Michigan’s largest public companies ‘encouraged’ by second-quarter rebound

Michigan’s largest publicly traded companies have mounted a strong comeback since the COVID-19 pandemic sent them reeling last year.

The latest corporate financial filings from the state’s biggest employers show their revenues in the second quarter (Q2) of this year rebounded to levels achieved in the same period in 2019 — before the coronavirus devastated the global economy.

Combined, revenues for 30 of these firms dropped 40 percent last year — from $128 billion in Q2 2019 to $77 billion in Q2 2020 — then rose 60 percent to $123 billion this year.

Many of the companies have demonstrated optimism that the recovery will continue by reinstating share buybacks, increasing dividends, paying down debt, and issuing improved financial outlooks for the remainder of the year.

“We’re encouraged by the healthy sales pipelines and new wins we’re seeing across all of our businesses,” Peter Quigley, CEO of Troy-based staffing company Kelly Services, said in a statement. “Our reinstatement of a dividend for the quarter reflects the progress we’re making . . . and our confidence in the economic recovery.”

On Kelly’s quarterly call with industry analysts, Quigley noted that “the temporary labor market is approaching pre-COVID levels, the unemployment crisis in the US has eased with three months of strong job growth, and demand for staffing and other workforce solutions continues to grow.”

Michigan’s recovery mirrors the national picture: in Q2 2021, U.S. economic output surpassed pre-pandemic levels for the first time. Gabe Ehrlich, an economic forecaster at the University of Michigan, said the U.S. government’s $5.2 trillion fiscal response to the pandemic bolstered household incomes and helped fuel the recovery — but the comeback is not complete.

“We have had a strong recovery so far. Big business has done well,” Ehrlich said. “That’s great news, but it’s not the whole picture. Small businesses have had a harder time during the pandemic and there is still a jobs shortfall.”

The state’s unemployment rate dropped to 4.8 percent in July but, compared with February 2020, the labor force has shrunk by 213,000 people and 256,000 fewer Michigan residents are working, according to data from the Michigan Department of Technology, Management and Budget and the U.S. Bureau of Labor Statistics. 

Some people who left the labor force during the pandemic won’t return to work, Ehrlich said, including individuals who retired earlier than they planned and women who quit to care for children and manage other family responsibilities.

Meanwhile, some Michigan-based public companies are concerned that the recovery is susceptible to inflation, supply chain vulnerabilities, and the resurgence of COVID.

The international microchip shortage is particularly concerning to the auto industry. Ford reported that its quarterly profits fell by half largely due to the shortage of computer chips, and GM CEO Mary Barra said the impact on production will likely extend into 2022. Production shutdowns cost Cooper Standard, a supplier based in Northville, $200 million in Q2.

As consumer demand drives the economic recovery, supply chain issues will continue to create bottlenecks — and this disconnect between demand and supply is expected to cause moderately higher inflation, Ehrlich said.

Economists are optimistic about blue collar employment, he added, noting that the construction sector is strong, logistics jobs are rebounding, and the warehousing and utilities sectors have surpassed pre-pandemic levels.

Hiring for jobs requiring a college degree will be less robust than the blue-collar segment, he said, but better than the service sector. Bars, restaurants, and entertainment venues may continue to struggle as working-from-home and reduced business travel become the norm.

“Due to COVID and how it’s changed the way we do business, (the hospitality sector) remains at risk,” said Ehrlich, who directs the U-M Research Seminar in Quantitative Economics (RSQE).

Overall, forecasts suggest the U.S. economy won’t fully rebound until at least the end of 2023. “Closing that last-mile gap is going to take some time,” he said.

The revenues of the 30 companies cited above show variations by industry sector:

  • Automotive: At GM, Ford, Gentex, Lear, Visteon, Meritor, and Cooper Standard, Q2 revenues nearly rebounded to 2019 levels. At Gentherm, Borg Warner, and Penske Automotive, they surpassed them by 75 percent to 95 percent.
  • Office Furniture: Herman Miller and Steelcase fell short of 2019 levels by 7 percent and 32 percent, respectively.
  • Food: Kellogg’s and SpartanNash, a grocery distributor and retailer based in Byron Center, did not experience a Q2 pandemic dip in 2020. Their revenues were flat across the second quarters of 2019, 2020, and 2021.
  • Fast Food: Grand Rapids-based Meritage Hospitality Group operates more than 300 Wendy’s and other restaurants in 16 states. Its revenues were flat in Q2 2020 and grew 20 percent this year. Domino’s second-quarter revenues grew 13 percent in 2020 and 9 percent this year.
  • Footwear: Wolverine Worldwide, whose brands include Merrell, Saucony, and Sperry, saw Q2 revenues drop from about $570 million in 2019 to $350 million last year – and climb to $630 million this year.
  • Financial Services: Ally Financial and Flagstar delivered steady Q2 growth in both 2020 and 2021. For Ally, quarterly revenues climbed 11 percent in 2020 and 19 percent in 2021. Flagstar was up 80 percent last year and 27 percent this year.
  • Building Supplies: Masco and Universal Forest Products were flat in Q2 2020 and grew revenues  22 percent and 125 percent, respectively, this year.

Rounding out the list ( all results are Q2 revenues for 2019, 2020 and 2021):

  • Dow (chemicals): $11 billion, $8.4  billion, $13.9 billion.
  • Whirlpool (appliances): $5.2 billion, $4 billion, $5.3 billion.
  • Stryker (medical devices): $3.7 billion, $2.8 billion, $4.3 billion.
  • Universal Logistics (transportation and logistics): $383 million, $258 million, $423 million.
  • Kelly Services (staffing): $1.4 billion, $975 million. $1.3 billion.
  • Perrigo (consumer self-care products):  $1.1 billion, $949 million, $981 million.
  • Trimas (consumer goods): $191 million, $200 million, $219 million.
  • Neogen (food and animal safety): $110 million, $109 million, $127 million.
  • Sun Communities (manufactured housing communities, RV parks, and marinas): $312 million, $303 million, $604 million.

