If IndustryWeek gathered a representative from every IndustryWeek 1000 company in one room -- a very large room -- and showed a film that detailed the financial performance of each company in 1997, there is no doubt that the reaction would be mixed. Representatives of companies whose sales soared would stand and cheer. Those from companies whose firms just met expectations would warmly applaud. Members of organizations whose sales sank might weep and head for the exits early, not wanting to see their Titanic-like endings. In our third annual list of the world's leading publicly held manufacturing companies based on revenues, there are few, if any, Titanics. What there are, however, are 1,000 tales of success and struggle -- stories woven as a result of innovation, economic shifts, industry trends, mergers, acquisitions, and changes in financial reporting. Among the 35 countries represented, 80 companies are new to the list. At a glance, the IW 1000 quickly shows which companies are consistent performers and which ones experienced substantial increases in revenues from 1996 to 1997. The list also shows which companies encountered an iceberg or two. Because revenue performance is not the only indicator of a company's financial success, IW also details each firm's record in areas ranging from profit margin to earnings per share. Based on companies listed in this year's IndustryWeek 1000, the U.S. continues to manufacture almost twice as much wealth as any other country. U.S. manufacturers generated just over $3 trillion in revenues in 1997. U.S. companies averaged 8.6% growth from 1996 to 1997. Among other top wealth-producing countries, companies averaged the following growth: Japan, 7.5%; Great Britain, 2.3%; Germany, 10.3%; and France, 6.5%. Among countries with at least 15 companies represented in the IW 1000, the Netherlands registered the highest growth percentage. Companies in that country averaged 18% growth. Companies in the IW 1000 producing petroleum/coal products continue to generate more wealth than any other industry on the list. As a group, companies in that industry produced approximately $1.2 trillion in revenues in 1997. Petroleum/coal products companies averaged 11.5% growth, in constant dollars, from 1996 to 1997. Among other top wealth-producing industries, companies averaged the following growth: motor vehicles and parts, 9.6%; electronic/electric equipment, 9.7%; food, 6%; and chemicals, 5.5%. Among industries with at least 10 companies represented in the IndustryWeek 1000, the computer/office equipment industry registered the highest growth percentage. Companies in that industry averaged 16.1% growth. For many companies in the IW 1000, their rise or fall from year to year has resulted from more than just revenues. Like Houston-based Compaq Computer Corp., they have chosen to grow through acquisitions or mergers. Like PepsiCo Inc., Purchase, N.Y., they have decided to shrink by spinning off part of the company. Or like Houston-based Mobil Corp., their ranking has been affected by a change in accounting methods. Mobil's revenue decline from $81.5 billion in 1996 to $65.9 billion last year was caused primarily by the way the company reported the returns on several of its joint ventures, including its exploration and production alliance with Houston-based Shell Oil Co. Mobil reported record operating earnings for 1997, up 11% from 1996. For other companies -- Moriguchi City, Japan-based Sanyo Electric Co. Ltd., for example -- their rapid climb up the list resulted from something as simple as a fiscal-year change. In 1996 Sanyo changed the end of its fiscal year from Nov. 30 to Mar. 31, so fiscal 1996 was only a four-month period. Because of this change, Sanyo's ranking jumped from No. 393 in 1997 to No. 104 this year. In constant dollars, its revenues increased from $4.5 billion to $14.1 billion. (Unless otherwise noted, revenue changes for individual companies in this story are based on fiscal years ending Dec. 31.) For different reasons, several companies deserve special mention for revenue increases or decreases from 1996 to 1997. Automotive companies in the IW 1000 averaged a 9.6% increase in revenues, but Toyota City, Japan-based Toyota Motor Corp. experienced a 14.1% increase from $82.2 billion in 1996 to $93.8 billion for the fiscal year ending Mar. 31, 1997. The company boosted its production of vehicles in North America from 850,000 units in 1996 to 900,000 in 1997. This year, production capacity in North America is expected to hit 1.2 million units. Toyota's increase in investments in North America from $4.9 billion in 1993 to $7.2 billion in 1996 has paid off handsomely. In February of this year, Toyota sold 90,922 units in the U.S., 5.7% better than the company's previous record month. Brian Ambrose, national industry director for industrial products and automotive for KPMG Consulting's manufacturing, retail, and distribution practice, Detroit, says Toyota's emphasis on lean manufacturing methods has helped it to continue to reduce costs and improve quality. "Everyone's trying to