Britney or Recession?

Two words I've heard too often in the past few weeks.

In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. In the United States, GDP is officially tracked by the Commerce Department's Bureau of Economic Analysis. An alternative, less accepted definition of recession is a downward trend in the rate of actual GDP growth as promoted by the business-cycle dating committee of the National Bureau of Economic Research.[1] That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. A devastating breakdown of an economy (essentially, a severe depression, or a hyperinflation, depending on the circumstances) is called economic collapse. Newspaper columnist Sidney J. Harris distinguished terms this way: "a recession is when your neighbor loses his job; a depression is when you lose your job."
Market-oriented economies are characterized by economic cycles, but actual recessions (declines in economic activity) do not always result. There is much debate as to whether government intervention smoothes the cycle (see Keynesianism), exaggerates it (see Real business cycle theory), or even creates it (see monetarism).

I think it's time we also debated the effect the media plays in our economy - if enough people hear, read, or blog about it, does it make it true?

Believe it or not, most economists say we've seen a recession in the U.S. every 6 - 8 years. Some businesses (like housing) or regions (like Michigan and NE Ohio) are already in a recession, based on the definition above.

So, what types of business will survive a recession, and what types hold up pretty well during a recession? Two things we know for sure - death and taxes. Therefore, the funeral home guys and the tax accountants are pretty safe during a recession. Safe to say that doctors and insurance people do ok as well.

Carmakers and car dealers often have a tough time during a recession, because when times get tough, people tend to put off buying a new car, it's just too scary to make that longer-term decision. But how about your business? Are you recession-proof or recession-resistant?

Here are some strategies to think about as we consider the effects of a recession nationwide:

1 - It is more important now than ever to keep a close eye on your competitors' pricing. As money becomes tight and consumer spending contracts, some businesses will cut prices as demand dries up. You need to be aware of what is going on in your marketplace, and react (or act) appropriately.

2 - Watch your debt load and cash flow. Even though the Fed reduced "an" interest rate this week, it may not necessarily make it any easier for a business owner to borrow more money to get through a downturn. Review costs and eliminate waste. (Good advice anytime, but during a recession this can mean the difference between staying in business or closing the doors.)

3 - Talk to your customers. Find out if they plan to reduce their regular maintenance, or if they are putting off major purchase and respond accordingly. If your regular customers plan to cut back on repairs, you need to widen the net you cast and develop new customers and new markets to make up for the lost income, or you will need to make changes to cope with the loss.

Surviving a recession as a business requires strategies that you probably use all year round. It's just more important now to keep them top of mind and in effect.

Coming Soon - Info from the Mac Tool Fair

This year, Mac Tools is assembling all their dealers and suppliers in the beautiful, sleepy little town of Orlando in Florida. It is guaranteed to be warmer than Akron, Ohio, and definitely snow-free.

Some of the key tool and equipment manufacturers in attendance will be:

A & E Hand Tools, Associated Equipment Corp, Autodata Publications, Channellock, Coast Cutlery, Delmar, Electronic Specialties, Ernst Mfg., E-Z Red, Ingersoll-Rand, Innovative Products of America, Irwin (Vise-Grip), Launch Tech, Lincoln/Mityvac, Lisle, Mastercool, Mayhew, Mechanics Time Saver, SP Tools, Omitec, of course OTC, Redline Detection, Shinn Fu, Silvertronic, Sir Tools, Dent-Fix, Streamlight, Ullman, Whiteside, and Challenger Lifts.

Every year at this show, Mac Tools and their suppliers exhibit numerous new tools and equipment unveiled for the first time. Check back here early next week and I'll fill you in on all that's new. Let me know if there is any particular tool you're looking for, or if you want to know more about a certain company.

If I don't see you in Orlando next week, I'll probably see you in Orlando later this year!

A day in 2008

"If everything seems under control, you're not going fast enough." Mario Andretti

News from this Week

None of this is late-breaking or hot off the presses, it was already reported by Babcox previously this week, but in case you didn't see it, I thought I'd repeat it here.

Bob Pond dropped me a note to announce the 100 Year Anniversary of Central Tools, in Cranston RI. That's exciting stuff! There are a handful of tool and equipment manufacturers in our market that can make that claim, but not many. So many tool companies have been purchased or merged or simply gone out of business. Congratulations Bob, Bruce Dawson, and the rest of the Central Tools team on a significant accomplishment. Best wishes for another hundred years of success!

