Many companies to reduce capital spending, production capacity
ISM report shows recession is taking its toll on capital spending budgets
By Jim Carbone -- Purchasing, 1/30/2009 1:23:00 PM
Many companies will cut capital expenditures and production capacity this year because of poor sales, economic uncertainty and the difficulty obtaining financing, according to a special survey conducted by the Institute of Supply Management (ISM).
ISM surveyed its members with senior-level job titles on how the financial crisis will affect their companies’ plans for capital spending and production capacity. Seventy-seven percent said their companies will reduce substantially or reduce slightly capital spending in 2009. Thirty-five percent indicated they would substantially reduce capital spending while 42% would slightly reduce capital spending.
Respondents said capital spending would be cut because of worsening sales prospects, economic uncertainty, the high cost of financing and difficulty obtaining financing.
The survey also found that 42% of respondents indicated that their organization plans to reduce substantially or reduce slightly production capacity for 2009. Of those, about 90% indicate that the reduction would be temporary, while nearly 10% said the reduction would be permanent.
As reported on Purchasing.com, 3M this week announced it was cutting back its capital expenditures budget by 30%.
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