Business Roundtable’s first quarter 2010 CEO Economic Outlook Survey indicated that the CEOs of America’s leading companies anticipate increased capital expenditures, sales, and employment in the next six months.
A recent survey of manufacturing CFOs, conducted by Grant Thornton LLP, shows that 46.74 percent expect the U.S. economy to improve over the next six months; the same percentage expect it to remain the same; and 6.52 percent expect it to worsen. Almost 60 percent expect their company’s financial prospects to improve during this timeframe; 35.87 percent expect it to stay the same; and only 4.35 percent expect it to worsen.
This month's "Fabricating Update" asked subscribers to share their forecasts for their companies in the next six months. The bottom line: the outlook depends in part on what you produce and who your buyers are. Jacob, a welding engineer for a company that produces agricultural products is very optimistic. He said, "Our current business state looks very good and production is now at an all-time high for us here at [our company]. We have even been hiring through the last year, while many other companies are laying off. The market for agricultural equipment is down only about 2 to 5 percent; grain carts and planters have been very strong for us over the past three years and for the next six months look to be very good. Of the grain carts [we are scheduled] to build, we have almost 80 percent sold already. I guess it helps to be in an industry that helps feed the world."
The outlook is not so rosy for another subscriber's company. This subscriber, who asked to remain anonymous, said, " ... our business is terrible. Most of our customers are government agencies (DOTs, tollway boards, county engineers), and those people have NO money to spend. I do not see it turning around until the fall at the earliest. It is going to be a very long, slow summer."
Customers' lack of credit and discretionary income are taking a toll on some companies. A subscriber from the southeast wrote, "Many of our products depend on easing the credit situation and/or more discretionary income to purchase the luxury items that we have built our base upon. We require customer pull-through, because we cannot push our products by advertizing, pricing, or promotions.
"We laid off 25 percent of our team in October of '08 and the rest have been working 32 hours a week since January of '09. In March we thought there was a rebound, so we moved back to 40 hours, but it was simply a restocking for our OEMs and, now, in April, we are back to shortened weeks. As long as the banks are hoarding money to protect themselves, our hands are tied and we will not be hiring.
"Our lower-margin, [commercial]-based product line has never fallen as far as the consumer products and shows more rebound, albeit leaving us with absorption, but no capital to purchase machines or expand. However that conservative philosophy is why we have remained in business for over 120 years. Not having debt is a blessing and a curse, but it does enhance longevity.
"To us it is obvious that there is very little interest on the part of this government to truly help manufacturing, and they only pay lip service to placate union constituents. We have told our family owners that this will be a drawn-out recovery. We have survived the 'Great Depression,' numerous 'Minor Recessions,' and we will survive this 'Significant Recession.'"
A subscriber who works for a company that makes fabricating equipment said, “[Sales in] the first quarter of 2010 were approximately 55 percent higher than the same quarter in 2009. When compared to the last quarter of 2009, they were up approximately 22 percent.
"We have seen our order board steadily increase; however, the size of the orders is considerably smaller than normal. This is a normal trend that I have seen in the past when recovering from a downturn in sales. We are optimistic going forward and have made many equipment purchases to increase our market share once the recovery is complete. Our company has always felt that it is what a company does in a slow period that sets you apart from the competition."
What a fabricator can do depends in no small measure on who his customers are and what they do. We all have to eat.
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