Four recession-based questions manufacturing companies should ask now

Advanced manufacturing and mobility businesses across Canada are well equipped to weather any economic disruption ahead by capitalizing on pandemic-era agility.

In brief

• Uncertainty abounds, but advanced manufacturing and mobility (AM&M) businesses can transform volatility into proactivity now.  
• Assessing tax credits and other programs can reveal new opportunities for AM&M to continue driving innovation forward. 
• Getting clear on what’s available can also empower organizations to create more efficient operations at the very same time.

Inflation is holding steady. Uncertainty is clouding the horizon. But advanced manufacturing and mobility (AM&M) businesses across Canada are well equipped to weather any economic disruption ahead. How? By capitalizing on pandemic-era agility to prioritize bold innovation and efficient operations in equal measure.

AM&M organizations are primed to transform tumult into transformation

Since 2020, AM&M — and all industries — have faced wave after wave of complex disruption. What many may not realize is the degree to which navigating those obstacles has actually empowered businesses with new muscles to flex from here on out.

How so? Surviving the pandemic years — from supply chain breakdowns and base material shortages right through to talent gaps — has pushed organizations across this space to build resilience, cultivate agility and shift gears more often than ever before. The industry has learned how to ride out unpredictable storms by embracing change and pivoting quickly. All of this is helpful. It’s made AM&M organizations fundamentally nimbler. Organizations can draw on that quality now to continue propelling progress, even as the economic outlook increasingly points to a potential recession.

How can AM&M harness the power of agility in a recessionary climate?

It’s not enough to simply “be” agile. Applying the spirit of agility on the road ahead means AM&M organizations must be intentional about what they do next. That means looking hard at innovation priorities and operational efficiencies to identify ways to make a strategic impact quickly, efficiently and effectively. What could that look like from day to day?

Answering these four questions constitute a good starting point for any AM&M organization looking to channel what they’ve learned into meaningful progress, no matter what comes next:

How can AM&M harness the power of agility in a recessionary climate?

It’s not enough to simply “be” agile. Applying the spirit of agility on the road ahead means AM&M organizations must be intentional about what they do next. That means looking hard at innovation priorities and operational efficiencies to identify ways to make a strategic impact quickly, efficiently and effectively. What could that look like from day to day?

Answering these four questions constitute a good starting point for any AM&M organization looking to channel what they’ve learned into meaningful progress, no matter what comes next:

1. How do we plan for the worst while hoping for the best? Economies will always be cyclical. The good news is AM&M organizations that have improved their ability to roll with the punches are now more flexible and better prepared to move through the ups and downs.

Six months from now, the world will likely look very different than it does today. So, maintain cautious optimism to keep things moving forward and emerge stronger. That could mean exploring tax credits or stimulus programs as they’re launched to continue spurring homegrown innovation.

 
For instance, a new investment tax credit covers up to 60% of costs for expenditures relating to carbon capture, use and storage for expenses incurred in 2022 or later. In 2023, two more new credits will come online, covering up to 30% of capital expenditures relating to clean technology and 40% of investments in clean hydrogen production, respectively. Also in 2022, the federal corporate tax rate for manufacturers of qualifying zero-emission technology is reduced by a significant 7.5 percent.

All these developments are in addition to existing Scientific Research & Educational Development (SRED) tax programs, which could potentially unlock new possibilities. It is possible to plan for the worst while hoping for the best if you can get comfortable in the grey zone and forge ahead anyway. 

2. Is it time to double down on sustainability? Even the most difficult economic circumstances could bring opportunities to transform your environmental, social and governance (ESG) aspirations into meaningful progress and concrete action. That’s because recessionary times are likely to generate some kind of government stimulus tied to priority areas and challenges like climate change.

Government action on this front could accelerate electrification of the grid — an important possibility for businesses across the AM&M space. What’s more, a move like this could generate opportunities to incur a faster depreciation of zero-emission vehicles in fleets.

Stay on top of changes and updates. Scan the market to spot opportunities. Then speed up any programs or projects that could benefit from this unique environment.

3. Can we prime operations to improve cash flow? Now is an ideal time to mine operations for additional efficiencies. You may just find cash savings waiting to be uncovered. True, too, for opportunities to reduce the costs of base materials or services, extend cash flow, slow down investment, plan for continuously rising interest rates and balance working capital. You simply don’t know what’s possible until you carry out a broad-based operational analysis to understand where opportunities might lie.

4. How do we navigate our own softest possible landing? If business is slowing down, it’s okay to slow down tax installment payments. If a company that’s earning less than last year, it might be beneficial to combine it with a more profitable one. If a big capital expenditure is coming, maybe it’s the right time to accelerate tax deductions to push that capital gain into the future.

Stepping away from the same old, same old approach and being flexible enough to change things up can help AM&M organizations generate better outcomes for their own individual bottom lie. If a company does have losses, think about filing early to carry those losses back. Don’t be afraid to try something different this year.