No question, 2008 was a tough year for the world’s largest assemblers. Among the Assembly Top 50, 20 companies saw their sales decrease in 2008 and 12 posted a net loss for the year. Even Toyota Motor Co., the world’s No. 1 assembler, reported a net loss for only the second time in its history.
And yet, 2008 provided plenty of bright spots, too. Fourteen companies saw their sales increase by at least 10 percent, and 21 companies enjoyed their sixth straight year of revenue growth. Twenty-eight companies can claim seven straight years with a net profit, and 10 of them can boast an annual net gain of at least $1.4 billion. High-tech companies such as No. 18 Cisco Systems Inc. and No. 23 Apple Computer Inc. continued to put up big numbers, but plenty of “low-tech” manufacturers had solid years, too. Indeed, even No. 38 Delphi Corp. posted its first net profit since 2002-a healthy $3 billion.
To determine the impact of product assembly on the U.S. economy, ASSEMBLY magazine ranked the top 50 publicly owned manufacturing companies by gross revenue. To qualify for our list, a company must derive a significant portion of its revenue from products it assembles or that it designs and has assembled by another company. More importantly, a substantial amount of the design and assembly of those products, whether in-house or outsourced, must occur in the United States.
All totaled, the Assembly Top 50 rang up $2.52 trillion in gross revenue in 2008, a decrease of 4 percent compared with 2007. It’s the first time since we began this project in 2003 that the Top 50 failed to produce an overall gain in sales from the previous year. Twenty of the Top 50 took in less revenue in 2008 than they did in 2007-the highest such number since 2005. In fact, five of the 10 steepest declines in annual revenue posted by individual members of the Top 50 occurred in 2008.
Blame the sharp decline in auto sales for the overall decrease in revenue. Collectively, Toyota, General Motors Corp., Ford Motor Co., Daimler AG, Honda Motor Co. and Nissan Motor Co. amassed 16 percent less revenue in 2008 than they did in 2007. After posting $14.6 billion in net income in 2007, these five companies took a whopping $31.5 billion net loss for 2008. GM had the worst of it, following up its record-setting $38.7 billion loss in 2007 with an equally huge loss of $30.8 billion.
With a few exceptions, their suppliers didn’t fair much better. Indeed, two automotive suppliers-No. 53 Lear Corp. and No. 61 Valeo-dropped out of the Top 50 altogether. Of the 140 companies we looked at for this project, 37 posted a net loss for 2008. Fourteen of them are primarily automotive suppliers.
If the automotive industry is excluded, the Top 50 actually performed fairly well in 2008, growing revenues by 5 percent. Thirty companies grew their sales in 2008, and five of them increased revenues by more than 15 percent.
Four manufacturers-Cisco, Apple, No. 31 Emerson Electric Co. and No. 50 Cummins Inc.-have grown their revenues by at least 10 percent for five years running. The latter cracks the Top 50 for the first time. Another company, EMC Corp., boasts six straight years of double-digit revenue growth and debuts in our rankings at No. 47.
EMC enters the Top 50 riding an avalanche of digital information. By one estimate, the amount of digital information produced in the year 2011 alone is expected to equal approximately 1.8 trillion gigabytes, or 10 times what the world produced in 2006. In other words, business conditions for a company that makes equipment to store, search, share and process digital information couldn’t be better.
Ranked 69th in 2002, EMC has tripled its revenues over the past seven years. EMC’s 2008 net gain of $1.35 billion marks the fourth straight year that the company has earned more than $1 billion in profit.
Cummins enters the Top 50 riding a breath of fresh air. The manufacturer of engines, filters, fuel systems and emission-control components has benefited from global efforts to reduce the environmental impact of gasoline- and diesel-powered trucks, tractors, buses and boats.
Despite the downturn in the economy, Cummins continues to invest in new assembly plants. The company opened a fuel systems manufacturing plant in Wuhan, China, in 2008, and it’s scheduled to begin production of a new light-duty diesel engine in Beijing next year.
If Cummins did well in 2008, so too did many of its customers. After a 16 percent increase in sales, CNH Global climbs five spots to No. 37, the highest ever ranking for the tractor maker. No. 16 Caterpillar Inc. enjoyed a 14 percent increase in sales; No 28 Deere & Co. reported an 18 percent increase; and No. 48 Navistar International boosted its sales by 20 percent.