While most of Michigan’s publicly traded companies are heartened by the comeback, they also are acutely aware that COVID remains a cloud on the economic horizon.

“The most important thing from here,” Ehrlich said, “is what the pandemic is going to do. It’s still in the driver’s seat.”

Evictions Across the U.S. Can Resume

Evictions can resume across the country after the U.S. Supreme Court blocked President Joe Biden’s administration from enforcing a temporary ban imposed due to the coronavirus pandemic.
In Michigan, however, the Michigan Supreme Court’s July administrative order that allows for a 10-day period after the moratorium lifts for tenants to pay or move remains in place, court spokesperson John Nevin said.

"The key element of the new procedure is giving renters time to access resources, and we know that eligible applicants in 80% of counties statewide are receiving assistance within the 45-day time frame provided in the order," he said. "Moreover, where renters are at risk of eviction, especially in areas where processing times are slower, cases are being prioritized to get assistance faster.

"This pioneering reform is saving lives and helping to resolve cases, getting landlords paid and keeping families safe in their homes," he added.

An estimated 26,000 Michigan families have received more than $160 million in assistance, with more to come, Nevin noted.

The U.S. Supreme Court’s late Thursday order from the conservative majority said the Centers for Disease Control and Prevention (CDC) lacked the authority to re-impose the moratorium on Aug. 3 under federal law without congressional authorization.

"It is undisputable that the public has a strong interest in combating the spread of the COVID-19 Delta variant," the unsigned order reads. "But our system does not permit agencies to act unlawfully even in pursuit of desirable ends . . . It is up to Congress, not the CDC, to decide whether the public interest merits further action here."

Justice Stephen Breyer writing for the three liberal justices who dissented, noted the increase in COVID-19 cases due to the Delta variant is one reason the court should leave the moratorium in place.

"The public interest strongly favors respecting the CDC’s judgment at this moment, when over 90% of counties are experiencing high transmission rates," Breyer wrote.

White House Press Secretary Jen Psaki said during this afternoon’s daily press update that Biden would support congressional action, but to date there has been none.

"Our objective is to keep as many people around the country in their homes as possible," she said. ". . . If there were enough votes to pass an eviction moratorium in Congress, it would have happened; it hasn’t happened."

Secretaries for the U.S. Department of Treasury and Housing and Urban Development today called on all governors, mayors and state courts to "put in place their own moratorium" and to get Emergency Rental Assistance (ERA) funds flowing to those tenants in need. Six states and the District of Columbia have implemented their own moratoriums.

Matthew Paletz, a Troy-based attorney who specializes in representing landlords, believes the state Supreme Court’s grace period should be invalid in light of the U.S. Supreme Court’s decision.

"If the moratorium is no longer valid, then anything springing from that should, therefore, not be valid; that’s my opinion," he said.

That said, Paletz noted that his Michigan landlords are not looking to immediately evict tenants as many have "consistently been diligently working with their tenants" to assist them, including helping to get them into the system to receive ERA help.

Paletz said the issue has been recovering that back rent and restoring landlords’ constitutional right to control who occupies their private property.

Paletz said the expected wave of evictions is not the real threat. Rather, he noted, the threat is the tenants who write off the mostly unsecured debt in bankruptcy proceedings.

"The landlords will be left holding all that bad debt and that isn’t going to help anyone as far as trying to bring some stability to an already precarious affordable rental housing market," he noted. "That’s going to be a major problem for the landlord and the landlords are not going to make it."

MI’s Colleges, U’s Slated To Receive $1.7B+ In Federal COVID Relief Funds

Thanks to three separate federal packages which provided funding to deal with fallout from the coronavirus pandemic, Michigan’s public colleges and universities have obtained more than $1.7 billion to assist in areas such as direct student financial aid and with supplanting lost revenue.

Estimates from a recent Senate Fiscal Agency report note that while the pandemic has created immense and unprecedented operational challenges for postsecondary education institutions, Congress has allotted a total of $76.2 billion in spending across three COVID relief bills to help mitigate those issues.

Three of six COVID relief packages – the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan – specifically provided funds to postsecondary institutions, with roughly 40 to 45 percent of those funds being earmarked for student aid, scholarships, grants or distance learning, grants for students’ basic needs and more.

Within the first shot of funding through the CARES Act, Michigan’s public universities and community colleges received a combined, estimated $289.2 million – $192 million for the universities, $97.1 million for the community colleges – which were provided directly to each institution from the U.S. Department of Education and were not subject to the state appropriations process.

Under the second, given through the Coronavirus Response and Relief Supplemental Appropriations Act, Michigan’s public universities and community colleges received a combined total of $519.1 million. Divided up, that translates to $307.2 million for public universities and $221.9 million for the state’s public community colleges.

Finally, under the American Rescue Plan – the money of which is not yet paid out in full – Michigan’s higher ed institutions are expecting to receive at least $897.5 million.

Allocation tables for the 7.5 percent tranches of the rescue plan formula were not available as of the time the SFA published its memorandum. It is anticipated the state’s public universities will receive $537.2 million while its community colleges receive $360.3 million.

In all, that allots $1 billion in federal COVID funding for Michigan’s public universities and $669.3 million for its community colleges.


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