CORONAVIRUS PANDEMIC: Strategies for Industrial and Automotive Companies

To rebound from the coronavirus pandemic, industrials must undertake a journey that begins with resolve and ends with fundamental reform.

During coronavirus pandemic, protecting lives is the first priority, but we must also protect our livelihoods. For automotive and industrial companies, surviving and emerging stronger at the far end of this crisis will require thinking beyond the next fiscal quarter. Success in the long run will require a journey across five stages: Resolve, Resilience, Return, Re-imagination, and Reforms.

Resolve

The first stage, Resolve, involves determining the scale, pace, and depth of action required. To do so, companies in advanced industries must take the following steps:

(a)       Establishing a nerve center to steer the organization, serve as the information hub, manage risk and responses, and align all stakeholders.

(b)       Protecting employees by making their health the paramount concern and adjusting production as needed

(c)        Screening and safeguarding the supply chain by understanding risks and taking action to address disruption

(d)       Adapting marketing and sales by identifying and mitigating the risks of declining sales while meeting critical customer needs

(e)       Maintaining financial health by improving liquidity, reducing costs, and establishing a spend control tower

Resilience

As industrials experience virus-related shutdowns and economic pressures, they should move quickly to address near-term cash management challenges and broader resiliency issues.

To understand what makes companies resilient, past downturns provide helpful insight. Some companies also flourish during those hard times—typically those that took significant action at the outset.  Resilient companies, defined as those in the top quintile of total revenue share within their sectors, took several key steps:

(a)       They sustained organic revenue growth throughout the recession and out-performed on earnings and on revenue in recovery.

(b)       They moved faster and harder on productivity, which preserved growth capacity.

(c)        They divested 1.5 times more during the downturn and acquired 1.2 times more in the recovery.

(d)       They maintain clean balance sheets long before a downturn starts.

Return

Restarting production facilities can be more challenging than shutting them down. It requires a thoughtful approach to revive the supply chain, match volume to actual demand, and, most importantly, protect the workforce. Given the complexity of global supply chains, ramping up factories in a coordinated way will be mission critical. This will include four important phases:

(a)       Preparation: Companies reach full transparency about systems, networks, and workforce, including the parts and people available.

(b)       System filling: Leaders monitor their global supplier networks to ensure readiness.

(c)        Stabilization: Employees become familiar with the new normal and prepare for volume increase.

(d)       Ramping up: Companies produce the full product portfolio, matching supply and demand.

Re-imagination

The coronavirus pandemic could fundamentally shift how people live, work, and use technology. Advanced industries will likely see a shift in preferences as the expectations of workers and leaders begin to change. The organizations that reinvent themselves will emerge much stronger than those that simply work to reclaim their pre-COVID-19 position.

For industrial companies, this global health crisis may lead to a re-imagination of the following:

(a)       The go-to market approach, as businesses shift to e-commerce and companies digitize their sales experiences or place greater emphasis on new business models, such as rentals and leasing, to overcome consumer reluctance about purchases that involve a greater commitment.

(b)       Cooperation and alliances.

(c)        Workers’ roles.

(e)       Geographic footprint.

(f)        Sourcing.

(g)       Costs.

Reform

In addition to dealing with the significant societal changes coming in the next few months, industrial companies may want to consider strategies for addressing some of the persistent issues affecting the sector to avoid the next crisis. For example, they may want to minimize supply-chain risks by increasing local production or dividing production among more sites. Other imperatives include sustainability, workforce flexibility, and adaptability to accommodate changing tariffs. Above all, companies need to retool their operations to produce medical equipment.  Keeping in view the demand of such products around the world due to current situation, it will be a great move not only towards meeting the need to fight against COVID-19 but also generating revenue by consuming such products within the country as well as abroad.

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