Business outlook report January PwC

Business outlook report January 2009 PwC

Contents 1 Quarterly highlights Page 1.1 Key indicators for the business outlook 4 2 Economic views 2.1 View of US economy, this quarter 6 2.2 View of US economy, next 12 months 7 2.3 View of world economy, this quarter 8 2.4 View of world economy, next 12 months 9 3 Company performance 3.1 Company revenue growth, calendar year 11 3.2 Industry growth, calendar year 12 3.3 International sales 13 3.4 Changes in gross margins 14 3.5 Changes in costs and prices 15 3.6 Inventory movement 16 3.7 Level of operating capacity 17 4 Business outlook, next 12 months 4.1 Revenue growth, next 12 months 19 4.2 International sales, next 12 months 20 4.3 Percent planning to hire 21 4.4 Percent planning to hire by type of employee 22 4.5 Percent planning major new investments of capital 23 4.6 Percent planning to increase operational spending 24 4.7 Expected barriers to business growth 25 4.8 Plans for M&A and other business initiatives 26 5 Survey demographics and research methodology 27 PricewaterhouseCoopers 2

Quarterly highlights In the fourth quarter of 2008, PricewaterhouseCoopers interviewed 60 US-based industrial manufacturing executives about their current business performance, the state of the economy, and their expectations for business growth over the next 12 months. We then compared their responses with the prior quarter s results to see how the panel s 12-month outlook changed. The final step was to compare their views with a wider panel to show how the industry differs from the broader population. Overall, US-based industrial manufacturers are expecting an average negative revenue growth over the next 12 months. Demand is the overwhelming concern, as oil/energy prices have plummeted and are no longer a major drag on growth. In the fourth quarter, the yearlong pattern of increasingly higher costs and prices reversed. An increase in market demand will be critical in the year ahead, either from international or domestic markets. International marketers remain hopeful that sales abroad will be a primary contributor to revenue. Key findings: Industry growth stalls. Senior executives of US-based manufacturers project an average minus 2.4 percent growth over the next 12 months. Twenty-five percent expect positive growth, but 34 percent are projecting zero growth, and 33 percent expect negative growth. Pessimism continues to spread. Pessimism toward the US and world economies over the next 12 months is in sync, with 70 percent pessimistic toward the US economy and 69 percent pessimistic toward the world economy. Most others are uncertain. Those who are optimistic about the US and world economy is at a survey low of 5 percent and 4 percent, respectively. International sales preserve hope. International sales turned negative in the fourth quarter for industrial manufacturers: up for 28 percent, but down for 44 percent. However, industrial manufacturers selling abroad project a solid 37 percent contribution to total revenue over the next 12 months, above last quarter and last year. These senior executives seem hopeful that sales abroad will hold fast and not slip as badly as domestic sales. Market demand stunts growth. Among panelists, concern about lack of demand is the overwhelming potential barrier to growth over the next 12 months, cited by 85 percent. Concern about decreasing profitability is next, cited by 62 percent. Higher interest rates weighed less on those surveyed, but concerns about available capital and taxation policies were on the rise as potential barriers to growth over the next 12 months. Cost-price spiral ends. Notably lower oil/energy prices and commodity prices in the fourth quarter helped break the yearlong cost-price climb. Only 25 percent reported increased costs, while 32 percent reported decreases a net of 7 percent reporting decreased costs. Similarly, only 15 percent raised their prices, and 33 percent lowered them a net of 18 percent decreasing prices. Investments, M&A activity idle. Plans for major new investments of capital over the next 12 months continued on pace with the prior quarter, dropping one point to 33 percent. Operational spending increases were cited by 57 percent of industrial manufacturers, a drop-off from 64 percent in the prior quarter and well below last year s 83 percent. Projected M&A activity was constant with the prior quarter, and positive initiatives over the next 12 months include plans to expand to new markets abroad (32 percent) and to form new strategic alliances (30 percent). More workforce reductions slated. Only 10 percent plan net new hirings, while 35 percent will be reducing their workforces. Composite new hiring plans for the next 12 months are negative, with workforces contracting 3.2 percent or more. A quarter-over-quarter comparison of key indicators shows the business outlook for the next 12 months and how the views of the panel have changed each quarter (see chart 1.1). The pages that follow provide a detailed look at each question for the past five quarterly surveys. PricewaterhouseCoopers 3

