Special Report: The Assembly Top 50

Although the recession hit manufacturers hard last year, a few companies proved there was still money to made.

If you want evidence of the power of a great idea, look no further than the Blackberry smart phone. You might think that a product with an average retail price of $330 might have trouble selling in the worst recession since the Great Depression, but you’d be dead wrong.

In fact, Research in Motion (RIM), sold 36.7 million Blackberries last year, or 10.7 million more units than it sold in 2008. The Waterloo, ON, based company tallied sales of $14.9 billion in 2009, a whopping 35 percent increase over 2008 sales-and that was the company’s smallest sales gain in seven years. Since 2002, RIM has grown revenues by an absurd 4,771 percent!

The company has done just as well on the profit side of the ledger. Its 2009 profit of $2.45 billion is 30 percent more than what RIM earned in 2008 and four times what it netted in 2006.

With performance like that, it was only a matter of time before RIM joined the ranks of the Assembly Top 50. Indeed, the company’s journey up our standings has been nothing less than meteoric. Ranked 143rd in 2002, the company jumped a record 22 spots in 2009 to debut at No. 46.

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.

Our analysis shows just how hard the past recession hit manufacturers in the United States and around the world. All totaled, the Assembly Top 50 rang up $2.32 trillion in gross revenue in 2009. That’s a staggering 11 percent decrease compared with 2008 sales, and it marks the second straight year that the Top 50 have posted lower sales from one year to the next. How low? As a group, the Assembly Top 50 haven’t reported sales under $2.4 trillion since 2005.

Thirty-six of the Top 50 took in less revenue in 2009 than they did in 2008, a record high. Even a seemingly recession-proof company like No. 12 Johnson & Johnson Inc. suffered a 3 percent decrease in sales last year, the company’s first decrease in revenue in more than a decade.

Outside of the Top 50, the damage was even worse. Incredibly, 110 of the 150 manufacturers we look at for this project reported lower revenues in 2009 than they did in 2008. In comparison, only 20 companies had lower revenues in 2007, and just five rang up lower sales in 2004.

Of the 14 companies in the Top 50 that did report higher sales in 2009, only six managed to boost gross revenue by 10 percent or more. To put that number in perspective, 12 companies grew their sales by at least 10 percent in 2008, and 29 enjoyed double-digit sales growth in 2007.

On a positive note, nine companies have grown their revenues for seven straight years. In light of the ongoing conflicts in Iraq and Afghanistan, it’s not surprising that five of the nine are defense contractors: No. 16 Lockheed Martin Corp., No. 21 Northrop Grumman Corp., No. 24 General Dynamics, No. 31 Raytheon Co. and No. 43 L-3 Communications Corp.

Two others-No. 27 Abbott Laboratories and No. 42 Medtronic Inc.-manufacture medical devices. In fact, while medical device manufacturers were not immune to the effects of the recession, they fared better than traditional “nuts and bolts” industries.

Indeed, of the 150 companies we look at for this project, just 15 have enjoyed seven straight years of revenue growth, and seven of them make medical devices, ranging from syringes and insulin pumps to artificial joints and imaging equipment. When the 150 largest assemblers are sorted according to income as a percentage of revenue-a key measure of profitability-13 of the top 25 and seven of the top 10 are medical device manufacturers.

Profit and Loss

Despite the sharp decline in revenue, the Assembly Top 50 did surprisingly well on the profit side of the ledger. Seven of the Top 50 concluded 2009 with their largest profit levels in eight years. Half of the Assembly Top 50 ended the year with at least $1 billion in profit, and seven of them reported at least $5 billion in profit. Even No. 3. Ford Motor Co. reported a $2.7 billion profit for the year, the carmaker’s first net gain since 2005.

Collectively, the Top 50 reported a net gain of $81.7 billion in 2009, a 59 percent increase compared with 2008. Almost half of the Assembly Top 50-23 companies-have not reported a net loss in eight years, and 10 of those manufacturers have accrued at least $1 billion in profit annually during that span.

