For some companies, such as those that banked with Lehman Brothers, credit lines have simply vanished. Three-quarters of survey respondents say their ability to access credit in the current environment has limited their ability to pursue attractive investments.
Faced with contracting consumer demand and shaky credit markets, CFOs plan to cut deeply in other areas besides payroll. Finance executives will slash their capital-spending budgets by more than 10 percent in the coming year. Spending on marketing and advertising will drop by 7 percent, while IT spending will fall by 4 percent. Overall, finance chiefs forecast an 8 percent decline in earnings, a stunning reversal from this time last year, when they forecast earnings growth of 6 percent, and a marked plunge from just last quarter, when they predicted earnings would grow by 4 percent. Companies will also cut their dividends by an average of 3 percent.
Jon Moreau, finance chief at Aarrowcast, is quick to point out that even in a recession, some pockets of the economy continue to hold up. A supplier of parts to military and agricultural equipment makers, Aarrowcast rang up sales during the third and fourth quarters of 2008 that were among the company’s strongest of the year, says Moreau. Even Sentient’s Bax, who has suffered the dual blows of fuel-price volatility and major declines in travel, sees opportunity: companies that until now have maintained their own planes and associated infrastructure are looking to downsize and have shown new interest in his company’s offering. Maybe the public flogging of Detroit’s Big Three CEOs will pay dividends. Then again, when last seen they were carpooling.
Kate O’Sullivan is a senior writer at CFO.