NAM/IndustryWeek 2015 1Q Survey of Manufacturers: Survey Responses

Responses from U.S. manufacturing executives to the 2015 1Q NAM/IW Survey of Manufacturers:

1. How would you characterize the business outlook for your firm right now?
   1. Very positive – 20.5%
   2. Somewhat positive – 68.0%
   3. Somewhat negative – 9.5%
   4. Very negative – 2.1%

Percentage that is either somewhat or very positive in their outlook = 88.5%

2. Over the next year, what do you expect to happen with your company’s sales?
   1. Increase more than 10 percent – 16.1%
   2. Increase 5 to 10 percent – 34.8%
   3. Increase up to 5 percent – 25.6%
   4. Stay about the same – 14.9%
   5. Decrease up to 5 percent – 3.9%
   6. Decrease 5 to 10 percent – 2.4%
   7. Decrease more than 10 percent – 2.4%

Average expected increase in sales consistent with these responses = 4.3%

3. Over the next year, what do you expect to happen with prices on your company’s overall product line?
   1. Increase more than 10 percent – 1.5%
   2. Increase 5 to 10 percent – 7.7%
   3. Increase up to 5 percent – 30.8%
   4. Stay about the same – 53.6%
   5. Decrease up to 5 percent – 4.7%
   6. Decrease 5 to 10 percent – 0.6%
   7. Decrease more than 10 percent – 1.2%

Average expected increase in prices consistent with these responses = 1.2%

4. Over the next year, what are your company’s capital investment plans?
   1. Increase more than 10 percent – 18.3%
   2. Increase 5 to 10 percent – 11.7%
   3. Increase up to 5 percent – 17.7%
   4. Stay about the same – 39.5%
   5. Decrease up to 5 percent – 4.8%
   6. Decrease 5 to 10 percent – 3.3%
   7. Decrease more than 10 percent – 4.8%

Average expected increase in investment plans consistent with these responses = 2.3%

5. Over the next year, what are your plans for inventories?
   1. Increase more than 10 percent – 3.9%
   2. Increase 5 to 10 percent – 9.0%
   3. Increase up to 5 percent – 16.7%
   4. Stay about the same – 47.2%
   5. Decrease up to 5 percent – 15.2%
   6. Decrease 5 to 10 percent – 4.8%
   7. Decrease more than 10 percent – 3.3%

Average expected increase in inventories consistent with these responses = 0.4%

6. Over the next year, what do you expect in terms of full-time employment in your company?
   1. Increase more than 10 percent – 3.3%
   2. Increase 5 to 10 percent – 12.8%
   3. Increase up to 5 percent – 35.5%
   4. Stay about the same – 41.5%
   5. Decrease up to 5 percent – 5.1%
   6. Decrease 5 to 10 percent – 1.5%
   7. Decrease more than 10 percent – 0.3%

Average expected increase in full-time employment consistent with these responses = 1.9%

7. Over the next year, what do you expect to happen to employee wages (excluding nonwage compensation such as benefits) in your company?
   1. Increase more than 5 percent – 2.1%
   2. Increase 3 to 5 percent – 22.1%
   3. Increase up to 3 percent – 62.7%
   4. Stay about the same – 12.8%
   5. Decrease up to 3 percent – none
   6. Decrease 3 to 5 percent – none
   7. Decrease more than 5 percent – 0.3%

Average expected increase in wages consistent with these responses = 1.9%

8. Over the next year, what do you expect to happen to employee benefit costs?
   1. Increase more than 10 percent – 18.7%
   2. Increase 5 to 10 percent – 35.6%
   3. Increase up to 5 percent – 32.3%
   4. Stay about the same – 12.2%
   5. Decrease up to 5 percent – 0.3%
   6. Decrease 5 to 10 percent – 0.6%
   7. Decrease more than 10 percent – 0.3%

Average expected increase in benefit costs consistent with these responses = 5.3%

9. Over the next year, what do you expect to happen with the level of exports from your company?
   1. Increase more than 5 percent – 13.8%
   2. Increase 3 to 5 percent – 11.1%
   3. Increase up to 3 percent – 7.8%
   4. Stay about the same – 55.0%
   5. Decrease up to 3 percent – 6.0%
   6. Decrease 3 to 5 percent – 2.1%
   7. Decrease more than 5 percent – 4.2%

Average expected increase in exports consistent with these responses = 0.9%

10. What are the biggest challenges you are facing right now?

(Respondents were able to check more than one response; therefore, responses exceed 100 percent.)

