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Costs will rise for companies, and their supplier, there is no escape from the increases ? save strong economical models enabling companies like the Clean Plus® Product Group to avoid price increases since 2001. Climate change is a major headache, it is here, and taking it straight on is a solid bet. Congress is looking at it and come next year will throw more than its two cents of expense at the industry. The shock will be serious knocking at least 3% from US gross domestic product in the near term. Fuel and electricity will be first amongst the victims, and this notwithstanding major efforts to develop alternative sources of energy. New prerequisites to operations will increase expense for utilities in general by at least 20%. Consider also the costs associated from behavioral modifications, the law of supply and demand will be deeply affected. All told, the average cost for the players in this industry will be 50% higher than today. The Car Care industry won’t get off easy, gas pump prices will be about $2 a gallon higher. The purchase of cars that use less fuel will however be limited initially by a sky high sticker price. Energy intensive industries are likely to be smacked hard : Makers of chemicals inherent to the Automobile After-Market, electronics, cardboard and boxes, aluminum, steel, glass and plastics. Most companies will lean on their suppliers to help. That spells headaches for many smaller businesses, an opportunity nevertheless as I outlined in a previous article about the acquisition strategies adopted by global and leading player Falken Industries Ltd OTC : FLKI. Another headache could come from companies that opt to establish their own eco standards. Wal-Mart, for example, is directing a requirement for its suppliers to certify the eco-friendliness of every product they sell to the retailer. Remember Eco-Pledge certification and adoption of the standard by such international brands as Clean Plus®? That Product Group indicated a tactical plan to certify its product’s carbon footprint. Many small to medium manufacturers will need to remodel their supply chains, or merge or be acquired, not just firms in the US. Transportation costs are likely to spring through the roof, making near-sourcing more attractive for some. On the other hand, local providers will have to crank up prices to offset their volume inefficiencies. Some will not live on collapsing from the blow, sending companies depending on them begging for cover. “When a manufacturer goes out of business, its suppliers are obviously hurt and affected. The losses in employment translate to less business for local shops, stores and service companies, imperiling their operations”, says Manuel Garcia, communications officer who now heads the Environmental Strategies Committee of the Product Group. “Consolidation, mergers, acquisitions are and will continue to be the name of the game for small to medium size manufacturers, which is the reason FLKI is aggressively pursuing an acquisition strategy” adds Garcia.
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