The business outlook for 2009 is grim. Some European manufacturers may not make it. But those that do could be faster, more flexible, and in better shape than ever.
As world manufacturing indicators continue to plummet over the first few weeks of the year, European companies are urgently rethinking their plans for the year ahead, focusing on technologies that will maximise what they have and innovating wherever they can to prepare for a better future.
“In the midst of this volatility, European manufacturers can seize the opportunity to explore new thinking about their business strategy, uncertainty, and corporate success,” says Hans Roehm, manufacturing industry global managing partner at Deloitte Touche Tohmatsu.
OK, so it’s not great news for the year ahead. Most European economies are reporting record periods of downturn, the Eurozone is officially in recession, and even Europe’s fast-expanding emerging economies are feeling the global squeeze. Across the continent, factories are being forced to take long breaks, jobs are being slashed, and facilities are being closed, many permanently.
In this tough climate, maintaining liquidity and cutting costs in the capital-intensive manufacturing sector is paramount as companies struggle to balance rapidly falling demand with excess capacity.
“Everywhere executives are stepping back and having senior-level meetings about what are they going to do. They’re putting their contingency plans in place and they all involve cost management. The concepts of lean and better waste management especially are being pushed much more aggressively,” says James Robbins, an automotive and industrial equipment lead partner at global management consultancy Accenture.
It’s a message recently echoed by IDC’s Manufacturing Insights team in their Top Ten predictions for the year ahead. “Companies will exploit existing tangible and, especially, intangible assets to ride out the financial crisis and prepare for recovery,” says IDC EMEA Research Director Pierfrancesco Manenti. “Budgets will also be under severe review and new investments will require shorter payback periods.”
Of course, not everyone will make it. Failures, mergers and acquisitions look set to dominate the headlines for months to come. Shakeouts in the automotive and pharmaceuticals industries are already being touted by global analysts and industry leaders. Some smaller feeder companies are already beginning to tumble, leaving potential gaps in local service and global supply chains.
“Certainly there is a strong indication that consolidation in the automotive sector will be inevitable as the global industry undergoes significant transformation out of these turbulent times,” Deloitte’s Roehm says.
Not All Gloom and Doom
But Roehm sees bright spots, too. “Surviving and thriving in the downturn will drive companies to stay closer to their customers and become more agile to the dynamic market conditions. Well-managed, innovative companies with competitive products will significantly improve their market position.”
