Economic gauge changes with times

December 05, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK -- Within a decade of its 1910 founding, Black & Decker Corp. was shipping drills and air compressors overseas. Three years later, it established its first assembly area outside the United States.

Each move's impact on the U.S. economy was minimal in those years, but it has become a matter of profound interest recently as overseas operations have mushroomed for Black & Decker and other companies in fields as diverse as petroleum, auto manufacturing and beverages. Now, nearly half of B&D's profits come from abroad, a proportion not unusual for large U.S.-based corporations.

That evolution was the foundation for yesterday's move by the Commerce Department to shift its quarterly reading of the U.S. economy from the gross national product to the gross domestic product.

The traditional GNP figure reflects the performance of U.S.-owned operations; the GDP reflects the performance of operations within the United States, regardless of where their owners are based. As a result, earnings from overseas affiliates of U.S. operations will be ignored, but earnings of foreign companies' U.S.-based operations will be included.

"If you are trying to measure the well-being of the United States, how Toyota is doing here has a lot more impact than how Exxon is doing in the Middle East," said Larry Moran, a Commerce Department economist.

The change comes as companies are becoming more willing to move manufacturing, design and distribution facilities, depending on other nations' ability to produce effectively and willingness to consume.

Ultimately, said David Blitzer, chief economist at Standard & Poor's, the impact of the Commerce Department's move will be to change how "we look and think about the economy. Where companies operate, regardless where they are based, makes a huge difference."

The most striking example may be the Coca-Cola Co., which, like Black & Decker, began building plants outside the United States early in the century. In 1990, 80 percent of Coke's profits came from abroad, and that percentage is likely to increase.

Coke's international sales are growing four times as fast as its domestic sales, and the company is pouring more money into foreign operations. Last year, for instance, after the Berlin Wall came down, it invested $450 million in East German bottling plants. From zero, sales there soared to 89 million cases, almost 5 percent of U.S. volume.

Heavy dependence on overseas sales and earnings has long been a factor in the petroleum industry. According to Oppenheimer & Co., Chevron Inc., Mobil Corp., Exxon Corp. and Texaco Inc. earn more than 70 percent of their profits abroad.

For the hard-pressed U.S. auto companies, the results are even more extreme. Beset by losses in its U.S. car operations, General Motors Corp.'s life support comes from billions of dollars earned abroad, primarily in Europe.

One result of the change in the measurement will be to further dampen perceptions of the vitality of the U.S. economy.

Foreign-sales giants

Overseas sales by U.S.-based companies are an example of the kinds of economic measurements that are not included in the gross domestic product. Companies are ranked by magnitude of foreign sales. Dollar figures are in billions.

Company .. .. .. Total .. .. Foreign .. .. Per-

name .. .. .. .. sales .. .. sales .. .. .. cent

Exxon .. .. .. $105.5 .. .. $87.4 .. .. .. . 82.8%

Mobil .. .. .. ..57.8 .. .. ..42.8 .. .. .. 74.0

BTC IBM .. .. .. .. ..69.0 .. .. ..41.9 .. .. .. 59.7

General Motors..123.3 .. .. .. 37.7 .. .. .. 30.5

Ford Motor .. .. 97.6 .. .. .. 35.9 .. .. .. 36.8

Texaco .. .. .. 40.9 .. .. .. 17.5 .. .. .. 42.8

Du Pont .. .. .. 39.7 .. .. .. 17.4 .. .. .. 43.8

Philip Morris .. 44.3 .. .. .. 15.1 .. .. .. 34.1

Dow Chemical.. ..19.8 .. .. .. 10.3 .. .. .. 52.0

Procter & Gamble..24.1 .. .. .. 9.6 .. .. .. .39.8

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