Mais Oui

Mais Oui - January 2009

by Cherry Fisher May

For these holidays, you can’t beat home sweet home As we go to press with this issue of Acadiana Business, Chrysler has just announced a one-month, nation-wide shutdown of production for its entire fleet as a last-ditch effort to survive into the new year. Ford soon followed with plans for the temporary closure of 10 of its manufacturing facilities. On the heels of a meltdown in global financial markets (that have impacted even Sweden, pundits warn warily), these are scary times indeed.

Locally, other than a decline in new home construction, Acadiana has felt little impact so far. But the price of oil dropped this week to $36 a barrel — the lowest since July 2004 — and Goldman-Sachs projects an average price of $46 for 2009, much lower than predictions just a few months ago. Since the summer peak of $147 per barrel, crude oil is down more than 72 percent, and for those of us who survived the crash of the mid-’80s, the steep and rapid decline is a sobering reminder of Christmases not-so-long past.

But that’s where the similarities end. The summer high may have been intoxicating but those inside “the bidness” knew better. “Our clients have been very conservative,” says MidSouth Bank President Rusty Cloutier. “We don’t see them highly leveraged like they were in the ’80s.

IberiaBank’s Lafayette market President Pete Yuan, who lived through the downturn in Texas, agrees that local lenders and their customers learned many lessons from the past. “The residential construction community has been disciplined and responsible in anticipating the slowdown,” he notes. “On the commercial side, projects that were planned are continuing but not at the booming rate they were.”

Acadiana’s economic base may be more diversified now than it was 25 years ago — and 2009 will be a real test — but the energy sector remains the driver. Acadiana Business recently co-hosted a summit of local experts who talked candidly about a slowdown in the industry but felt that companies paying big bucks for leases in North Louisiana’s Haynesville Shale and deep water drilling rights will continue to mine those investments. That should soften the blow for Acadiana. But some oil companies are already cutting back. No one is talking lay-offs, but we may see reductions in other ways, like attrition, reduced overtime and early retirement packages.

And although home sales are also down, Van Eaton & Romero CEO Bill Bacque says it would be a mistake to blame it all on the national economic news. “Between 1991 and 2004, the average increase per year was 3 percent,” he says. “In 2005 (post hurricanes Katrina and Rita) the rate of home sales jumped by 26 percent and continued to rise over the next two years. All prudent professionals knew it was an anomaly. A market like that can’t continue; part of what’s happened in 2008 would have happened anyway, regardless of the national economy.”

Even Cloutier, a pragmatist not prone to painting rosy pictures, filters the national headlines for south Louisiana and says there’s no place he’d rather be in business right now. “I still believe that we live in the best 200-mile radius of the United States,” he says. “People can make money at $40 a barrel and $5 an mcf for natural gas. They’ll just make a little bit less.”

“This is the time for all businesses to assess internal operations for efficiency,” says Yuan. “We’re cautiously optimistic that oil and gas prices have hit bottom. But we’re urging our clients to make a plan and be prepared.”

Cloutier anticipates a slowdown in capital spending but not a dead stop: “We’re telling our clients that we may have tough economic times ahead and to manage their businesses as such but not to forget about the future.”

As we pause for reflection during this holiday season, I recall past Christmas wishes that were only half in jest: God, grant us one more boom. We promise not to screw this one up.

Looks like we’re about to find out.