Rio Osumi, director of Japan treasury for Intel Corp., was working on a presentation at 2:46 p.m. on Friday, March 11, when the room started to shake. She dove under her desk. The 46-year-old Tokyo native wasn’t panicked. The take-cover move she had been taught in grade school was a reflex. But Osumi knew this was different. “It was shaking violently, up and down,” she recalls. “Usually it shakes horizontally. I knew this was a bad one.” Once again the orderly world of treasury and risk management plunged into crisis as the world’s third largest economy suffered an unprecedented disaster.
Multinational treasury staffs deployed quickly to shore up liquidity, cover currency exposures, investigate supply chain damage and react to risks that were hard to predict.
Once the dust settled, Schloss found Ford was in pretty good shape. Its cash remained accessible; its liquidity was not in peril. The expanded revolver agreement closed on schedule on March 31. No extraordinary steps were necessary to manage currency risk. While its Japanese rivals were hit hard, Ford faced only manageable problems. For example, some popular paint colors, including Tuxedo Black, were made solely at a badly damaged plant, Schloss says. Buyers can still get those colors if the cars are in dealer stocks, but they will not be able to order new cars in those colors for a while.
In the sensitive world of just-in-time inventory, Ford anticipated some production slowdowns. It moved to minimize the cost by juggling the schedule for plant downtimes that are a normal part of auto production, moving them up for some plants and back for others, so that they would be in sync with production and inventory revisions, Schloss explains.
Although there was no general crisis at Honeywell, the disaster touched off a vigorous review process. “We have a robust business process around our supply chain,” says John Tus, treasurer and vice president. “Once the earthquake and tsunami occurred, each business unit went into action to gauge the impact on their suppliers and customers and to report what they expected. We’d do this in any disaster.”
The experiences of the Intel, Ford and Honeywell treasuries provide a window onto the problems for business plans, budgets, cash forecasts, and property insurance availability and pricing. Dislocations could be far-reaching.
Another issue is attracting the right personnel to Japan. By the time that the damaged Fukushima nuclear reactors added a third element to the disaster, multinationals were pulling nonessential executives from Japan and bringing them home for safety and consultation. “Now some are finding it hard to get senior people to move with their families to Japan,” says Torsten Kaehlert, head of transaction banking in Japan for Standard Chartered Bank.
The disaster in Japan may be unprecedented, but after a slew of natural disasters starting with Hurricane Katrina in 2005, treasury staffs have learned how to operate in crisis mode.