The DN 100 11145The DN 100
December 16, 1996
Deja vu! That's the scenario for the 1996 Design News survey of the Top 100 Original Equipment Manufacturing (OEM) employers of engineers.
Last year, mergers, buy outs, reorganizations, job cutbacks, and a volatile stock market helped shape the fortunes of those OEMs that made the Top 100 list. As a result, many companies on the list enjoyed record revenues. Engineers benefited as last year's survey revealed that more than 6,000 jobs were added to the Top 100 payrolls. And those payrolls were on the rise, as, for example, average pay for engineers in the $30,000 to $40,000 salary range went up 9%.
Rewarding results. Guess what? Many of those same factors strongly influenced the final outcome of this year's engineering-employee leaders. And the results provided the foundation for increased engineering jobs. The Top 100 companies reported to Design News that they had 585,743 engineers on their payrolls this year. That's up a whopping 24,353 from last year.
These job-growth rewards mirror the financial rewards. The Top 100 companies had combined sales of $1.19 trillion last year, up nearly $925 billion from the 1994 Design News survey results. And they recorded this increase in spite of the fact that the Top 10 reported sales of $367 billion, down $38 billion from the previous year.
On an even more rewarding note, these firms made their banner financial year also notable for engineers' pockets and pocketbooks. The Top 100 companies reported that 34% of their entry-level engineers earn from $35,000 to $45,000. That's up 9% from last year. A total of 15% of those companies pay entry-level engineers $40,000 to $45,000 a year, a leap of 17% from 1995. No companies paid their engineers less than $25,000. This seems to signify that competition and salaries for engineering talent are on a healthy rise.
For those engineers on the job five years or more the picture looks equally bright. Survey results show that the biggest jump upward on the pay scale was made by engineers in the $55,000 to $60,000 range, up 5% from last year. They were followed closely by counterparts in the $50,000 to $55,000 pay range, with a 4% increase in numbers. No engineers with five-plus years of experience earned less than $35,000. This would indicate that companies want to keep seasoned engineers in the fold.
Ups and downs of the Top 100. As in past years, however, the survey turned up some "winners and losers" among the Top 100 firms. Once again holding down the top spot in the 1996 list is Lockheed Martin, dominating the list with 62,000 engineers on the job. This should surprise few Design News readers, since the huge defense-aerospace company got even bigger with the acquisition of Loral's Defense Electronics and System Integration Businesses for $9.1 billion. Even so, following the buy out, the company reported it will drop 15,000 workers over two years.
The nearest rival and number 2 on the Top 10 list, General Motors had 30,000 engineers on its payroll, the same as last year. Boeing, which cut its workers by 13,000, dropped out of the Top 10 to number 11, although adding 1,000 engineers from its last-year total of 15,000.
Making the biggest leap up the Top 100 ladder is Lucent Technologies at slot number 4 on the list with 24,000 engineers. This should come as no shock, since the company was formed from the former Bell Labs, which AT&T spun off. In fact, last year the Bell Lab operations ranked number 3 on the Top 10 list. This year AT&T falls to the number 21 slot.
Perhaps it's a sign of the times for AT&T. The company reported that profit from continuing operations fell 11% during the most recent quarter, reflecting cut-throat competition in the long-distance industry, as well as stepped-up spending on new businesses. Rivals continue to rock the telecommunications giant as it completes a three-way breakup to address its problems and search for a new president, moves not expected to take hold until next year. Meanwhile, the "Baby Bells" (Bell Atlantic, BellSouth, Pacific Telesis, and SBC) reported healthy quarterly profits, buoyed by strong demand for second phone lines, enhanced services, and cellular fare.
Also climbing up the Top 100 ladder was Teledyne, which spiralled from 53 to 22 on the list, while Eaton climbed 19 notches to 30 from 49, and Newport News Shipbuilding charged from nowhere to 88. Actually, the ship builder's ascent up the ladder resulted from Tenneco spinning this operation off along with its Automotive/Packaging businesses as separate companies. Tenneco also merged one of its four operating divisions, Tenneco Energy, with El Paso Energy Corp.
Hewlett-Packard was the Forbes 500 choice as the "outstanding corporate performer of 1995." It's not hard to see why. HP's earning share rose 51%, and its share price gained 90%, "both extraordinary accomplishments considering that both increases came from a high base," Forbes notes. However, HP slid down two rungs on the Top 10 ladder even though the company had the same number of engineers (20,000) on the job as last year.
Drifting much more rapidly down the Top 100 list this year were Loral Space & Communications (from number 15 to 85), EG&G (38 to 72), Polaroid (66 to 97), and DuPont (23 to 44). And like Tenneco, Thiokol, number 86 last year, has undergone serious downsizing and failed to make the list this year. However, if a major acquisition, which has been in the works over the last couple of years, comes to fruition, the rocket maker could appear on the scene again next year.