The lone exception is Paccar Inc. After peaking at No. 38 in 2006, the manufacturer of Kenworth and Peterbilt trucks slides to No. 45 following two straight years of declining sales.
Toyota Motor Co. reported a net loss for only the second time in its history, but it’s still the world’s No. 1 assembler. Photo courtesy Toyota Motor Co.
Profit and Loss
The Assembly Top 50 did not do so well on the profit side of the ledger. Only 38 members of the Top 50 posted a net profit in 2008, compared with 45 in 2006 and 41 in 2007. Of those, 12 recorded a net gain of at least $3 billion, compared with 18 in 2006 and 18 in 2007. All totaled, the Top 50 earned just $57.2 billion in net income last year, which is a 48 percent decrease compared with 2007. Even if Toyota, GM, Ford and Nissan are excluded from the total, the Top 50 still did not earn as much profit last year as they did the previous one-$109.5 billion in 2008 vs. $128.8 billion in 2007.Of the 140 companies we studied for this article, 47 percent reported total sales of at least $10 billion for 2007, and 74 percent posted a net gain for the year. Thirty-seven of the top 140 earned at least $1 billion in net profit for 2008, and six earned at least $5 billion.
The 100 Billion Club-manufacturers with at least $100 billion in annual sales-lost one member, Nissan, but gained a new one, IBM Corp. The computer giant climbs two spots in our rankings, to No. 8, after tallying more than $103.6 billion in sales in 2008, a 5 percent increase over 2007.
It should be pointed out, however, that assemblies account for only 19 percent of IBM’s revenue, the lowest such percentage of any company in the Top 50. Of course, 19 percent of $103.6 billion is still a nice chunk of change, but assembled products have become less and less important to IBM over the past seven years. Indeed, 34 percent of IBM’s revenue came from assemblies in 2002. When the Top 50 are ranked by revenue from assemblies, IBM falls all the way down to No. 31.
IBM is not alone in that regard. In fact, when the Top 50 are sorted by revenue from assemblies, six companies fall out of our rankings: No. 26 Abbott Laboratories, No. 29 BAE Systems, No. 39 Xerox Corp., No. 42 Illinois Tool Works Inc., No. 46 L-3 Communications Corp., and EMC. With only 27 percent of its revenue coming from assemblies, Xerox takes the biggest fall, dropping all the way to No. 96.
A key measure of profitability is the ratio of net income to gross revenue, and in this regard, the Assembly Top 50 did well. Thirty-two of the 140 manufacturers we studied had income-to-sales ratios of 10 percent or more in 2008, and 11 of them are among the Assembly Top 50. In comparison, only 20 of those 140 companies had ratios above 10 percent in 2002, and just four of them were in the Top 50.
For the second straight year, Cisco Systems leads the Top 50 with the highest ratio of income to revenue: 20 percent. In fact, the manufacturer of networking equipment can boast that this ratio has been 20 percent or more for five years running. No other company in the Top 50 can make that claim, and only No. 63 Qualcomm Inc. can beat that mark, having gone six straight years with an income-to-sales ratio over 20 percent.
Besides Cisco Systems, only three other members of the Top 50 have recorded income-to-sales ratios above 10 percent for seven straight years: No. 2 General Electric Co., No. 11 Johnson & Johnson and No. 49 Medtronic Inc. The fact that all three of those companies derive some or all of their revenue from medical devices of one form or another is no coincidence. Of the 32 manufacturers with income-to-sales ratios of at least 10 percent in 2008, 11 assemble some sort of medical device.
Every automotive OEM in the Top 50 took in less revenue in 2008 than 2007, but only Daimler and Honda had net profits for the year. Photo courtesy Daimler
Ups and Downs
All totaled, 24 companies in the Top 50 moved up in our rankings, while 15 moved down. Among all 140 companies we examined, 16 moved up or down by at least three positions, which made 2008 a moderately volatile year. By way of comparison, 20 companies moved up or down by three or more spots in 2006, while only 12 did so in 2003.With one exception, the top 25 are the same as they were in 2005. That exception is Apple Computer, which continues its remarkable ascent up our rankings, jumping nine spots from No. 32 in 2007 to No. 23 in 2008. Over the past seven years, Apple has climbed 44 spots in our rankings, more than any other member of the Top 50. In that time span, only one other company has climbed further or faster up our rankings: Research in Motion. The manufacturer of the now ubiquitous Blackberry has risen 75 spots, from No. 139 in 2002 to No. 64 in 2008.
