What do Gulf, Getty Oil, Republic Steel, Prentice-Hall and St. Regis all have in common?
All of them disappeared last year from Fortune magazine's list of the 500 largest industrial corporations, casualties of the takeover and merger wave sweeping through American business.
In all, nineteen companies dropped off the list last year because other firms swallowed them up, the largest disappearance due to acquisitions in the 31 years Fortune has published the list. The 1984 Fortune 500 directory went on newsstands last week.
Gulf, No. 11 in 1983, was acquired by Chevron. Getty Oil, No. 24, became a part of Texaco. The Continental Group, No. 68, was snapped up by David Murdock and the Kiewit-Murdock Investment Corp.
And in a rare double play, Norton Simon, No. 136, was acquired by Esmark, No. 88, which then was absorbed by Beatrice Foods, No. 36. Farther down the line, Republic Steel, No. 145, was acquired by LTV and Superior Oil, No. 196, became part of Mobil. Prentice-Hall, No. 477 was added to Gulf & Western's publishing stable and St. Regis, No. 141, was acquired by Champion International.
As the list shows, what helped make 1984 special was the oil industry mergers, as the low value of oil company stocks drew takeover raiders and bargain hunters like bees to honey.
The annual rankings, published by Fortune, and more recently, by Forbes magazine, provide snapshots of some major developments in American business. (The two lists differ in several ways -- Fortune's includes only industrial firms while Forbes', also just out, includes service and financial companies).
A determined campaign to cut overhead took its toll on both white collar and blue collar workers. The companies on Forbes' top 500 list (ranked by sales) cut their employment rolls by 840,000, or 4 percent last year, although sales rose by 5.5 percent. That meant a gain in productivity for the big companies, which boosted their sales per employe to $133,000, up 10 percent, or faster than the gain in inflation. Put another way, the top 500 accounted for more than 21 percent of the nation's total civilian employment five years ago. Last year, they provided less than 19 percent of the jobs. The job growth is coming primarily from firms too small to make the top 500.
Profits were a disappointment. Although the gross national product rose 10.8 percent last year, profits for the companies on the Forbes list totaled $139.6 billion, up only 6 percent.
International Business Machines led all companies with $6.6 billion in profits, up 20 percent from 1983. It ranked second in 1983. American Telephone & Telegraph, the profit leader in 1983 fell to 12th after its breakup. IBM's profits exceeded the sales of all but the top 89 companies on Forbes' list, including such high-tech firms as Hewlett-Packard, Digital Equipment, Honeywell, Raytheon, Texas Instruments and Control Data.
The biggest profits gainers on Forbes list: Freuhauf, up 914 percent; Penn Central, up 762 percent; Allied Corp., up 727 percent and Continental Corp., up 606 percent. The biggest losers, in percentage terms: Texaco, down 75 percent, thanks to a $765 million write-down for tankers, refineries and reserves; Public Service of Indiana, down 67 percent; Colgate-Palmolive, off 64 percent, and Atlantic Richfield off 63 percent.
Fortune, in its tally, notes that the major industrial companies have not kept up with the overall pace of economic growth. The nominal gross national product in 1984 was up 24 percent over the pre-recession peak in 1981, not counting the effects of inflation. But sales for the Fortune 500 companies actually declined 1 percent in that period and profits were up only 2.6 percent over 1981. A strong profits gain in the beginning of 1984 petered out in midyear.
"What went wrong," notes Fortune, "was the implacable rise of the U.S. dollar . . . . " The dollar climbed by 72 percent over the low point in 1980 and 12 percent in just the second half of 1984. It battered companies like Colgate-Palmolive, that depend heavily on overseas business, or those that are vulnerable to import competition, like machine tool companies, semiconductor producers and carton manufacturers.
Forbes' rankings note another key development of 1984 -- the rise in long-term debt as companies borrowed to buy their own stock, either to take advantage of bargain prices, or to finance maneuvers in the takeover wars. It cites Teledyne, which bought up almost half its outstanding stock last year, nearly doubling long-term debt. For healthy companies, the stock buyback makes sense. For others, it adds a heavy new risk.
The stock buyback phenomenon helped lower the total market value of Forbes top 500 companies, in December 1984, to an estimated $1.27 trillion, $50 billion below the previous year's total.