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IW U.S. 500: The Healing Continues

July 11, 2011
Auto manufacturing, primary metals and semiconductor industries were big winners in 2010 as IW U.S. 500 revenues bounce back.

There were reports in 2010 of an engine humming along a long, bumpy road called "recovery." The engine is manufacturing, and it's driven by the likes of Ford Motor Co., Exxon Mobil Corp. and Caterpillar Inc.

Yes, manufacturing was the beacon last year in the long, painful slog toward an economic rebound. The strong year helped push overall IW U.S. 500 revenues just over $5 trillion after dipping below that mark last year for the first time since 2006.

"It's clear that 2010 was a year in which you had a fairly broad-based expansion in the manufacturing sector," says Donald Norman, an economist with the Manufacturers Alliance/MAPI. "The manufacturing sector really was the bright spot in terms of the overall economy. Of course, you have to put that into context when you look at the extent to which activity in manufacturing dropped in the fourth quarter of 2008 and the first quarter of 2009."

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The comeback was evident by hiring increases and expansions at several major IW U.S. 500 manufacturers, particularly in heavy industries. The automotive sector was one of the more positive stories in 2010. Ford posted its highest earnings in more than a decade. The sixth-ranked IW U.S. 500 company more than doubled its earnings per share and profit in 2010, achieving a 9% year-over-year revenue gain. Ford's strong year carried into the early part of 2011 when the company announced it would hire 7,000 employees over the next two years.

Fifth-ranked General Motors Corp. returned to the IW U.S. 500 and profitability after a bankruptcy and government takeover led to a one-year hiatus. The company's earnings reached $4.7 billion in 2010, its first annual profit since 2004. GM's revenue was $135.6 billion in 2010.

Revenues for IW U.S. 500 auto manufacturers grew 30.2%, tops among all industries on the list. (The growth figure excludes GM because the company did not have comparable 2009 revenue.) Auto manufacturers likely benefited from consumers who waited for the economy to improve before unloading aging vehicles, Norman says.

Technology Gains

Other industries that fared well include the technology, oil and gas and metals sectors. The computers and other electronic products category showed the second-greatest average revenue increase for an IW U.S. 500 sector. Included in this category is the semiconductor industry, which showed some significant gains by individual companies.

Wafer fabrication company Lam Research Corp. climbed 146 spots on the IW U.S. 500 to No. 310, the greatest individual jump on the list. Lam Research's revenue grew 91.2%, and the company returned to profitability in 2010 after posting a loss the previous year. Lam Research attributed the increases to market share gains in etch and clean semiconductor technologies.

MEMC Electronic Materials Inc. is another semiconductor industry supplier that improved dramatically in 2010. The company rose 145 spots on the IW U.S. 500 to No. 301. Semiconductor capacity utilization reached a low point during the recession of approximately 64%, MAPI's Norman says. By April, it reached 85%, he says. Primary metals is another industry that bounced back in 2010. Included in this category is No. 144 Steel Dynamics Inc., which returned to profitability in 2010 and saw its revenues climb 59%.

But the sluggish building industry continues to hamper growth in industries that supply products to the sector. The furniture and fixtures category was one of only two IW U.S. 500 sectors that posted an overall revenue drop in 2010. Combined revenues for the industry fell 2.3% in 2010. Among the casualties were furniture manufacturer Steelcase Inc., which fell 58 spots to No. 296, and Herman Miller Inc., which dropped 41 notches to No. 411.

Companies that supply the construction industry also struggled. Wallboard manufacturer USG Corp. fell 17 places to No. 252. The company posted a loss in 2010 and revenue dropped 9.1%.

One anomaly on the list is a 200-spot free fall by natural gas producer Questar Corp. The company's revenue fell after the spin-off of its natural gas and oil exploration and production business QEP Resources in 2010.

As for 2011, Norman says he expects the manufacturing sector to continue expanding but at a somewhat lower rate. "I don't think that all of a sudden it's going to be a big drop-off, but it will continue to expand at a slower rate than it has" he says.

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