Everything Is Looking Up for Manufacturers... Except Sales

April 13, 2012
CFOs are feeling more optimistic about their companies, but recognize the recovery is still rather fragile.

Things are definitely improving for manufacturers on the economic front, if the optimism of those in the best position to know -- chief financial officers -- is any indication. Based on consulting firm Deloitte's quarterly survey of North American CFOs, mostly at large (more than $1 billion in sales) public companies, optimism represents a bull market when it comes to corporate earnings, capital investment and hiring. Still, there is one area where optimism has given way to pessimism -- sales.

"Overall, CFO expectations are mirroring some of the positive activity we are seeing in the U.S. economy, including their prospects for increased investment, particularly in mergers and acquisition," says Sanford Cockrell III, national managing partner of Deloitte's CFO Program. "Still, CFOs remain concerned about economic uncertainty, particularly in Europe, and are keenly aware of how tensions in the Middle East as well as potential 'black swan' events could derail a fragile recovery."

For CFOs at U.S. manufacturing companies, the top economic challenge is "social policy/spending/investment," a catchall phrase that includes rising health care costs, education and infrastructure. Other major economic concerns for manufacturing industry CFOs are unemployment and environmental policy (regulations, carbon reporting, etc.).

In terms of trends, 24% of U.S. companies' cash is held offshore, according to survey respondents, and that's largely due to the tax situation. (The percentage is even larger for U.S. manufacturers, at 41%). CFOs say that they would invest more in their home country if taxes were not a factor, with half of the respondents saying they would put more cash toward domestic investment.

In terms of the job itself, the top stress for manufacturing CFOs is major change initiatives (e.g., mergers and acquisitions, IT systems change, IPO). One trend noted by Deloitte is that "strategic ambiguity" is no longer one of the top three stresses, indicating perhaps that companies' post-recession strategies are becoming clearer and CFOs are able to focus more on executing those strategies.

"Improving earnings, investment and hiring projections in the face of slowing revenue growth suggest CFOs have confidence in their companies' ability to get even more efficient," explains Greg Dickinson, director of Deloitte's North American CFO survey.

However, he cautions, "If efficiency improvements fall short or if companies continue to be hit with rising input costs, their renewed optimism may be short lived."

Popular Sponsored Recommendations

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

3 Best Practices to Create a Product-Centric Competitive Advantage with PRO.FILE PLM

Jan. 25, 2024
Gain insight on best practices and strategies you need to accelerate engineering change management and reduce time to market. Register now for your opportunity to accelerate your...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!