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Cost-cutting here to stay

“Caterpillar flaunts its muscle.”

You’ve got to admit, that’s a great headline. After reading the story in Friday’s Wall Street Journal, I thought back to a blog I wrote while sitting in the Las Vegas expo center’s coffee shop (which happened to have good Internet access), about 200 yards away from the hall where Jim Waters, a Caterpillar executive, gave the keynote address for FABTECH 2008. Here’s what I wrote.

We all seemed to be in denial back then. At least I was. I walked the floor for several days asking attendees how business was. Most (at least those outside the automotive sector) said business wasn’t too bad at all. The banking crisis was scary, but backlogs were still there. At the time things looked dandy.

Well, we all know how dandy it looked several months later.



Today Caterpillar is bullish again, as are many manufacturers and Corporate America in general. According to the Journal article, “Manufacturers are  ... cautious, but many of them say they see no signs of a double-dip recession and some, including Caterpillar, are rehiring laid-off workers and proceeding with plans to expand.”

But good times aren’t necessarily here again. As David Wessell, the Journal’s economics editor, explained on NPR’s Morning Edition Thursday, corporate profits may be heading skyward, but revenue trends are lackluster. “A number of big name companies are reporting decent profit growth but disappointing revenue,” Wessell said. Translation: Those profits are coming more from cost-cutting than any significant sales increase.

Of course there’s the oddball company here and there, such as Apple, which reported an eye-popping 78 percent increase in quarterly earnings.  My gut tells me that bubble’s going to burst sometime. I mean, come on. Do we all need an iPhone that badly? (OK, I do, but that’s beside the point.)

A few exceptions aside, most companies are growing by getting leaner, and I think that trend is here to stay, even when the good times return. This may be the crux of the unemployment situation: Fewer of us are employed, and many of us have found ways to get more done with less effort. I think back to the number of jokes I used to get in my e-mail inbox back in the late 1990s. Heck, back then, silly stuff probably made up nearly half of my inbox volume. Today I’m lucky if I get one joke a week. It’s not that my friends lost their sense of humor. They’re just too busy to spend time at work sending jokes.

If you can help customers save money, you’re probably on the expansion path now. And really, that’s what the metal fabrication business is all about; last week’s blog is a prime example.

The metal fabrication world is far from Apple, whose marketing techniques tug at the USB cords of lifelong geeks and design aficionados (yours truly included). The metal fabrication world is about adding value and saving money.

If North American contract fabricators haven’t saved their customers money by now, they wouldn’t be in business.
About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.