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The scale of the problem
15 June 2009 |  2 comments |  Print This Page


Right from the start, I don’t have a hope of saying when this crisis might end. I’m not sure anyone in this business even knows the scale of the problem, let alone has any sensible idea of when it might start to ease.

This month, I wanted to try to put the crisisrecession-downturn into some kind of perspective, and clarify which sectors have been worst affected, and those which remain bouyant. Finally, I wanted to offer advice taken from some of the rubber industry’s business leaders over the last few months.

It is clear that the automotive sector – and especially the commercial vehicle side of the business — has been hit worst. Most of the world’s largest truck makers are located in Western Europe. That has meant suppliers based in this region have been hit especially hard.

ACEA says truck registrations in Europe are down by around 40 percent. But that is just the local market. Michelin says April saw European sales of OE truck tyres down by 75 percent on this time last year, and by 66 percent for the first four months. These numbers are more representative, as they includes the trucks made here for export to other regions.

The monthly numbers for Japan and North America are marginally less bad, but they follow on from a sustained period of declining markets. Even the Latin American market which has been growing strongly in recent years took a sharp reverse. China is showing flat demand for trucks at best.

At least the tyre makers have their replacement businesses to fall back on. Suppliers of air springs; hoses, vibration control systems and other products aimed at the heavy vehicle sector are all facing a bleak summer, with little prospect of recovery anywhere in the world in the short term.

While the car sector might feel like a disaster area, it is not as bad as truck. Nevertheless, with Opel up for sale, and a strong possibility that GM will join Chrysler in the bankruptcy courts, the crisis among car industry suppliers is extreme. ACEA shows European registrations down by 16 percent in the first four months of the year, while Michelin shows overall OE deliveries in Europe running almost 40 percent below the levels of 2008.

In the car market, North American numbers are even worse than the European figures. There is some indication that China is making more cars, ready for export, but that recovery offers little hope to suppliers based in the West.

Up to now, the construction market has been little affected by the downturn, but the signs are not good. Large building projects often take more than a year to complete. This time lag means many of the large construction projects currently seeking seals for glazing and sewerage were started before the crisis hit home. Reports suggest that many of the projects due to be signed off in the last six months have been delayed and put on hold.

The continuing flow of business on existing projects is good, but those exposed to the construction markets need to prepare now for difficult times ahead.

On the positive side, two sectors important to the rubber industry appear relatively unaffected.

Agriculture and healthcare continue to grow, apparently oblivious to the storms sweeping through the rest of the industrial sector.

Geographically, of course, China continues to grow, while India, after a brief stutter at the turn of the year is now recovering strongly. The Middle East is also seen as a strong growth area.

What to do
For those exposed to the automotive sector and the developed markets, early action was important.

Realising that the downturn was going to be deeper and harder than the economists predicted was the first attribute of the successful manager.

To that end, those who recognised first that cash would become king, are likely to do well. Cuts in capital expenditure were the first and easiest savings. More difficult was choosing between taking orders and incurring bad debts.

Everyone has now had to make hard decisions about the financial viability of their business partners. This has meant being more open about financial strength than ever before.

In some cases, this has strengthened pre-existing business relationships. In others, the insistence on paying cash up front has led to difficulties.

Communicating these business issues to the workforce was also a necessary step. Underlining that when the recovery — eventually — comes, the longterm success of the business depends on its ability to retain good people.

On the other hand, extended reductions in the order book has meant pain, and that pain has been shared throughout the organisation. When the recovery comes, managements should not forget the sacrifices made by their workforces, which helped bring the company through the crisis.

Finally, the need for speed. While some projects have been cancelled, others, deemed vital to corporate success have been brought forward. If, as a supplier, you can help your customer to achieve his goals earlier than originally planned, your contribution will be recognised.


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Comments
  • Roberto Bieler wrote:
    26 June 2009 19:51

    Dear Mr. Shaw I wrote a Postscript article about scrap tyres in Brazil. This was back in 1995, as far as I remember. Are you able to retrieve it and send to me? Regards Roberto Bieler

  • whirlston zhai wrote:
    27 October 2012 10:36

    http://www.seedoilpress.com/product/oil_press/hydraulic_oil_press.html Thanks very much for share.

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