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April 03, 2009

Is There Such a Thing as "Recession-Proof"?

Marc Tracy

bizbox.slate.com

Summary

A few recent posts on how the struggling auto industry is affecting small businesses formed the sort of juxtaposition that positively scream

A few recent posts on how the struggling auto industry is affecting small businesses formed the sort of juxtaposition that positively screams, "Blog about this!" So here we go.

On the one hand, the potential collapse of the Big Three--although, really, at this point, it's only two of the Three, General Motors and Chrysler, who are in serious danger of insolvency should the federal government not once again step in with favorable loans--threatens untold thousands of small businesses both directly and, through the demolition to the whole Midwest region's economic prospects, indirectly. We've written on this before. And Forbes just published a nice piece on the businesses that form a part of the Three's supplier networks and thus would be likely to go under water should any of the big firms disappear. Some of these are themselves big (you may have heard of Dana, Delphi, and Visteon, for example), but others, such as Plymouth, Mich.'s E&E Manufacturing, are small--E&E had only 500 employees, and, given the way things have been, it has recently laid off half of those.

On the other hand, there is a different type of business--a type that we at least would think is unusually dominated by small corporations--that is actually benefiting from consumers' desire not to buy things and especially not to buy cars: we speak (and Entrepreneur.com speaks), of course, of auto-repair shops.

Think of it this way: if demand for cars themselves can vary with the times--the economic term is "elastic"--demand for the use of cars varies much less. Yes as people get laid off, or are permitted to work from home, or gain access to public transit, they may need to drive less; but, ultimately, no matter what, most people are going to need to drive and probably own a car. During good times, this would lead to a surge in car purchases. But during bad times, it leads to a surge in repairing of old cars, so that, at little cost, a much larger cost can be postponed.

Then again, thoughts of auto repair and other supposedly recession-proof industries (actually, if anything auto repair isn't so much recession-proof as recession-advantaged) caused Independent Streetto take a closer look at the whole "recession-proof" concept and, ultimately, to find it wanting. The blog talks to the proprietor of, yes, an auto-repair shop: "People just aren’t fixing their cars, he said, unless it’s absolutely necessary."

As some of us like to say, why is this recession different from all other recessions? It seems as though not for a very long time--at least the early 1980s, if not (gulp) the 1930s--has the macroeconomic situation been so bad in so many ways and for so wide a swath of the country. Yes, the auto and finance industries are getting hit especially hard (and don't forget journalism...); the Midwest is in particularly dire straits. But it seems that no industry or region is an island. Which is why the best steps to take are likely not industry- or region-focused but national. When both auto dealers and auto repair shops are struggling, extraordinary measures are required.


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