DN 100

Mergers, buy outs, reorganizations, job cutbacks, and a volatile stock market. Sound familiar? It should. It's the same scenario portrayed in the last two DN 100 reports. And the picture hadn't changed all that much as we tallied the results for this year's Design News ranking of the Top 100 Original Equipment Manufacturing (OEM) employers of engineers--with one major exception.

Sitting at the top of this year's Top 10 list is Lockheed Martin with a whopping 50,000 engineers on board. That's nearly 20,000 more engineers than are working at General Motors, last year's biggest employer.

Actually, this news should come as little surprise to Design News readers. We predicted this could happen last year following the announcement of the merger of Lockheed, which placed number 10 on the list, and Martin Marietta, which held the lofty number 2 spot. However, from a job standpoint, beware. The nation's largest defense contractor recently announced plans to eliminate another 15,000 jobs and close 12 plants and laboratories over the next two years.

But those layoffs might not mean much, at least as far as the number-one slot goes. Lockheed recently reached a memorandum of understanding to buy General Electric's jet-engine-control manufacturing and service business. The GE unit makes the digital-electronic equipment that regulates many of GE's commercial and military aircraft engines.

The good and the bad. In spite of the similarities found in the last three surveys, this year's results from the country's manufacturing giants provide some interesting information for engineers. And, like last year's report, there's good news and bad. Let's begin this report with the good.

According to The Forbes 500, median profits per employee rose 61% last year, while sales per employee increased 24%. In other words, U.S. industry continues to produce more and earn more.

With one exception, this year's Design News survey nearly matches the Forbes results. The Top 100 companies had combined sales of $1.1 trillion last year, down $302 billion from 1993. The Top 10, on the other hand, reported sales of $405 billion, $89 billion more than the previous year.

Jump in jobs. Engineering employment set a new record in the final quarter of 1994 with 1.9 million engineers on the job, according to the American Association of Engineering Societies (AAES). As a result, the unemployment rate for engineering professionals dropped to 2.6% from its unprecedented high of 4% just a year ago.

The Design News Top 100 survey reveals a similar trend. Last year, the Top 100 employers reported they had 554,764 engineers on the job. This year, the number has grown to 561,390. The 6,626 jump in jobs is a far cry from 1994, which recorded a 2,850 decrease in the engineering population.

This year's top employer is greater than the sum of its parts. Lockheed Martin's 50,000 engineers compares with 15,500 for Lockheed and 28,000 for Martin Marietta last year, a gain of 6,500 engineers. Other Top 100 OEMs that added extensively to the engineering population: AT&T Bell Laboratories, with 30,000 engineers, up 17,000; Raytheon, with 15,000 engineers, up more than 6,000; and Loral Corp. (13,000 engineers) and Northern Telecom (5,000 engineers), both up 2,000.

Despite this rosy picture, AAES warns that future trends in engineering remain uncertain. Early 1995 data suggest that the size of the workforce has slipped back under the 1.9 million threshold, and recent layoffs and cutbacks by organizations like NASA and Lockheed Martin contribute to the mixed outlook.

The picture appears to be even bleaker for older electrical, electronics, and computer engineers. Based on a survey released recently by the Institute of Electrical and Electronics Engineers (IEEE), nearly 6% of members in their 50s report they are involuntarily unemployed, compared to no more the 2% for all other age groups.

Pay improves--sort of. On the salary side, the Engineering Workforce Commission of AAES has found that overall salaries of engineers have risen an average of just 1.2% over the past year. While median starting salaries are up 1.3% from 1994 levels, salaries of engineers with 12-23 years of experience are actually lower than they were a year ago.

Design News readers should be encouraged, however, since the commission notes that engineers working in manufacturing industries did well in the past year (a rise in median income of 5.1%), while their non-manufacturing counterparts' wages decreased by 4.5%.

The Design News Top 100 survey adds another pleasant note to the AAES findings when it comes to OEMs. Of those companies willing to divulge their pay scales, 46% revealed that entry-level salaries range between $30,000 and $40,000 a year, up 9% from last year. A total of 8% said their starting salaries range from $40,000 to $45,000, up 3% from 1994. The 1% who reported that new recruits earn only $25,000 to $30,000 dropped 4% from the previous year.

For those engineers on the job five or more years, 33% of the Top 100 companies reporting said that salaries range from $40,000 to $50,000 annually, up an average of only 1% from 1994. However, 18% reported that salaries for longer-term engineers in the $45,000 to $50,000 pay range increased 5%, while those making only $40,000 to $45,000 dropped 4%. Also making gains, engineers earning $50,000 to 55,000, up 5%; those in the $55,000 to $60,000 range, up 1%; and those in the over $60,000 range, up 2%.

Firms that reported paying more for both entry-level engineers and those on the job five or more years also increased somewhat from last year's survey. If you would like to start your career at a salary of $45,000 to $50,000, FMC would be the place to visit. In the $40,000 to $45,000 range, check out DuPont, Ford, Los Alamos Laboratories, National Semiconductor, Polaroid, Qualcomm, Sandia National Laboratories, or Teledyne. For those engineers who have more experience and would like to make $50,000 to $60,000 a year, the companies to contact would include Ford, NASA, Sandia, Seagate Technology, and Storagetek.

Although the merger mania and downsizing shuffles have diminished somewhat, they remained active enough to create some major shakeups again among this year's Design News Top 10 list. Lockheed Martin aside, it's not hard to see why AT&T, with 17,000 more engineers on the job this year, jumped from the number 16 spot last year to number 3 on this year's list. However, Chief Executive Robert Allen announced in late September that the electronics giant will divide itself into three independent, publicly traded communications companies. What this means on the job front remains to be seen.

