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Survival vs growth.

Finally! The year is coming to an end. Its passing will cause few tears to be shed in the business community. Management's attention was riveted on cost control. Cash flow concerns took center stage away from profitability. Companies were forced to survive by balancing extended receivables with stretched-out payables. Many failed the balancing-act test. But those that passed, no matter how small they are, could boast that they made more money than the Big Three combined. Through the first three quarters, General Motors reported losses of $2.22 billion; Ford dropped $1.78 billion; Chrysler's performance was equally dismal.

Next year has to be better. Most agree it's not a question of "if" but rather "when" and "how much".

The good news we keep hearing is that the recession is over. The bad news is that any noticeable rebound appears to be stalled. As Washington-based economist Mike Evans of Evans Economics reports, over the past few months shipments have risen 2.9%, new orders are up 5.3%, inventories have been pared back 2.1 %, and industrial production advanced 2.6%.

Even so, many executives aren't sure. It's as if they are waiting for the other shoe to fall. Economist Evans says there is some basis for the reluctance. Writing in October for the American Production & Inventory Control Society, he points out that in recent months orders for nondefense capital goods, excluding aircraft, slipped 2.5% and the growth in real disposable income, consumer spending, housing starts, and exports has stalled.

Most business people we talked to are in an economic void-they feel the worst is over, but they hesitate unleashing their optimism. They would rather wait for more positive signs-someone else to move first. As Mike Evans writes, "businesses perceive that the economic climate is still weak, and they are unwilling to expand."

Currently, we are wallowing in more of a "psychological" depression than an "economic" recession. It appears that perception is creating reality. Business people seem to be neither positive nor negative, but rather just hesitant. Management decisions about investing in people, equipment, training, etc are being delayed as budget-makers take a wait-and-see attitude.

Until that changes, the economy will remain stalled. It's time to shift our preoccupation away from shrinking cost to expanding revenues. Most companies have already pared all the fat from their operations. As one observer quipped: "We've taken the road of equipping copying machines with electronic-use keys about as far as we can go."

The targets for manufacturing success haven't changed. The need to keep up with rushing technology and faster product obsolescence, to boost productivity and efficiency, to maintain workforce skills, to meet increasingly tighter quality expectations, and to do all that in the context of keeping up with markets that are shifting from domestic to global-those pressures are as pervasive as ever.

The winners in the race for manufacturing supremacy will be those that most effectively meet those challenges. It'll be those managements with an aggressive growth strategy that "lead" their companies out of the recession, rather than those that are content to "manage" and follow along.

Stanley J Modic Editor-in-Chief
COPYRIGHT 1991 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Modic, Stanley J.
Publication:Tooling & Production
Article Type:Editorial
Date:Dec 1, 1991
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