Wednesday, 3 June 2009

Clearing out the dead wood

The demise of LDV yesterday is a bitter blow to both the van manufacturer, its workforce and the company’s supply chain, but it was probably inevitable. I had hoped that Weststar had a plan for the company’s future, niche green or biofuel vans or something, but in all honesty it was always going to be a long shot.

However, as we begin what is likely to be the long and tortuous process of lifting ourselves out of recession, one or two things are becoming increasingly clear, namely that this recession will probably be more cleansing than catastrophic. The fear, as little as 3-4 months ago, was that good businesses of all sizes would be forced to the wall because of the dire economic news. That concern is now beginning to lift as the credit markets thaw and lending begins again as banks get used to their new status of being publicly owned.

With hindsight, we may therefore look back on this recession as being a cathartic clearing out of dead wood companies that have teetered on the brink, even in the good times. LDV will now unfortunately go into history alongside another acronym, MFI, and other companies which have failed to keep pace with the times, such as Woolworths and Whittards of Chelsea.

The path to insolvency for each of these companies was eerily familiar. A gradual loss of market share and consumer confidence, management buy-outs promising to resurrect the brands, fierce competition from massive, often global companies, able to exploit huge economies of scale, failure to adapt to changing market dynamics and an inability to identify and seize opportunities.

A former colleague of mine who advised Whittards told me once that the company really missed the boat with the explosion of the coffee shop culture of the late 90s and the rise of Starbucks. It limped on for a while, but the end was inevitable. The same goes for LDV.


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