When preparing and mailing out our 2009 Corporate Survey forms in late summer, we expected the results would bear witness to the economic downturn our nation has experienced since December 2007. As our survey-takers filled out these questionnaires, the United States was in the midst of the longest and deepest recession since the one experienced in the 1930s; unemployment had reached a 26-year high of 10.2 percent and, at that time, many economists expected it to climb much higher. Job worries curtailed household and, consequently, business spending, and everyone kept wondering when the economy would bottom out.
This was the mindset of our survey-takers in late summer. Nearly two years' worth of dismal economic news - initiated by the subprime mortgage crisis and a near meltdown of the nation's financial and credit markets - is reflected in our 2009 Corporate Survey results, which indicate a continued slowdown of plans for new and expanded facilities, as well as relocation, and increased emphasis on cost-related site selection factors. Let's examine these results more closely.
Nearly two-thirds of those who responded to our 2009 Corporate Survey are with manufacturing firms (Figure 1), and about 70 percent of these individuals are the chief or high-level executives of their companies (Figure 2). More than half make the final location decision at their firms, with another quarter of the respondents involved in their companies' preliminary site selection decisions (Figure 3).
Seventy percent of the responding executives are with firms that operate more than one domestic facility, and nearly two-fifths say their companies operate five or more U.S. facilities (Figure 4). More than half of the respondents to our 24th Annual Corporate Survey also claim to have five or more foreign facilities, but 27 percent of the respondents said they only run one foreign operation.
More than a quarter of the corporate executive respondents indicated their firms employ 1,000 or more people. The bulk of the respondents (42 percent) are with mid-size companies having 100-499 employees (Figure 5).
It's no surprise that more than half (58 percent) of the 2009 Corporate Survey respondents said their number of facilities had not changed over the last 12 months (September 2008-09 period). In fact, 21 percent reported decreasing their number of facilities during that period (Figure 6). Last year, only 12 percent of the 2008 Corporate Survey respondents had reported decreasing their number of facilities over the prior 12-month period.
Seventy percent of those who had decreased
their number of facilities said they were consolidating operations
(Figure 7). Other primary reasons cited for decreasing the number of
facilities were a decrease in product sales (76 percent) and a need to
lower operating and/or labor costs (70 percent). By comparison, only 39
percent of the 2008 Corporate Survey respondents who had decreased
their number of facilities over the prior 12-month period cited a
decrease in product sales as the reason for their actions.
Among the 21 percent of 2009 Corporate Survey respondents who said they
had actually increased their number of facilities over the previous 12
months, 55 percent cited an increase in product sales (Figure 8), as
compared with the 72 percent of the 2008 Corporate Survey respondents
who had cited an increase in sales as the reason they had increased
their number of facilities. More than 40 percent of the respondents to
our 24th Annual Corporate Survey also said the increase in their number
of facilities resulted from a merger or acquisition, i.e., they took
over another firm's facility - again, no surprise, their gain was
another company's loss.
This year, we asked a specific question about the effect of the
economic downturn on our corporate executive readers. In response to
this question, only 14 percent of the respondents said they plan to
open new facilities and only about a fifth said they had plans to
increase hiring (Figure 9). A quarter said they were putting new
facility plans on hold and/or deferring hiring plans; 30 percent said
they needed to defer capital spending. In fact, 8 percent of the
respondents said they were seeking new sources of funding/financing.