James Cowan makes difficult decisions to stay in business at American Railcar Industries

James Cowan kept hoping that he had hit rock bottom with the layoffs at American Railcar Industries Inc. But as he made a third round of cutbacks in two years, it was getting really hard to believe that his luck was about to turn around.

“Part of the reason we went through it three times was when we did our first assessment, we thought the business was going downhill,” says Cowan, the company’s president and CEO. “Then a couple months after that, you realize once you are going through the first cuts that the dire strait is going to be more dire.

“So now you’re a quarter later, maybe four months later, [and] we thought we were going to get this order or that order and none of them came through. So our backlog continues to go down. Then you make the second wave of cuts. The same process. You go two or three or four months and you realize you thought it was going to get bad and now it’s worse than bad.”

Cowan is certainly not alone in his business struggles, but the railcar industry has been hit particularly hard by the weakening of the economy over the past few years.

“The whole industry is at 15 percent capacity,” Cowan says. “I didn’t foresee that two years ago. I thought it might get to 30 percent. When you go from 85 to 90 percent capacity to 30 in a year and from 30 to 15 in another year, that’s pretty brutal.”

So what do you do when it appears as though the walls around you are crumbling before your eyes and the business you’re leading seems to be on the verge of extinction?

“The hardest thing is to downsize a business,” Cowan says. “You don’t want to cut out the muscle. You hate to tell anybody that they are not needed in the business. But as the business starts to shrink, you have to consolidate efforts and make do with fewer people. Obviously, there is a cost to that.”

While railcars, by the name of the business itself, are obviously a core for Cowan, he needed to look in other directions to make ends meet.

“We’re good with heavy fabrications,” Cowan says. “So you take a look and see if you can make some headway in other markets there. Margins can be embattled and very thin, so it always makes you wonder. You can ramp down a business, but you still have to see profitability in your future.”

At 1,335 employees and $423.4 million in revenue at the end of 2009, American Railcar was down substantially from its revenue of $808.8 million in 2008. It really becomes about survival and your ability to make the tough decisions to stay alive until business begins to pick up again.