US Broad-Based Manufacturing Corp Earnings Growth Pummeled Further in the 2Q 2012 By US Congressional Republicans and By Europe

I found 70 US Broad-Based Manufacturing Corps, which file with the SEC, which have already reported their calendar June 2012 quarter earnings, and with Pretax Income or Loss of more than $100 mil in any of the following quarters: 2Q 2012, 1Q 2012, 2Q 2011, or 1Q 2011.

I’ve included several foreign corporations which have very substantial US operations.

These 70 US Broad-Based Manufacturing Corps generated Total Pretax Income in the 2Q 2012 of $28.2 bil, a decrease of 1% from the 2Q 2011. 

The clear stick-out winning sector in the 2Q 2012 was the Farm and Construction Equipment segment, whose total earnings growth was a very impressive 44% over the 2Q 2011, and an acceleration from the 28% total earnings growth experienced in the 1Q 2012 over the 1Q 2011.

And the spectacular performer here was Caterpillar, whose 2Q 2012 earnings were up an off-the-charts 91% over the 2Q 2011.

The Auto segment got crushed in the 2Q 2012.  Both Ford and General Motors were substantially hurt by their huge European operations, due to the extremely weak European economy.

One interesting finding is that the smaller Broad-Based Manufacturing Corps did a bit better in the 2Q 2012 than their larger Corp brethren.

In deriving Pretax Income, I start with Pretax Income under Generally Accepted Accounting Principles (GAAP), and then exclude several clearly unusual very large items relative to Pretax Income, such as Long-term Asset Impairments, and Gains and Losses on both Debt Retirements and Asset Dispositions.

I use Pretax Income rather than After-tax Net Income, since so much of the change in effective income tax rates just happens due to financial engineering.

Below here is the Pretax Income (PTI) or Pretax Loss of each of these 70 US Broad-Based Manufacturing companies for the 2Q 2012 and the 2Q 2011.

			Increase	Increase
	PTI	PTI	(Decrease)	(Decrease)
	2Q 2012	2Q 2011	Amount	%
	mils $s	mils $s	mils $s
Broad-Based Manufacturing Sorted by Sub-Sector
Motor Vehicle and Parts
General Motors	1,842	2,594	(752)	-29%
Ford Motor	1,829	2,878	(1,049)	-36%
Chrysler	541	238	303	127%
Paccar	446	353	93	26%
Delphi Automotive plc	440	383	57	15%
Harley Davidson	382	292	90	31%
TRW Automotive	319	348	(29)	-8%
Borg Warner	233	188	45	24%
Autoliv	182	191	(9)	-5%
Lear	166	202	(36)	-18%
Goodyear Tire & Rubber	166	120	46	38%
Tenneco	116	87	29	33%
Dana Holding	114	94	20	21%
Oshkosh	106	105	1	1%
WABCO Holdings	97	101	(4)	-4%
Allison Transmission	71	54	17	31%
Visteon	64	102	(38)	-37%
Tesla Motors	(105)	(59)	(46)	-78%
Navistar	(257)	93	(350)	-376%
Total all 19	6,752	8,364	(1,612)	-19%
Conglomerates Manufacturing
United Technologies	2,011	2,009	2	0%
3M	1,695	1,614	81	5%
Honeywell	1,223	1,100	123	11%
Johnson Controls	504	469	35	7%
Ingersoll-Rand	420	430	(10)	-2%
TE Connectivity	348	421	(73)	-17%
Total all 6	6,201	6,043	158	3%
Farm & Construction Equipment
Caterpillar	2,576	1,350	1,226	91%
Deere	1,597	1,341	256	19%
CNH Global NV	476	422	54	13%
Joy Global	316	231	85	37%
Dover	294	298	(4)	-1%
AGCO	244	181	63	35%
Total all 6	5,503	3,823	1,680	44%
Miscellaneous Large Manufacturers
Danaher	774	581	193	33%
Illinois Tool Works	743	681	62	9%
Cummins	661	694	(33)	-5%
Corning	555	878	(323)	-37%
PPG Industries	527	500	27	5%
Eaton	419	396	23	6%
Total all 6	3,679	3,730	(51)	-1%
Aircraft and Parts
Boeing	1,446	1,425	21	1%
Triumph Group	124	79	45	57%
Spirit AeroSystems	105	42	63	150%
Total all 3	1,675	1,546	129	8%
Metals
Parker Hannifin	425	381	44	12%
Nucor	246	477	(231)	-48%
Timken	204	184	20	11%
US Steel	189	287	(98)	-34%
Kennametal	109	110	(1)	-1%
Allegheny Technologies	90	100	(10)	-10%
Steel Dynamics	64	149	(85)	-57%
Alcoa	(6)	517	(523)	-101%
Total all 8	1,321	2,205	(884)	-40%
Electronic/Electrical Equipment & Products
Rockwell Automation	245	221	24	11%
Cooper Industries	230	199	31	16%
Amphenol	194	188	6	3%
Hubbell	116	96	20	21%
Donaldson	100	82	18	22%
Whirlpool	90	73	17	23%
Total all 6	975	859	116	14%
Miscellaneous Smaller Manufacturers
Crown Holdings	218	210	8	4%
Stanley Black & Decker	206	225	(19)	-8%
Ball Corp	193	209	(16)	-8%
Owens-Illinois	179	135	44	33%
Ametek	164	137	27	20%
Teradyne	152	96	56	58%
Flowserve	148	137	11	8%
Carlisle	134	81	53	65%
RPM International	122	108	14	13%
Xylem	121	133	(12)	-9%
Snap-On	116	101	15	15%
Valspar	111	84	27	32%
Gardner Denver	104	95	9	9%
Pentair	102	95	7	7%
Pall Corp	89	96	(7)	-7%
USG	(18)	(69)	51	74%
Total all 16	2,141	1,873	268	14%
Grand Total all 70	28,247	28,443	(196)	-1%

