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Industrialists Understand the New Normal

Continuing our theme of the “New Normal,” we thought we’d share this tidbit from the Financial Times: “Industrialists fear return to growth is long way ahead.”  Writing for the FT, Richard Milne says,

Some industries may never see demand return to pre-crisis levels as manufacturers learn to live with much lower growth rates in the coming years, according to leading chief executives.

Hans-Paul Bürkner, chief executive of Boston Consulting Group, said companies such as manufacturers of trucks and machines - which have seen revenues plummet 50-70 per cent during the economic crisis - would struggle to return to the levels they achieved at the peak of the boom in 2007.

“Some will never get back to those [levels] because they have lost competitiveness and will be taken over,” Mr Bürkner told the Financial Times in a video interview .

In the New Normal, we start at a lower level and we accept a slower rate of growth.  Expectations have to be moderated.   There are casualties along the way, but the economy  more or less moves sideways with a slight upward bias.

What might some of those casualties be?  Bloomberg reports that GM and Chrysler, even after bankruptcy washed away most of their legacy debts, may still be at risk of ultimate failure.  Who else might join them on the scrap heap of economic history?  Sears and K-Mart, perhaps?  An airline or two?  We shall see.

Charles Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy