The Downturn: Is the Worst Over?

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Congress and the White House have given the American people confidence that they will do whatever needs to be done—and then some—to prevent a replay of the Great Depression.

3. The Bottom Didn't Drop Out. When consumers and business executives realized that we were not heading for the end of capitalism and not everyone would lose their job, they stopped hunkering down. Companies began spending again. Likewise, many consumers had deferred purchases for six to nine months. But everything can't be deferred forever. So some consumers, by necessity or choice, also started spending again—spurred in many cases by falling prices.

4. Banks Are Lending Again. It turns out that everyone is not a deadbeat. There are lots of viable businesses, especially after they cut 20% out of their cost structure. As bankers get used to this new environment, they may be more confident in their ability to separate good risks from bad. They also may be realizing that the spread between the rate they pay for funds (which is now very low) and the rate they charge borrowers is larger than it has been. There is a lot of money to be made on good risks.

5. Preparing to Win. Many companies have been getting into fighting shape during the recession—cutting excess costs, restructuring manufacturing facilities, etc.—and are now starting to make their moves: buying "wounded" assets on the cheap, capturing customers from hurting or bankrupt competitors, and attracting world-class talent from those who can no longer afford to pay the market rate.

Unfortunately, the reports I hear from Europe are not the same. Just further declines, with no signs of an upswing. Europe, which entered the recession after the U.S., may still be working on the downside. Hopefully, this will change soon.

Many things can still go wrong. We are not out of the woods. But perhaps we have reached bottom and are heading up again. Perhaps the U.S., with our economy on the rebound, will lift the rest of the world from recession. And perhaps we will see confirmation of this before 2009 ends.

Perhaps, too, if your company has not yet taken the steps necessary to win on the upswing—cutting fat and turning it into muscle—now is the time to do so. Take advantage of the fact that some companies are struggling, thus creating the opportunity for you to hire their best people, claim their customers, and buy their assets on the cheap.

I think I see a light at the end of the tunnel and I don't think it's an oncoming train. Best to be prepared, however, whether it's a train or the light of a growing economy.

Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group and author, with James W. Hemerling and Arindam K. Bhattacharya, of GLOBALITY: Competing with Everyone from Everywhere for Everything (Business Plus, June, 2008).

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