This 1% Total Pretax Income decline in the 2Q 2012 was a significant earnings trend reversal from the 1Q 2012 total earnings growth of 7% over the 1Q 2011.

That’s certainly not good news.  But to get a better handle on this negative earnings reversal, it is wise to get a better understanding of just what has been going on with these 70 Manufacturing companies in the past several years.

Here’s the Total Pretax Income or (Loss) of these 70 Manufacturing Corps in the most recent three fiscal years, along with the percentage change over the immediately preceding year:

2011…..$99,030 mil, up 31% over 2010, and up 1369% over 2009

2010…..$75,531 mil, up 1068% over 2009

2009…..$(7,802) mil

And below here is the Pretax Income (PTI) or Pretax Loss of each of these 70 US Broad-Based Manufacturing Corporations for each of the most recent three fiscal years, along with the related percentage changes in earnings.

						Obama
				US House	US House	Bump
				Republican	Democratic	Two
				Control	Control	Year
	PTI	PTI	PTI	PTI	PTI	PTI
	2011	2010	2010	% Change	% Change	% Change
	mils $s	mils $s	mils $s	2011 vs 2010	2010 vs 2009	2011 vs 2009
Broad-Based Manufacturing Sorted by Sub-Sector
Motor Vehicle and Parts
GM	7,253	5,541	(24,473)	31%	123%	130%
Ford Motor	8,681	7,993	(2,067)	9%	487%	520%
Chrysler	932	(513)	(8,095)	282%	94%	112%
Paccar	1,507	660	109	128%	506%	1283%
Delphi Automotive plc	1,506	944	(1,129)	60%	184%	233%
Harley Davidson	793	475	207	67%	129%	283%
TRW Automotive	1,188	1,041	140	14%	644%	749%
Borg Warner	766	478	18	60%	2556%	4156%
Autoliv	828	806	6	3%	13333%	13700%
Lear	616	449	(229)	37%	296%	369%
Goodyear Tire & Rubber	618	(65)	(357)	1051%	82%	273%
Tenneco	271	132	(41)	105%	422%	761%
Dana Holding	296	35	(298)	746%	112%	199%
Oshkosh	417	1,212	12	-66%	10000%	3375%
WABCO Holdings	405	223	(28)	82%	896%	1546%
Allison Transmission	208	83	(93)	151%	189%	324%
Visteon	371	318	169	17%	88%	120%
Tesla Motors	(254)	(154)	(56)	-65%	-175%	-354%
Navistar	320	290	359	10%	-19%	-11%
Total all 19	26,722	19,948	(35,846)	34%	156%	175%
Conglomerates Manufacturing
United Technologies	7,605	6,538	5,760	16%	14%	32%
3M	6,031	5,755	4,632	5%	24%	30%
Honeywell	4,084	3,193	2,705	28%	18%	51%
Johnson Controls	2,111	1,763	(207)	20%	952%	1120%
Ingersoll-Rand	1,260	1,011	594	25%	70%	112%
TE Connectivity	1,629	1,558	(123)	5%	1367%	1424%
Total all 6	22,720	19,818	13,361	15%	48%	70%
Farm & Construction Equipment
Caterpillar	6,725	3,750	569	79%	559%	1082%
