Cutbacks, closures & consolidation

By Tim Wright | January 8, 2009

Cars and homes aren't selling well, which means neither are paints and coatings. That's been the story since the second half of 2008 when the subprime mess caused a steep drop in the U.S. housing market, sending the U.S. economy with the rest of the world at its tails in a downward spiral. Since then we've seen the effects trickle down throughout the U.S. industrial complex leaving sectors such as the automotive industry on the verge of collapse.

Government has taken unprecedented measures to slow the bleeding with its $700 billion bailout package without anyone really knowing how it's getting spent and who is watching over. With a new Democratic president set to take office and all this never-before-seen government taking ownership of industry in this country, it will be interesting to see just how, and when, the economy is back on course. Unfortunately, this is going to take time. Some analysts predict this won't happen until at least the third quarter of 2009 and that is an extremely optimistic estimate.

During these troubling economic times, paint makers are bearing down for what is sure to be a grim year ahead. Throughout the paint and coatings supply chain companies are ramping up cost-saving plans and laying off workers.

Though its only January, when I look into my crystal ball I see cutbacks, closures and consolidation as the major themes dominating headlines for the year ahead. Small- to medium-sized paint firms in North America and Western Europe are going to be hurting the most as they try to hang on.

Though 2009 may not bring any blockbuster deals like AkzoNobel's acquisition of ICI and PPG's taking over of SigmaKalon, the large multi-national paint firms will use the down economy as an opportunity gobble up market share from the smaller players who can't survive. Let's face it, unless you have the infrastructure in place to expand operations to the world's growth markets and the R&D budget to pour into newer "green" paint formulations, it's going to be hard to stay afloat.

Tim Wright