There are a lot of mixed signals right now. At the joint meeting of the National Fluid Power Association and the Fluid Power Distributors Association in Cleveland this past week, attendance was strong; people are searching for answers and new paradigms that develop out of uncertainty.
Companies are responding by reverting to a few basic and mostly reasonable survival behaviors. Cut spending hard and wait to see what happens. The first round of staffing cuts addressed profitability. Depending on the specific market, the next round of cuts will be deeper to ensure continued operations.
This is not to reach for the panic button, but rather to reflect the wide range of responses and hits across this industry. There are some fortunate companies that are up from last year, but you have to consider what was happening last year and their luck in the draw for a few customers that are probably keeping them whole right now. There is an interesting dynamic taking place. Some companies see the opportunity to go after market share. Some manufacturers today are able to make some positive changes to support key distributors that one or two years ago were impossible because the risk to change channel focus was too great.
This next year promises to show dramatic changes. Manufacturers will be doing some weird things as they try to cope with the changes taking place. The same is true for distributors. We will see channel partnerships and streamlining, which people have been paying lip service to for a few years, start to take a more recognizable and positive shape as there are fewer bottom lines left.