And, speaking of a 100-year-old company, allow me to shamelessly segue into another announcement. Yesterday, my old alma-mater, Ken-Tool made a joint announcement with Mayhew Tools about a deal they are working on. Mayhew is planning to acquire the brand name, assets, and manufacturing capabilities for the Oldforge and Carica brands. Congratulations to both companies, and the principals involved: Alec Pendleton and John Lawless! (By the way, it is Mayhew who celebrated 100 years last year.)

Delphi Recognizes Future Technicians

Yesterday, Tomorrow's Technician editor, Ed Sunkin and I drove through a driving rain to meet with Delphi representatives, Marissa Sura and Doug Vidler, at the Tennessee Technology Center in Jackson, TN. Through the generosity of Delphi, we were able to bring the future of the automotive aftermarket to life for Instructor Ronnie Bush and his automotive class at TTC-Jackson. Tomorrow's Technician selected the class as the winner of our monthly pop quiz, and Delphi awarded the class with $3,500 in tools and equipment. Delphi gave them a new Air Conditioning Diagnostic Tool and a J2534 Universal Reprogrammer, as well as individual "goody bags" for each student. We presented them with an attractive plaque for their classroom, as well as the tools and equipment, followed by a training seminar presented by Doug Vidler. Then, to the delight of everyone, pizza and pop were served!

After that, Dr. Don Williams, Director, and Ronnie Bush, gave us a full tour of their facility. The Technology Center is located on a spacious campus, near the local airstrip. They are the 4th largest technical center in Tennessee, having recently surpassed the Knoxville Center in terms of enrollment numbers. Educational programs include automotive technology, collision repair, tool & die, machine tool technology, CAD-CAM, engineering, drafting, HVAC, nursing, computer, and several others. The automotive class included students ranging from high-school-aged men and women to men in their 40's looking to begin an exciting new career in automotive repair service. The automotive classroom included personal computers for each student, and all kinds of repair vehicles, including Ford vehicles, GM vehicles, and a beautiful 50th Anniversary Thunderbird! These students get plenty of desk-time, computer-time AND hands-on time working on cars and trucks. And I have to tell you, they are ENTHUSIASTIC about their future. When, during the presentation, Doug Vidler asked how many wanted to own their own shop, every hand went up.

Mr. Bush runs his classroom like a business and turns out extremely employable people every year. He places 100% of his students in automotive-related jobs when they graduate from his program.

Thanks again to all who played a part in bringing this together. It was a fun way to show our combined commitment to the future of our industry. I wish more suppliers within our community would make a similar commitment.

By the way, Delphi has made a commitment to the future of our industry by sponsoring the same program in 2008. Anyone else interested in betting on our future ?

A View from Rush Truck in Nashville, TN

http://www.youtube.com/watch?v=EJVrCDHVWmI


I recently attended the 2nd annual Rush Truck Technicians Rodeo, where their top technicians competed against each other for cash prizes and other incentives. Here are some brief commments some of their top technicians gave me, regarding the opportunities available to young people who want to come into our business.

News from NADA

That's the National Automobile Dealers Association. They've compiled and printed their latest stats on dealership sales, and I thought I'd share them with you. This reflects how some of your competition fared through most of 2007.
Average Dealership Sales: Up 4.5% in total sales through 9/07, however, there was a net decline of 250 dealers. Also, total dealership gross sales grew more than 5%, with net profit before taxes of 1.8%
Dealership Expenses: Grew by 5.2%. Service and parts absorption remained at 52%, same as previous year.
New-vehicle Profits - even though sales of new units improved during the third quarter, retail gross profit fell 2% through September, to 5.1%. Now, where do you think the dealership will turn to make more money in 2008?
Used-car Sales: Revenue was up 6.2%, and operating profit increased 2% from the same period in 2006.
Service and Parts: Strong, strong sales through September, up almost 6% from the previous year. How do you compare? Are the dealerships taking service business away from you? What are you doing to combat the competition? Service and parts accounts for nearly 70% of the dealerships operating profit, up 2 points from 2006. I have to ask again, where do you suppose the dealerships will be looking for more sales/profits in 2008? That's right - they'll be looking at your business and doing what they can to take it away from you. Their operating profit on service and parts sales was almost 3% greater than in 2006. How does your rate?
Total Customer Sales per Repair Order: These were up 2%, and warranty work was up 2.5% from 2006. European and Asian models continue to maintain higher dollar rates than domestic repairs. Average warranty for European models was $379, $231 for Asian, and $206 for Domestics. When the customer paid the bill (instead of the insurance company) the typical repair order wa $441 for European, $199 for domestic, and $187 for Asian.
For 2008 - I hope you are able to concentrate on ways to improve your market share, increase your profitability, and have fun doing it. Best wishes for a prosperous new year!