Efficiency improvements a recession breaker?

Though it came a bit later to the automation industries than to much of the rest of the economy, the recession has definitely settled in and doesn’t appear to be on its way to lifting any time soon. Everyone in the industry knew this inevitable slowdown would come, but what surprised many was the swiftness with which it arrived.
By David Greenfield, editorial director March 1, 2009

Though it came a bit later to the automation industries than to much of the rest of the economy, the recession has definitely settled in and doesn’t appear to be on its way to lifting any time soon.

Everyone in the industry knew this inevitable slowdown would come, but what surprised many was the swiftness with which it arrived. As late as October and even early November 2008, when speaking with various automation executives, official and off-the-record comments maintained that the industry outlook still looked good despite looming recessionary clouds.

By late November and into early December, the tone changed dramatically. Gone were the “knock on wood, we’re still looking good” quotes. Replacing this cautiously optimistic outlook was a clear sense of uncertainty about the future.

While speaking with automation industry executives and representatives in late January and early February of 2009, a few things became clearer. First is that while many projects have been postponed, very few have been taken off the board completely. The concern now is whether these projects will be put back on line over the next quarter or two. If that occurs as expected, further dramatic adjustments in the automation and control industries will likely be unnecessary.

The second thing I heard more than once is that funds that had been set aside by manufacturers for efficiency improvement projects—ranging from installation of drives for better motor control to software implementation for improved tracking of energy use—are still very much pending. The word on these projects is that they are not currently on hold due to the lack of visibility in the markets, but rather due to the expectation that additional incentives may be on the way from the Obama administration that would add to the bottom line benefit of these initiatives.

Real world experience seems to be supporting this more bullish tone surrounding sustainability-related projects. For example, building and engineering supplier Alumasc (a company operating in the hard hit construction industry) actually experienced a 1% growth in revenue during the last half of 2008. The company attributed its improved performance to the sustainable building market, which provided two-thirds of its first-half revenue.

Alumasc chief executive Paul Hooper said, “I think in the circumstances of a challenging marketplace, particularly on the engineering side, we are relatively pleased. In the context of a pretty big reduction in engineering and a decline in manufacturing, it’s not too bad a performance.”

Likewise, California’s solar and renewable energy industry continues to grow dramatically. The amount of investment in clean tech in the state nearly doubled from 2007 to 2008, reaching as high as $3.3 billion. “Solar installations under the California Solar Initiative were up 100% in 2008, with the last quarter being among the busiest on record,” says Adam Browning, executive director of Vote Solar.

In a decidedly down market, sustainability clearly appears to be one bright point. Is your company capitalizing on this?

david.greenfield@reedbusiness.com