BUFFALO’S BUSINESS
Companies prep for recession
Can you hear the hammering? It’s the sound of companies all around the Buffalo Niagara region battening down the hatches against the still-undeclared recession.
While few local companies outside the free-falling auto industry believe the sky is falling, the overriding concern lately for for businesses around here is this:
“How can we get through this recession?”
The most common answer is to turn cautious. Local companies are cutting back on their spending for expansion projects. Companies, even those without a lot of debt and plenty of cash, are putting their hunt for acquisitions on hold. They’re looking for any way they can find to save money by consolidating plants. Some, like Mattel Inc.’s Fisher-Price division in East Aurora, are cutting jobs.
“We’re definitely in a slowdown,” says David Lupp, the chief financial officer at Mod-Pac Corp., a Buffalo printing company that still was able to report its first profit in 13 quarters last week because of relentless cost-cutting.
Yet Mod-Pac also is seeing the effects of the slowing economy, which led to sluggish third-quarter sales and lower demand for some of its products, like the stock boxes that candy shops use. To save money, the company has put its personalized print products plant in Blasdell up for sale and shifted that operation to its underused Buffalo factory.
“The mantra now is to conserve capital,” says David Rogers, the Sovran Self Storage chief financial officer.
To keep its self storage facilities filled as much as possible as the economy slowed this summer, Sovran stepped up the discounts it offered new customers, offering most the first month rent-free.
It cost the company about $2 million, but Sovran executives wanted to fill as much vacant space as possible during the busier summer months, rather than scramble to do it during the slower fall and winter seasons. In the long run, they hope the discounts keep their self storage centers busier as times get harder.
Sovran is pinching pennies, too. It scaled back plans to expand some of its facilities and add higher-end amenities, like air conditioning and humidity controls to some units, saving about $25 million this year.
“We can sit in a hibernating mode for as long as we have to,” Rogers says.
Over at Columbus McKinnon, the Amherst material handling equipment maker, executives are hoping for the best but preparing for the worst, as U. S. factories now are running at about 75 percent of capacity. “That tells us we need to be prepared,” says Karen Howard, the company’s chief financial officer.
Columbus McKinnon has aggressively paid down its debt and streamlined its operations over the last few years, and company officials were starting to look at making smaller acquisitions to broaden its product line or help it push into targeted markets, like China.
Not so much anymore. “We are very focused now on hanging onto our cash,” Howard says. “We are absolutely not interested in leveraging up at this time.”
Companies like North Tonawanda shock absorber manufacturer Taylor Devices and Batavia condenser manufacturer Graham Corp. are facing real uncertainty over whether the orders they hope to get from big construction projects or expensive refinery upgrades will come through anytime soon because it’s so hard to get financing.
“The pace at which orders will be placed is a little unpredictable now,” says James Lines, Graham’s chief executive officer, who nevertheless remains “bullish” on the long-term prospects for the company’s energy markets.
“There aren’t many privately run projects that are going to be built right now,” says Douglas Taylor, the Taylor Devices president. “It’s still awfully uncertain.”
