By Ros Krasny
CHICAGO (Reuters) - Manufacturers are hoping to ride out the worst U.S. and global economic storm in decades, but some fear that more pain lies ahead as demand plummets and a recovery could be tentative at best.
Executives at the Reuters Manufacturing Summit in Chicago this week characterized the near-term outlook and the velocity and time of a recovery as highly uncertain.
On a positive note, many said their companies were quick to respond to changing conditions by slashing production when economic activity fell off a cliff in late 2008.
In that vein, the U.S. Commerce Department on Thursday showed durable goods orders down 5.2 percent in January, a sixth consecutive monthly decline to a six-year low. December orders were revised down sharply as well.
Ed Rapp, group president at Caterpillar Inc (CAT.N: Quote, Profile, Research, Stock Buzz), said the world's largest producer of construction and mining equipment did not muck around when the economy turned.
"There's a difference in CAT this time around, versus maybe what we experienced in previous recessions ... We are prepared to pull the trigger," he said.
Peoria, Illinois-based Caterpillar announced in January that it would cut about 22,000 jobs. It was far from alone: U.S. payroll figures show a total of 490,000 manufacturing jobs lost in the three months through January.
"Most people in our industry have been very aggressive in adjusting production to align with sales," Rapp added. "Everyone understands that it's to nobody's benefit to get an excess level of inventory."
Without an inventory overhang -- the kind that has crippled the U.S. housing market, for example -- business could get a lift when the recession finally ends.
"A contraction in inventories ... could set up for increased production from inventory restocking down the road," economists at Goldman Sachs said in a research note following the durable goods report.
The collapse in the U.S. and global economy in the second half of 2008 surprised even industry veterans.
"Conditions in the fourth quarter deteriorated more quickly than I've seen in my time in the industry," said Ron DeFeo, chairman and CEO of diversified manufacturer Terex Corp (TEX.N: Quote, Profile, Research, Stock Buzz). "Business went from 'full speed ahead' to 'stop' in a number of product categories."
Terex, based in Westport, Connecticut, has announced some 5,000 job cuts but might have to cut more, DeFeo said.
Several officials were disappointed with the low level of funding aimed directly at infrastructure projects in the Obama administration's $787 billion economic stimulus.
Even so, what funding is made available -- in both the United States and globally -- should fall into a sweet-spot for some manufacturers. Continued...
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