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McGladrey Manufacturing and Distribution Monitor Shows Business Accelerating, Despite Concerns About Government Gridlock
November 22, 2011
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By aftermarketNews staff

CHICAGO – According to results from the most recent McGladrey Manufacturing and Distribution Monitor, manufacturers and distributors, particularly those in the durable goods sector, suffered from a number of challenges leading into the fall, including rising energy and raw materials costs and falling business and consumer sentiment. Still, more than 43 percent of fall Monitor participants say their businesses are thriving and growing, the tax and consulting firm says.
 
Questions in the fall Monitor focused on the motivations and challenges related to exporting. Responses revealed that 71 percent are exporting to countries outside of the United States, and these export sales make up approximately 16 percent of total company revenue.  
 
Fall Monitor results showed a 52 percent increase over summer Monitor results in the number of respondents who identified federal government gridlock as a high risk factor for their companies (23 percent in the summer and 35 percent in the fall). Uncertainty over what, if anything, will come out of Congress's super committee in November likely contributed to this increase, according to McGladrey. There was a 48 percent increase in the number of respondents who cited the global economy as a high risk factor in the summer (23 percent) and those who cited it in the fall (34 percent). Conversely, the percentage of respondents who cited higher commodities prices as high risk fell 33 percent, from 48 percent in the summer to 32 percent in the fall.  
 
"Since 95 percent of the world's population resides outside of the United States, a close look at exporting was a relevant area of focus for the fall Monitor," said Karen Kurek, national manufacturing leader for RSM McGladrey. "The majority (52 percent) of the 511 respondents reported increases in exporting activities within the past year."
 
Additional findings show that:
 
* The most common reason for exporting is customer and/or key client demand.
 
* There is a rising level of interest in exporting to various locations, notably Brazil and Central and South America. Brazil, in particular, appears to be the country in which middle market manufacturers see the greatest growth potential.
 
* A company's first foray into an offshore market tends to focus heavily on transactional issues, while subsequent moves into additional foreign markets focus more on strategic issues such as foreign competition and market acceptability.
 
"Since Free Trade Agreements with Colombia, Panama and South Korea were signed in late October – after the fall Monitor response window was closed – it will be worth watching to see if exporting plans for the industry are directed toward these countries moving forward, particularly for South Korea, where distance and the difficulty of penetrating the market appears to have kept plans for exporting low," said Kurek. "Growth appears to be slowing for China, where the market is getting increasingly sophisticated and, as a result, harder to penetrate."
 
The trend toward exporting is echoed by findings from recent research done by RSM International, one of the world's largest global audit, tax and consulting networks of which McGladrey is the U.S. member, and the European Business Awards. It shows that European business leaders are also pursuing growth opportunities abroad, with more than two-thirds of them planning to enter new markets in the next year, despite the difficult post-recession climate.
 
An item of note from the fall survey results is that the automotive sector continues to gain strength.

"Despite the fact that the automotive sector is continuing to expect increases in their raw materials, that sector has led the way in regard to thriving and growing. More than 80 percent of automotive respondents anticipate an increase in domestic sales over the next 12 months," said Kurek.  
 
Monitor respondents receive access to customized, interactive dashboards they can use in multiple ways to compare their responses against the national aggregate. Those who participate will be able to track changes to their companies' responses over time and will receive regular reports that delve into the findings. Results from the 2011 fall Monitor are online, along with the 2011 spring edition and summer edition results. Results include detailed breakdowns of industry segments, including automotive; food and beverage; chemicals, oil and plastics; industrial machinery, biotech and medical; metal fabrication, and more.
 
The next Monitor will launch in January 2012. Results will be available in February 2012.