For the first time in the history of our study, No. 2 General Electric did not post the largest profit of any member of the Top 50. Instead, that honor falls to No. 7 IBM Corp., which reported a net income of $13.4 billion for 2009. That’s a 9 percent increase from Big Blue’s 2008 profit of $12.3 billion, and it’s the seventh straight year that IBM has increased profit from one year to the next. No other member of the Top 50-or indeed, the Top 150-can make that claim.

A dozen members of the Top 50 reported a net loss for 2009. That’s not great, but it’s not terrible, either. In comparison, 15 members of the Top 50 reported a net loss in 2002, while just four members had a net loss in 2004.

For three of the 12-No. 13 Robert Bosch GmbH, No. 28 Volvo AB and No. 30 Johnson Controls Inc.-the net loss in 2009 was their first in eight years. For four others-No. 6 General Motors Co., No. 29 Continental AG, No. 36 Alcatel-Lucent and No. 38 Magna International-2009 was at least the second straight year with a net loss.

If revenues are down and profits are up, something has to give. For most of the Assembly Top 50, one thing that gave was head count. The top 15 companies alone shed 140,695 jobs worldwide in 2009, or 4 percent of their collective workforce. And, if not for No. 15 Dell Inc., which had a net gain of some 17,000 employees through an acquisition last year, the layoff total would have been much worse.

Another area where the Assembly Top 50 cut back was R&D. Again looking only at the top 15 companies in our rankings, R&D spending was slashed by 8 percent, or more than $6.2 billion, in 2009. Of the top 15, only No. 2 GE, No. 5 Siemens and No. 11 Boeing boosted R&D spending last year.

But, the biggest spending reduction by the Assembly Top 50 was in capital spending. By themselves, our top 15 manufacturers cut capital expenditures by nearly $33 billion in 2009, a stunning 30 percent decrease from 2008. No. 4 Hewlett-Packard was the only company among the top 15 that actually increased capital expenditure, from $2.99 billion in 2008 to $3.69 billion in 2009.

Coming and Going

Twenty-four members of the Assembly Top 50 moved up in the rankings, while 19 moved down. Four members of the Top 50 moved up at least 10 spots, while two moved down 10 spots.

Overall, 2009 was an extremely volatile year in our rankings. Among the 150 companies we examined, 47 moved up by at least three positions and 15 moved up at least 10 notches. In the opposite direction, 48 companies moved down by at least three spots and 12 moved down at least 10 notches.

In comparison, 36 companies moved up at least three spots in 2006, and five moved up 10 notches or more. In the opposite direction, 36 companies moved down by at least three spots and five moved down at least 10 notches.

Whereas the 100 Billion Club-manufacturers with at least $100 billion in sales-boasted nine members in 2007 and 2008, it has only six members in 2009. Nevertheless, the top 10 are the same as they’ve been since 2002, though Daimler falls from fifth to 10th after a third consecutive year of declining revenue. Despite a 3 percent decrease in sales in 2009, Hewlett-Packard moves from sixth to fourth, the highest ranking the company has ever reached. Siemens was the only member of the top 10 to increase sales in 2009, and it moves up two notches, from seventh to fifth.

Besides Research in Motion, the Assembly Top 50 welcomed four other new members in 2009.

With a 27 percent increase in sales in 2009, aerospace giant Rolls-Royce soars 18 spots to enter the Top 50 at No. 41. That’s the highest any company has debuted in the Top 50 since No. 17 Apple Computer Inc. shot into our rankings at No. 46 in 2005. And, with an order book of $94.5 billion, it appears that Rolls-Royce will remain in the Top 50 for a while.

When the Top 50 are sorted by income as a percentage of revenue, Rolls-Royce comes out on top-the first time the company has held that distinction. After reporting a net loss of $1.96 billion in 2008, the manufacturer of jet engines, marine propulsion systems and gas turbines earned a profit of $3.59 billion in 2009.

During the past decade, the London-based manufacturer has expanded its sales beyond the civil aerospace market. Revenues from its marine, defense and energy businesses have grown from $3.4 billion in 1999 to $9.1 billion in 2009.

The company has also become more efficient. Rolls-Royce has increased revenue per employee every year for the past 10 years. In 2009, revenue per employee grew 16 percent to $439,593. “We are now selling more than twice as much as we were 10 years ago, with 2,000 fewer people,” says Rolls-Royce CEO Sir John Rose.

