The manufacturing industry is decoupling from everything that once sustained its success - and yet it continues to grow. Employment is declining, investments are moving abroad, and central functions are losing importance. What appears to be a contradiction is, in fact, a systemic shift. Growth is still being generated, but no longer on the basis that was long considered stable.
The transformation runs deeper than individual measures might suggest. Companies are not merely reacting to pressure; they are redesigning their operating models. The Horváth CxO Priorities Study shows that several fundamental dynamics are shifting simultaneously. Growth, value creation, and competition no longer follow the same mechanisms as before.
Growth is decoupling from employment
The most visible disconnect can be seen in the relationship between growth and employment. Companies continue to grow while simultaneously reducing headcount and rigorously cutting costs.
On average, company executives expect growth of around four percent. The fact that this level is already considered ambitious illustrates the pressure the manufacturing industry is facing. At the same time, many companies are planning additional cost reductions equivalent to three to five percent of revenue, while key cost drivers continue to rise. As a result, growth is no longer being generated by additional capacity, but by productivity gains.
In manufacturing, management expects workforce reductions averaging about 4.7 percent. Germany is disproportionately affected, particularly in the automotive and mechanical engineering sectors, where tens of thousands of jobs are being eliminated each year. Automation and artificial intelligence are accelerating this trend.
Production moves abroad - Innovation follows
At the same time, value creation is shifting geographically. Investments are consistently following the markets where demand is growing, especially the United States, China, and India. For many companies, there is effectively no alternative to these markets. Simultaneously, value creation is increasingly being relocated to lower-cost regions such as Eastern Europe.