22ND ANNUAL CORPORATE survey & THE 4TH ANNUAL CONSULTANTS survey, the

by Geraldine Cambale, editor

It's a case of déjà vu. In last year's survey, I wrote about how our readers' plans reflected moderating growth of the U.S. economy brought about by a softening in the housing market and rising energy prices.. .about the Federal Reserve Bank lowering interest rates to boost borrowers' confidence.

Fast forward to December 2007 and the situation has gone from bad to worse. Many economists are saying the nation is on the brink of a recession, yet the latest Commerce Department reports indicate that U.S. GDP grew 4.9 percent in the third quarter of this year thanks to an acceleration in exports. This is the strongest performance in four years. And while rising energy prices might lead to a rise in inflation, the Federal Reserve noted in early November that core inflation had improved.

Even business leaders' predictions for the economy are at odds. Executives at heavy-equipment maker Caterpillar say the United States might fall into recession in 2008, but their peers at Intel, Ford, and Dupont disagree. The latter group believes falling housing prices and the crisis in the subprime mortgage market are not enough to put the U.S. economy into recession. In fact, a Business Council survey of chief executive officers conducted in late October predicted that growth would slump to 2 percent or less next year but there would be no recession.

Additionally, only 63 percent of large and 76 percent of small manufacturing companies responding to a National Association of Manufacturers (NAM) third-quarter survey had a positive business outlook, representing the lowest level of optimism in roughly four years. Nevertheless, both groups of manufacturers expect pricing to remain stable and sales to increase, albeit moderately, over the next year. They also expect to continue to increase capital expenditures, although there will be a significant slowdown. Large manufacturers' capital expenditures are projected to rise by only 0.3 percent, while small manufacturers' capital expenditures are expected to increase by 1.6 percent. Both groups of respondents to the NAM survey also expect to increase employment over the next 12 months, with employment increases at large firms being more modest (just 0.4 percent) than at smaller companies (1.6 percent).

How do all these findings and predictions compare to our readers' plans? Once again Area Development's editors have surveyed our readers to determine their plans and priorities for the next several years. The results of our 22nd Annual Corporate Survey follow.

Profile of Respondent Companies

More than 70 percent of the Corporate Survey respondents represent manufacturing firms; 16 percent are with warehouse/distribution operations (Figure 1). Nearly half of these companies operate five or more domestic facilities, and more than half also operate five or more foreign facilities. Only about a fifth of the respondents said their companies have just one domestic and/or foreign facility (Figure 2).

More than half of the 2007 Corporate Survey respondents (57 percent) are with mid-sized firms in terms of employment (100-999 employees). Just 6 percent have fewer than 100 workers, but another 38 percent employ 1,000 or more people (Figure 3).

Interestingly, there's been a rise in the number of firms increasing their number of facilities over the past 12 months - 35 percent of the respondents said their firms had done so. Last year, only 25 percent of the respondents made a similar claim. And 53 percent reported no change in their number of facilities (as compared to 65 percent last year), while just 13 percent decreased their number of facilities, 3 percent more than reported last year (Figure 4).

Of those respondents reporting an increase in their number of facilities, more than half said this was in response to an increase in sales/production; 44 percent reported the need to serve new markets; and 37 percent said their companies had been acquired by or merged with another firm (Figure 5). About three-quarters of the respondents are also happy with the "service after sale" in their new facilities' locations - a nice compliment to economic development and other government entities that garnered this new business (Figure 6).

Three-fourths of these respondents also had no problem recruiting labor at their new locations. Of the 23 percent who did experience such difficulties, 88 percent said they couldn't find highly skilled workers, especially high-tech/IT employees (47 percent) (Figure 7).

Nearly all of those respondents whose companies decreased their number of facilities said this was in response to a consolidation of operations, with 30 percent saying their companies were acquired by or merged with another firm. About a third also cited the need to lower operating/labor costs as the reason for closing facilities (Figure 8).

We also know the responses to our Survey are the "real deal": 68 percent of the respondents to our Corporate Survey are involved in their companies preliminary or final location decisions. Nearly 30 percent are their companies' owner or chief executive; 39 percent are corporate officers; and another fifth are real estate or facilities managers (Figures 9 and 10).