Last year, Rolls-Royce began construction on a new U.S. manufacturing facility in Crosspointe, VA, where the company will make disks for gas turbines. The company is also building a fan blade factory in Singapore and four new factories in the U.K. The company now has manufacturing facilities in 20 countries and service centers in more than 50 countries.

Medical device manufacturer Medtronic has also injected itself into our rankings, climbing 13 spots to debut at No. 42. The Minneapolis-based company has enjoyed 8 percent sales growth in back to back years, and it has earned a net profit of more than $3 billion in each of the past three years.

Technology Review magazine recently named Medtronic one of the 50 most innovative companies in the world, and it’s not hard to see why. During the past year, the company launched a number of new products, including an insulin pump, a drug-eluting stent, a spinal implant, and an advanced pacemaker that remains safe and functional even during a magnetic resonance imaging procedure. Next year, Medtronic plans to launch 60 new products worldwide, including an implantable cardioverter defibrillator and a glucose monitoring system.

To ensure a steady flow of new products, Medtronic nurtures a culture of innovation through such tools as collaboration blogs and internal grants. For example, the company’s Quest program is an internal venturing program that provides technology funding to Medtronic scientists and engineers to test new ideas for possible advancement. Employees apply for Quest grants and a committee of senior technical employees chooses which projects will receive up to $50,000 in seed money.

Since its inception in 1989, the program has awarded 165 grants. Roughly 25 percent of projects gain additional funding and are eventually launched as new products.

Another newcomer to the Assembly Top 50 is L-3 Communications, which jumps nine spots in our rankings to debut at No. 43. Ranked No. 85 in 2002, the defense contractor has increased sales by an astounding 289 percent over the past seven years.

In 2009, the company won a number of major defense contracts. For example, the U.S. Special Operations Command selected L-3 to provide and support a variety of unmanned aircraft systems (UAS). The company introduced the Mobius, a medium-altitude, long-endurance UAS, and the Cutlass, a small, expendable UAS.

L-3 also won business outside of the military. For example, the Transportation Security Administration awarded L-3 a contract for airport checkpoint screening systems. The company’s new ProVision system uses radio waves to detect concealed objects with a single 2-second scan. The system can scan 200 to 400 people per hour.

EMC Corp. enters the Assembly Top 50 on a cloud-cloud computing, that is. Despite a 6 percent decrease in sales in 2009, the computer manufacturer cracks the Top 50 for the first time at No. 48. Since 2002, EMC has increased sales by 158 percent. Among the Top 50, only Research in Motion, Apple and L-3 have done better than that. EMC’s 2009 net gain of $1.08 billion marks the fifth straight year that the company has earned more than $1 billion in profit.

To fuel innovation, the company invests 11 percent to 12 percent of annual sales in R&D, or more than $7 billion over the past five years. Over the same period, the company has invested roughly the same amount to acquire approximately 40 companies.

The Assembly Top 50 said farewell to five members in 2009: ZF Friedrichshafen, Faurecia, Eaton Corp., Delphi Corp. and TRW Automotive. Two of those companies-Faurecia and Delphi-had been in our Top 50 since we began our rankings in 2002.

The fact that all five are automotive suppliers is no coincidence. The recession and credit crisis were particularly hard on the automotive industry. Of the 150 companies we target for this project, 38 are either automotive OEMs or their suppliers. Collectively, these companies took in 19 percent less revenue in 2009 than they did in 2008. Only three of them-Toyota, Honda and Nissan-avoided double-digit declines in sales. Only one company-No. 139 Donaldson Co. Inc., a manufacturer of engine filters-managed to scratch out higher sales in 2009 than in 2008, and that a paltry 0.4 percent increase.

Profit was also hard to come by in the automotive industry last year. Only 16 of the 38 automotive manufacturers in our study turned a profit in 2009, compared with 20 in 2008 and 29 in 2007. As a group, the automotive industry posted a $23 billion loss for the year. Just three years earlier, in 2006, these same manufacturers recorded a $23 billion net gain.

