GE study sees midsized firms adding sales even as economy slows
Midsized U.S. companies that added 2.2 million jobs during the recession and its aftermath say a slowing U.S. economy won’t stall sales growth now, according to a study by General Electric Co. and Ohio State University.
“Middle-market businesses have a solid track record for performance through the recession,” GE and the university’s Fisher College of Business said in a report on the study. “Looking forward into 2012, 80 percent of middle-market companies expect to grow over the next 12 months.”
Findings from the study, which included 2,028 executives from companies with annual sales of $10 million to $1 billion, were presented today at Ohio State’s Columbus campus during a summit attended by customers of the GE Capital finance unit.
While mid-size firms’ payrolls fared better than those of large companies, which cut millions of jobs amid the worst slump since the Depression, the study also found challenges. About 55 percent of participants reported insufficient access to capital markets, 84 percent lacked confidence in the national economy and only 17 percent reported confidence in their local economies.
“By their own self-assessment, the data strongly indicates that there is plenty of room to improve overall business performance,” the study found. Executives’ concerns include developing top leaders, attracting new customers and developing new products, according to the report.
About 71 percent reported challenges dealing with regulations including tax law, and 45 percent are seeing challenges from global rivals, the survey said.
International ‘Heat’
“While many middle-market companies have embraced global markets and are aggressively distributing their products and services in new geographies, many are also facing the heat from international competitors,” the study’s authors wrote.
The U.S. has about 200,000 mid-size companies, accounting for about 3 percent of all the nation’s businesses, the study said, citing U.S. Census data. The firms offer 16 percent more jobs per dollar in assets than large companies and about 80 percent more jobs per dollar in revenue, the study indicated.
Of the jobs they added from 2007 to 2010, about 500,000 were in the Midwest, a region where large companies eliminated 4.9 million workers. The unemployment rate in Ohio, the nation’s seventh most-populous state, was 9.1 percent in August, matching the U.S. rate. The state has lost 407,000 jobs, or 7.37 percent, during the past decade, federal data show.
Nationwide, large companies cut a net 3.7 million jobs from 2007 to 2010, including firms that expanded employment, the GE survey showed. On average, middle-market companies added 20 jobs each, while their large counterparts cut 2,000, the survey said.
GE Capital’s own review of about 1,200 middle-market customers and their fiscal health shows less-leveraged balance sheets and fewer paying down debt. That indicates companies may have arrived at a comfortable level of borrowing, Dan Henson, who oversees the Americas, said in an interview last week.
The finance unit of Fairfield, Connecticut-based GE is among the largest lenders to middle-market companies. The parent company’s chief executive officer, Jeffrey Immelt, heads President Barack Obama’s Council on Jobs and Competitiveness.