On the downside, Boeing slipped six places from number 4 to number 10. With the exception of Motorola, which held down the number 9 spot, all other Top 10 club members merely shuffled up or down one or two slots.

Some equally revealing ups and downs also wove their way in and out of the remainder of the Top 100 companies. After sliding from number 4 in 1992 to number 17 last year, IBM moved up one slot in this year's survey to number 16. Having recently brought prominent software maker Lotus Development Corp. into its fold, the computer giant could once again move into the Top 10 next year.

The biggest move upward, however, is reserved for Silicon Graphics, leaping from number 75 to number 54. This advance up the Top 100 ladder was closely followed by Northern Telecom (46 in 1994 to 28 in 1995) and Tektronix (93 in 1994 to 75 in 1995), both moving up 18 rungs.

On the down side of the coin, Cooper Industries took a nose dive from number 33 to number 59, a drop of 26 places. It was followed by Asea Brown Boveri, which plunged 21 spots, and Ball Aerospace, with an 18-point descent.

Recent news from Wall Street indicates that investors are increasing their stakes in high-technology companies. One reason seems to be that the U.S. high-tech industry is quickly learning to make the most of R&D dollars. As part of its 1995 Product Development Benchmarking Study, management consulting firm Pittiglio, Rabin, Todd & McGrath (PRTM), using its R&D Effectiveness Index, determined that U.S. industry's overall return on R&D investment has increased 84% since 1992.

In 1992, the average index was .25, meaning that for every $1 of R&D investment, companies received a return of 25 cents in new products. In 1993, that return rose to 31 cents, and in 1994, to 46 cents. With $100 billion spent on R&D in the U.S. in 1994, those index figures translate to a $21 billion improvement since 1992.

This picture becomes even more encouraging considering that the National Science Foundation has reported that industry R&D spending has increased only 2% since 1993. "The fact that U.S. companies were still able to see an increased return of $21 billion shows that they got much more from the same level of investment," says PRTM Managing Director Michael E. McGrath. One of the major reasons for this, McGrath states: cross-functional design teams.

High on the list of companies that make good use of those R&D dollars are those high-tech firms that produce electronic marvels. Motorola, which occupies the ninth spot on the Top 100 list, posted record earnings in the third quarter of this year.

Not to be outdone, rival Texas Instruments, number 20 on the Top 100 tally, reported a 55% rise in net income for the third quarter. TI's results continue to be driven by its semiconductor business, which accounts for about three quarters of its revenue and more than 90% of its profit. Moreover, William Aylesworth, TI's chief financial officer, predicts that sales for its key chips will continue to grow, faster than the semiconductor business as a whole next year.

Intel, the number 19 company on the Top 100 chart, could be raking in the highest corporate profits in the world within several years, according to The Wall Street Journal. Intel Chairman Gordon Moore thinks he knows why. Moore is famous in the industry for his observation that the performance of microchips doubles every 18 months with no increase in price. "Moore's law" continues to drive down the cost of technology, spreading the use of products that were once affordable by only a few. "It looks like we will stay on the same trend we've been on for another decade," Moore predicts.

Hewlett-Packard, already among the fastest-growing companies and number 4 on the Top 100 list, should also benefit from this surge in sales. Its revenues have exploded from $6.5 billion in 1985 to $25 billion in 1994. Richard Sevcik, general manager of H-P's systems technology group, forecasts that consumers and workers will, by the next decade, each own three or four sub-$100 electronic devices for work. What does this rosy picture portray for engineering opportunities? According to the Top 100 survey, it's "very good" at HP, Motorola, and TI, and "good" at Intel. Even IBM says its hiring outlook is "good," as does Apple Computer. On a more subdued note, job prospects at Unisys are only "average," and Digital Equipment's are "fair."

Automotive slips a gear. Last year at this time, the automotive industry seemed poised to set an all-time annual sales record in 1995 of more than 16 million units. However, after a brisk start for the 1995 model year, summer sales sagged. Even many incentives to get cars off the dealers' lots late last summer failed to spur much buyer interest. As a result, analysts say the Big Three automakers are expected to post sharply lower combined earnings of about $1.9 billion for the third quarter, down from the year-earlier $2.3 billion. With the '96 models already at the dealers, it appears that '95 sales will fall below the 15-million-plus range of last year.

Looking ahead, if the economy continues to grow at a steady pace, and '96 models like the all-new Ford Taurus strike the buyer's fancy, automotive sales could shoot up again. Even General Motors might set its sights higher following J.D. Power & Associates' recent announcement in its Initial Quality Study that GM builds "the most defect-free cars of the Big Three." Ford's formerly stellar quality numbers have deteriorated, the report also notes.

What does this mean from the standpoint of jobs for engineers? For one thing, if sales continue to sag, don't look for hiring flags to be in abundance at any of the Big Three companies. And it seems doubtful that GM's quality coup over Ford will translate into engineering jobs. In fact, by the end of this decade, GM plans to cut about 25% from the cost of developing new vehicles. The reduction, according to Arvin Mueller, GM's vice president and group executive for North American vehicle development and technical operations, should enable the company to eliminate about 5,000 of the 30,000 engineers working on vehicle development. This applies to jobs at both the automaker and at contract engineering companies that GM hires.

If there is any consolation, at least for engineers working in the auto industry, consumer satisfaction with American cars and vans has grown since last year, while satisfaction with Japanese auto brands has declined. This word comes from the American Society for Quality Control in its most recent Customer Satisfaction Index. Ironically, the proclamation came at just about the same time that Honda announced it had produced its one millionth Civic in the U.S. Still, the quality report could turn buyers away from foreign brands and back to U.S. models.

A mixed bag. You already know how Lockhe