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Ark. businesses tighten budgets, cash flows, look for opportunities in economic downturn Thursday, Mar 6, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - In University of Arkansas economist Kathy Deck's eyes, a dismal picture of the state's economy that had been developing in 2007 became crystal clear in the last three months of the year. "We were getting contradicting data in the last few quarters about where the economy is going, but that has ceased," Deck said Wednesday after delivering an over-breakfast analysis of the fourth quarter. "We now really have a lot of negative signs." Manufacturing employment, which accounted for 16 percent of the state's jobs in 2007, fell nearly 5 percent during the year. The state's unemployment rate rose to 5.7 percent in December, up from 4 percent in October 2005. Additionally, foreclosures are up, consumer confidence is down and inflation is rising, Deck said. "All of these things point to a lot of weakness in the overall economy," said Deck, the director of the UA Center for Business and Economic Research in Fayetteville. Arkansas businesses, large and small, say they are tightening their budgets, cutting inventory levels and making a point to collect revenue faster, but that business isn't terrible. In fact, some say the economic downturn has created opportunities for them. "We're not fully buying into the sky-is-falling mentality," Alexander-based Power Technology Inc. executive Walter Burgess said Wednesday, "because I think the tech sector is pretty strong and I think that's where our customer base is." That's not to say the economic downturn has not caught the attention of the company that employs 60 people, including sales representatives on the coasts, and manufactures and distributes lasers and laser products. Until two months ago, sales were 60 percent to 75 percent of target, Burgess said. "We've started to watch the trade credit," he said, and when accounts receivable go delinquent, "we're starting to pursue them at an earlier time instead of waiting and letting them go long on their payment." Maverick Transportation is also using a tougher, more watchful management style to control business at a time when demand is slowing because of a weakening demand for housing materials, the Little Rock-based trucking company's bread and butter. Maverick is casting a mindful eye toward the budgets for all aspects of its business, right down to the mail room, and negotiating hard for the best possible diesel contracts as fuel prices climb, spokeswoman Spring McMurry said. Its 1,700 employees are not in danger of losing their jobs, and existing plans, like a building expansion that began years ago, have not been curtailed, but future plans are conservative, McMurry said. "We're not making any major investments in terms of things that we don't have to have to operate," she said. "Any money that's being spent is necessary to day-to-day operations, nothing beyond that." Still, both Maverick and Power Technology say they see a silver lining in what most economists are calling a recession, the nation's first since 2001. "With the dollar so weak against the euro, we're really trying to push that in terms of our European customers since they're getting a good deal with us," Power Technology spokeswoman Ginny Wiedower said. The company's bigger accounts have always been overseas, but a poor U.S. economy has been an incentive to refocus on business outside the country, Burgess said. Maverick will have to wade out the downturn before its possible benefits occur. "Where some of our competitors might not make it through this, we really feel confident that we will, and I think that puts us in a better position when this is all over with," McMurry said. The effects of the last recession were relatively mild for Arkansas business because the state did not fully experience the boom leading up to it, and to a degree, the same thing could happen this time around, Deck said. Some businesses are even doing well, she said, noting an announcement this week that Nestle Foods would invest $60 million and add 200 jobs in Jonesboro and natural gas exploration in the Fayetteville Shale play activity that has benefited many other businesses, all the way down to restaurants. "Still, when you look at the credit market problems, inflated housing prices, erosion of consumer confidence, high gas prices - those are all factors that Arkansas has to deal with as well," Deck said. Retailers are well aware of her point, according to Carole Lucas, who manages Austin's, a West Little Rock home furnishings store. "People are out to look versus buy," she said. "They're a little more cautious with what they're spending." |
