The New Normal
It was interesting to read a plastics industry survey completed by Plante & Moran titled “The New Normal” that was issued in March 2010. It’s focus was on four areas: sales growth and recovery, human capital, continued cost reductions, and credit management in a “new normal” business environment. There results showed that this recession has forced companies to carve out as much excess as possible to contain costs while remaining viable as on ongoing entity. The most successful plastics companies will retain the lessons of the recession and have an opportunity to enjoy greater profitability at reduced volumes.
I then read the article “The New Normal- Suppliers who survived are lean enough to thrive in an 11-million market” written by James B. Treece in the July 5th edition of Automotive News. The theme of this article was very similar to the Plante & Moran survey. The auto parts suppliers who emerged from the recession are able to be profitable at much lower volumes. Profits are possible at North American auto volumes of 11 to 12 million units annually.
Team 1 Plastics has experienced the same trend as outlined in both of these items. We had to make some very difficult decisions in the fall of 2008 and early 2009 to remain viable during the depths of the recession. Because we entered this recession in solid financial shape and we reacted quickly we were able to make a small profit in 2008 and 2009. In addition, we were able to manage through volume reductions as high as 60% with no additional credit and on our own cash flow. As we look to a “new normal” we can remain profitable and build on our financial strength at these reduced volumes.
Do you agree or disagree that we are in a “new normal” for business?
