Thomas Johnstone
Age: 54
Company: SKF
Year named CEO: 2003
Company employees: 43,653
12-month B-share performance: –19.9 percent
Compensation: 15.5 million Swedish kronor ($2.0 million)
A year ago Tom Johnstone was stunned when he saw the swift erosion of business from the automotive industry as the recession whacked global car sales. But he was equally worried about the prospects for industries like wind-power generation and cement and paper making, which are major customers of SKF.
SKF is a leading manufacturer of ball bearings, from pea-size bearings for motorcycles to much larger parts for wind turbines, trucks and heavy industrial equipment. The rapidly eroding economic climate took its toll on most of those business lines. “By the end of the fourth quarter, demand in basically all divisions of SKF was down, even if some businesses were still doing well,” says Johnstone.
The executive responded promptly, putting more than 6,000 workers in Germany and Italy on part-time shifts. The tactic is an “excellent tool to buy time” in the face of a collapse in demand, he says.
Since then, Johnstone has had to cut further, shrinking his workforce by 2,600 employees, to 43,653, by the end of the first quarter. SKF is also slashing capital expenditure by as much as 30 percent this year, and Johnstone plans even steeper cuts next year. Still, the CEO is investing in the future. The company is going ahead with plans to open two ball-bearing manufacturing plants in India, after having put the project on hold for nine months. SKF is also building a plant in Russia to provide parts for the Russia rail industry, which Johnstone says is a huge growth opportunity.
“We are varying the speed, but we’re still going ahead with these projects because they’re focused on faster-growing markets,” Johnstone explains.
“We still believe in the activities we see in Eastern Europe, China and India, because that is where demand will grow in the future.”
