The 2008 IndustryWeek U.S. 500 -- The Big 500

The 2008 IndustryWeek U.S. 500 -- The Big 500

Shaky economic situations in 2007 were beneficial for some manufacturers -- but damaging for others. Companies on the 2008 IW U.S. 500 list provide a glimpse into the haves and have-nots of 2007.

In 2007 the housing market crumbled, oil prices continued to rise and U.S. involvement in Iraq and Afghanistan pushed onward. These events, as bleak as they may seem, help paint the picture for this year's IW U.S. 500 list of the nation's largest manufacturers.

The tumultuous year couldn't stop total IW 500 revenue from increasing 5.6% over the previous year to reach $5.4 trillion. Record-high fuel prices kept petroleum and coal-related companies on top as the biggest revenue-generating business sector with nearly $1.3 trillion, more than India's gross domestic product in 2007. To no one's surprise, Exxon Mobil Corp. remains the largest manufacturer on the list with $395.6 billion in revenue.

The fuel price squeeze and search for alternative energy sources also benefited a growing competitor of the oil industry -- ethanol producers. One of those companies, The Andersons Inc., took the greatest leap up the list since last year, jumping 123 spots to No. 314. The diversified company produces agricultural and lawn-care products, provides rail fleet services and operates grain and ethanol mills, which realized the most significant growth. Increased ethanol demand boosted total revenue in the company's grain and ethanol group 90% from 2006 to $1.5 billion.

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Military needs on the battlefield helped propel DRS Technologies Inc. 107 spots to No. 280. The maker of defense electronic systems increased revenue 63%, benefiting from a full year of sales from its January 2006 acquisition of Engineered Support Systems Inc. The company reported a record $3.49 billion in new orders in 2007, including a $175 million contract with the U.S. Army to produce computer systems installed in more than 40 tanks.

Harder Times

Of course, other industries weren't so fortunate. Portions of the auto industry took a hit with General Motors Corp. dropping two spots to No. 4 as revenue declined 12.6%. Auto components manufacturer Dana Corp. fell five places and Harley-Davidson Inc. dropped nine notches. On a more positive note, Ford Motor Co.'s revenue increased slightly in 2007 -- enough to maintain its No. 6 ranking. Olin Corp. , a producer of chlorine and other chemicals, sunk the farthest to No. 461, 212 spots lower than last year. The company lost revenue after selling its metals business unit in late 2007.

The housing downturn battered furniture, wood products and other building-related industries. Temple-Inland Inc., a provider of corrugated packaging and building products, tumbled 51 places to No. 221. Chairman and CEO Doyle Simons acknowledged in the company's year-end report that the housing market hurt the company's 2007 performance. "Building products pricing and demand were adversely affected by deteriorating housing markets in 2007," he said. "We expect 2008 to be difficult for our building products business." The company saw revenue fall to $3.9 billion from $5.5 billion the previous year. Likewise, building materials supplier Louisiana-Pacific Corp. dropped on the IW 500 list, sliding down 65 spots to No. 389.

Another company that struggled with the poor housing market was Masco Corp. The company, which makes popular homebuilding and remodeling products such as KraftMaid cabinets and Behr paints, fell 17 spots to No. 95. Net sales totaled $11.8 billion in 2007, a 12% drop from the previous year. In its year-end report, the company said it expects 2008 sales will "decline high-single to low-double digits compared with 2007."

The grim forecast doesn't surprise Thomas Duesterberg, president and CEO of The Manufacturing Alliance/MAPI and an IW columnist. "Anything related to housing has just been hammered," he says. MAPI projects the housing and construction-related industries will continue to struggle in 2008. The manufacturing research organization forecasts an 18% decline in production for the wood products sector, 10% for furniture makers and 15% for household appliance industries.

Another industry that's seen better days is the publishing sector. Eight of the 19 companies in the IW 500 publishing and printing category experienced revenue declines in 2007. (Though not always considered traditional manufacturing, all publishing and printing companies appearing on the IW 500 list derive at least 50% of their revenue from manufacturing-related functions such as printing-press production.) The media-related companies, including New York Times Co., The McClatchy Co. and Gannett Co. Inc., struggled in 2007 because of declining ad revenue and higher paper costs. However, despite its poor performance, McClatchy actually leapfrogged 71 spots because of revenue gained from its acquisition of Knight-Ridder Inc. in 2006.

Spinoffs, Mergers and More

Astute readers may notice that some of last year's IW 500 companies are absent from the current list. That's because they either merged with another company, went private, changed their name or didn't make the revenue cutoff. Some manufacturers of note missing from this year's list include Lyondell Chemical Co. (No. 44 in 2007), Solectron Corp. (No. 100) and Bausch & Lomb Inc. (No. 315). Lyondell was acquired by Netherlands-based chemicals and plastics maker Basell Holdings B.V., Solectron was acquired by Flextronics International Ltd., and Bausch & Lomb was purchased by a private equity firm in October. The five companies from last year's list that dropped off the current list because of lower revenue are Teradyne Inc., Lancaster Colony Corp., Accuride Corp., FrieghtCar America Inc. and BPC Holdings Corp.

Uncertain Times at Idearc

One newcomer on the IW U.S. 500 list is off to a rocky start after being spun-off from former parent company Verizon Communications Inc. Dallas-based publisher Idearc Inc. entered the IW 500 list at No. 259 with revenues slightly off from 2006 at $3.2 billion. Shortly after releasing its year-end financials in February, the company said Kathy Harless was stepping down as president and CEO and named John Mueller her replacement. One week later, the producer of Verizon print directories, as well as several online phone directories, said Mueller had resigned his post because of unforeseen health reasons.

The company then named Frank Gatto, who was serving as executive vice president, the interim CEO while Idearc conducts a search for a permanent replacement. More than a month later, Idearc acting CFO Samuel Jones offered some promising news, telling investors that the "set of assets that made this business an attractive investment are still there, still sound and still solid."

These companies made way for newcomers, several of which shot up to the top half of the list. Tobacco producer Philip Morris International Inc. debuted at No. 16 with $55 billion in revenue after it was spunoff from Altria Group Inc. in March. Mining giant Freeport-McMoRan Copper & Gold Inc. came in at No. 63 after tripling its revenue in 2007 to $17 billion. The company became the largest publicly traded copper producer in the world after purchasing Phelps Dodge Corp. The company also benefited from rising copper prices, which Duesterberg notes has been a boon to related industries, including IW 500 newcomer Bucyrus International Inc. (No. 403). "You have companies like Joy Global (No. 300) and Bucyrus in Milwaukee doing well, so the commodities boom is having an impact," he affirms.

The aerospace industry is another manufacturing sector that fared well in 2007, resulting in record revenues for BE Aerospace Inc. and a spot on the IW 500 at No. 390. "One thing we've seen pretty consistently is strength in aerospace and all the suppliers that sell into the aerospace market," Duesterberg says.

To view the entire IW U.S. 500 list, click here. A database searchable by industry, location, ranking and financial performance is also available at www.industryweek.com/iw500-2008.

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