Listen to Sal–He Knows a Recession is Coming

Sal is my barber.  He’s been a barber for forty years and has seen it all.  Sal doesn’t think a recession is coming, he knows it’s here.  How does he know?  He sees customers taking longer to get their hair cut.  Someone who used to get it cut once a month is stretching it to  once every six weeks.  And, that’s happening with lots of his customers.  He hears them worry about meeting the mortgage, paying for food and paying for basic services like heat.  Sal is one of my early warnings of an economic downturn and he’s a good one.

 

Bill Zollars, CEO of YRC Worldwide, the newly expanded Yellow Freight, saw two things happening around Christmas time.  Customers were shipping fewer shipments and putting less things in each shipment.  What did he do?  He met with his senior managers and “reacted swiftly” to the problem.  They cut back on drivers by 10%, stopped renting trucks and put 10% of their current trucks in the parking lot.  He and his team got ahead of the problem.  They didn’t kid themselves, didn’t drive price down to meet suddenly unreasonable projections.  Instead they did what senior leaders are supposed to do–meet the problem head on.

 

Look at Ford Motor Company.  During a downturn, they would have traditionally kept building cars and pushing them out to dealers who would rely on massive price discounts to chase a shrinking base of consumers who wanted new cars.  For the first time in a long time, they have decided to reduce production to match the shrinking demand.  The result?  They are “the only one of the six biggest carmakers that did not raise (price) incentives in December”.  This is when they are losing ground and ranking to Toyota and sales are declining. 

 

Tough choices in tough times.  But Kudos to Ford and YRC for being willing to face the music and make the decisions that need to be made.  How about your company?  Are you still chasing unrealistic objectives.  Are you using price to fill the hopper when there is less business out there?  Know wonder your profits are down.  Listen to Sal, he knows what’s going on.