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Study: Manufacturing CFOs Optimistic For 2010

Although energy costs continue to rise and companies still aren't looking to significantly boost employment, small and midsized manufacturing CFOs remain optimistic for 2010.

CHICAGO -- Prime Advantage, a consortium for midsized industrial manufacturers, released the findings of its Group CFO Survey on the top financial concerns of its member companies' CFOs in 2010.

The survey found widespread optimism about the economy in 2010, which coincides with Federal Reserve data showing industrial output grew for the seventh straight month, even while energy costs rose in January.

Responses to several questions in the survey indicate that optimism has returned to small and midsized manufacturing companies in 2010. In fact, 67 percent said they feel more optimistic about the economy compared to 2009, and 64 percent believe the manufacturing economy will expand in 2010. Sixty-four percent were more optimistic about the financial prospects for their companies.

When asked to rank their companies' financial prospects for 2010 on a scale of 1-10, with 10 being most optimistic, 51 percent ranked themselves at 7 or higher.

In 2009, 55 percent of CFOs were pessimistic about the economy, and 45 percent said they were pessimistic about their companies' financial prospects.

For 2010, the recession and tight credit conditions will like continue to impact growth. Ninety-one percent of respondents said their customers and prospects have been affected by the cost or availability of credit.

Fifty-seven percent said domestic employment in their factories won't return to year end 2007 levels before 2011 or 2012, but 82 percent still said they would hire new staff to meet increased demand in 2010.

To get passed the recession hangover and improve liquidity, companies are reducing inventory levels (79 percent), working to improve purchasing and sourcing efficiency (52 percent), and implementing asset and inventory optimization plans (48 percent).

Seventy percent of respondents said they will continue to focus on cutting operational costs as their top corporate policy. Fifty-five percent said their organizations will focus on developing new products and services, while 52 percent say a top priority will be to respond quickly to future economic changes and find new markets for products and services.

Uncertainty about customer demand was the top external concern among 61 percent of respondents, followed by price pressures (28 percent) and federal government policies (19 percent).

Some of the top internal concerns include healthcare costs (28 percent), ability to forecast results (25 percent), and maintaining employee morale and productivity (22 percent).

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