The Linamar Corporation is facing the current economic challenges head on and is already seeing progress, the company's CEO, Linda Hasenfratz, told attendees during the APMA-AUTO21 conference in Hamilton, Ont.
"Clearly the automotive industry is undergoing a wrenching restructuring that is leaving no company unaffected today. North American production volumes are down dramatically," she said, citing the current production levels of eight million vehicles a year.
But Hasenfratz explained that these sales levels are not sustainable, and predicted that the automotive industry will start to see production rise in North America as soon as next year. Based on historical levels, a more sustainable level, she said, is 13 to 15 million vehicles a year - roughly 55 to 65 vehicles per thousand capita. That number is "vastly higher than the level of production that we are seeing this year," she said. "So we have a future that we can look towards here."
In the mean time, companies have to turn these lemons into lemonade.
"When you're faced with a crisis, you always have two choices - you can run or you can turn and face that crisis and try to figure out a way to turn it into an opportunity, turn it into something positive, and that's what we've tried to do at Linamar," she said.
The first step to building a future and creating opportunities is putting a plan together, she explained. Linamar has implemented a four-part action plan. The first part is a focus on sales growth - namely takeover opportunities, as well as customer opportunities, as OEMs change outsourcing strategies.
The second part of the plan is a focus on cost reduction, which includes a target to reduce overhead costs by $40 million a year. In addition, they are focused on mission-critical-only spending, and they continue to emphasize process innovation and process improvement as ways to continue to streamline costs and operations to make the company more efficient.
The third part of the plan focuses on cash conservation, including a working capital reduction of $100 million, and a significant capital expenditure reduction of 25 to 40 percent of what they've spent in previous years by reallocating existing capital.
And the final part of the plan is employee morale, which includes increasing communication with employees through things like company-wide webcast updates. "We've got to keep people focused on the positive; keep them focused on where we can take the company in the future, where we're trying to get to," she said.
"We're making very good progress in all of these areas," Hasenfratz explained. As a result of the plan, they've implemented $15 million a year in cost savings as of the end of the first quarter. They've temporarily cut salaries by five to 10 percent, and they've saved $29 million in working capital. In addition, they've won $300 million in new business as of early April.
"We can't cut our way out of this situation, we have to grow our way out of it," she said.
Their growth strategy includes diversification, globalization and green technologies. Growth from these areas has been instrumental in offsetting the volume declines that they've seen.
"Tough times don't last," she said. "What we have to figure out how to do, as leaders in our companies, is strategize a way to get from here to there... Now is the time for all of us to get our businesses aloft and survive these challenging times, [and get] ready for when these difficult days are behind us."
For more information, visit AUTO21 at www.auto21.ca or the APMA at www.apma.ca.