Whereas the iPod propelled Apple’s growth over the past few years, the iPhone fueled the company’s success in 2008. In 2007, the first year it became available, the device accounted for just $123 million in revenue. One year later, the iPhone brought in more than $1.84 billion. It’s little wonder, then, that Apple’s overall sales increased 35 percent in 2008. That’s the biggest sales increase of any company in the Top 50, and it’s the company’s fifth straight year with at least 24 percent revenue growth.
Apple did well on the bottom line, too. The company’s record profit of $4.83 billion in 2008 is three times its earnings in 2005 and 74 times its earnings in 2002.
With iPhones and Blackberries flying off shelves, cell-phone pioneer Motorola Inc. has felt the sting of intense competition. Following back-to-back years of double-digit declines in revenue, Motorola falls six spots in our rankings, from No. 19 in 2007 to No. 25 in 2008. What’s worse, the company posted a net loss of $4.24 billion in 2008, which is almost as much as the $4.58 billion in profit it earned in 2005.
The top 10 are the same as they’ve been since 2002, though there was some jockeying for position. Despite a 20 percent reduction in revenue-the second largest sales decrease of any member of the Top 50-Toyota hangs onto the No. 1 ranking by a wide margin.
After posting a 6 percent increase in revenue in 2008, General Electric grabbed the No. 2 spot away from GM, which falls to No. 3 after suffering its second straight year with a double-digit decrease in revenue. GE also earned the highest net income of any member of the Top 50-the seventh straight year it holds that distinction.
With back-to-back years of double-digit revenue growth, Hewlett-Packard Co. moves up three spots, to No. 6, the highest position for the computer maker in the history of our study. After reaching as high as No. 6 in 2007, Honda slides back down to No. 8 after a 15 percent decrease in sales. A similar fate befell rival Nissan, which drops two notches to No. 10.
Besides Lear and Valeo, three other companies fell out of the Top 50: No. 52 Sun Microsystems Inc., No. 54 Rolls-Royce, and No. 58 Texas Instruments Inc. In addition to EMC and Cummins, one other company, No. 43 Eaton Corp., debuts in our rankings, while two others, Medtronic and Navistar return.
Eaton leaps up into our rankings, moving up 12 spots from No. 55 in 2007. That’s the second largest jump in the six-year history of our rankings, and it’s the second highest debut for any company in the Top 50. (Apple debuted at No. 42 in 2005.) Eaton rang up $15.4 billion in revenue in 2008, a 15 percent gain over 2007 sales. It’s the fifth time in six years that Eaton has enjoyed a double-digit increase in revenue. In addition, Eaton is one of only 10 members of the Top 50 that have increased their net income for six straight years.
Diversification has been key to the company’s success. At one time, the company was primarily a supplier of automotive and truck components. Today, approximately three-quarters of Eaton’s sales and profits come from its electrical, hydraulics and aerospace businesses. For example, the company is now the second largest supplier of uninterruptible power systems in the world, and it provides more than 800 components for the Airbus A380, the world’s largest passenger aircraft. In fact, revenues from Eaton’s electrical business grew by 45 percent in 2008, while its aerospace business grew by 14 percent.
That’s not to say Eaton has ignored the car and truck market. The company is a leading supplier of hybrid drivetrains for trucks, buses and other commercial vehicles, offering three distinct hybrid platforms to match a range of applications. Eaton superchargers are helping automakers boost the power and fuel efficiency of V6 engines. That technology is also being adapted for hydrogen-powered fuel-cell buses.
Eaton is committed to achieving world-class environmental, health and safety performance. The company reduced its global energy consumption for the second straight year, and it lowered its greenhouse gas emissions by 7.2 percent, indexed for sales. Since 2006, Eaton has reduced the total amount of carbon dioxide generated by its operations from 933,000 metric tons to 840,000 metric tons.
