It’s only a crisis if you’re in pain, and there are plenty of companies feeling no pain from the Asian currency crisis or the burgeoning trade deficit.
Some of the Midwest’s biggest companies have been dinged by the stumbling Asian economies, including Motorola Inc. and FMC Corp. of Chicago, which blamed slower sales in the Far East for lower-than-expected earnings. And others are scrambling to hold on to customers impoverished by Asia’s currency collapse.
But Moline, Ill.-based Deere & Co., the huge manufacturer of agricultural and construction equipment, said this week that it racked up more than $2 billion in export sales from U.S. operations in 1997. In the first quarter ended Jan. 31, export sales from the U.S. were $444 million, up 13 percent from the year before.
Hardly a case of hard times.
“The big picture says that, for a company that’s international like we are, we’ve got a lot of markets, we’ve got a lot of growth,” said Deere spokesman Gordon Tjelmeland. “It’s a very strong company.”
Still, the issue of the health of the U.S. economy was put squarely back on the table Thursday when the Commerce Department reported that the nation’s trade deficit hit a nine-year high of $113.7 billion in 1997. In December, the deficit jumped more than 24 percent.
Not surprisingly, deficits with Pacific Rim nations led the surge. Many Asian nations are seeing the value of their currencies plunge against the dollar. That makes U.S. goods far more expensive in those nations, but also means foreign products are suddenly cheaper for U.S. buyers.
The U.S. trade deficit with China hit a record $49.7 billion, second only to the deficit with Japan. And the deficit with Japan widened.
Buried in the figures was news that U.S. companies exported a record $932.3 billion worth of goods and services in 1997. That was dwarfed by the $1.05 trillion of goods and services Americans bought from foreign companies. That wasn’t just a record; it was the first time that U.S. imports topped $1 trillion.
Economists suggest the deficit will only get larger throughout this year as Asian nations struggle to get their economies rolling again. But successes like Deere are no anomaly. Plenty of companies are sailing along at a brisk clip, some because they don’t export heavily to Asian markets, some because demand for their products in Asia remains high.
Dell Computer Corp., for example, reported that its profit soared 52 percent in the fourth quarter, thanks to a surge in foreign sales. More to the point, Dell said sales in Japan and other Asian nations rose a whopping 79 percent during the quarter–just as many economists told U.S. companies to begin bracing for the worst.
But Dell noted that its key Asian customers are Japan, Australia and Singapore, which haven’t seen their currencies slide as much as those of some of their neighbors, including South Korea and Indonesia.
Deere’s export success also is partly attributable to geography, Tjelmeland said. “Our sales in Asia are less than 1 percent. It’s just not that significant. The biggest export market is Europe and Australia.”
Another key is that agriculture equipment is just a good business to be in as the world’s economies become more global, he said.
“As countries develop all over the world, including Asia, their diets change. We note they don’t tend to go backwards during economic problems. They enjoy increasing their meat consumption. They enjoy a variety of foods,” Tjelmeland said. That translates into a demand for American agricultural products, which, in turn, fuels demand for Deere’s products. So Deere needn’t export tractors and combines directly to foreign countries to profit from the global economy.
“A lot of people say that agricultural equipment is a mature market,” Tjelmeland said. “No, it’s not mature at all. . . . As the world gets smaller and the population grows, we’re well-positioned.”
Caterpillar Inc. has a similar tale. Even though the Peoria-based maker of heavy equipment said it expects shaky economic conditions in Asia to lower demand for heavy equipment and engines, it is predicting that its total sales will increase this year.
But Asia is hurting some American companies, such as Coleman Company Inc., a Wichita, Kan.-based maker of camping and outdoor equipment. In announcing a $2.5 million loss for fiscal 1997, the company noted that the fourth quarter was hurt by economic problems in Southeast Asia, and that sales in its Eastpak division were $2.5 million below expectations.
But that gloom and doom needs to be viewed in a bigger context: Coleman lost $41.9 million the year before. And it made its dramatic drive toward profitability despite Asia-related problems.
On the other hand, Coleman noted that despite a wide-ranging restructuring, it wasn’t in the black yet, and said that weak Asian markets could hurt 1998 results.
