I’ve included several foreign corporations which have very substantial US operations.
These 58 US Broad-Based Manufacturing Corps generated Total Pretax Income in the 3Q 2012 of $25.6 bil, an increase of 2% from the 3Q 2011. This was a slight improvement from the 1% earnings growth of these 58 manufacturing companies in the 2Q 2012 over the 2Q 2011.
The main reasons for the earnings growth improvement over the prior year's quarter in the 3Q 2012 vs in the 2Q 2012 were the Big Two Auto Companies. Ford improved its earnings change from a negative 36% in the 2Q 2012 to a positive 11% in the 3Q 2012. And General Motors improved its earnings change from a negative 29% in the 2Q 2012 to a positive 1% in the 3Q 2012. And these two earnings turnarounds occurred despite a continuing, extremely weak European economy.
In addition, both Honeywell and Whirlpool also substantially improved their earnings growth in the most recent 3Q 2012.
The sectors with the highest earnings growth in the most recent 3Q 2012 were the Electronic/Electrical Equipment & Products (+31%), driven by Whirlpool, and Farm and Construction Equipment Sector (+23%), driven by Caterpillar. However, the Farm and Construction Equipment Sector had a substantial earnings growth deceleration in the 3Q 2012, with Caterpillar's blistering 91% earnings growth in the 2Q 2012 moving down to 33% earnings growth in the 3Q 2012.
In deriving Ongoing, Core 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 58 US Broad-Based Manufacturing companies for the 3Q 2012 and the 3Q 2011. I've also included a comparison of each company's earnings growth over the prior year's quarter in both the 3Q 2012 and in the 2Q 2012.
| PTI | PTI | |||||
| Pretax | Pretax | 3Q 2012 | 3Q 2012 | 2Q 2012 | ||
| Income | Income | Increase | Increase | Increase | ||
| State | (Loss) | (Loss) | (Decrease) | (Decrease) | (Decrease) | |
| HQs | 3Q 2012 | 3Q 2011 | Amount | % | % | |
| mils $s | mils $s | mils $s | ||||
| Broad-Based Manufacturing Sorted by Sub-Sector | ||||||
| Motor Vehicle and Parts | ||||||
| Ford Motor | MI | 2,163 | 1,944 | 219 | 11% | -36% |
| GM | MI | 1,871 | 1,857 | 14 | 1% | -29% |
| Chrysler | MI | 437 | 259 | 178 | 69% | 127% |
| Paccar | WA | 345 | 395 | (50) | -13% | 26% |
| Delphi Automotive plc | MI | 338 | 370 | (32) | -9% | 15% |
| TRW Automotive | MI | 244 | 223 | 21 | 9% | -8% |
| Harley Davidson | WI | 207 | 234 | (27) | -12% | 31% |
| Goodyear Tire & Rubber | OH | 186 | 305 | (119) | -39% | 38% |
| Autoliv | UT | 175 | 193 | (18) | -9% | -5% |
| Borg Warner | MI | 170 | 193 | (23) | -12% | 24% |
| Lear | MI | 154 | 138 | 16 | 12% | -18% |
| Total all 11 | 6,290 | 6,111 | 179 | 3% | -16% | |
| Conglomerates Manufacturing | ||||||
| United Technologies | CT | 1,825 | 2,012 | (187) | -9% | 0% |
| 3M | MN | 1,644 | 1,543 | 101 | 7% | 5% |
| Honeywell | NJ | 1,224 | 893 | 331 | 37% | 11% |
| Johnson Controls | WI | 664 | 691 | (27) | (4)% | 7% |
| Ingersoll-Rand | NJ | 405 | 397 | 8 | 2% | -2% |
| Total all 5 | 5,762 | 5,536 | 226 | 4% | 4% | |
| Farm & Construction Equipment | ||||||
| Caterpillar | IL | 2,177 | 1,634 | 543 | 33% | 91% |
| Deere | IL | 1,215 | 1,079 | 136 | 13% | 19% |
| CNH Global NV | IL | 432 | 358 | 74 | 21% | 13% |
| Dover | IL | 336 | 300 | 36 | 12% | -1% |
| Joy Global | WI | 283 | 230 | 53 | 23% | 37% |
| AGCO | GA | 110 | 104 | 6 | 6% | 35% |
| Total all 6 | 4,553 | 3,705 | 848 | 23% | 44% | |
| Miscellaneous Large Manufacturers | ||||||
| Illinois Tool Works | IL | 739 | 690 | 49 | 7% | 9% |
| Danaher | DC | 717 | 601 | 116 | 19% | 33% |
| Corning | NY | 608 | 921 | (313) | -34% | -37% |
| Cummins | IN | 487 | 629 | (142) | -23% | -5% |
| Eaton | OH | 403 | 432 | (29) | -7% | 6% |
| Total all 5 | 2,954 | 3,273 | (319) | -10% | -2% | |
| Aircraft and Parts | ||||||
| Boeing | WA | 1,466 | 1,642 | (176) | -11% | 1% |
| Spirit AeroSystems | KS | 130 | 100 | 30 | 30% | 150% |
| Triumph Group | PA | 126 | 91 | 35 | 38% | 57% |
| Total all 3 | 1,722 | 1,833 | (111) | -6% | 8% | |
| Electronic/Electrical Equipment & Products | ||||||
| Cooper Industries | TX | 240 | 189 | 51 | 27% | 16% |
| Amphenol | CT | 203 | 191 | 12 | 6% | 3% |
| Whirlpool | MI | 198 | 38 | 160 | 421% | 23% |