Key indicators for the business outlook Chart 1.1 Key indicators for the business outlook A quarter-over-quarter comparison of the key indicators shows how the 12-month outlook has changed each quarter. The change column indicates the movement of opinion from the past two quarters. Business outlook, next 12 months among industrial manufacturers 2007 2008 Change Page 4Q 07 1Q 2Q 3Q 4Q 3Q - 4Q Optimistic about US economy 29% 12% 8% 6% 5% = 7 Optimistic about world economy 64% 38% 37% 7% 4% 9 Expect positive revenue growth 81% 7 68% 54% 25% 19 Average growth rate expected 5.4% 4.6% 3.7% 2.8% -2.4% 19 Planning major new investments 41% 52% 5 34% 33% = 23 New investments as a % of sales 9. 5.6% 5.4% 6.1% 8.3% 23 Planning to hire 36% 32% 32% 12% 1 = 21 New workers as a % of workforce (net) +0.1% -0.3% +0.1% -4. -3.2% = 21 Expected barriers to growth Lack of demand 61% 62% 6 82% 85% 25 Decreasing profitability 31% 48% 5 64% 62% = 25 Monetary exchange rate 44% 57% 4 36% 38% = 25 Legislative/ Regulatory pressures 29% 35% 38% 36% 37% = 25 Capital constraints 15% 32% 23% 26% 37% 25 Taxation policies 2 18% 25% 22% 3 25 Competition from foreign markets 44% 25% 37% 34% 25% 25 Oil/energy prices 66% 68% 78% 62% 25% 25 Higher interest rates 29% 12% 17% 3 13% 25 Pressure for increased wages 25% 3 5 2 1 25 Lack of qualified workers 22% 23% 18% 26% 3% 25 PricewaterhouseCoopers 4

Economic views

Economic views View of the US economy, this quarter Which best describes your view of the US economy this quarter? Almost all industrial manufacturing executives interviewed 98 percent believe the US economy declined in the fourth quarter, 8 points more than last quarter's 90 percent. None of them believed it grew, and only 2 percent believed it was unchanged. Chart 2.1 View of the US economy, this quarter 8 5 3 2 0 Growing 8 2 20 20 Unchanged 32 Declining 6 4 32 75 77 90 98 2 36 4Q 07 1Q 2Q 3Q '08 4Q '08 8 33 26 4 7 5 0 10 4 28 Growing Unchanged Declining 6 4 36 70 65 85 96 2 31 Note: In 4Q 2008 n=60,, n=103 4Q 07 1Q 2Q 3Q '08 4Q '08 PricewaterhouseCoopers 6

Economic views View of the US economy, next 12 months Looking at the next 12 months, how do you feel about the prospects for the US economy? In view of the US credit crisis, only 5 percent of USbased industrial manufacturers expressed optimism about the 12-month outlook for the US economy, slightly below the prior quarter s 6 percent but sharply below last year s 29 percent. Seventy percent are pessimistic, and 25 percent are uncertain. A year ago, only 24 percent were pessimistic. Chart 2.2 View of the US economy, next 12 months 8 6 12 8 6 5 Optimistic Uncertain 29 25 28 Pessimistic 36 40 47 4 52 52 66 70 2 24 4Q 07 1Q 2Q 3Q '08 4Q '08 8 26 18 14 8 9 30 26 Optimistic Uncertain Pessimistic 6 39 46 50 4 62 65 2 43 40 24 Note: In 4Q 2008 n=60,, n=103 4Q 07 1Q 2Q 3Q '08 4Q '08 PricewaterhouseCoopers 7

Economic views View of the world economy, this quarter Which best describes your view of the world economy this quarter? (international marketers only) Attitudes toward the US and world economies were in sync in the fourth quarter 2008. Virtually all of those marketing abroad 98 percent believe the world economy declined in the fourth quarter, 18 points above the prior quarter. Chart 2.3 View of the world economy, this quarter 8 38 37 13 7 2 0 Growing Unchanged Declining 6 72 4 37 28 80 98 2 19 35 25 9 4Q 07 1Q 2Q 3Q '08 4Q '08 8 34 32 13 9 2 2 Growing Unchanged Declining 66 6 4 40 37 78 96 Note: In 4Q 2008 those marketing abroad, Industrial manufacturers n=54,, n=90 2 25 31 26 9 4Q 07 1Q 2Q 3Q '08 4Q '08 PricewaterhouseCoopers 8

