Cover story Garry Bartecki
COVID-19 Epidemic vs. Lift Truck Industry Novel Coronavirus COVID-19—Demand Shock Supply Shock---Shutdowns---Restrictions Employee concerns---Unknowns versus Lift Truck Industry This does not look like a fair fight. Seven against one. All eating away at your cash flow, which is the lifeblood of any business. If this fight is short-term, say 60-90 days, most of you can figure out how to manage expenses and cash flow to survive. If longer, 180 days or longer, some will fall by the wayside. Add in the extended impact where the economy slows down into recession or depression and your ability to restore lost profits will get pushed out like it was post-2009. Thinking back to 2009-10 I have said and believe that the lift truck industry and its dealers did a hell of a job staying afloat. What is even more amazing is that you did these owning highly leveraged businesses. Performance groups, MHEDA programs, and OEMs, along with strong dealer management took steps to lower break-even sales levels, adjust expenses and increase absorption. You made it through the last crash, but this 2020 event could be worse than what you experienced ten years ago. In 2009 and 2010 there was a credit crisis. This year there are 7 enemies to deal with along with unknown factors that are sure to pop up when least expected. To me, COVID-19 is the greatest unknown with the highest disruption factor. If one employee tests “positive” sales and cash flow could be halted at the branch in question. If you only have one location, you may find yourself in the economic fight of your life. Rest assured that “working from home” is here to stay and should be adopted until further notice. Stop and think who and what you need at the “store”. Most clerical and accounting personnel can probably work from home if you decide to have their data available in the cloud. A laptop or desktop work computer along with a printer, set up to get files from work, will do the job. The cloud updates individual files and general files daily. There may be a small Cap-x cost, but nothing major. Accounting, payroll, collections, AP processing, banking, and reporting can all be accomplished with a work from home program. I used one tech to set up computers and printers to work from home. It did not take much time at all. 4
www.MHWmag.com
May 2020
Being that COVID-19 is a major threat to your business a What-if plan should be in place. How you remain in business is the question. How you service customers is key. Communication with your OEM should result in a back-up plan to sell service, parts, and rental. Using sister dealers in your area may be the answer. And don’t forget the union contracts you are obligated for. They can also assist with a plan for the time you are off the grid. Adding to this financial dilemma is both a DEMAND AND SUPPLY SHOCK, which seldom appear simultaneously. Both SHOCKS are directly related to the number of manufactured goods we buy from China. COVID-19 caused China to shut down production and thus reduced supply which resulted in shortages and thus price increases. The DEMAND SHOCK. But now that China is in recovery mode and is ramping up exports, it appears that the rest of the world is slowing down and thus not interested in buying the goods currently being produced by China. Thus, the Supply Shock. So, we now have companies in trouble on both sides of the world unable to maintain normal business cycles. Hopefully, the Feds plan to provide liquidity can stem the impact of a slowing economy sooner rather than later. After this episode, you may see a more robust “BUY AMERICA” trend which could spark a movement to bring manufacturing jobs back to the US. Last I looked at the spread between manufacturing in China vs the US is narrowing quite a bit. It may be time for the Feds to assist in some way to stimulate this movement. As far as the SHOCKS are concerned dealers should determine that they have adequate parts inventory to maintain rental units and customer repairs. If not, stock up if you can. And if there are bloated inventories sitting in China make sure to look for lower prices compared to what you paid six or eight months ago. The remaining enemies need consideration as well because any one of them can cause either a shutdown or a significant reduction in sales. In either case, even if additional unknowns pop up, cash flow will be the major issue. It always is and always will be. Not being able to nail down the potential period of disruption I suggest we use a six-month window to