1. Attracting and retaining a quality workforce – 56.2%
2. Challenges with access to capital or other forms of financing – 5.1%
3. Increased raw material costs for our products – 23.7%
4. Rising health care/insurance costs – 69.4%
5. Strengthened U.S. dollar relative to other currencies – 36.3%
6. Unfavorable business climate (e.g., taxes, regulations) – 69.1%
7. Weaker domestic economy and sales for our products – 30.3%
8. Weaker global growth and slower export sales – 30.0%

11. What are your expectations for health insurance cost increases for 2015 relative to 2014?

1. Increase of 15.0 percent or more – 12.8%
2. Increase of 10.0 to 14.9 percent – 19.0%
3. Increase of 5.0 to 9.9 percent – 35.0%
4. Increase of less than 5.0 percent – 17.5%
5. No change – 8.0%
6. Decrease of less than 5.0 percent – 1.2%
7. Decrease of 5.0 percent or more – 2.1%
8. Uncertain – 4.5%

Average expected increase in health insurance costs consistent with these responses = 7.2%

12. What is the size of your firm (e.g., the parent company, not your establishment)?
    1. Fewer than 50 employees – 21.1%
    2. 50 to 499 employees – 53.3%
    3. 500 or more employees – 25.6%

Direction of the Country

13. Do you think the United States is headed in the right direction, or is our country on the wrong track?
    1. Right direction – 11.7%
    2. Wrong track – 73.6%
    3. Unsure – 14.7%

Estate Tax

President Obama has proposed several changes to estate tax provisions. Specifically, he would increase the top tax rates from 40 percent to 45 percent and reduce the exclusion amount from $5.0 million to $3.5 million. In addition, he would repeal what the Administration is calling a “trust fund loophole” by eliminating “stepped-up basis,” with heirs to family businesses paying a third level of tax when they sell any inherited assets.

14. Are you a family-owned business?
    1. Yes – 68.3%
    2. No – 31.1%
    3. Uncertain – 0.6%
15. If so, would these proposed changes in the estate tax alter your current business plans? (Select all that apply.)
    1. It would make it harder to pass along my manufacturing business to future generations. – 72.3%
    2. It would significantly increase the tax liabilities of the firm and my descendants at the time of my death and/or when the business is eventually sold. – 71.9%
    3. It would make us consider selling the business rather than passing it to the next generation. – 42.5%
    4. It would force us to reduce investment in our business in order to redirect resources to estate and succession planning. – 48.0%
    5. Uncertain – 18.1%

Shareholder Activism

16. How is your company structured?
    1. Public company – 12.6%
    2. Privatively held S-corporation, LLC, partnership, etc. – 55.7%
    3. Privately held C-corporation – 31.7%
17. Please answer only if you answered (a) to question 16. According to reports, shareholder activism is on the rise. How much has shareholder activism increased for your company over the past two years?
    1. No change – 46.5%
    2. Shareholder activism has increased slightly – 39.5%
    3. Shareholder activism doubled – 9.3%
    4. Shareholder activism tripled – 4.7%
18. Please answer only if you answered (a) to question 16.  What kinds of shareholder activism campaigns has your company experienced over the past few years? (Select all that apply.)
    1. Corporate governance (e.g., separate chairman and CEO, spinoff or separate company, proxy access) – 22.8%
    2. Executive compensation – 12.3%
    3. Social policy (e.g., environmental reporting, human rights, political spending) – 29.8%
    4. None of the above – 54.4%

Employee Benefits Tax

19. Is your business considering altering the coverage it provides to avoid the prospect of a 40 percent tax on high-cost health insurance coverage starting in 2018 (e.g., the employee benefits tax or “Cadillac” tax)?

1. Yes, we have already altered our coverage. – 9.6%
2. Yes, we plan to alter our coverage. – 15.0%
3. No, we do not plan to alter coverage as a result of the tax. – 39.6%
4. Uncertain – 35.7%

20. If you answered “yes” in the previous question (you have or plan to alter the coverage you provide to your employees as a result of the employee benefits tax), what types of approaches are you using or considering using to avoid having to pay the tax when it goes into effect in 2018?

Sample responses to this question include:

• “We have a high deductible HSA and will have to increase the deductible to stay within the guidelines.”
• “We have not yet decided whether or not we will alter our coverage because of the prospect of the 40% tax.”
• “Higher co-pays.”
• “We significantly increased the individual and family deductible to approx. $6,000/12,000.”
• “Considering hiring a consultant to help us, it’s too confusing to figure out on our own.”
• “Considering offering different plans including a high deductible plan.”
• “Not sure at this point, but we are looking at some form of self insurance, at least up to a point.”
• “Presently working on one. We now have in-house medical services which seem to work, except where we have smaller plants elsewhere.”
• “Moving from a single platinum level plan to offering choices to employees and heavily marketing the consumer driven options.”
• “We will adjust the range of plans available to our employees.  We will likely shift to a higher level HSA with a lessor company contribution.”
• “We plan to adjust benefits {and co-pays if necessary) to avoid the punitive tax. Hopefully, by 2018, this rule will be altered or eliminated.”