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As we are all aware from extensive media coverage the Automotive industry is the latest casualty of the recession following in the footsteps of Construction and Financial Services. No company or country has been immune from the collapse and the woe’s of America’s ‘Big 3’ were only the start. We are now seeing the likes of our biggest marque’s including Aston Martin, Bentley, Rolls Royce and Jaguar Land Rover making mass redundancies and halting production over Christmas for an extra few weeks only to come back to more doom and gloom and the halting of production in some cases, until mid 2009.
Prestigious brands have been clobbered as much as volume manufacturers and the cause is no mystery. It all began more than a year ago in America with the subprime-lending crisis and then the doubling of oil prices. Buyers found it hard to borrow to buy new or used cars and dearer pump prices set off a trend to swap gas guzzlers for smaller more economical cars. However the real trouble came in November following the financial meltdown of the Lehmann Brothers earlier in the year. Credit systems seized and stock markets panicked. I think all in the industry will agree when I say that the force with which this has hit the industry has been gigantic, a bit like hitting an ice burg! Almost every car maker has a plan, to cease production for the short term, drop shifts and postpone new launches. Offers in showrooms are being used to lure buyer’s but as yet this has not no significant impact, although some manufacturers have reported December 08 figures were up on predictions. IS this the positive we have been hoping for or just a Christmas rush?
How much of the downturn can be attributed to the credit freeze it is hard to say, and the feedback I have been having from my clients is also around customers not wanting to drive into work after having made redundancies in their new car, and rightly so on some counts especially in smaller business where they are very exposed.
But is this now an opportunity for the industry to take stock of its production and re-assess where it is going for the future? Surely it needs to be addressing more complex issues than just customer expectations but those of the larger environmental picture and the fact that in the not so distant future the internal combustion engine will be a limited commodity, if not extinct. Alternative fuels, smaller car will all be topics being discussed amongst Board members and Engineers alike and the cars we see launched over the next 18 months will unfortunately be cars that have been in production and development for 3 or more years so may contain some of the future aspects of the industry but not all.
Some manufacturers are reporting customers looking to modify and make additions to their current cars rather than buy a newer updated model, is this the future for the short term as we have seen in the housing market? Customers extending their properties and improving their kitchen and bathroom rather than move to new home, will customers add sat-nav systems, DVD players and new interiors rather than upgrade to a new car?
I would be very interested to know your thoughts on how the industry can use this as an opportunity to move forwards and improve, and where you think Interims will fit into this? Will we see more Interims in place of permanent staff to move around the industry, maybe with fresh eyes and new ideas?
What does the future hold for the industry longer term and what effect will that have on their interim usage? The next few months will be crucial and with redundancies and some feeling a little uneasy about the state of Automotive there are bound to be resignations and the loss of some key members of staff, so this will prove a challenge in itself if there is a recruitment freeze, so fingers crossed that the industry heads are all aware of the value an interim can bring at such times and the level of expertise that may not currently be available in-house.
To sum up, the Automotive Industry has a tough year ahead. It has had an outstanding period of growth over the last few years but now needs to look to the future and interims will most certainly play a part in that transformation, when and how only time will tell.
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January 23rd, 2009 at 7:25 am
P&L being profit and loss of late would be better known as preservation or lost! Yes cash is the greatest driver currently to enable any hope of a future for our FMCG business.
the traditional “cut cost businesses” are employing short term “stem the loss of cash tacktics”which traditionally would carry them over the “short term storms” but their efforts will unfortunately be in vain in this unchartered trading enviroment without the clarity of strategy coupled with immediate action to re-shape their busness from within .
Never has a management team needed to challenge and change as now, this is the interim opportunity!
January 23rd, 2009 at 8:13 am
You are right there clearly will be opportunity during the next 12-24 months. For every ‘bad’ story you hear there are still just as many good ones. The key issue is press and what sells paper on that front.
In regards to what will be required fro 2009. It will be dependent on the particular business but broadly I think these will fall in to 4 key areas.
1. Commercial – Revenue driving first, cost cutting second (and vice versa)
2. Restructuring – Break the model and put it back together
3. Turnaround – Short term pain for long term gain
4. Continuity – Where companies cannot/don’t want to recruit a permanent employee but the need for operational/strategic input remains.