Jobs, jobs, jobs. Among the Top 100 companies, 71 reported that the job outlook for next year is "very good or good." Also, the hiring flag is raised throughout all industrial sectors. That's not too surprising for the electronics giants (E-Systems, GTE, Harris Corp., Hewlett-Packard, Intel, National Semiconductor, Northern Telecom/BNR, Silicon Graphics, Storagetek, Sun Microsystems, Tandem, Tektronix, Texas Instruments, and Xerox), but it carries through into the automotive industry (Case, Caterpillar, Chrysler, Cummins Engine, Dana, Eaton, FMC, and Goodyear Tire & Rubber). Even the aerospace industry has its bright spots, with AlliedSignal, Ball Aerospace, Boeing, Lockheed Martin, Loral, and Sunstrand Aerospace keeping the employment doors open. And don't overlook the R&D goliaths in your job search, with Battelle Labs, C.S. Draper Lab, and Johns Hopkins University all seeking new hires.
The fact is that U.S. corporations added jobs at a quick pace this year, more than offsetting positions eliminated in business makeovers. That's the latest finding from an American Management Association survey of 1,441 large- and medium-sized companies. The report notes that 68% of these companies created jobs during the 12 months ending last June 30. That's up from 58% in the year-earlier survey.
"Downsizing is no longer the dominant theme of change in the U.S. work force," says Eric Rolfe Greenberg, AMA's director of management studies. "In fact," he adds, "companies have learned that smaller is not necessarily better."
Of those companies reporting job losses, slightly more than half were in wholesale or retail trade or offered business and professional services, such as lawyers and accountants. A little under half were in manufacturing and financial services.
By region, the Southwest and West suffered the biggest hit in jobs, with 56% of the firms reporting cuts. Fifty-three percent of companies in the Mid-Atlantic region shed jobs, as did 47% in New England, 46% in the South, and 45% in the Midwest.
Job gains, the survey notes, were highest in the Pacific region, with 72% adding to their payrolls. The Southwest, West, and Midwest followed closely behind with 71% of the companies surveyed adding jobs.
Aerospace and defense. It's far from a boom, but new aerospace orders picked up last year, and, as a result, the industry's backlog hit $182 billion as the year ended. But that's future business. For 1995, aerospace sales fell by 5%, according to the Aerospace Industries Association.
Fighting tooth and nail for the business from the airlines are Boeing and McDonnell Douglas and engine makers Pratt & Whitney, a division of United Technologies Corp., and General Electric. For example, McDonnell Douglas had to slash prices to win the order from upstart ValuJet to launch the new MD-95.
But the outlook isn't all that gloomy. United Technologies, down one slot to number 19 on the Top 100 list, but with the same number of engineers (20,000), posted a 12% increase in third-quarter profit to $210 million, with double-digit gains reported by four of its five businesses. Pratt & Whitney's operating income rose 19% to $131 million, driven by increased sales as well as productivity improvements. Otis' operating income rose 17% and the automotive unit 13%, with only Flight Systems showing a 29% decline.
Then there's the case of AlliedSignal, number 14 on the list. "You can cut your way out of trouble, but you can't cut your way to growth," says Chairman and CEO Lawrence A. Bossity. "Ultimately, you have to grow the business."
Despite the slowdown in the defense industry, Allied's sales went up 18% since 1992 to $14 billion over a recent 12-month period, while the net profit margin jumped from 4.5% to 6%. Such progress has kept Allied in the Top 100's Top 20.
Bossidy gets high praise for the skillful way he's used acquisitions to fill gaps in the company. One buy worked particularly well: 1994's $375 million cash acquisition of Lycoming from Textron. Still, with third-quarter profits posted at a 15% increase this year, word is out that Allied plans to shed one or possibly two businesses and eliminate about 3,000 automotive jobs to further bolster earnings.
Raytheon, even with the acquisition of E-Systems for $2.2 billion, slipped down two rungs to number 13 on the Top 100 list. However, healthy tax incentives and a reduction in power costs in its home state of Massachusetts, plus the award of a contract by the Federal Aviation Administration to upgrade the nation's air-traffic control network, valued at about $1 billion over 10 years, could put it into the Top 10 next year.
Also, look for Boeing, which slipped out of the Top 10 this year, to move up the list in 1997 following the recent announcement that it will acquire Rockwell International's Aerospace and Defense businesses for about $3.5 billion.
Recent Defense Department approval of full production of Northrop Grumman Corp.'s $9.4 billion "Joint Stars" surveillance plane helps explain why the Los Angeles-based company moved into the elite Top 10 group this year. Billions more could flow into the company's coffers if the U.S. persuades allies to purchase the E-8C plane for use by NATO.
