Here's how to get through a recession, courtesy of the publicly held companies of the U.S. rubber product manufacturing industry.
This advice is drawn from some of the data we've gathered for our annual rankings section, based on 2009 financial results, which appears in this issue. You have to drill down a bit and extrapolate—maybe fabricate is a better word—what the numbers disclose. But that's what I'm here for.
Note I say “publicly held companies.” Manufacturers in this business mostly are privately held, and their actual financial figures usually are known only by owners, senior managers, tax lawyers and Uncle Sam. Not the press, although we do ask. Repeatedly.
The first thing that stands out is this: “cut your capital expenditures.” Of the 21 publicly held companies listed, 17 reduced their spending by 40-50 percent or more.
Makes you wonder if there are any machinery suppliers left in the rubber biz. Well, there are, which indicates these decisions may be more of a delay than a cut. So Lesson 1 is “postpone” your capital spending.
Lesson 2 is cut staff. This is obvious, of course: Nothing gets rid of costs quicker than reducing the headcount. And, no doubt, the remaining staffers that now do the work of two or more people won't complain because they are glad just to have a job, right? Besides, Wall Street just loves productivity numbers.
Of the 21 manufacturers, only West Pharmaceutical Services added any employees, a couple hundred.
The third and final lesson actually is a two-parter: Part 1, “forget all those bromides you've been tossing around about how research and development is the lifeblood of your business”; and Part 2, “cut deeply into your R&D spending.”
Maybe this is just another delay in spending, but 11 of 16 companies that disclose their R&D expenditures sliced them last year, half of those by at least 20 percent. Then again, at least all those firms spent some money on R&D.
The final lesson from all this is obvious: In a recession, you do whatever it takes to survive.
Noga is the editor of Rubber & Plastics News.