Companies with an international reach that are based in the Midwest, including firms in Michigan, are nearly three times more profitable than their domestic peers, says a recently released report by HSBC, a multinational banking company. HSBC Spotlight on U.S. Trade: Midwest — which studied such global companies as Ford Motor Co. in Dearborn, Steelcase in Grand Rapids, and Whirlpool in Benton Harbor — had an average profit margin of 9 percent between 2007 and 2012. In contrast, companies primarily focused on the United States had an average profit margin of 3 percent during the same period.
According to the Business Roundtable, exports range from 11.8 percent of Michigan’s economy to just 4.5 percent of South Dakota’s. The national average is 12 percent.
“Michigan has done a very good job of utilizing export activity to help the economy over the last several years,” says Steve Trepiccione, a senior vice president at HSBC. “It’s the eighth largest exporting state in the country, with Detroit as the fourth largest export city in the United States. It goes without question that Detroit’s export activities have been the lifeblood of the economy over the last six years as the domestic economy experienced a downtown.”
The report shows a diversified geographic customer base or operations have an impact on business performance, Trepiccione adds.
What’s more, such companies were better able to protect themselves from domestic market fluctuations, and remain consistently profitable. Following the start of the last recession, international companies based in the Midwest maintained profit margins above 7 percent, while profit margins at firms with minimal global reach dipped as low as minus .5 percent in 2009.
“(The report) validates what we have always felt to be a very important source for growth in this economy,” says Trepiccione. “It’s a small world now, and to have the ability to go overseas makes for good business.”
This sentiment is validated in the report, which details the joint venture between Steelcase, the world’s largest manufacturer of office furniture, and the French manufacturer Strafor-Facom. As noted by Jim Keane, Steelcase’s president, “Sometimes you spot a trend in one market, and realize it’s a trend everywhere. Sometimes things become apparent outside your home market. We can pick up on things more quickly than before.”