Who's Who

WHO’S IN

Rolls Royce, London. What recession? With a 27 percent increase in sales in 2009, the manufacturer of jet engines debuts in our Top 50 at No. 41.

Medtronic Inc., Minneapolis. The medical device manufacturer has doubled sales since 2002 and cracks the Top 50 for the first time at No. 42.

L-3 Communications Corp., New York. Ranked 85th in 2002, the defense contractor enters the Top 50 for the first time at No. 43.

Research in Motion, Waterloo, ON. Over the past seven years, the maker of the ubiquitous Blackberry has climbed an astonishing 97 spots in our rankings to debut at No. 46.

EMC Corp., Hopkinton, MA. Despite a 6 percent decrease in sales, this manufacturer of computer equipment hits the Top 50 for the first time at No. 48.

WHO’S OUT

ZF Friedrichshafen AG, Friedrichshafen, Germany. Back to back decreases in revenue push this automotive supplier out of the Top 50 for the first time. ZF falls six spots to No. 52.

Faurecia, Nanterre, France. Faurecia’s 2009 sales were the company’s lowest since 2005. The automotive supplier tumbles five spots to No. 52.

Eaton Corp., Cleveland. After cracking the Top 50 for the first time in 2008, the manufacturer of electrical, hydraulic and pneumatic components drops six spots to No. 55.

Delphi Corp., Troy, MI. Once ranked as high as No. 20, Delphi falls out of the Top 50 in 2009, dropping 13 spots to No. 56.

TRW Automotive, Livonia, MI. After eight straight years of revenue growth, TRW saw its sales drop 23 percent in 2009. The automotive supplier drops eight spots to No. 58.

WHO’S UP AND COMING

Ingersoll-Rand, Davidson, NC. The manufacturer of locks, air conditioners, golf carts and other products climbs seven spots in our rankings, from No. 60 to No. 53.

Baxter International Inc., Deerfield, IL. One-fourth of this pharmaceutical giant’s sales come from assembled products, such as insulin pumps and dialysis machines. Baxter jumps 10 spots to No. 54.

Jabil Circuit Inc., St. Petersburg, FL. Ranked 90th in 2002, the electronics manufacturing services provider now sits at No. 57, its highest position ever.

Seagate Technology, Scotts Valley, CA. The manufacturer of disk drives has enjoyed double-digit sales increases in five the past seven years. Seagate climbs 12 spots, from No. 72 to No. 60.

Highs and Lows

2.32 trillion
Total revenue amassed by the Top 50 in 2009, an 11 percent decrease compared with 2008.

81.7 billion
Total net income earned by the Top 50 in 2009, a 59 percent increase from the previous year.

36
Number of companies in the Top 50 that saw their revenues decline in 2009, a record high.

9
Number of companies in the Top 50 with seven straight years of revenue growth.

35
Percentage increase in revenue posted by No. 46 Research in Motion, the largest such increase of any company in the Top 50.

46
Top 50 rank of Blackberry manufacturer Research in Motion in 2009.

143
Top 50 rank of Research in Motion in 2002.

13
Number of positions No. 56 Delphi Corp. falls in our rankings, the worst drop of any company in the 2008 Top 50.

42
Percentage decrease in revenue posted by No. 10 Daimler AG, the largest decrease in revenue of any company in the Top 50 and the automaker’s third straight year of declining sales.

3
Rank of General Electric Co. when the Top 50 are sorted by net income, marking the first time in the history of our rankings that the conglomerate hasn’t been No. 1 in that category.

41
Rank of Rolls-Royce in the Assembly Top 50.

1
Rank of Rolls-Royce when the Top 50 are sorted by income as a percentage of revenue.

65
Rank of Rolls-Royce when the Top 50 are sorted by revenue from assemblies.

5
Number of consecutive years with a net loss posted by General Motors, the only one of the 150 companies in our rankings with that distinction.

2.7 billion
Net profit reported by No. 3 Ford Motor Co. It’s the first time since 2005 that the carmaker has posted a net gain for the year.

23
Number of companies in the Top 50 that have not posted a net loss in the past eight years.

The Assembly Top 50