Issue link: https://iconnect007.uberflip.com/i/1236528
APRIL 2020 I PCB007 MAGAZINE 25 Matties: So when you look at the current situ- ation, what do you feel is the most immediate or critical financial concern we should have in our industry? DuBravac: Well, one of the things that we are seeing now, which is a good sign, is that the Federal Reserve is implementing a number of tools. Obviously, they cut their target interest rates early as this started to materialize into much more than just a supply shock. But they also dusted off their toolkit from the 2007 and 2009 period, and they begin to look at every- thing that they used then and what they could use now. And they were quick to implement some of those tools. Even this morning, the tools were expanded that they had in place. Some of these, we did not see until the eighth or ninth month of the financial crisis in 2007, 2008. Some of these were not implemented until late in 2008. And so I do see a quick re- sponse. We're using the tools that worked well during that period. I think those are all very good signs that re- move some of the uncertainty, that we've seen the Fed respond very quickly, using tools that have worked in our recent past in the last re- cession, so that's a good sign. What I am mon- itoring closely and what I talk to companies about frequently is how their lines of credit are looking. Because if you think about the lines of credit that businesses are using, often they might finance a warehouse or other equip- ment on any real estate, typically office build- ings and in factories, warehouses tend to be fi- nanced on five-year balloons. Every five years, they have to either refinance that loan or pay it off, and often they're just refinancing it with the current issuer of that loan, be it a bank or someone else. What we saw during the financial crisis was that even a company that was doing well, oper- ating fine, they were still selling product, they were able to make their payments, those loans were being called in. So when they were due at five years, they weren't being extended. And that left businesses running to find alternative lending sources or being forced in some cases to sell this asset, sell warehouses, sell facilities. And so we watched those types of things very closely because even a company that is operat- ing well and operating fine in this type of diffi- cult environment could run into trouble if they have difficulties on the financing side of it. Now a lot of what the Fed has implemented is to help address some of those things. And we haven't heard from any companies yet that are facing these types of challenges, but I defi- nitely am always asking about these types of things and always on the lookout for compa- nies that might be facing any type of financial hardships as a result of this. Somebody should be checking with their bank; they should be ensuring that they have good lines of credit, that those lines of credit are secure, that they'll be able to tap those if needed, that they'll es- sentially have the liquidity that they'll need should they run into financial constraints that are out of their control. Thus far, it looks like a lot of the manufac- turers continue to operate "as normal." And I say "as normal" in quotes. Obviously, this is a very strong shock that we've seen. And from the beginning, electronics manufacturers and suppliers were impacted by this because they were having to adjust everything as new in- formation was coming out. But at least as of last week, we were hearing from companies that they continue to operate at close to full capacity. In some instances, if they're within the medical supply chain, they're seeing new orders come in. Other companies report that they are ramping up production and also in- ventory builds just in case they run into any operating constraints or issues. For example, warehouses closing down or other things like that. Transportation is becoming more diffi- cult. They want to be able to turn to additional inventory that they may have on stock to be able to provides and service the sales that they have coming in. So the electronics manufacturing sector, at least for right now, seems to be intact, seems to be operating at close to full capacity here in North America. And what we're hearing from Asia is that things have quickly come back on- line and by the end of the month they'll be at or very near full capacity as well.