Economic views View of the world economy, next 12 months Looking at the next 12 months, how do you feel about the prospects for the world economy? (international marketers only) Only 4 percent of US-based industrial manufacturers who market abroad are optimistic about the prospects for the world economy over the next 12 months, slightly less than the 7 percent last quarter. But a year ago, 64 were optimistic. Twenty-seven percent expressed uncertainty, and 69 percent said they are pessimistic. Chart 2.4 View of the world economy, next 12 months 8 6 7 4 Optimistic Uncertain 38 37 27 30 Pessimistic 64 4 41 36 63 69 2 30 27 21 6 4Q 07 1Q 2Q 3Q '08 4Q '08 8 61 41 33 8 7 32 31 Optimistic Uncertain Pessimistic 6 Note: In 4Q 2008 those marketing abroad, Industrial manufacturers n=54,, n=90 4 2 43 44 60 62 31 24 15 8 4Q 07 1Q 2Q 3Q '08 4Q '08 PricewaterhouseCoopers 9

Company performance

Company performance Company revenue growth, calendar year What is your company s estimated revenue growth rate for the calendar year? In the fourth quarter of 2008, 42 percent of US-based industrial manufacturers expected positive growth 12 percent double-digit growth, and 30 percent single-digit growth. Overall, the composite average growth estimate dipped to plus 1.3 percent from plus 2.5 percent in the prior quarter, and it is well below last year s plus 6.1 percent. Chart 3.1 Company revenue growth, calendar year 8 6 4 1 or greater 12 12 20 18 Between 0 and 1 32 Zero 30 Negative 53 36 45 Not reported 18 48 12 2 18 17 28 37 10 12 13 9 1 5 5 6 3 4Q 07 1Q 2Q 3Q '08 4Q '08 Mean 6.1% 3. 3.4% 2.5% 1.3% Note: In 4Q 2008 n=60,, n=103 8 6 4 2 24 55 10 9 14 21 18 15 35 56 43 51 18 14 16 13 20 30 11 12 2 3 3 5 2 4Q 07 1Q 2Q 3Q '08 4Q '08 Mean 5.6% 3.2% 4. 3.8% 1.6% 1 or greater Between 0 and 1 Zero Negative Not reported PricewaterhouseCoopers 11

Company performance Industry growth, calendar year What is your industry s estimated growth rate for the calendar year? Industry growth for the calendar year is expected to average minus 3.8 percent, below the prior quarter s minus 1.9 percent. US-based industrial manufacturers interviewed anticipate an average growth rate of plus 1.3 percent for their companies in 2008, notably better than the estimated negative growth rate for their industry. Chart 3.2 Industry growth, calendar year 8 6 4 2 12 4 10 12 9 23 53 28 45 56 20 18 15 25 12 36 47 14 22 18 6 6 2 6 1 4Q 07 1Q 2Q 3Q '08 4Q '08 Mean 2.6% 1.3% 1.9% -1.9% -3.8% 1 or greater Between 0 and 1 Zero Negative Not reported Note: In 4Q 2008 n=60,, n=103 8 6 4 2 9 5 9 9 7 56 62 15 13 20 12 4 54 19 16 4 2 31 40 22 18 37 30 3 3 4Q 07 1Q 2Q 3Q '08 4Q '08 Mean 3. 1.3% 2.1% -0.6% -2.7% 1 or greater Between 0 and 1 Zero Negative Not reported PricewaterhouseCoopers 12

Company performance International sales Are international sales up, down, or the same compared with three months ago? Chart 3.3 International sales International markets turned negative for US-based industrial manufacturers that sell abroad. In the fourth quarter, only 28 percent of international marketers increased sales abroad, while 44 percent reported a decrease, a sharp contrast to stronger performances in the prior four quarters. 8 64 63 66 45 28 Up Same Down 6 28 4 42 2 32 37 30 44 13 4 4 4Q 07 1Q 2Q 3Q '08 4Q '08 Up 8 57 58 57 44 32 Same Down 6 33 4 44 2 38 42 38 35 Note: In 4Q 2008 those marketing abroad, Industrial manufacturers n=54,, n=90 12 5 5 4Q 07 1Q 2Q 3Q '08 4Q '08 PricewaterhouseCoopers 13

