Troubled US economy could have benefits for service providers

Spend any time reading today’s business press and you will likely come across an ever growing number of stories about what is in store for the American economy in 2008 — all of it rather gloomy. The dreaded word ‘recession’ is making more frequent appearances in the outlook of economists. They point to several things: the continuing fallout of the global credit crisis started by the meltdown in the sub-prime mortgage market in America; economic growth showing signs of sluggishness; poor housing sales; and worries about the rising price of oil linked to the continued instability in the Middle East. Economists are predicting that if things do not improve, 2008 could be a very tough year for North American auto manufactures. With people growing more concerned about the direction of the economy, and with many more predicting a recession, the first casualty will be spending on big ticket items, such as automobiles. In anticipation, GM said it would cut first-quarter production by 11 per cent and Ford by seven per cent. Global Insight, an automotive research firm, expects US vehicle sales will be down by some three per cent in 2008.

Does this mean that there is trouble ahead for Canada? Possibly. While Canada has better weathered the global credit meltdown and our housing market continues to surge ahead, a recession in the US could spell trouble and might lead to tightening of the belts and wallets here at home. So where is the upside in this? Well, one thing economists predict is that if things get rough, Canadians will likely hold onto their current vehicles longer and forego spending on new ones. If that happens, service providers could see, even in tough times, better business as people invest in keeping their current cars running longer as it is much cheaper to do so than buying a new car.

However, service provides will have to work very hard to get those customers into the bays. Tough times mean people will be more reluctant to part with their money. There will likely be many customers who will try to put off necessary maintenance and repair work as long as possible, or try to push back on price, in order to reduce how much they have to pull out of their wallets. Service provides will have to be very careful not to fall into a trap of dropping their prices in order to get work as it will only cause a downward pressure to keep dropping prices which will hit the bottom line and be hard to stop. Instead, service providers will have to work hard to build trust and work at establishing long-term relationships with customers in order to get them into the bays regularly. With that element of trust and relationship building, one will be able to not only keep customers, but to bill at levels that are both competitive and supportive of a healthy bottom line. So while the economy may take a hit in the coming months, your business does not have to if one practices good business management, build on customer relationships and avoids the temptation to try and compete by lowering one’s prices.

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One thing economists predict is that if things get rough, Canadians will likely hold onto their current vehicles longer and forego spending on new ones. If that happens, service providers could see, even in tough times, better business as people invest in keeping their current cars running longer.