A New Year of 'What-Ifs'

There are plenty of questions about the economy. The answers are up to you.

A New Year of ‘What-Ifs’

In with the new and out with the old. Doesn’t ring quite right these days, does it? After all the tragic and surprising events of 2001, we’re feeling apprehensive, nervous, even frightened about 2002. Terrorism is now a major part of the American world, and we’re at war with an enemy that might be anywhere and everywhere — across the oceans, right next door or on the shop floor.

This is new to most of us. Not since Pearl Harbor has America had to respond to a direct attack. Sixty years ago, the country’s leaders, its industry and its people united in a war effort the likes of which had never been seen before. Last year, we went through a similar situation and people are still wondering out loud: What if?

What was tested all last year, and will be for this year as well, is American optimism, particularly in terms of the economy and specifically in terms of business and manufacturing. What if the recession — which is now official although who in industry didn’t know it was here almost a year ago — turns into a lengthy one, a deep one?

What if situations like the bankruptcy of LTV Steel in Cleveland become common in the metals industry? What if other large manufacturers follow suit?

On the other hand, what if the economy soars in terms of manufacturing output and zero inflation and unemployment drops to three percent and the Dow actually does go to 36,000? Remember that prediction? Remember irrational exuberance?

Well, according to the CFOs of 300 middle-market manufacturers responding to a survey by Fleet Capital Corporation, exuberance is going global. Ninety-two percent of the companies surveyed sell to foreign markets. Nearly half (47 percent) expect an increase in foreign sales in 2002, while 42 percent expect exports to stay the same, and only eight percent anticipate a decrease in sales to foreign markets.

However, 49 percent of respondents indicate that another large-scale terrorist attack similar in magnitude to the September 11 tragedy, which many economists believe pushed the U.S. economy into its official recession, would have a significant impact on the national economy.

Says James G. Connolly, president and CEO of Fleet Capital, “The CFOs’ optimistic outlook is consistent with the demand we’re seeing for financing acquisitions and other growth activities.”

Another survey of manufacturers of durable goods says this year they will spend eight percent to 10 percent more than last year or some $15 billion. Only 15? Keep in mind that’s the durable goods folks, machine tools and so on. That’s a whopping increase! Durable goods companies are the most telling bellwether industry in the economy and their capital spending plans suggest a mighty busy metalworking year. Gardner Research of Cincinnati did this survey, but several others have come out with similar predictions. Meanwhile, productivity and consumer spending are up while inflation is close to zero. What if?

Manufacturing managers should ask themselves “what if” every day, and apparently, many of them do. The American manufacturing manager has always been the ultimate problem-solver and, I’m sure, will continue to deserve that title.

The world still looks to the U.S. for examples of the successful application of industrial technology. We have been setting good examples for generations. America and American manufacturing is the hope of the world. Nothing about 9/11 or 2001’s sad and frightening events has changed that. Happy New Year!

George Weimer

contributing editor, [email protected]

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