I think the interesting debate, in my mind, is how flexible should interim assignments be, I have had conversations with companies where they are starting to talk about interims taking on 1-2 week projects as well as long 6-12 month ones. That presents a whole new world of opportunity and challenge, that many will not have experienced. One thing is for sure, interims needs to be more flexible and adaptable than ever and the broader the range of skills/benefits the better.
January 23rd, 2009 at 11:08 am
I have have to agree with you Simon. 2009 will be a good year for Interims, although maybe not until the second half.
In the first half of 2009 companies will continue to cut costs and minimise cash outflow, but in the second half I suggest that winning companies will be thinking about how they drive for growth, cash and profit. The winners will say “Enough retrenchment, what do we need to do to grow?”. Since they will have trimmed off all of their fat, they well turn to interims with track records for additional capacity and new capabilities.
This climate of fighting back will drive a broad portfolio of interim opportunities, spanning strategy determination, M&A (there will be loads of “fire sales” for those who have cash to take advanage of them) and continuing long term restructuring.
Additionally, one has to assume the current weakness of the pound against other currencies must lead to pressure on imports and potential for export. This has to be a window of opportunity for well managed manufacturers, especially those with existing overseas routes to markets.
So is the retrun to growth inevitable? Not at all. THE issue is the availability of commercial debt finance. Without it, the optimism of the above will fail, and by necessity businesses will remain on the back foot. Lets hope the UK government’s attempts to free up the debt market is effective, and soon.
January 23rd, 2009 at 12:01 pm
The economic landscape in 2009 will force many companies to come to terms with the realities that have been masked in recent times due to the easy availability of funds. The responses chosen though will be very dependant upon a number of factors, not least of course the capability of the organizations leadership team to understand the options open to them (here lies a host of opportunities for the interim community to play a short term assignment role like the consultancy firms but with credibility and responsibility for the choices proposed) some of course will be more focused on balance sheet restructuring with the short term effect that this has on investment whilst others will find themselves in a sector with excess capacity where the clamour for cash may well require some bold consolidation activity, where as others may well find that the most appropriate response is to build capability to drive the market (and I don’t mean price promotions) focus on real innovation and simplification rather than over complication derived from resegmenting and then segmenting again in the name of premiumisation – the result of too much capacity driving businesses to chase volume through any means open to them.
All this turmoil has got to be good for interim managers organizations do not have the talent to lead and deliver all the activities lets hope the FMCG businesses realize the value of interim managers both as short term consultants was well as the more traditional longer term role played
January 23rd, 2009 at 6:17 pm
Should be an interesting couple of years.There appears no shortage of companies out there currently looking for interim support.
I can see two ways towards a positive market
- businesses will not commit to permanent, but will employ interims on ever extending contracts
- businesses that cut deeply now will be short of capable staff in 12 months
and the market and rates will be strong
Failing that ,if the market nosedives or is swamped by people being made redundandant, take some time out, go on holiday ride out the storm and return to the market when things improve and short-term interims have become disillusioned.
Good luck.
January 23rd, 2009 at 8:51 pm
There are as plenty of opportortunities out there for fmcg companies if they have the wisdom to know where to look and the aptitude to pursue.
January 24th, 2009 at 5:31 pm
The madness exhibited by our financial institutions should provide fertile ground for good interims but i think this will be at the top end or the bottom end of our profession. As cost cutting bites i see pressure on mid priced interims as the markets still don’t fully understand the benefit. For me i am in the middle of a turnaround assignment with all the usual problems that this entails. Cash is king at the moment but it is really about the agility of the business during this time as there are great opportunities to drive profit and terms that are being missed in the cash chase. Its also about keeping ones nerve and riding out some silly reactions from insurers, press, government and the banks.
January 25th, 2009 at 9:35 pm
In my sector – Food, as Simon says, the coming year should not be quite so bleak as much of the rest of industry, since everyone has to eat.
The focus (as in the last few months of 2008) from the retailer’s perspective is in offering better “value” ranges – offering cheaper options, either through cheaper ingredients, product “re engineering” or the usual favourite -squeezing the supplier’s margins.
Fortunately, going in the suppliers favour this year is a trend toward lower raw material prices and lower fuel prices as we see the rebound fom the surge in cost of 2008. Though the spectre of the collapse in the exchange rate means that those suppliers relying heavily upon imported raw materials will find the squeeze more than most.