Looking ahead, McDonnell Douglas, which slipped down one notch to number 9 on the Top 10 list but added 1,000 engineers during the year, recently released its 20-year forecast that predicts a worldwide need for nearly 13,600 new commercial jet transports with a value of about $1.1 trillion. Meeting the demand, McDonnell analysts say, will require the aircraft industry to deliver an average of about 680 new planes every year.
Automotive anxiety. Sales of vehicles, although healthy, failed to meet some expections this year in the auto world. So, as the 1997 models hit the market, consumers are benefitting from cash backs and low interest rates on 1996 models.
Factor in recent labor negotiations and the industry's outlook for next year appears muddy. Ford, number 12 on the Top 100 list, settled with the auto workers union by agreeing to maintain at least 95% of its current blue-collar jobs for three years. Chrysler, which moved up two slots on the list to number 39, and with profits continuing to roll in, reached a similar agreement with the UAW. Guaranteed employment isn't particulary onerous for the two automakers, since both companies pared down their work forces in the 1980s and are quite lean.
In fact, Chrysler has hired about 13,000 workers during the past three years as its share of the U.S. light-vehicle market has grown. Moreover, Chrysler would welcome a two-tier wage system, as the company, which outsources more parts than GM or Ford, is selectively bringing parts jobs back in-house. And to top it off, the automaker recently announced it plans to boost capacity 14% by 1999.
In an associated move, Ford has announced it is further restructuring its global automotive operations, including creating a separate organization for its automotive parts-making activities. Ford decided to fold five global product-development centers that were created in the company's 1994 reorganization into three new organizations. Of those, one will be responsible for trucks, one for small and medium cars, and one for large and luxury cars.
Ford's new vice chairman, Edward E. Hagenlocker, will have the responsiblity to sort through the company's uncompetitive parts businesses and determine which are worth saving. One move recently made in that direction was an announcement that the company will streamline its four components divisons into a stand-alone Delphi-type operation that will sell more parts to outside customers. With 75,000 employees and annual sales of $14.3 billion, the new outfit--to be called the Automotive Products Operations--will become the world's second largest automotive supplier. Already, GM's Delphi automotive systems has expressed interest in working with Ford overseas.
On the other hand, labor provisions accepted by Ford and Chrysler are of little use to GM, which maintained its number 2 spot on the Top 10 list. In spite of nearly doubling its most recent quarterly earnings from a year ago, the number 1 automaker is in no position to guarantee 95% of its 220,000 UAW jobs, according to the Wall Street Journal. Instead, it wants to reduce its hourly U.S. work force by 50,000 to 70,000 jobs to become just as lean as its rivals. And, in contrast to its U.S. cousins, GM has more in-house parts-making units and is moving to outsource more parts work to lower-cost independent suppliers.
What does all of this moving and shaking mean from an engineer's perspective? Fierce competition to bring cars to market faster is changing the independent design and engineering sector as well. Design-oriented companies are growing quickly or banding together to get contracts from the automakers.
Chemical compatibility. Strong demand kept chemical plants humming at 81% of capacity last year. Shipments rose 8% to $369 billion, and profits 11% to $34 billion. As a result, industry giants DuPont, Dow Chemical, and Monsanto posted strong increases in profits.
Although slipping 21 places in the Top 100 list, DuPont retained its financial momentum, and also earned the number 44 spot on the list this year. The company's third-quarter net income rose to $769 million from $647 million a year earlier. Total revenue rose 3.9% to $10.42 billion from $10.03 billion, lead by its polymers segment, which jumped 12% to $198 million from $177 million. Its diversified businesses segment profits jumped 42% to $192 million from $172 million.
The whole chemical segment could possibly make big inroads on next year's list. Who, for example, thought such chemical giants as DuPont and Dow would join forces to increase their shares of the chemical marketplace? But that happened last year when the two companies formed a separate operating unit, DuPont Dow Elastomers, to take advantage of each firm's technology and business savvy in fluoropolymers.
Not to be outdone, 3M and Hoechst AG recently formed a joint venture in fluoropolymers call Dyneon. The new company will have estimated sales of $350 million in its first year of operation and employ about 600.
Likewise, Exxon Chemical and Union Carbide have formed a 50/50 joint venture to research, develop, market, and license process and catalyst technologies used to make polyethylene. This enterprise embodies Exxon's super-condensed technology, which can double the output of Carbide's UNIPOL process reactors.
Meanwhile, Norton Performance Plastics Corp. continued to expand and diversify by purchasing a group of four European silicone elastomer processing companies. Process technologies include extrusion, injection molding, compression molding, liquid injection molding, calendering, and sponge/foam production. And BASF and DuPont plan to establish a joint venture to make and sell nylon intermediates in Asia, including the construction of a 300-kiloton plant scheduled to begin production in 1998.
