Manufacturers should spread their funding risk to counter Brexit uncertainty
Manufacturers need to focus even more closely on cash management and spread their funding risk to counter the current Brexit uncertainty, according to financial management specialists at Hitachi Capital Invoice Finance.
As the country prepares for an extended period of instability and uncertainty following June's Brexit vote, manufacturers could find there is heightened risk of supply chain disruption, which could put pressure on cash flow at this critical time. There is also a risk that access to funding could become restricted.
For smaller businesses, if key customers pull back from orders and credit lines suddenly get pulled, the pressure on cash flow could force them to close.
According to Hitachi Capital Invoice Finance, businesses in the sector should be looking for ways to spread their funding risk.
John Atkinson, Managing Director of Hitachi Capital Invoice Finance, explained: “After the credit crunch in 2008, businesses found it much harder to raise finance to fund their business strategies and many were forced to put their investment plans on hold. While lenders are currently reassuring businesses that they are still ‘open for business’, this position could change if orders begin to stall and supply chain disruption spreads.
“The explosion of alternative funding solutions in recent years means businesses have more options and they should seek advice about how they might use these to bridge any funding gaps and keep investment plans on track.”
Before taking action to protect cash flow, manufacturers need to conduct a financial risk assessment of their business model based on a variety of Brexit scenarios. Such risks are not always readily apparent but can have devastating consequences if left unchecked.
Atkinson added: “Most manufacturers have established good relationships with their key suppliers, but they may not be aware of potential problems lower down the chain if tier two or three suppliers are heavily reliant on trading links in the EU. By identifying such issues early, it should be possible to put mitigating strategies in place.”
From a financial perspective, businesses may wish to avoid getting into a situation where they are spending more time chasing payments and managing bad debt. By using flexible finance solutions, such as invoice finance, they can pass ownership of any unpaid invoices to a third-party organisation, which assumes responsibility for recovering the money. At the same time, the business benefits from almost immediate access to finance, which it can draw down as needed.
Atkinson concluded: “Businesses learned a lot during the last economic downturn. They know the importance of careful cash management and ensuring the business has access to the funding it will need to take advantage of any improvement in trading conditions in the future.”
John Atkinson is Managing Director at Hitachi Capital Invoice Finance.
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Ultium Cells LLC/Li-Cycle: Sustainable Battery Manufacturing
Ultium Cells LLC - a joint venture between General Motors and LG Energy Solutions - has announced its latest collaboration with Li-Cycle. Joining forces the two have set ambitions to expand recycling in North America, recycling up to 100% of the scrap materials in battery cell manufacturing
What is Ultium Cells LLC?
Announcing their partnership in December 2019, General Motors (GM) and LG Energy Solutions established Ultium Cells LLC with a mission to “ensure excellence of Battery Cell Manufacturing through implementation of best practices from each company to contribute [to the] expansion of a Zero Emission propulsion on a global scale.”
Who is Li-Cycle?
Founded in 2016, Li-Cycle leverages innovative solutions to address emerging and urgent challenges around the world.
As the use of Lithium-ion rechargeable batteries in automotive, industrial energy storage, and consumer electronic applications rises, Li-Cycle believes that “the world needs improved technology and supply chain innovations to better recycle these batteries, while also meeting the rapidly growing demand for critical and scarce battery-grade materials.”
Why are Ultium Cells LLC and Li-Cycle join forces?
By joining forces to expand the recycling of scrap materials in battery cell manufacturing in North America, the new recycling process will allow Ultium Cells LLC to recycle cobalt, nickel, lithium, graphite, copper, manganese and aluminum.
“95% of these materials can be used in the production of new batteries or for adjacent industries,” says GM, who explains that the new hydrometallurgical process emits 30% less greenhouse gases (GHGs) than traditional processes, minimising the environmental impact. Use of this process will begin later in the year (2021).
"Our combined efforts with Ultium Cells will be instrumental in redirecting battery manufacturing scrap from landfills and returning a substantial amount of valuable battery-grade materials back into the battery supply chain. This partnership is a critical step forward in advancing our proven lithium-ion resource recovery technology as a more sustainable alternative to mining, " said Ajay Kochhar, President, CEO and co-founder of Li-Cycle.
"GM's zero-waste initiative aims to divert more than 90% of its manufacturing waste from landfills and incineration globally by 2025. Now, we're going to work closely with Ultium Cells and Li-Cycle to help the industry get even better use out of the materials,” added Ken Morris, Vice President of Electric and Autonomous Vehicles, GM.
Since 2013, GM has recycled or reused 100% of the battery packs it has received from customers, with most current GM EVs repaired with refurbished packs.
"We strive to make more with less waste and energy expended. This is a crucial step in improving the sustainability of our components and manufacturing processes,” concluded Thomas Gallagher, Chief Operating Officer, Ultium Cells LLC.