As Simon says, this will all be driving a need for cost reduction, an increased focus on cash management and consolidation/rationalisation of businesses. All of which are “rich pickings” or opportunities for adding value to the Finance function as an interim.
I look forward to capitalising on these opportunities – it is an environment where the interim should thrive. Bring it on!
January 26th, 2009 at 10:28 am
From an FMCG perspective-The key question for Retailers is;’what is the consumer going to do? It is likely that they will turn to own brand products.There also a school of thought that says that conventional ‘treats’-e.g.chocolates and up market desserts will actually see increased sale rates.It is also true that a reduced eating out occasions will increase consumptionion of food at home.Cosmetics/toiletries sales will not suffer-again the comfort /treat factor.
Manufacturers will have to bring forward and drive through big cost cuts-factory closures -and squeezing/consolidating of suppliers of materials will mean grasping the mettle.There is always spare capacity out there. There will be a huge drive on Inventory management and stock reduction.Interims will be required to manage these big changes.
Recruitment of permanent staff who need to relocate will become very difficult because of the lack of properties becoming vacant and the difficulty of acquiring a mortgage ,particularly at the mid-senior level just below the Board.Retrenching and ’staying where you ‘are will be favoured-the comfort factor again.This will mean firms having to use more inventive organisational methods to fill gaps and they will use Interims.The pressure at Board and on subsid Boards will become intense ,competency will become paramount ,and those not up to it will leave-generating opportunities for Interims.People who have been made redundant will try Interiming between finding roles-this is old news but it will further complicate the Interim market.
January 26th, 2009 at 11:56 am
A brave person who feels they can forecast anything in this current climate!!
As ever, there will be little change in the drivers for companies to take on interims – perhaps a bit more for cost projects, due to cutbacks leaving less slack within organisations to handle it ‘in-house’ – perhaps a bit less from major investments and mergers. Only certainty (as mentioned above) is likely to be shorter assugnments and lower fees resulting from short-term cash and profit being even more ‘front of mind’ than in the past
January 26th, 2009 at 1:13 pm
The challenges and opportunities are certainly there for FMCG clients and interims alike but the question is who will be bold enough to seize them and when? Cost reduction and restructuring exercises within manufacturing can be expected in the medium term, particularly if the inevitable shake out produces some “fire sale” acquisition opportunities.
Past recessions on this scale are something of a rarity and it may well be that key decision-makers have little direct personal experience of managing through them. I expect there will be a certain reluctance to take any radical action initially (risk averse, not sure what the future holds, don’t want to be seen to over-react, let’s wait for the numbers ….). After the initial “paralysis by analysis” phase, I would anticipate a rush for the barricades on the basis that everyone else is doing something we must make sure we are not left out.
For the interim providers, this probably means a quiet Q1 with steadily increasing enquiries so that Q2 is more “normal” (if there is such a thing) and with the potential for Q3/4 to become manic as increasing numbers of clients are fishing for help in a shrinking pond of competent interims/consultants. Business is generally a zero-sum game and there are always winners as well as losers even in the present climate. Clients will soon realise that taking no action may not be the safest option.
January 26th, 2009 at 4:02 pm
My two awards for 2009 consist of 1 Oscar and 1 Rasberry.
And the winner is….Apple who have created a retail experience head and shoulders above anything else in the high street . This makes a huge contribution to their retail offtake. They are unusual in having understood thoroughly the connection between the product and the purchasing experience. It is partly because of this, that their sales of laptops worldwide went up by 4% when they launched the iPhone. They make it so easy for consumers to part company with their dosh, whether on line or in their retail outlets. If you have not experienced it, I recommend you pay a visit to one of their outlets.
And th loser is..ASDA. They may have the cheapest goods but the store layout not to mention the car park layout make if a frustrating experience for one to part company with one’s readies. Note the number of people who give up waiting and just leave their trollies and walk out. It happens regularly in Wembley where I used to shop. They have not understood that less is more as far as space between isles is concerned. They need much more space between the end gondola and the tills. There is chaos on Saturdays and Friday evenings. There are not enough tills open at peak times and the self checkout space is manned by insufficiently trained people. I won’t shop there again whatever the price.
Moral of the story. The sale of all FMCG is enhanced by a positive shopping experience.
