These were among the primary actions recommended by industry experts who recently convened for a special panel discussion, “How Will You Survive 2009 to See the Recovery,” presented at SUR/FIN 2009 in Louisville, Ky. The esteemed panel—made up of finishers, suppliers, and a distributor—offered timely, “tough-love” advice in dealing with the present economic challenges.
"We instituted a 70% cut in salaried employees, imposed mandatory pay cuts, modified health plans—although we kept employee’s 401(k) in place—and we cut on capital spending,” said John Lindstedt, president of Milwaukee, Wis.–based Artistic Plating, which suffered a 41% drop in sales between the first quarter of 2008 and 2009. To maintain cash flow, Lindstedt reluctantly accepts jobs that bid on the low end. The strategy: “Take that job at a low bid, then figure out a way to make a profit on it.”
Jim Jones, another finisher on the panel, also had to make similarly wrenching decisions in the face of declining sales. His company, Dixie Industrial Finishing, based in Tucker, Ga., recently released 30 employees—the first layoffs in the company’s 60-year history. To ensure cash flow, he’s allocating more resources toward collecting outstanding debts. “You have to work your receivables and payment terms just as hard as you work your sales,” Jones stressed.
Others are in agreement. Supplier panelist Chuck Walker, CEO of Angola, Ind.–based Univertical, believes a change in mindset is needed if manufacturers plan to recover a larger percentage of bad debts. “As manufacturers, we’ve gotten into the habit of accepting bad terms (i.e., 180 days),” he said. “We have to get out of the mentality. We’re not going to get billions from the government or be [encouraged] to go bankrupt, so we have to take responsibility.” But it doesn’t necessarily mean strong-arming customers and supply partners. Instead, Walker suggests offering discounts for early payment or cash terms—a dated practice that he predicts will make a comeback.
The upside of adjusting terms cannot be overemphasized. For example, George Gilbert, co-owner of distributor Gilbert & Sons, has renegotiated everything from telephone bills to health-care premiums as he seeks to mitigate expenses. The tactic has also netted positive results for Artistic Plating. But be warned: It requires both patience and persistence. “I’ve spent a lot of time with banks, restructuring long-term debt and lines of credit,” Lindstedt said. “It took me nine months.”
These recommendations are certainly no panacea to the host of economic ills plaguing the manufacturing sector at large and the finishing community in particular. However, the strategies do represent a starting point in what will surely be a long, uphill climb to a full recovery.