Why Are These CEOs Smiling?

By Daniel Eisenberg

With all the bad economic news these days, it's hard to believe every company isn't struggling just to survive. But for all the damage they do, recessions often help the best businesses widen their lead over the competition. "The true sign of greatness is a company's ability to emerge from difficult times stronger than it was going in," says Jim Collins, author of the just-published Good to Great: Why Some Companies Make the Leap...And Others Don't.

Some market leaders, like Wal-Mart and Dell, have such enormous scale and low cost structures that they can use aggressive pricing to bleed their rivals. Other relatively smaller players, like Toyota, Steel Dynamics and Southwest Airlines, are so efficient and innovative that they can steal customers away from lumbering giants. Certain companies, like online-auction dynamo eBay, offer a service that lots of struggling firms and consumers are eager to use in hard times.

Recession winners do, however, share some common traits, from good labor relations to contingency plans. Smart CEOs avoid across-the-board layoffs, instead making careful cuts that don't deplete their talent pool. And the savviest bosses stay aggressive, often using downturns to "become savvy acquirers," says Orit Gadiesh, chairman of Bain & Co., a Boston-based consulting firm. GE Capital, for instance, went on a buying binge during the Asian financial crisis a few years ago. Above all, while mediocre firms often flail around for a new strategy to deal with a downturn, the best companies just keep on doing well what they've done well before. Here's how six of them are doing just that.

With reporting by Cathy Booth Thomas/Dallas, Elizabeth Coady/Chicago, Frank Gibney Jr. and Unmesh Kher/New York City, Tim Larimer/Tokyo, Laura Locke/San Francisco and Joseph R. Szczesny/Detroit