Fortune magazine’s annual ranking of America’s biggest companies doesn’t change much from year-to-year, but over time it captures the rising and falling fortunes of firms that reflect the evolution of America.
So far, the effects of the Great Recession haven’t made much of an impact on the top tranche of the Fortune 500. Giant energy company Exxon is No. 1, despite the biggest decline in gasoline consumption since World War II. General Motors and Ford are still in the top 10, even though car sales have dropped 40 percent from their peak a few years ago. Big banks like Bank of America and Citigroup have fallen only a few notches, despite mounting losses related to the recession and the government’s inclination to shrink some of the biggest financial firms, lest they become “too big to fail.”
By this time next year, however, the Fortune 500 may reflect many of the changes that the housing bust, financial crisis, and lengthy recession will bring about. Some predictions for the 2010 list:
The oil companies will fall. In addition to Exxon, Chevron, ConocoPhillips and Valero Energy all made the top 10 this year, largely because of the surge in gas prices during the first half of 2008. But that led consumers to drive less, buy more efficient cars, and cut back on gasoline consumption. And now, gas prices are hovering around $2 per gallon, about half their 2008 peak. With unemployment likely to rise for most of 2009, consumers aren’t going to feel gluttonous any time soon. Some oil companies have already felt the results, and by the end of 2009 most of them will.
[See why more companies are likely to fail this year.]
Wal-Mart will become No. 1 again. Exxon’s surge knocked the discount retailer from the No. 1 spot, even though Wal-Mart had healthy growth of 7.1 percent in 2008. As the recession drags on, Wal-Mart is one of the few retailers doing reasonably well, which means it could grow in 2009 as many of its fellow top-10ers shrink along with the economy.
Ford and GM will fall out of the top 10. How could they stay there? GM’s sales are down 49 percent so far this year. Its government-backed survival plan calls for killing at least three of eight divisions, and possibly more if the firm declares bankruptcy. Ford’s sales are down 43 percent and it’s barely one step ahead of GM. While both seem certain to fall, Ford, America’s perennial No. 2 automaker, could surpass GM as the top-selling domestic car company.
Tech will rise again. One of America’s most successful companies right now is Hewlett-Packard, which rose from No. 14 last year to No. 9 this year, thanks to healthy gains in both revenue and profit. HP has also nicely outperformed the broader stock markets over the entire recession. It could rise into the middle of Fortune’s top 10 by next year. Other tech-related firms like IBM, Microsoft, Sysco and Intel could gain just by holding steady, as other firms shrink and struggle with the recession.
[See why optimism over the economy is premature.]
Many firms will be smaller in 2010. Thin is in, especially with consumers cutting back on spending and the government on a crusade against firms deemed to pose a “systemic risk” to the economy if they should fail. The real measure of success is profitability, after all, not size, so expect many companies in struggling sectors like banking, retail, autos, and insurance to fall lower on Fortune’s 2010 list.
Next year’s risers will be companies in industries most able to ride out the recession: AT&T and Verizon (telecom), Procter & Gamble (consumer staples), Johnson & Johnson (consumer staples and pharmaceuticals), and Pfizer (pharma). Some of the biggest changes may come lower on the list – where a record number of firms may declare bankruptcy and disappear altogether.