Manufacturers Stressed as Overseas Growth Sputters

North American manufacturers face more stresses that will likely persist in 2009 and even possibly 2010, according to Moody’s Investors Service, due mainly to a worsening global recession that is now spreading from Europe to Asia.

Not surprisingly, manufacturers are trying to get in front of the downturn by cutting costs through restructuring or layoffs. Caterpillar Inc. (NYSE:CAT) was the latest to offer voluntary buyouts to managers and slash their pay by up to 50 percent next year.

Moody’s says similar cost-cutting measures have been announced recently at Danaher Corp. (NYSE:DHR), Carlisle Companies Inc. (NYSE:CSL), Rockwell Automation Inc. (NYSE:ROK) and Tyco International, (NYSE:TYC).

Lower business volumes will result in declining revenues and stress on operating margins. Restructuring actions and lower commodity costs could partially offset the effect of lower volumes.

Among manufacturers, some sectors will be hit harder than others in 2009 by crumbling demand, as illustrated by Moody’s in the following table:

For stronger manufacturers with healthy balance sheets and access to stable funding, the severe recession offers opportunities for strategic acquisitions, Moody’s points out.

Comments

[Anthony Alfidi:]

Defense and aerospace look mighty healthy. Get ready for a big surge into Afghanistan.

2008 Dec 24 06:54 PM