Company performance Changes in gross margins Are gross margins up, down, or the same compared with three months ago? In the fourth quarter of 2008, gross margins were higher for 17 percent of US-based industrial manufacturers but lower for 48 percent, a net minus 31 percent continuing the downward pattern of the past three quarters. Chart 3.4 Changes in gross margins 8 23 18 17 26 41 Up Same Down 6 42 39 32 35 4 32 2 27 35 43 42 48 4Q 07 1Q 2Q 3Q '08 4Q '08 Net +14% -12% -25% -16% -31% 8 28 28 21 32 21 Up Same Down 6 39 39 43 42 38 4 2 29 30 40 30 40 Note: In 4Q 2008 n=60,, n=103 4Q 07 1Q 2Q 3Q '08 4Q '08 Net -1% -2% -19% +2% -19% PricewaterhouseCoopers 14

Company performance Changes in costs and prices Are costs up, down, or the same compared with three months ago? Prices? In the fourth quarter, the yearlong pattern of increasingly higher costs and prices reversed. Only 25 percent of USbased industrial manufacturers reported higher costs, and 32 percent reported lower costs a net minus 7 percent with lower costs. responded to fewer cost increases in the fourth quarter by raising fewer prices. Only 15 percent raised prices, while 33 percent lowered them, a net minus 18 percent with higher prices. Chart 3.5 Changes in costs and prices Costs Prices 8 6 4 2 25 63 63 66 80 43 27 32 20 13 10 5 7 14 32 Net +53% +58% +73% +52% -7% 15 53 57 55 54 52 38 35 32 28 9 8 13 18 33 8 6 4 2 4Q 07 1Q 2Q 3Q '08 4Q '08 Net +44% +49% +42% +36% -18% Up Same Down Up Same Down Costs 8 6 4 2 Net 27 56 56 71 59 47 34 36 26 23 10 8 6 15 26 +46% +48% +65% +44% +1% Up Same Down Prices 8 6 4 2 43 50 21 52 53 55 48 43 36 33 9 7 12 14 24 4Q 07 1Q 2Q 3Q '08 4Q '08 Up Same Down Note: In 4Q 2008 n=60,, n=103 Net +34% +43% +4 +39% -3% PricewaterhouseCoopers 15

Company performance Inventory movement Are finished inventories as a percent of sales up, down, or the same compared with three months ago? (product companies only) Breaking a three-quarter pattern, more US-based industrial manufacturers reported lower inventories (30 percent) than higher inventories (23 percent) a net 7 percent with lower inventories. Chart 3.6 Inventory movement 8 17 26 33 36 23 Up Same Down 6 48 47 4 44 56 40 2 35 23 18 24 30 Net 4Q 07 1Q 2Q 3Q '08 4Q '08-18% +1 +8% +12% -7% 8 19 32 24 34 24 Up Same Down 6 48 43 42 58 40 4 2 33 26 18 26 33 Note: In 4Q 2008 n=60,, n=103 Net 4Q '07 1Q '08 2Q '08 3Q '08 4Q '08-14% +6% +6% +8% -9% PricewaterhouseCoopers 16

Company performance Level of operating capacity What is your organization s current operating capacity? Operating capacity is an estimate of the current level of permanent staffing compared with what is needed for full-capacity output. In the fourth quarter of 2008, the average level of operating capacity for US-based industrial manufacturers dropped off sharply to an estimated 76.8 percent well below the prior quarter and last year. This quarter, only 33 percent of industrial manufacturers claimed to be at or near capacity. Chart 3.7 Level of operating capacity 8 6 33 42 44 51 50 Near full About 3/4 capacity About 1/2 capacity Not reported 4 2 45 47 42 42 42 7 6 22 6 12 2 5 2 0 4Q 07 1Q 2Q 3Q '08 4Q '08 Mean 85.1% 84. 81.8% 80.2% 76.8% Near full About 3/4 capacity 8 56 57 48 55 44 About 1/2 capacity Not reported 6 4 2 38 36 43 36 42 Note: In 4Q 2008 n=60,, n=103 5 14 5 1 6 8 1 4 1 0 4Q 07 1Q 2Q 3Q '08 4Q '08 Mean 86.2% 85.7% 83.6% 83.8% 79.7% PricewaterhouseCoopers 17

