends, and this process may lead to additional increases in car prices – Krznar told us.

Multinorm from Cerna, a company engaged in the design and manufacture of welding devices and tools for the automotive industry, derives more than four-fifths of its revenue from Germany and has recorded steady growth, except in 2020 when the coronavirus pandemic prevailed. They are currently in a solid position, regardless of their partners’ problems.

– The volume of business and revenue that our company had last year from the German industry was almost one hundred percent. Our entire business is based on cooperation with the German industry. The trend of this cooperation has been increasing. Over the past five years, our collaboration has grown, and we have achieved significant results together. Given our cooperation with partners from Germany, we regularly monitor the situation in the German and overall European market. Over the past year, we dedicated a significant amount of time to planning and organizing work, and we secured business for the current 2025 year. It is undeniable that the situation in the German market will affect our business, but we do not plan to reduce production or the number of employees. The situation will be monitored regularly, and we will open the possibility of cooperation with other, new partners. – Multinorm responded to Lider’s inquiry about how the problems in the German automotive industry will affect their business and whether they plan to reduce production or the number of employees, adding that they are constantly considering options in other industries.

Recovery in the coming years?

Among those who do not feel the consequences is AD Plastik, due to the fact that it is not significantly exposed to the German market.

– The share of the German automotive industry in the total revenue of the AD Plastik Group is not materially significant. In the recent period, we had contracted jobs for the handles of several Volkswagen vehicle models, but these projects are nearing completion, as planned. Similarly, the realization of previously contracted jobs with Ford’s factories in Germany, for which we worked on wheel arch covers for several vehicle models, is also nearing completion – stated Marinko Došen, the CEO of AD Plastik, for Lider.

The key question seems to be how long the crisis will last. Došen is convinced that the German automotive industry will be able to respond appropriately to the current challenges and that it will overcome difficulties. Adaptation and increased efficiency through investments in modernization and digitalization of production, as well as optimization of business costs, Došen assessed, will bring recovery in the coming years. When exactly this will happen will depend not only on the strategic moves of the industry but also on the adaptation of the overall economy of Germany to new global circumstances.

It seems that so far, the crisis that has engulfed the automotive industry in Germany is most affecting Slovenia among partner countries, where the automotive industry employs 40,000 people. As much as 40 percent of business entities in that sector in Slovenia are connected with partners from Germany, and the most concerned are craftsmen, among whom as many as 68 percent of all members of the Slovenian Chamber of Crafts who cooperate with the automotive industry in that country are considering layoffs due to a drop in orders.

Regarding Slovenian companies in that sector, Unior announced in early December last year the gradual closure of its facility in Zreče, which employs a total of 155 people. It was previously announced that by the end of the year, they would also close production in Stari trg na Kupi, from where 29 people will move to Zreče, while the others will be retired or laid off. The reason for such restructuring of Slovenian Unior lies in the growing losses that have become unsustainable, but which have deeper reasons than just business with the German automotive industry. It is estimated that Unior will record a loss of between 20 and 30 million euros for 2024, which is why it wants to sell its stake in the Štore Steel foundry to the Slovenian Steel Industry (SIJ), but the crisis in the automotive industry has not brought new projects and orders that would facilitate a less painful restructuring.