Then there's Monsanto who is considering spinning off or selling its flagship chemical business, a move that would shift its focus to its agricultural biotechnology business. While the chemical unit remains the company's biggest business, with 1995 sales of $3.7 billion, it isn't nearly as profitable as its agricultural products.
All of this shake-out/buy-out/spinoff activity should help shuffle next year's Top 100 companies.
Electronic shockwaves. Last year's Internet explosion fueled the continued spread of computer equipment throughout homes and offices. So even though many electronic stocks sagged from historic highs, the computer software and services sector became last year's biggest market-value gainer.
Computer hardware makers were hot, too. For example, IBM, number 17 on the Top 100 list, soared thanks to high demand for mainframe computers, which are enjoying a resurgence in computer networks. With profits up 38% to $4.2 billion, and sales up 26%, IBM's market value rose 55% to $65.5 billion. What remains to be seen is the effect the buy out of Lotus Development Corp. will have on future profits.
Perhaps as a result of this uncertainty, IBM recently announced it is preparing a job-reduction plan that would offer between 3,000 and 5,000 employees cash to leave the company or to transfer to other areas where jobs are available. Fortunately for engineers, it's believed the cuts will come from legal, marketing, public relations, and members of the corporate staff. This move follows cuts from just over 400,000 in 1986 to around 230,000 as IBM tried to revive itself.
Compaq came from nothing--it was founded in 1982--and passed IBM in 1994 to become the market leader in PCs, while posting a 43% gain in profits during the most recent quarter. Even Apple Computer surprised some analysts by recording a somewhat remarkable comeback quarterly profit of $25 million, perhaps one reason the company gained four spots on the Top 100 list to number 28.
On the other side of the coin, last July Digital Equipment Corp., number 32 on the Top 100 list, reported that it plans to lay off 7,000 workers, according to Challenger, Gray & Christmas, a Chicago-based out-placement firm. On an equally gloomy note, the company reported that it lost $66 million during the most recent quarter, blaming a reorganization of its worldwide sales force for the showing.
Next year's outlook. From January 1993 to December 1995, an estimated 8.4 million workers were displaced from their jobs, including 3.8 million long-term workers. Of these 8.4 million, roughly 6 million had successfully found new work by last February, according to the Labor Department's Bureau of Labor Statistics. Adds economist Audrey Freedman, president of Audrey Freedman & Associates of New York: "We've created about 10 million new jobs. It's been a strong, strong labor market recovery."
What remains the biggest question mark when it comes time to total 1997 survey results is what the federal government will do to advance or slow down the economy following the November elections. Several key money and administrative bills remained on hold during the presidential campaign, many of which should resurface early in the new congressional session. Stay tuned for for their impact on engineers in next year's DN 100 report.
INDEX OF THE 1995 DN 100
Aerospace Corp. 64
Allied Signal 14
Apple Computer 28
Argonne Labs 90
Asea Brown Boveri 45
AT&T Bell Labs 21
Ball Aerospace & Tech Corp. 95
Battelle Labs 74
Becton Dickinson 94
Black & Decker 61
C.S. Draper Lab 100
Cincinnati Milacron 89
Compaq Computer 82
Cooper Industries 60
Cummins Engine 52
Dana Corp. 59
Data General 84
Deere & Co. 69
Digital Equipment 32
Eastman Kodak 36
Emerson Electric 34
Ford Motor 12
General Dynamics 51
General Electric 7
General Motors 2
Goodyear Tire & Rubber 75
Hughes Defense Comm. 96
Hughes Electronics 8
Illinois Tool Works 80
Ingersoll Rand 34
ITT Defense & Electronics 67
Jet Propulsion Lab 47
Johns Hopkins University 68
Johnson Controls 40
Litton Industries 24
Lockheed Martin 1
Los Alamos Lab 65
Lucent Technologies 4
Masco Tech 73
McDonnell Douglas 9
National Semiconductor 54
Navistar Int'l 93
Newport News Shipbuilding 88
Northern Telecom/BNR 29
Northrop Grumman 10
Orbital Sciences Corp. 81
Perkin Elmer 99
Rockwell Int'l 23
Sandia National Lab 43
Seagate Technology 56
Silicon Graphics 53
Southwest Res. Inst. 76
Sun Microsystems 57
Sunstrand Aerospace 98
Tandem Computers 38
Texas Instruments 20
Tracor Inc. 48
United Technologies 19
Varian Assoc. 63
NEW TO THE LIST
Lucent Technologies 4
Case Corp. 66
Newport News Shipbuilding 89
OFF THE LIST
Company Rank '94
AT&T Global Info Solutions (NCR) 51
Magnavox (Hughes Defense) 91
Qualcomm Inc. 97
Square D 68
NEXT YEAR'S HOPEFULS
Square D 600
Ingersoll Rand 500+
American Microsystems 200
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