Linamar sees opportunities in challenging economy
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
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."