Leadership

Planning for the Upturn

By Michael Fitzgerald

Updated on: August 4, 2008 / 7:11 PM EDT / MoneyWatch

Downturn? Upturn! It might sound like the PBS version of how the top-floor management tries to bewitch what's left of the rest of the company into being happy about the latest restructuring. But it could also be a sound plan for a firm that would otherwise simply flounder under the weight of an economic downturn.

Asaf Farashuddin proposes in Upturn Thinking in a Downturn Year (registration required) that companies facing severe slowdowns in their operations do more than just cut costs. He recommends three strategies:

an upturn SWAT team that looks for new markets to develop during the downturn;
long-term strategic planning to buffer the effects of an inevitable slowdown;
a company Marshall Plan implemented during recessions, to avoid cutting promising projects.

Farashuddin has personal experience of how these can work: he's now at the auto parts maker Visteon, and before that worked at Cummins Engine and Lucent. Farashuddin's career choices raise questions about his planning skills -- his career path seems to leap from frying pan to fire to furnace. Still, it makes intuitive sense that companies need to look past short-term business cycles.

And it is not often to see someone writing from the maw of the maelstrom, as he certainly is about Visteon:

Facing a North American automotive market in which sales are approaching 15-year lows, Visteon is streamlining operations; at least 30 production facilities will be fixed, sold, or closed before too long. But in the midst of this deep restructuring, the strategic planning process continues to focus Visteon's business units on growth opportunities as well. This process requires each business unit to forecast the size and growth of its underlying market, to identify differentiated products, and to make focused investments in key technologies.
At the corporate level, Visteon evaluates long-term economic and demographic "mega-trends" that will shape the transportation industry in the future, including consumer concerns about climate change. Accordingly, Visteon's climate product group has begun to emphasize development of alternative refrigerants that reduce greenhouse gas emissions. Another mega-trend is that traffic accidents are on their way to becoming the second-leading cause of preventable death; Visteon's electronics product group is developing driver information systems that improve awareness while minimizing distraction. Finally, the growth of the automotive industry in Asia has led to a strategic initiative aimed at effectively building business with the new automakers of that continent.

As Farashuddin says, "If it does not plan for the nearly inevitable upturn in the automobile industry, Visteon will not realize the full benefit from the sweat and tears of its restructuring."

And when that upturn comes, it will have to think about the inevitable downturn.