Wednesday, October 31, 2012

Chain Reaction


Blink:
Ford announced last week it was planning to close one of its main European factories by the end of 2014.  Consequently, the move will result in the loss of 4,500 direct jobs and an estimated 5,000 related subcontractor jobs.  Did Ford take into account the chain reaction that will follow?

Read On:
Ford Motor Company’s Genk plant located in the eastern part of Belgium produces the midsize Mondeo, the S-MAX minivan and the Galaxy car.  A comparison of their sales in September of 2012 versus 2011 reveals a 14.9 percent drop in sales.  European car sales according to Acea (the European carmaker’s association), dropped 10.8 percent during this same period, primarily attributed to the European debt crisis.  For the record, the announcement came one month after Ford’s management gave reassurances about continuing production at the Genk plant which represents about one-third of the automotive production in Belgium.

Let’s examine the chain reaction that will follow.  I will stick with my area of expertise, food-away-from home.  Think about the reduced sales of breakfast and/or lunch sales or better yet catering sales due to the reduced labor force at Genk.  Specifically for Delicatesse Catering, an established caterer located in Genk since 2001.  After the layoffs, they will most probably sell fewer sandwiches; less sandwiches means a reduction in supply chain sales for their bread, protein, cheese and packaging suppliers.  Less supply chain sales will result in layoffs – bakers, route drivers, etc.  I do not know if Delicatesse Catering has the vending contract for the Genk plant, but think about the chain reaction associated with lost vending sales.   Etc., etc., etc.
  
Are chain reactions a harbinger of our new global economy?

4 comments:

  1. As a Belgian national, I just have to comment on this Blog post, Jimmy. Absolutely right: the shutdown of the Genk plant is a catastrophe for the Belgian region of Limburg, where Ford is currently the biggest company (3,035 billion euro Turnover) and biggest employer. Image families who have both husband and wife working there... It is especially bitter because the Ford employees had agreed witho a 12% salary decrease 2 years ago, in return for guarantees that the Ford plant would stay open until 2020. And look what happened now. Ford broke their promise.

    As far as Delicatesse Catering is concerned: luckily they seem to have well-spread their activities: they also cater for children day-care centers, schools, resthomes. But the chain reaction will touch many more than we think, for sure.

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  2. My only comment is that Ford alone, out of the big three, did not require billions of dollars in Federal bail out funds and unlike GM and Chrysler is not owned by you and me.

    Putting it on a foodie footing, if people stopped eating tomatoes and as a result farmers stopped growing tomatoes, would the chain reaction to suppliers of tomato stacks, packaging etc. be of interest and concern?

    The point is that in a capitalistic economy supply works out to meet demand. If demand is down 14-18% the supplier must make adjustments.

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  3. Chain reaction is a great play on words for many multi unit operators in the foodservice industry today. Chains are reacting in many ways; raising prices, eliminating high food cost items from menus, offering more value priced items, looking hard at off shore supply, slimming down marketing budgets and they are also innovating to keep prices low, partnering with companies that excel, elevating talent, etc. etc. and each of these scenarios sets off its own set of chain reactions...requiring most everyone to adjust in some way. It's not all bad.

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  4. Interesting range of comments. Thank you.

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