design new products much faster," says Ambrose. "When you accomplish that, you cut out a lot of costs." While a revenue increase is one indication of a company's health, it does not tell the whole story. For example, because of its Aug. 1, 1997, merger with McDonnell Douglas Corp., Seattle-based Boeing Co.'s revenues jumped from $22.6 billion to $45.8 billion. Yet its financial results for 1997 were disappointing. The company recorded a net loss of $178 million. Because of its inability to efficiently ramp up production of commercial aircraft, Boeing had to shut down its production lines for about a month last year. Company officials expect better results in 1998. At the end of 1997, the company had a contractual backlog of $121.6 billion in orders, and it announced in April that Elk Grove Township, Ill.-based UAL Corp.'s United Airlines had ordered 23 wide-body aircraft in a $3 billion deal. Lucent Technologies Inc., Murray Hill, N.J., continues its climb in the IW 1000. Spun off from AT&T in April 1996, Lucent increased its ranking from No. 95 in 1997 to No. 53 this year. Its revenues totaled $26.3 billion for the fiscal year ending Sept. 30, 1997. The maker of telecommunications systems posted a net income of $541 million. Revenues for the second quarter of this fiscal year compared with 1997 were up from $5.1 billion to $6.1 billion. Lucent's fortunes have risen because of the global demand for communications systems and technology resulting from deregulation, as well as the needs of developing nations for modern communications systems. "We're in an industry that is growing about 14% a year," says Jeff Baum, director of financial media relations for Lucent. "We've segmented into 11 businesses to target our growth markets." Baum says the growth of the Internet and an overall increase in the transmission of data are propelling tremendous growth as service providers install new lines. In late April, Lucent announced it would acquire Lanham, Md.-based Yurie Systems Inc. for about $1 billion. Yurie provides ATM wide-area-network access equipment for service providers, corporations, and government users. ATM is an industry standard, cell-based, high-speed communications technology used to transmit voice and video data -- including Internet traffic -- over backbone networks. The transaction is expected to be completed by the end of June. Like most computer and software manufacturers in the IndustryWeek 1000, Compaq Computer Corp. enjoyed a substantial revenue increase last year. The maker of personal computers and PC servers boosted its revenues by 26%, from $18.1 billion to $24.6 billion. That compares with the 16.1% average increase experienced by the other computer/office equipment manufacturers in the IW 1000. Bill Page, vice president of corporate planning and supply-chain strategy for Compaq, says part of the company's success resulted from changes made in manufacturing techniques. "What we have done is invest in manufacturing reengineering opportunities," says Page. "We changed to a cellular approach to manufacturing. We also invested in an information infrastructure." Last June, Compaq acquired Tandem Computers Inc., Cupertino, Calif. "The Tandem deal gave us a much broader product line," says Page. "We also were able to utilize [Tandem's] sales-force expertise." In January, Compaq announced plans to acquire Digital Equipment Corp. Expected to be finalized by the end of June, Compaq will pay $9.6 billion for the Maynard, Mass.-based firm. Information-technology companies in the U.S., according to the U.S. Commerce Dept., have been growing twice as fast as the overall U.S. economy. "If you look at the people coming into the workforce now, they are more comfortable with computers," says KPMG's Ambrose. "The Year-2000 issue also is driving a lot of companies to invest faster than they otherwise would have. Those countries in Asia eventually will come back and have a tremendous need for information technology." While manufacturers such as Toyota, Compaq, and Lucent experienced significant revenue increases from 1996 to 1997, Qualcomm Inc., San Diego, experienced revenue growth of 157%, the highest of any IW 1000 company. The supplier of digital wireless solutions posted record revenues of $2.1 billion, and net income quadrupled to $92 million. Qualcomm attributes its growth to an emphasis on efficiency and cost containment, as well as expansion into new global markets. Besides mergers and acquisitions, no other series of events has impacted the IW 1000 list more than the economic crises throughout Asia. In South Korea, depreciation of the won plagued a number of chaebol conglomerates. Since early 1997 the won has depreciated by 60% against the U.S. dollar. Shipbuilder and heavy-equipment manufacturer Daewoo Heavy Industries Ltd., Inchon, saw revenues rise only slightly when converted into U.S. dollars, from $3.4 billion in 1996 to $3.7 billion in 1997. Without the currency devaluation, Daewoo's revenues would have approached $6 billion last year. Seoul-based Hyundai Motor Co. Ltd., Korea's biggest car