Business outlook, next 12 months

Business outlook, next 12 months Revenue growth, next 12 months What is your organization s estimated revenue growth rate for the next 12 months? US-based industrial manufacturers projected a minus 2.4 percent average growth rate for the next 12 months, below the prior quarter s projected plus 2.8 percent and well below last year s plus 5.4 percent. Over the next 12 months, only 25 percent are planning for growth 3 percent expect double-digit revenue growth, and 22 percent expect single-digit growth. Looking ahead, more businesses expect negative growth than positive growth 33 percent versus 25 percent. Chart 4.1 Revenue growth, next 12 months 8 6 4 27 54 13 57 50 18 16 38 16 22 34 3 1 or greater Between 0 and 1 Zero Negative Not reported 2 15 19 10 3 5 12 4 33 22 5 8 8 8 4Q 07 1Q 2Q 3Q 4Q '08 Mean 5.4% 4.6% 3.7% 2.8% -2.4% 8 6 21 18 20 57 56 54 15 46 7 26 36 1 or greater Between 0 and 1 Zero Negative Not reported 4 16 Note: In 4Q 2008 n=60,, n=103 2 13 5 15 15 25 16 5 5 4 6 6 7 6 4Q 07 1Q 2Q 3Q 4Q '08 Mean 5.3% 4.8% 4.8% 3.8% -0.6% PricewaterhouseCoopers 19

Business outlook, next 12 months International sales, next 12 months What percent of your business s total revenue over the next 12 months do you expect to be derived from international sales? Of those selling abroad, the projected contribution of international sales to total revenue is 37 percent over the next 12 months, a rise from the prior quarter s 32 percent and above last year s 33 percent. International marketers still expect to draw an increasing percent of their nowdeclining revenue from world markets. Chart 4.2 International sales, next 12 months 4 3 2 33 35 38 32 37 10 % 4Q 07 1Q 2Q 3Q 4Q '08 4 3 2 28 29 29 26 31 10 % Note: In 4Q 2008 those marketing abroad, Industrial manufacturers n=54,, n=90 4Q 07 1Q 2Q 3Q 4Q '08 PricewaterhouseCoopers 20

Business outlook, next 12 months Percent planning to hire Do you plan to add or reduce the number of full-time equivalent employees over the next 12 months? In line with last quarter, only 10 percent of US-based industrial manufacturers interviewed plan to add employees to their workforces over the next 12 months, but 35 percent plan to reduce the number of full-time equivalent employees. The net workforce projection is minus 3.2 percent, similar to last quarter's minus 4.0 percent net projection. A year ago, it was a plus 0.1 percent. Chart 4.3 Percent planning to hire 8 6 12 10 36 32 32 48 55 Add Same Reduce 4 50 53 51 2 Net 40 35 14 15 17 4Q 07 1Q 2Q 3Q 4Q +0.1% -0.3% +0.1% -4. -3.2% 8 41 38 40 26 20 Add Same Reduce 6 48 54 4 45 49 44 Note: In 4Q 2008 n=60,, n=103 2 Net 26 26 14 13 16 4Q 07 1Q 2Q 3Q 4Q -1. -0.1% +0.5% -0.8% -3. PricewaterhouseCoopers 21

Business outlook, next 12 months Percent planning to hire by type of employee What types of employees do you plan to add or reduce over the next 12 months? Only 10 percent of industrial manufacturers interviewed are planning to hire over the next 12 months, slightly below last quarter but 26 points below a year ago. Chart 4.4 Percent planning to hire by type of employee 4Q 07 1Q 2Q 3Q 4Q Planning to hire (net) 36% 32% 32% 12% 1 Professionals/technicians 26% 23% 27% 6% 5% Skilled labor 24% 23% 8% 4% 3% White collar support 14% 13% 1 2% 3% Production workers 17% 13% 1 2% 2% Sales/marketing 12% 12% 15% 4% 2% 4Q 07 1Q 2Q 3Q 4Q Planning to hire (net) 41% 38% 4 26% 2 Professionals/technicians 27% 26% 3 18% 11% Skilled labor 2 18% 1 8% 5% White collar support 14% 17% 15% 1 8% Production workers 13% 13% 11% 6% 6% Sales/marketing 14% 14% 18% 11% 6% Note: In 4Q 2008 n=60,, n=103 PricewaterhouseCoopers 22