| Hubbell | CT | 129 | 118 | 11 | 9% | 21% |
| Molex | IL | 103 | 119 | (16) | -13% | -13% |
| Donaldson Co. | MN | 102 | 90 | 12 | 13% | 22% |
| Total all 6 | 975 | 745 | 230 | 31% | 10% | |
| Packaging and Containers | ||||||
| Crown Holdings | PA | 231 | 245 | (14) | -6% | 4% |
| Ball Corp | CO | 211 | 186 | 25 | 13% | -8% |
| Owens-Illinois | OH | 160 | 177 | (17) | -10% | 33% |
| Silgan Holdings | CT | 116 | 119 | (3) | -3% | -32% |
| Total all 4 | 718 | 727 | (9) | -1% | 2% | |
| Paints | ||||||
| PPG Industries | PA | 486 | 462 | 24 | 5% | 5% |
| Valspar | MN | 127 | 94 | 33 | 35% | 32% |
| RPM International | OH | 112 | 119 | (7) | -6% | 13% |
| Total all 3 | 725 | 675 | 50 | 7% | 10% | |
| Metals | ||||||
| Parker Hannifin | OH | 336 | 412 | (76) | -18% | 12% |
| Nucor | NC | 210 | 298 | (88) | -30% | -48% |
| Timken | OH | 140 | 182 | (42) | -23% | 11% |
| Alcoa | PA | (208) | 280 | (488) | -174% | -101% |
| Total all 4 | 478 | 1,172 | (694) | -59% | -44% | |
| Miscellaneous Manufacturing | ||||||
| Stanley Black & Decker | CT | 243 | 212 | 31 | 15% | -8% |
| Ametek | PA | 166 | 139 | 27 | 19% | 20% |
| Flowserve | TX | 145 | 140 | 5 | 4% | 8% |
| Pall Corp | NY | 137 | 112 | 25 | 22% | -7% |
| Pitney Bowes | CT | 136 | 168 | (32) | -19% | -2% |
| Snap-On | WI | 110 | 98 | 12 | 12% | 15% |
| Xylem | NY | 108 | 130 | (22) | -17% | -9% |
| Carlisle | NC | 104 | 76 | 28 | 37% | 65% |
| Teradyne | MA | 103 | 58 | 45 | 78% | 58% |
| Gardner Denver | PA | 87 | 104 | (17) | -16% | 9% |
| Owens Corning | OH | 52 | 149 | (97) | -65% | -47% |
| Total all 11 | 1,391 | 1,386 | 5 | 0% | 6% | |
| Grand Total all 58 | 25,568 | 25,163 | 405 | 2% | 1% | |
So why is the earnings growth of these manufacturing companies so modest in the most recent two quarters?
Well, one reason is that the earnings growth of these manufacturing companies in the first three years of the Obama Administration (2008 to 2011) has been truly spectacular, and thus the earnings base has grown substantially.
But there is a third very significant explanation for this modest earnings growth in the most recent two quarters.
I think this substantial earnings growth deterioration in the most recent two quarters, and also the substantial earnings growth deceleration in the five previous quarters from the beginning of 2011 to the end of March 2012, is due predominately to the switch from Moderate Democratic control to an Ultra Conservative, Uncompromising 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.
In addition, the killing of the very stimulative 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 measured foreign earnings repatriation at somewhat progressive discounted US federal income tax rates would also help. But it only makes sense to put in some measures which allow all of these very lucrative business tax incentives only if these companies also increase their US payroll counts sufficiently, 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, have 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 mistakenly think that will cause voters to remove President Obama from office. Instead, what this self-centered strategy should do, in all fairness, is to remove many of the US House Republicans 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 two 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 magically trickle down to US job creation.
And a second key element of Romney's main economic plan is to permit US Multinational Corps to now 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 doesn't want these corporations receiving this massive tax benefit windfall to be required to increase their number of employees.....a no job creation strings attached tax free foreign earnings repatriation. 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? Further, there will be even more of an incentive for US multinational corporations to find additional creative ways to shift even more income from the US to foreign tax havens. Thus, there will be a substantial drop in US federal income tax collections, and thus the US Deficit will be ballooned up even more.
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 foreign earnings 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.