Deere	4,223	3,025	1,339	40%	126%	215%
CNH Global NV	1,151	416	(93)	177%	547%	1338%
Joy Global	896	679	683	32%	-1%	31%
Dover	1,095	899	494	22%	82%	122%
AGCO	561	275	154	104%	79%	264%
Total all 6	14,651	9,044	3,146	62%	187%	366%
Miscellaneous Large Manufacturers
Danaher	2,448	1,939	1,326	26%	46%	85%
Illinois Tool Works	2,593	2,089	1,320	24%	58%	96%
Cummins	2,671	1,617	640	65%	153%	317%
Corning	3,343	3,521	1,934	-5%	82%	73%
PPG Industries	1,597	1,295	617	23%	110%	159%
Eaton	1,553	1,036	303	50%	242%	413%
Total all 6	14,205	11,497	6,140	24%	87%	131%
Aircraft and Parts
Boeing	5,393	4,507	1,731	20%	160%	212%
Triumph Group	234	126	136	86%	-7%	72%
Spirit AeroSystems	280	298	273	-6%	9%	3%
Total all 3	5,907	4,931	2,140	20%	130%	176%
Metals
Parker Hannifin	1,414	755	683	87%	11%	107%
Nucor	1,252	267	414	369%	-36%	202%
Timken	697	406	14	72%	2800%	4879%
US Steel	27	(385)	(1,845)	107%	79%	101%
Kennametal	296	77	(12)	284%	742%	2567%
Allegheny Technologies	339	126	74	169%	70%	358%
Steel Dynamics	424	213	(18)	99%	1283%	2456%
Alcoa	1,063	548	(1,498)	94%	137%	171%
Total all 8	5,512	2,007	(2,188)	175%	192%	352%
Electronic/Electrical Equipment & Products
Rockwell Automotive	868	544	274	60%	99%	217%
Cooper Industries	757	665	483	14%	38%	57%
Amphenol	717	664	447	8%	49%	60%
Hubbell	390	320	262	22%	22%	49%
Donaldson	312	230	161	36%	43%	94%
Whirlpool	131	735	356	-82%	106%	-63%
Total all 6	3,175	3,158	1,983	1%	59%	60%
Miscellaneous Smaller Manufacturing
Crown Holdings	587	614	459	-4%	34%	28%
Stanley Black & Decker	780	240	239	225%	0%	226%
Ball Corp	660	606	537	9%	13%	23%
Owens-Illinois	235	424	215	-45%	97%	9%
Ametek	557	406	295	37%	38%	89%
Teradyne	219	389	(144)	-44%	370%	252%
Flowserve	588	530	585	11%	-9%	1%
Carlisle	254	188	176	35%	7%	44%
RPM International	295	268	181	10%	48%	63%
Xylem	470	388	277	21%	40%	70%
Snap-On	413	277	205	49%	35%	101%
Valspar	307	319	238	-4%	34%	29%
Gardner Denver	387	232	124	67%	87%	212%
Pentair	313	300	173	4%	73%	81%
Pall Corp	420	328	271	28%	21%	55%
USG	(347)	(381)	(370)	9%	-3%	6%
Total all 16	6,138	5,128	3,461	20%	48%	77%
Grand Total all 70	99,030	75,531	(7,803)	31%	1068%	1369%

So, this is just massive total earnings growth deceleration for these 70 Broad-Based Manufacturing companies:

Annual 2010 Earnings Growth… +1068%

Annual 2011 Earnings Growth…….+31%

1Q 2012 Earnings Growth…………..+7%

2Q 2012 Earnings Decline…………..-1%

So what is causing this massive earnings growth deceleration in the most recent year and a half? 