Business outlook, next 12 months Percent planning major new investments of capital Are you actively planning any major new investments of capital over the next 12 months? If so, what percent of total sales do you expect to invest? Thirty-three percent of US-based industrial manufacturers interviewed plan major new investments of capital during the next 12 months, similar to the prior quarter but 8 points below last year s 41 percent. The mean investment as a percentage of total sales rose to 8.3 percent, in line with 9.0 percent a year ago. Chart 4.5 Percent planning major new investments of capital 6 5 4 3 52 50 2 41 34 33 10 % Mean investment as a % of total sales 4Q 07 1Q 2Q 3Q 4Q 9. 5.6% 5.4% 6.1% 8.3% 6 5 4 3 2 48 51 48 40 31 10 % Note: In 4Q 2008 n=60,, n=103 Mean investment as a % of total sales 4Q 07 1Q 2Q 3Q 4Q 8.6% 5.9% 7.7% 7.9% 6.8% PricewaterhouseCoopers 23

Business outlook, next 12 months Percent planning to increase operational spending Over the next 12 months, where do you expect to increase spending? Looking at the next 12 months, three types of increased expenditures lead the way among US-based industrial manufacturers: geographic expansion, information technology, and new product or service introductions. Geographic expansion rose 10 points to 30 percent and is in line with a year ago. IT rose 4 points quarter-toquarter to 28 percent but is well below last year s 48 percent. Note: In 4Q 2008 n=60,, n=103 Chart 4.6 Percent planning to increase operational spending Percent planning to increase spending (net) 4Q 07 1Q 2Q 3Q 4Q 83% 75% 77% 64% 57% Geographic expansion 31% 27% 35% 2 3 Information technology 48% 4 38% 24% 28% New product or service introduction 43% 38% 48% 26% 23% Facilities expansion 34% 25% 27% 2 18% Business acquisition 34% 33% 3 26% 18% Research and development 36% 35% 4 24% 15% Marketing & sales promotion 29% 23% 13% 14% 7% Internet commerce 9% 15% 17% 12% 3% Advertising 15% 15% 12% 12% 2% Percent planning to increase spending (net) 4Q 07 1Q 2Q 3Q 4Q 83% 84% 78% 69% 58% Geographic expansion 31% 27% 3 23% 28% Information technology 49% 46% 43% 29% 33% New product or service introduction 44% 36% 48% 3 21% Facilities expansion 31% 29% 29% 24% 2 Business acquisition 37% 33% 3 25% 22% Research and development 26% 27% 29% 17% 15% Marketing & sales promotion 32% 22% 16% 18% 14% Internet commerce 14% 17% 18% 13% 7% Advertising 22% 14% 12% 15% 1 PricewaterhouseCoopers 24

Business outlook, next 12 months Expected barriers to business growth Over the next 12 months, will any of the following represent barriers to business growth? Two major potential barriers to business growth are expected during the next 12 months lack of demand and decreasing profitability. Concern about lack of demand is overwhelmingly the chief barrier among respondents, up 3 points to a survey high of 85 percent. Chart 4.7 Expected barriers to business growth Lack of demand Decreasing profitability Monetary exchange rate Legislative/ regulatory pressures Capital constraints Taxation policies Competition from foreign markets Oil/energy prices Industrial manufacturers 30 22 25 18 20 Higher interest rates 13 30 17 12 29 10 Pressure 20 for increased wages 30 25 3 Lack of qualified 26 workers 18 Note: In 4Q 2008 n=60, 23, n=103 22 31 37 36 38 35 29 37 26 23 32 15 25 34 37 25 44 25 60 62 61 62 64 50 48 38 36 40 57 44 50 85 82 62 78 68 66 39 38 38 36 30 36 27 28 33 19 32 24 23 17 21 22 21 27 22 37 26 17 35 20 16 34 11 21 45 29 31 6 20 20 25 27 76 75 53 65 60 58 45 45 42 40 40 37 38 46 40 52 66 58 57 4Q 08 3Q 08 2Q 08 1Q 08 4Q 07 PricewaterhouseCoopers 25

