International competition and rising structural costs like raw materials and health care are eating into profits for U.S. manufacturers dramatically, pushing down earnings to historic lows for some industries, according to a new study.
The Oct. 11 study, jointly funded by the National Association of Manufacturers and the Manufacturers Alliance, looked at five segments, including chemical manufacturing, automobiles and appliances. It argues that profits were 67 percent lower than they would have been without those structural costs, and have not returned to their historic norms.
``This unprecedented drop in profits is relatively unique in American history,'' said Jerry Jasinowski, president of the Manufacturing Institute, a unit of Washington-based NAM.
While other sectors of the economy recovered from the 2001 recession and returned to profitability, manufacturers have lagged, because structural costs like high pension liabilities are having a greater impact on profitability, Jasinowski said.
The decline in profitability means that manufacturers are having to finance more of their research and development crucial for future growth through debt and issuing more stock, rather than from profits, said Thomas Duesterberg, president of the Arlington, Va.-based MAPI.
Except for the chemicals sector, the study, called ``The Profit Squeeze for U.S. Manufacturers,'' focused on durable goods because it said those segments were the hardest hit. Profits in nondurable goods industries have held up much better but are still on average at three-decade lows, the study said.
The study does not offer any solutions, and follows an analysis the groups did last year attempting to document those structural costs.