January 26th, 2009 at 8:53 pm
I agree with Simon Gough’s comments about the food industry. The way I see it, everyone’s got to eat, so unless we’re all getting thinner, there’s a guaranteed market out there. How best to benefit from this? From what I have seen in the last few months, the lack of credit has had two significant effects on our industry. Firstly, some businesses with a lot of debt and poor cash-flow will cease trading, leaving an opportunity for the survivors. Secondly, there is very little capital around to fund expansion or improvements. The need to reduce unit costs and improve output & yield is stronger than ever, but the easy option of spending on shiny new machines is no longer there. Experienced Interims invariably take a fresh look at an existing process and can realise significant savings with little or no capital spend and, what’s more, no equipment lead-time. In my view, these times are a huge opportunity for canny businesses to profit from a change in circumstances.
And another thing…..
The current state of the housing market means that even if companies want to recruit permanent staff, many candidates are unwilling or even unable to relocate. Good news for Interims…..
January 27th, 2009 at 8:56 am
Whilst I agree with almost all of the comments/predictions above, I believe that possibly the greatest challenge for those of us at the sharp end is to convince client companies to invest in our services.
Since the turn of the year I have had experiences of food companies admitting quite openly they are losing money and need to bring in additional specialist resource but then getting cold feet when it comes to signing up that resource.
This then brings about two challenges:
1. New and possibly novel ways of getting in front of the real decision-makers to “sell our wares”.
2. Convincing potential clients that our charges really will generate savings, representing a benefit and not just another cost especially when compared with the lower fees offered by the recently redundant temporary interims who are happy to take lower rates while they find a “proper job”.
Hopefully this is where the interim providers can help.
The bottom line: Do differently, try to identify clients’ real needs whilst resisting the temptation to simply lower day rates.
January 27th, 2009 at 12:10 pm
I would agree with most of the comments above.
Yes everybody has to eat, but as more announcements are made regarding job losses there will be a move to trade down, as witnessed by the retailer adverts. Even Hugh and Jamie’s drive to improve food quality will have little affect. This will in turn drive a need to focus on cost reduction / value engineering so that the profit line is not too badly affected.
As our banking colleagues continue reap the rewards of their efforts there will be very little capital spend in FMCG unless projects have already been planned and financed. A further fallout from the banks is the continuing decline is house prices which will cause anybody to thank long and hard before relocating. So recruitment may take longer when people do move, or they will not move. The permanent market does appear to be much quieter now, particularly the support functions.
All of the above means that most companies will look at how to save costs in-house, inevitably this will start with the support function and some will go to far in terms of numbers and will realise this, too late and will require expertise. Which will mean good quality Interims. The trick will be to convince them this is what they need. This will take some doing as the pressure on the profit line will continue for some time, almost certainly into 2010 and probably beyond.
It is also likely there will be consolidation between sites and the strong taking advantage of the weak. So a need for Interims to help in the transfer process.
2009 started off very, very quiet but now seems to be picking up, with pressure on daily rates.
In summmary I believe within FMCG – there will be a need for Interims, with a Proven track record, to carry out cost saving exercises from Q2 on an increasing basis, aid in product transfers, as well the traditional filler role, but probable, for longer. All in all a greater need for Interims
In the meantime if this does not happen take the advice from above have a good holiday and spend some quality time with the family.
All in all a good time to be a proven Interim
January 27th, 2009 at 3:28 pm
Some great responses here to Simon’s original blog.
I don’t know what 2009 will bring or indeed when, but am positive there will be many Interim opportunites as companies survey the scene after taking initial costs out through the usual people reduction and find they cannot do what they need to do with the resources at hand
For me the key to success is to concentrate on the value added by interims and move away from the ‘day rate’ discussion which in the current economy can simply be seen as expensive.
The pressure on cost will always be there even in buoyant economies and inflationary times as companies seek competitive advantage. Interims will need to demonstrate even better than before how they will add value using their experiences as icons of change and innovators as well as driving the usual cost out scenarios
I am looking forward to hearing how Interim Partners plan to sell in the enhanced Interim proposition in the current market and what I/we all can do to help in the process
Back to you Simon
January 27th, 2009 at 5:04 pm
Yes, it is going to interesting year in 2009 and for too many it looks like a short-term fix of cost cutting and throwing the baby, bathwater and bath out all at once. In far too many FMCG business; time, money and effort are wasted on redoing and replaying as processes and procedures are not followed or written without foresight.