Business outlook, next 12 months Plans for M&A and other business initiatives Over the next 12 months, do you expect to participate in any of the following new business initiatives? Plans for M&A activity among US-based industrial manufacturers during the next 12 months remained at 32 percent in the fourth quarter. Twenty-five percent plan to purchase another business, 8 percent indicated they might divest parts of their businesses, and 3 percent plan equity carve-outs or spin-offs. Plans to expand to new markets abroad remained positive, at 32 percent, along with new strategic alliances, at 30 percent. Note: In 4Q 2008 n=60,, n=103 Chart 4.8 Plans for M&A and other business initiatives 4Q 07 1Q 2Q 3Q 4Q New business initiatives (net) 66% 6 63% 7 6 M&A activity (net) 44% 37% 4 32% 32% - Purchase another business 36% 33% 33% 28% 25% - Sale part/all own business 14% 7% 1 2% 8% - Equity carve-out/spin-off 9% 8% 8% 4% 3% Expand to new markets abroad 29% 3 3 32% 32% New strategic alliance 37% 3 23% 32% 3 New joint venture 27% 3 27% 28% 25% New facilities abroad 2 25% 17% 2 2 Reduce activity in markets abroad 14% 1 1 16% 15% Close/reduce facilities abroad 1 1 5% 1 13% 4Q 07 1Q 2Q 3Q 4Q New business initiatives (net) 67% 6 62% 63% 6 M&A activity (net) 43% 4 4 32% 33% - Purchase another business 36% 36% 31% 27% 27% - Sale part/all own business 14% 7% 11% 5% 9% - Equity carve-out/spin-off 6% 9% 8% 5% 5% Expand to new markets abroad 29% 32% 29% 26% 3 New strategic alliance 4 32% 23% 3 27% New joint venture 28% 27% 29% 26% 25% New facilities abroad 14% 17% 12% 13% 16% Reduce activity in markets abroad 1 1 8% 12% 12% Close/reduce facilities abroad 8% 5% 3% 5% 9% PricewaterhouseCoopers 26

Survey demographics and research methodology Demographics Who Senior executives of US-based, industrial manufacturing organizations Interview dates November 7, 2008 to January 16, 2009 (60) (103) Average number of employees 8,917 10,107 Average business unit revenue $3.22 billion $3.65 billion Average enterprise revenue $9.22 billion $9.96 billion Market capitalization $6.16 billion $6.22 billion Industry sectors Products 10 Manufacturing 10 Trade/Distribution --- All other --- Services --- Products 81% Manufacturing 72% Trade/Distribution 2% All other 7% Services 19% Methodology PricewaterhouseCoopers' Manufacturing Barometer is a quarterly telephone survey conducted by the independent research firm BSI Global Research Inc. Our regular survey panel consists of senior executives from a geographically balanced sample of large companies in the United States. Ninety-five percent of the panelists hold titles such as president, CEO, CFO, VP of finance, treasurer, controller, internal audit director or other related title. PricewaterhouseCoopers 27

www.pwc.com/manufacturing Industry contacts: Barry Misthal US Industrial Manufacturing Leader +1 267 330 2146 Tom Haas Sector Analyst +1 973 236 4302 About the research: The Manufacturing Barometer is one in a series of quarterly business outlook surveys from PricewaterhouseCoopers. The survey provides a view on the 12-month outlook for revenue growth, new investments, new hiring plans, emerging business barriers and more. In addition to the business outlook, we hear from our panelists about special issues they face as the business climate changes. Results of the quarterly business outlook surveys and special issue surveys are available from www.barometersurveys.com. Visit: www.barometersurveys.com Mobile: wap.barometersurveys.com Email: barometer.surveys@us.pwc.com PricewaterhouseCoopers has exercised reasonable professional care and diligence in the collection, processing, and reporting of this information. However, the data used is from third-party sources and PricewaterhouseCoopers has not independently verified, validated, or audited the data. PricewaterhouseCoopers makes no representations or warranties with respect to the accuracy of the information, nor whether it is suitable for the purposes to which it is put by users. PricewaterhouseCoopers shall not be liable to any user of this report or to any other person or entity for any inaccuracy of this information or any errors or omissions in its content, regardless of the cause of such inaccuracy, error or omission. Furthermore, in no event shall PricewaterhouseCoopers be liable for consequential, incidental or punitive damages to any person or entity for any matter relating to this information. 2009 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. MC-NY-07-1162-A. PwC