manufacturer, saw its revenues plummet almost 40% in two years, from $12.4 billion before devaluation in 1995 to a post-devaluation total of $7.8 billion in 1997. While part of that steep drop can be blamed on the devalued won, domestic sales also have plunged, with no end in sight. In the first quarter of 1998, Hyundai's sales in Korea were half of what they were in the same period last year. Adding to Hyundai's woes is a brand new entrant to the local car market. This March, in a joint venture with Tokyo-based Nissan Motor Co. Ltd., Samsung Motors Inc., Pusan, South Korea, started producing 80,000 sedans scheduled for introduction this year. "We don't expect our sales to return to 1996 levels for three to four years," says H.K. Lee, director of Hyundai Motors International Marketing Group. "Until then we'll rely on exports." Indeed, Hyundai's only solution may be to grab as much local market share as possible and export everything else. One way Hyundai hopes to boost its local presence is by buying another Korean automaker. Hyundai is trying to purchase what's left of Kia Motors Corp., once the country's third largest automaker, which went bankrupt a year ago. The picture looks equally dim for Seoul-based Samsung Electronics Co. Ltd. -- once the cash cow of the Samsung Group chaebol -- whose profits allowed its parent company to invest in such risky ventures as a new auto company. Revenues at Samsung, one of the world's largest manufacturers of memory chips, dropped from $19.4 billion before devaluation in 1995 to $12.3 billion after devaluation in 1997. Prices on its DRAM (dynamic random access memory) chip, its most profitable product, dropped 65% in 1997. To push revenues back up, Samsung is concentrating on manufacturing the next generation of semiconductors, including the one-gigabit DRAM chip. It is also investing in more nonmemory products such as the Alpha CPU. In telecommunications, it plans to increase sales from 27% to 40% of the company's total by the year 2000. Asia's currency devaluation hurt some U.S. companies, including Rochester-based Eastman Kodak Co. The company's revenues declined from $16.2 billion in 1996 to $14.5 billion last year because of a strong dollar and Kodak's decision to divest its office-imaging business at the end of 1996. "If you take out the currency impact and revenues for office imaging, total revenues would have been flat," explains a Kodak spokesperson. The company, which conducts half of its business outside the U.S., saw sales reduced by $558 million because of currency fluctuations. Slower growth in emerging markets including China was to blame. What's more, the company lost $440 million in digital technology, an area Kodak considers promising, as sales failed to keep up with investments. In an effort to restore revenues, Kodak has embarked on a major restructuring plan that calls for shaving $1 billion from its cost structure and eliminating 10,000 positions worldwide by 1999. Also going through a painful restructuring, Cupertino, Calif.-based Apple Computer Inc. sounded one bright note among problem-ridden companies in the IW 1000. Although its revenues were down from $9.8 billion in 1996 to $7 billion in 1997, in its final quarter the company returned to earning profits after more than a year of losses. The company attributes the turnaround to strong demand for its new Power Macintosh G3 computer launched in November 1997 and to declining operating costs. Analysts also credit the reversal to Steve Jobs, who cofounded Apple and returned to its helm as interim CEO last summer. While Apple's slide down the IW 1000 list resulted from poor performance, the downward movement of PepsiCo Inc. has a different explanation. In October of last year, PepsiCo combined its Pizza Hut, Kentucky Fried Chicken, and Taco Bell businesses into Tricon Global Restaurants Inc., a $10 billion Louisville, Ky.-based company. Then it spun that company off to its shareholders. Smaller restaurants were sold to outside investors. The company left the restaurant business to focus on its Pepsi Cola and Frito-Lay brands, and operating profits for those brands grew 30% in 1997. KPMG's Ambrose says the main trend affecting all companies, whether they had significant sales gains or losses last year, is global competition. Even the problems in Asia aren't stopping investment in that region. While Asian countries are struggling now, a recent "Millennium Survey" sponsored by Wilton, Conn.-based Deloitte & Touche LLP indicates the region has the strongest potential for growth over the long term. The survey, which queried CEOs and senior executives at more than 400 large U.S. companies, found that 79% of executives believe that Asia will experience the greatest increase in economic influence by 2005. Forty-seven percent of those surveyed expect Asia to experience the greatest revenue growth by 2005. "The world is much smaller," says Ambrose. "The winners in the future will be the global companies. If you want to continue to grow, you have to expand globally."
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