Cost control must be linked to productivity control in conjunction with delivering the service to customer in a consistent fashion. Far too much is wasted in reactive measures as planning as a guessing game, rather than getting close to customers to understand there business in order to aid your own or the one you are working with.
The company that is able to always be on the front foot by constant review, monitoring and planning will always fair better through challenging times and with an Interim’s speedy; review, implementation and response we can make 2009 a good year.
January 29th, 2009 at 3:55 pm
Some interesting comments above. From all the press releases over the last year, the one certainty is that we can guess but we really don’t know what will happen.
Yes I am seeing a lot more companies focusing on utilising interims skills in driving quick change, where the Interims don;t last as long, but their ability to get immediately into the detail, recommend solutions and implement quick wins a must. Also, there are headcount (FTE’s) freezes out there, which for all those from an FMCG permanent background generaly means more Interims to pcik up the slack.
With the number of business competitors getting smaller (through administration, takeovers etc), at some point the switch will indeed be to growth in terms of volume, sales and profit.
The biggest change I have seen so far and potentially in the short to medium future is the larger focus of companies on cashflow. I do not see this changing and those that can link this with the P&L, BS, operations and strategic thinking should be in a good place, whether permanent or interim.
January 29th, 2009 at 4:57 pm
Cracking debate and insight going on here which has lit a few light-bulbs.
The lack of mobility of perms due to housing/finance issues could be good but the temporary flood of recent redundees may not be so good for contracts and rates in the short-term.
Areas that I see as possibles for development are:
1) Supply chain finance – ie larger companies using their leverage with their own bankers to obtain better banking terms and financing arrangements for their suppliers. This is beginning to happen and gives extra business to the particular banks, usually better terms to smaller suppliers and potentially lower financing coasts to the introducing company and potential lower back-office charges as invoices are generally settled directly by the bank – opportunities for Supply Chain Finance people.
2) As I have mentioned in the Retail Blog – innovative pricing strategies that go beyond the usual bogofs etc could well yield better returns – opportunities for finance / pricing specialists who could take value/portfolio more flexible approaches
3) I also feel there are possibilities for Treasury specialists as there is a trend and an opportunity for smaller suppliers to band together in `loose` consortiums to use their combined leverage if they are uncomfortable with `1` above.
4) Another trend is the increasing prevalence of `bartering` – there are few specialising in this field but companies are definitiely looking at this but don`t really understand it. Interims that do could provide viable `managed` alternatives to the usual `distress` selling that occurs these days. Furthermore, if you are in-between barters 9ie you`ve sold but not bought) the HMRC recognises `traded £s` as cash on the Balance Sheet.
5)More play could be made on using the networks of interims on assignments as this is one of our USPs. Making introductions is a definite vote winner, particularly for references and gaining additional assignments.
6) There will be a definite need to tighten supply chains in terms of relationships and info sharing as recent events have shown that JIT `losse` networks have significant short-comings. Interims that have an ability in this area will be in demand.
7) The full ramifications of what has happened over the past year or so are not fully known but there should be a healthy tick-up of work in the compliance/controls area and particularly centred around risk aversion. FMCG has been more attuned to this than most other sectors but there should be demand for good finance interims in this field.
Anyway, those are my thoughts for the day.
February 3rd, 2009 at 9:26 pm
A very well informed debate / discussion going on here, and I think between us we will be taking a fairly accurate temperature of the FMCG food sector (which is the bit I’m in).
I’m doing a fairly long-term turnaround project in (primarily) chilled food, and the experience of the past few months is that retail volumes are generally holding up (people stop eating out, but they don’t stop eating!) but margins are extremely tight. Recent raw materials prices increases are proving very hard to pass on, and all the press hype is about deflation which hasn’t really worked its way through the supply chain (yet). Possibly the cost pressures will ease slightly, but it seems that the sterling rate against the dollar and the euro will keep input prices high.
In that environment there will definitely be a need for specialists in materials cost management, and with some businesses going into administration (eg Findus in January 09, and others to follow…) there may well be very short notice requirements for production transfer interims. there is always a need for lower business costs, but in general though, I don’t believe business confidence will improve sufficiently till later on this year for companies to start new projects that may then call for more interim support.
What’s the experience of demand for interims right now? Simon – have you got a feel for that?
Richard