Three Likely Disruptors and Opportunities for Manufacturers in 2023

The ever-resilient manufacturing sector has been bruised (and some might say battered) in recent years, through the pandemic, raw material shortages, increased labor costs, rising interest rates, and Russia’s war against Ukraine. Below are the three likely disruptors manufacturers face at the outset of 2023, and tips for surviving (or even thriving) in the face of what Foley and Lardner’s manufacturing sector attorneys see coming down the road:

More manufacturers will suffer financial distress, but there will be possible opportunities for growth through acquisition. Lenders, many of whom previously provided extensions of credit and forbearance on defaults, are increasingly asserting their rights and remedies in the case of new or ongoing defaults. Variable interest rate facilities have become more burdensome. The cash flow and credit issues that borrower companies face may result in opportunities for other companies to purchase them (or their lenders’ debt) at depressed valuations. While these deals may appear hard to come by, shrewd investors will be well served by considering both out-of-court and bankruptcy acquisitions of the distressed companies under pressure due to the current environment. For more information, click here.
More manufacturers will face continued increased costs, but there are possible opportunities for cost-recovery. While manufacturing costs continue to rise, suppliers who seek cost recovery from their customers and who support their request with transparent and thorough data are more likely to achieve support from their customers. This can be in the form of increased prices, a lump sum payment, or more profitable go-forward business. These negotiations can strengthen long-term relationships within the supply chain.
Some manufacturers may be disrupted by the transition from internal combustion engine (ICE) vehicles to electrical vehicles, but there will be opportunities for growth in the new frontier. Perhaps not since the introduction of the Ford Model T has there been a more exciting and transformative time in the automotive industry. Countless opportunities exist for startup and early-stage companies seeking to supply new components required for electric vehicles, with many still in the development phase. Federal grants to support this nascent industry are increasingly in play, such as those awarded by the Department of Energy in 2023 to support the manufacture of batteries for electric vehicles in the U.S. For more information, click here.

Foley’s manufacturing sector attorneys who focus on financially distressed suppliers can help identify and maximize opportunities in a challenging market.

Disclaimer

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.