Capacity utilisation in focus as the credit crunch tightens

Every day brings bad economic and business news from the US economy as the implications of the credit crunch take effect. Here is an example of a major manufacturing business taking pre-emptive action to reduce capacity in the face of falling sales.

The Guardian has reported that American carmaker Chrysler has told its 70,000 workers to take a two-week holiday in July 2008, in a company-wide shutdown reflecting plunging sales of vans and lorries.

“in an internal memo, Robert Nardelli , chief executive, asked staff to approach the idea “with an open mind and a team spirit”. He wrote: “In order to create better alignment and efficiency across organisational lines and boost productivity.”

Another way of wording the memo would have been to say: we’re in a deep mess; sales volumes are falling and we need to cut fixed costs if we’re to have any chance of surviving this nightmare

We’ll be keeping a lookout for more stories from the US and the UK which illustrate how businesses are responding to the economic downturn.

Growing sales and profits during an economic boom is often straightforward. Maximising profit and cash flow during a recession (or worse) takes a different set of management disciplines.