Industry Week Analyzes COVID's Effect on the Manufacturing Industry

INDUSTRYWEEK - Typically, the IndustryWeek U.S. 500 serves as a vital market index, measuring the impact of a full fiscal year’s worth of activity in the manufacturing sector. Typically, tallying year-end bottom- line metrics and key profitability and operational factors for the 500 largest public U.S. manufacturers provides clear and unmistakable insight into the real-world results of any micro or macroeconomic events in the industry—from strikes to tax cuts, from innovations to recessions.

Typically, year-over-year movements up and down this ranking demonstrate lasting trends in the industry—the longterm rise of tech or the slow decline of the petrochemical and coal industries, for example. Typically, the IW U.S. 500 report provides the missing details of these ongoing, predictable trends, and it is typically used to make the next year’s trends even more predictable.

But 2020 was anything but typical, and the numbers it recorded serve as a stark reminder of just how painful it was.

Given this, the results shouldn’t come as too much of a surprise. Total revenue for this block of the industry dropped over $390 billion from 2019 and net income fell nearly $201 billion, losses felt most heavily in the petroleum and coal, motor vehicle and parts, rubber and machinery industries, which all saw revenue declines in double-digit percentages.

This, of course, was the predicted outcome of the pandemic and the shutdowns it caused. As Chad Moutray, chief economist for the National Association of Manufacturers, reminds us, “Manufacturing production fell 20.1% between February and April of 2020, which rivals what we saw in the Great Recession in some ways.” During that time, he notes, motor vehicles and parts production saw an 83.5% crash, crude was down below $20 per barrel, aerospace production was down 27.5%, primary metals was down 25.5%, and so on and so on.

It’s a reminder, he says, that “no sector is immune to a complete closure of the economy”— not even the industry responsible for keeping society functioning in times of crisis. A lesson we all learned quite well.

THE UPSIDE

This year’s list isn’t all doom and gloom, though. Quidel Corp. (IW500/433), for example, saw a 211% increase in revenue thanks to its quick work developing the rapid COVID test, while successful mergers and acquisitions helped increase Cleveland- Cliffs’ (IW500/192) revenue 167% and Ingersoll-Rand’s (IW500/206) over 100%.

And even this is burying the lead—after two straight years of losses, the once untouchable Exxon Mobil (IW500/2) lost its No. 1 spot in 2020 to Apple (IW500/1), which pulled in about $275 billion in revenue last year. With the big oil challenges last year, the gulf between these leaders expanded to an unimaginable $95 billion.

MAKING SENSE OF 2020

Now the question is, what do we make of all this? Is this the next step in the long march of tech supremacy? Does this year’s list indicate that quasi-manufacturing models like Apple’s and Microsoft’s (IW500/3) are officially stronger and more profitable than core manufacturing processes like Exxon’s or Ford’s (IW500/4)? Or is it a blip? Is it all an anomalous, pandemic- driven asterisk in the greater trajectory of the industry?

The answer to these questions will play out over the next few quarters. For many companies and industries, the 2021 IW U.S. 500 ranking marks rock bottom in a once-in-a-lifetime, unavoidable dip; for others it marks the acme of an overnight whirlwind of unrepeatable success. For the rest, however, it demonstrates something far more relevant—it highlights a year’s work of high-stakes innovation, of strategic technology investments, of flexibility, wherewithal, and extreme business intelligence that allowed them to mitigate their losses, to capitalize on their opportunities, and to survive in otherwise impossible conditions.

In this sense, the 2020 numbers represented here are far more than a blip—they are the first chapter to a whole new epoch of manufacturing.These are the companies to watch in the coming months, those that learned the most from the asterisk year and that made long-term strategic shifts to rebound stronger and more resilient than ever.

*Article Courtesy: IndustryWeek

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