The economic environment has deteriorated rapidly, particularly in Europe and China. Managers who boldly cut costs do not make themselves popular. But they act with foresight.
Consumers have become more cautious due to higher energy prices, which forces entrepreneurs to act. In the picture: the inner workings of a transfer machine for the watchmaking industry.
Managers are optimists by profession – with good reason. Only those who radiate confidence inspire trust in their own products and thus help to boost sales. And until recently, business leaders had every reason to be optimistic. Driven by strong consumption, a high level of construction activity in the residential and infrastructure sectors and further investments in digitization in advance, business in most sectors ran like clockwork.
Uncertainty instead of lightness
But suddenly this lightness begins to give way to a deep insecurity. Top executives are talking about the world facing a prolonged economic downturn and are musing loudly about cost-cutting measures.
What happened? Since the end of September, business in many internationally oriented companies no longer seems to have developed as robustly as it had in the first half of the year and in some cases even in the third quarter. The European sales market and China are primarily affected.
In Europe, the sharp rise in energy prices is making consumers act more cautiously. Larger expenses such as buying a new car or booking longer vacation trips are postponed. Even when investing in your own home, savings are suddenly being made, like this week the sanitary technology group Geberit.
In China, new lockdown measures are always leaving their mark. Because millions of Chinese are unable to leave their homes and shops remain closed, consumption is suffering. The bad mood rubs off on the industry. The industrial group OC Oerlikon reports that companies in China are increasingly reviewing investments and holding back orders. It is to be feared that the downturn in the world’s second-largest economy will increase in breadth.
Swiss confidence
So far, only the Americans seem to have maintained their optimism. In Switzerland, too, buyers from industrial companies are still in good spirits: the mood barometer for this important professional group is still in the green, unlike its colleagues in the euro zone, where the values indicate a contraction.
However, market observers at the major bank Credit Suisse have recently stated that the prospects for industry in this country have also clouded over. This raises the question of what measures company leaders will take. As optimistic as managers are in the habit of appearing to the outside world, they tend to react uncompromisingly to a deterioration in the business environment. They prescribe cost reductions so that margins do not fall excessively despite stagnating or even falling sales. Every responsible manager knows that profitability must not fall below a certain level. Because only with sufficient profits can future activities be financed.
Be ready for the rebound
Listed companies are usually the first to report restructuring plans. They are obliged to be fully transparent towards their shareholders. In the Swiss industrial sector, OC Oerlikon and Schweiter recently announced job cuts. If the economic situation does not noticeably improve soon, others are likely to follow their example.
From today’s perspective, however, widespread layoffs are not to be expected. With the supply of skilled workers still in short supply, most companies will probably try to retain the majority of their proven employees. Eventually, every downturn comes to an end, and when it picks up again, you want to be ready for it. Managers, who like to see themselves as stand-up characters, have also deeply internalized this insight.