As 2008 draws to a close, the global economy stands on the precipice of what many are predicting will be the most protracted and painful downturn in decades. As this issue of Control goes to press, U.S. stocks are yo-yoing about at 60% of their value of only a year-and-a-half ago. Judging by the volatility in stock prices, uncertainty runs rampant. The reality of a downturn is clear: What is now uncertain is just how long and just how severe it will be.
With its roots in the increasingly complex and interconnected financial services sector, most industry observers agree that this downturn is unlike any other that has gone before it. Indeed, some pundits have attempted to draw a distinction between the ins and outs of finance and the rest of the “real” economy.
But when a “real” manufacturer can no longer access the liquidity needed to finance needed capital improvements—or payroll, for that matter—the lines between what’s real and what isn’t prove elusive.
I’ve talked with many industry leaders, and none confess to possess a crystal ball. Points of consensus are that the discrete manufacturing industries—dragged down by automotive—will be harder hit than the process industries. But any time there’s slump in production of these 3,000-lb. assemblages of steel and glass, plastics and rubber, it’s clear that the process industries won’t be immune.
But lest all seem lost, the process industries do harbor a few bright spots. The energy sector, for example, has a backlog of committed projects that will continue to buoy that part of the economy for some time to come. Oil companies are sitting on significant cash reserves developed over the recent run-up in crude prices, and few predict that sub-$2-a-gallon gasoline will stay with us for long as global economic growth resumes and demand tightens.
Another potential counter trend are those companies looking over longer time frames and that see today’s easing in commodity prices as an opportunity to actually increase capital investment activity.
But what can the rest of us do, as we face an uncertain start to 2009? Unrelenting discipline, personal leadership and incessant communication top the list of recommendations from a panel of process manufacturing management all-stars convened at early November’s PlantSuccess conference in Wilmington, Del.
Discipline, Leadership Needed
“We have to show leadership,” said Tom Archibald, vice president and director of engineering and operations for Rohm and Haas Co., now a division of Dow Chemical Co. “The wrong answer is, ‘I think we’re okay.’ ”
When times are tough, you need to continuously re-recruit your best people, Archibald added.
“We have to tell the story. We have to be able to show people what we’ve done and why it is important that we keep on doing it,” added Tom Strang, vice president of manufacturing excellence for Hercules Inc.
“It is going to be very tough,” Strang continued. “We may have to forego things, but we need to make sure that this doesn’t make us any less than we are.”
“Stay calm, stay focused on the customer,” recommended Jim Porter, recently retired chief engineer and vice president for engineering and operations for DuPont. “Panic makes for bad long-term decisions. Stay focused on core values and do not lose operating discipline.”
“Felt leadership is critical,” Porter continued. “You can’t get that by email. You must do it on the ground, face to face.”
You can’t neglect infrastructure investments, the panel agreed. “You have to make sure that everybody agrees that it is time to invest in the future,” said Porter, “because that investment will be critical to getting us through this.”
Here’s hoping that cool, forward-looking heads prevail, no matter what the coming months bring.