Well, certainly a very weak European economy, coupled with the weak Euro resulting in these profits getting translated into a stronger US dollar, is causing havoc on the earnings of US Broad-Based Manufacturing companies which have a significant presence in Europe.

But there is a second very significant explanation for this earnings deterioration in 2011 and the first half of 2012.

I think this massive earnings deterioration in 2011 and the first half of 2012 is due predominately to the switch from Moderate Democratic control to an Ultra Conservative Republican control, particularly in the US House.

The US economy stopped to a walk by the US House Republicans stopping, and the US Senate Republicans filibustering, nearly every Obama Administration economic initiative.  And the House Republicans abandoning the Grand Bargain Talks with the Obama Administration, the subsequent US Debt downgrade, and the unsuccessful Super Committee, all clearly showed that the US Congress could not get anything of substance done, and this severely harmed the US economy.

And the killing of the 100% first-year tax depreciation on equipment purchases in 2012 had an extremely harmful impact on US Manufacturing companies.

The US economy is shouting out for bold, targeted, quick-hitting fiscal measures like the 100% first-year tax depreciation on equipment and computer software, highly accelerated first-year tax depreciation on buildings and building remodelings, and even lucrative investment tax credits on equipment, building, and computer software investments.  And it only makes sense to put in some measures which allow these very lucrative business tax incentives only if these companies increase their US payroll counts, which must be retained for a reasonable number of years or the tax benefits are recaptured.

And the first-year tax depreciation measures would be particularly explosive in the remainder of 2012 when combined with President Obama’s Business Tax Reform, which reduces business income tax rates starting in the following year.

But most US Congressional Republicans, in a Mean-Spirited Party over Suffering People Strategy, are stubbornly determined to keep the US economy from improving and US job creation from occurring at least until after the upcoming November 2012 election.  They are fervently praying for an increase in the US Unemployment Rate in July, August, September and October 2012.  They think that will cause voters to remove President Obama from office.

But you know what?  If Mitt Romney is elected President, and if the US Senate and the US House are both in Republican control, I am pretty certain you will see the US Unemployment Rate continue to rise, and average in the low double digit percentages for the last three years of Romney’s Presidential term.

Why?  Because even though the US economy is substantially better than it was at the end of 2008, it is still very fragile.

And Romney’s main economic plan is to simply reduce the income tax rate sharply on both Corporations and the wealthy, and to let that trickle down to US job creation.   

And a second key element of Romney's main economic plan is to permit US Multinational Corps to repatriate all of their foreign earnings, pretty much tax free.  Yeah that’s right, he wants to now reward these US Multinational companies who played key roles in causing the high US unemployment rate due to their shipping US jobs overseas to foreign tax havens.  So, he effectively wants to turn these foreign earnings into tax free municipal bond interest.  And he sees nothing wrong with doing this?

A third key element of Romney's main economic plan is to adopt a worldwide territorial tax plan.  What this would do is to never require US Multinational Corps to pay a dime of US federal income tax when their foreign earnings are repatriated back to the US.  So, this would incentivize US Multinational Corps to ship even more US jobs overseas to foreign tax havens, because unlike now, they would never have to pay any US federal income tax when these foreign earnings are repatriated back to the US.  It’s clearly a US job killer, and he sees nothing wrong with doing this?
  
All three of these main parts of Romney's economic plan are so incredibly off target in their purported goal: to maximize US job creation.  US businesses have consistently shown that when they get a no-strings-attached reduction in the tax rate, they hire no one.  And tax free repatriation provides a substantial incentive to ship even more US jobs overseas.  The end result of Romney's economic plan is that the US Deficit will balloon further, US unemployment will continually rise, US underemployed will rise, the middle class will shrink further, and the poor will be crushed.  And the gap between the very rich and everyone else will be substantially expanded further.

The only good thing about the above scenario is that with these disastrous economic effects occurring in the next four years, US citizens will be shouting out for Obama’s return to office in 2016.....and the election would be a landslide.