Up and Comers
If 2008 brought five new members to the Top 50, 2009 could bring a few more. Research in Motion could jump into the Top 50 with “just” a 30 percent increase in sales in 2009, a moderate growth rate by this company’s standards. Either Qualcomm or No. 57 Danaher Corp. could also join the Top 50 if they can follow up six straight years of double-digit sales growth with a seventh. No. 58 Jabil Circuit Inc. is also on the cusp. The electronics manufacturing services provider has more than tripled its sales since 2002, rising 30 spots in our rankings over the past seven years.The Assembly Top 50
|
Company |
Rank |
Income |
Revenue |
Income/ |
% Revenue |
|
Toyota |
1 |
-4,448 |
208,995 |
-2% |
93% |
|
GE |
2 |
17,410 |
182,515 |
10% |
38% |
|
GM |
3 |
-30,860 |
148,979 |
-21% |
99% |
|
Ford |
4 |
-14,672 |
146,277 |
-10% |
88% |
|
Daimler |
5 |
1,993 |
135,152 |
1% |
91% |
|
HP |
6 |
8,329 |
118,364 |
7% |
77% |
|
Siemens |
7 |
8,505 |
111,730 |
8% |
90% |
|
IBM |
8 |
12,334 |
103,630 |
12% |
19% |
|
Honda |
9 |
1,411 |
103,116 |
1% |
94% |
|
Nissan |
10 |
-2,371 |
85,598 |
-3% |
93% |
|
J & J |
11 |
12,949 |
63,747 |
20% |
36% |
|
Bosch |
12 |
518 |
62,812 |
1% |
100% |
|
Dell |
13 |
2,478 |
61,101 |
4% |
91% |
|
Boeing |
14 |
2,672 |
60,909 |
4% |
82% |
|
United Technologies |
15 |
4,689 |
58,681 |
8% |
72% |
|
Caterpillar |
16 |
3,557 |
51,324 |
7% |
94% |
|
Lockheed Martin |
17 |
3,217 |
42,731 |
8% |
81% |
|
Cisco Systems |
18 |
8,052 |
39,540 |
20% |
84% |
|
Johnson Controls |
19 |
979 |
38,062 |
3% |
80% |
|
Philips Electronics |
20 |
-259 |
36,725 |
-1% |
98% |
|
Honeywell |
21 |
2,792 |
36,556 |
8% |
65% |
|
Northrop Grumman |
22 |
-1,262 |
33,887 |
-4% |
58% |
|
Apple |
23 |
4,834 |
32,479 |
15% |
83% |
|
Flextronics |
24 |
-6,086 |
30,949 |
-20% |
100% |
|
Motorola |
25 |
-4,244 |
30,146 |
-14% |
100% |
|
Abbott Labs |
26 |
4,881 |
29,527 |
17% |
20% |
|
General Dynamics |
27 |
2,459 |
29,300 |
8% |
69% |
|
Deere |
28 |
2,053 |
28,437 |
7% |
91% |
|
BAE Systems |
29 |
2,582 |
27,108 |
10% |
33% |
|
Schneider Electric |
30 |
2,398 |
25,487 |
9% |
100% |
|
Emerson Electric |
31 |
2,412 |
24,807 |
10% |
100% |
|
Alcatel-Lucent |
32 |
-7,992 |
23,942 |
-30% |
77% |
|
Magna |
33 |
-39 |
23,704 |
0% |
100% |
|
Raytheon |
34 |
1,672 |
23,174 |
7% |
89% |
|
Tyco |
35 |
1,553 |
20,199 |
8% |
65% |
|
Whirlpool |
36 |
418 |
18,907 |
2% |
100% |
|
CNH |
37 |
825 |
18,476 |
4% |
94% |
|
Delphi |
38 |
3,037 |
18,060 |
17% |
100% |
|
Xerox |
39 |
230 |
17,608 |
1% |
27% |
|
Faurecia |
40 |
-792 |
16,718 |
-5% |
100% |
|
AB Electrolux |
41 |
99 |
15,902 |
1% |
100% |
|
ITW |
42 |
1,519 |
15,869 |
10% |
52% |
|
Eaton |
43 |
1,058 |
15,376 |
7% |
100% |
|
TRW |
44 |
-779 |
14,995 |
-5% |
100% |
|
Paccar |
45 |
1,018 |
14,972 |
7% |
92% |
|
L-3 Communications |
46 |
949 |
14,901 |
6% |
48% |
|
EMC |
47 |
1,346 |
14,876 |
9% |
68% |
|
Navistar |
48 |
134 |
14,724 |
1% |
98% |
|
Medtronic |
49 |
2,169 |
14,599 |
15% |
100% |
|
Cummins |
50 |
755 |
14,342 |
5% |
85% |
