Ceramic Industry

INSIDE CI<br>Looking Back, Looking Forward

January 2, 2003
If you’ve read some of the economic headlines lately, you’re liable to feel as if the New Year isn’t getting off to a very happy start. With continued terrorist threats and a potential war with Iraq, many forecasters have remained cautious in their outlook, if not downright pessimistic.

“The U.S. unemployment rate is at its highest level since August 1994;” ... “The manufacturing sector declined in November for the third consecutive month;” ... “Major [market] indexes down for two straight weeks ....”

If you’ve read some of the economic headlines lately, you’re liable to feel as if the New Year isn’t getting off to a very happy start. With continued terrorist threats and a potential war with Iraq looming, many forecasters have remained decidedly cautious in their outlook, if not downright pessimistic. Two years after the economy first started taking a nosedive, companies are still afraid to invest in new equipment and employees, and an unrelenting focus on the immediate bottom line has forced continued cutbacks in an effort to keep profit margins in the black.

Ceramic Industry’s 2003 Raw & Manufactured Materials Review and Forecast (this month’s cover story) paints an equally dour picture. Production and consumption of many materials were down in 2001, in many cases for the second or even third consecutive year. And with the economic outlook for the U.S. as a whole “uncertain” at best, future prospects for materials—and for the ceramic and glass markets they serve—appear equally shaky.

But it’s important to remember that appearances can be deceiving, especially when it comes to market trends. History tends to repeat itself, and every down cycle is inevitably followed by an upswing. The question, of course, is when that upswing will occur, how large it will be and how long it will last—and unfortunately, no one has a crystal ball that can accurately forecast those trends. According to some more optimistic views, technology spending is set to increase by as much as 35% in 2003, with an overall growth of 3% in gross domestic product.* Can we count on those numbers to be 100% reliable? Of course not. But at some point, we have to stop worrying about what’s going to happen tomorrow and start thinking about long-term potential.

This is apparently what Coca-Cola had in mind when it announced in December that it would no longer offer quarterly or annual earnings guidance.** By not concentrating on or trying to predict the inevitably uncertain near-term future, the company is enabling itself to focus instead on its long-term goals. “We believe that establishing short-term guidance prevents a more meaningful focus on the strategic initiatives that a company is taking to build its business and succeed over the long-run,” said Douglas N. Daft, the company’s CEO and chairman of its board of directors. Other companies are expected to follow Coke’s lead in the future.

It’s always much easier to plan ahead and invest in new technologies when the current economic news is good and we feel confident that it will be even better in the near term. But even the best predictions, whether positive or negative, are only educated guesses based on historical trends. No one really knows what tomorrow—or next year—will bring. What is certain, however, is that the companies that believe in and invest for the long term will be the ones most likely to celebrate an even brighter future in the next New Year.

* CNN/Money, December 12, 2002; and Standard & Poor’s The Outlook, December 11, 2002. ** Coca-Cola’s online Press Center, http://www.cocacola.com.