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Many companies see better times in 2011

  • April 23, 2011 - 1:46 PM

Executives at most of Minnesota's biggest companies think 2011 is going to be a strong year for sales, hiring and capital investment. They also think health care reform needs to be revisited, pronto.

Our annual survey of Minnesota's largest publicly held companies found:

•Four out of five firms expect their 2011 sales to improve from last year.

•Sixty-four percent of the companies said they plan to increase hiring in the next 12 months. That compares with 42 percent a year ago and just 17 percent in 2009.

•Fifty-one percent plan to increase capital expenditures, up from 32 percent a year ago and 13 percent in 2009. Just 2 percent of responding companies planned to cut spending in the next year, down from 12 percent in 2010 and 43 percent in 2009.

The significant positive shifts in plans for hiring and capital expenditures bode well because both are key indicators of a recovery.

"Small and big business were more optimistic about the sustainability of the recovery'' in the last six months, said Scott Anderson, senior economist at Wells Fargo Securities in Minneapolis.

The Star Tribune conducted the survey in February and March. Of 120 large, publicly held Minnesota-based companies that got surveys, 54 responded.

The plans for hiring came from a diverse group of companies, ranging from American Medical Systems Holdings, a manufacturer of medical devices for male and female incontinence, to foodmaker General Mills, industrial filter maker Donaldson Co. and adhesives firm H.B. Fuller.

Retail and services companies planning to hire include coffee chain Caribou and investment bank Piper Jaffray. In the health care field, insurer UnitedHealth Group, device makers Synovis and Vascular Solutions, and dental and veterinary products maker Patterson Cos. are looking to hire.

Continued concern

Yet even as recovery takes hold, memories of the deep recession mean the economy remains the No. 1 concern of Minnesota companies.

In addition to the economy, the companies ranked federal tax rates; hiring and retaining workers; health care benefits; state tax rates, and increased regulatory enforcement as first-tier concerns.

Second-tier concerns included energy costs, wage rates, education and transportation, privacy regulations, and the housing slump. Terrorism and climate change ranked last.

Seventy-two percent said their access to credit was "about the same'' today as it was a year ago. Just 7 percent reported they had less access to capital, down from 14 percent a year ago.

Government intervention

Asked the "single most important thing that federal and state government can do to help your company grow and add more employees," 52 percent chose "lower taxes.''

Ten percent said "increase access to capital'' and 29 percent chose "other'' and filled in that blank with a variety of responses.

For instance, Donaldson Co. said: "Simplify compliance with regulations.'' General Mills suggested state and federal governments "manage [their] fiscal situation[s].''

American Medical Systems said: "Lower taxes and revisit health care. Excise tax on medical devices will have a significant impact to our business.''

Health care debate

After a year's worth of experience with the federal Health Care Reform Act, which passed in March 2010, Minnesota companies pleaded for the act to be revisited.

Nearly three out of four companies (72 percent) reported that the cost of health care had "some influence'' or "significant influence'' on their decision to hire employees. That's a big change from 2010, before the act passed, when 54 percent said health care costs had "little or no influence'' on hiring.

Nearly three out of four respondents (73 percent) agreed that high-deductible health plans and health savings accounts (HSAs) "are helping to reduce health care costs."

These plans generally push health care decisions down to consumers by requiring them to pay for the first several thousand dollars in annual medical expenses beyond preventive care.

Corporate contradictions

The survey also revealed some disconnects on health care reform.

When asked "does the health care reform act make your company more likely or less likely to offer employee health insurance,'' 84 percent said the act makes "no difference'' in the decision to offer health care.

But when asked how urgent it is to revisit health care reform, 83 percent said it was "very urgent'' or "somewhat urgent.''

"Human nature just does not like uncertainty .... and I think that's part of what you are seeing on these preferences,'' said Christopher Puto, dean of the University of St. Thomas Opus School of Business.

If companies can predict health care costs, regulatory costs or taxes with some degree of certainty, then they can plan for that. "Otherwise you have to come up with all of these contingencies'' to anticipate a range of public policy outcomes, Puto said.

"My hypothesis is that they are convinced that the health care challenge is on its way to some form of resolution that is not negative. When you have a sweeping change ... it's going to have problems. So you revisit that.''

Here's what companies had to say about health care:

Patterson Cos.: "We'll continue to offer a competitive benefits package. However, [parts of the reform act, including removal of lifetime limits on coverage and dependent coverage to age 26] will cost this business almost $3 million annually."

Graco Inc.: "While the current plan is concerning, the lack of predictability is even more concerning since businesses can't plan with confidence regarding expenses.''

Target Corp. "Clearly the [health care reform act] does make companies less likely to offer health care long-term.''

UnitedHealth Group: "Our position has not changed. We recognize health reform is the law and will offer our input and expertise on its development, especially focused on ensuring that consumers and employers have access to quality, affordable care.''

General Mills: "They will need to [revisit the act] -- and will rather often over the next many years.''

John J. Oslund • oslund@ startribune.com • 612-673-7206

Patrick Kennedy • pkennedy@ startribune.com • 612-673-7926

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