We Know About the Banks, What About Manufacturing?

Here in the UK there are many small manufacturing companies going bust because of the credit crunch, this is because the banks have stopped their overdrafts.

Several larger companies have also fallen foul of the credit crunch, one in particular is JCB (one of Europes largest) which manufacture excavating machines, they have layed off 500 workers and the remaining staff (300) are on a lower wage than before!

If it carries on like it is there will be a major recession in the very near future.

Spencer.

A lot of companies use the banks money to do business. Kind of a borrowed cash flow loop. If the banks suddenly jump interest rates a lot higher or quit lending them money their cash flow loop is gone. In a JIT (just in time) environment that means no inventory, no production, no accounts receivable in the near future. If competition for market share is tough many will not have the financial reserves to replace the easy money with their own.

Brad

We are in the US- Midwest. We are having a record year and as with all markets some customers are doing well, others OK and a portion struggling. What we have seen is companies holding orders since mid September and ordering as needed. No stock wanted. Anticipating steel prices coming down. Steel prices are coming down due to fire sales or just moving inventory not actual price reductions. There are still sectors/OEM's with orders booked out till 2010/2011. Residential and domestic automotive are struggling (I have yet to hear any struggles with foriegn owned auto companies in reduction of orders) Hence a head seat frame mfg for Honda extremely busy. Residential housing products related is a problem, commercial/industrial has been good to strong but now is being hurt by credit crunch. Other sectors of equipment and those exporting seem to be working from full work weeks to lots of overtime. I have heard more customers in recent 3 weeks of having trouble finding material as panic stricken suppliers are not re-stocking steel (coil, tube, bar, plate, semi-finished parts). Please note my perspective is from the metals industry- mfg metal parts. I think a great deal of the problem is the media and press only expressing negative perspectives. When was the last time you heard the US building 3 new mills and over 30 improvement/additions to exisiting mill/processing facilities?

Good news doesn't sell newspapers. I think to some extent, bad economic forcasts are self-fulfilling. Panic buyers drive down their suppliers' inventories. Worry about the financial crunch can make others reluctant to buy until absolutely needed. Both can cause fluctuations. In the durable goods medical industry, I haven't seen much of a down turn, at least not yet.