At the onset of the coronavirus pandemic, we published stories predicting that a lot of our readers were headed for financial trouble.
One quoted Laurie Harbour, CEO and president of consulting firm Harbour Results Inc., warning that some plastics processors and mold makers would not survive. It reminded me of a story we published in 2009, at the onset of the Great Recession. Jeff Mengel, then at Plante Moran PLLC, predicted that 15 percent of North American plastics processors — around 1,000 companies — were facing potential liquidation.
Harbour in April 2020 and Mengel in March 2009 didn't just sound an alarm. Both also gave processors good advice to help them survive the calamity.
In 2009, many of you were paying attention. How about in 2020? It's too early to say if we'll see a major consolidation. Anecdotally, we have seen some companies fold and more auction advertisements in our classified ads.
Staff reporter Sarah Kominek recently took a closer look at how plastics companies are navigating changing markets. She spoke with Ted Morgan, partner and management consultant at Plante Moran, who told her how a number of factors have helped stave off a major implosion. Kominek also spoke again with Harbour, who added that we are still in the very early stages of financial strain due to the pandemic.
The story includes a quote from Harbour that's one of my favorites this year: "We rode this 11-year expansion wave in manufacturing and the return of the economy from the Great Recession. We got a little fat, dumb and happy. If we didn't have good leaders driving consistent discipline, we got into debt, we got bad balance sheets, and our profit and our efficiency went the wrong direction and then COVID hit," she said.
I have a feeling we'll still remember that quote a decade from now.
When some companies fail, others benefit. So Bill Wood's advice in the same story is also worth considering.
Wood, the owner of Mountaintop Research and Plastics News' economics editor, said some better-positioned companies are beginning to make moves on their struggling competition.
"There's never a better time to get aggressive than when interest rates are at all-time lows," Wood said. "If you have the ability to borrow, now is the time to get after it."
Where do we go from here?
I hope today's plastics company senior managers, who survived the globalization and the Great Recession, are well equipped to handle this downturn. A lot of people seem to be hoping for a V-shaped recovery, but I think it's more realistic to pay attention to seasoned experts like Morgan, Harbour and Wood.
Loepp is editor of Plastics News and author of the Plastics Blog. Follow him on Twitter @donloepp.