Not Grieving For The Greenback

Some call it a crisis. But Douglas R. Oberhelman, chief financial officer of Caterpillar Inc., has nothing but kind words for the dollar's recent plunge. Caterpillar, a big exporter of earthmoving and other machinery, saw an 18% increase in overseas sales, to $1.8 billion, in the first quarter of 1995. And Oberhelman gives the currency chaos a lot of credit: "The weaker dollar helps us around the world," he says.

Since December, the greenback has plunged 18% against the yen and 11.5% against the German mark. The dollar's decline may be worrisome to central bankers, but it's great news for American exporters: A weaker currency allows U.S. companies to increase earnings overseas without hiking prices or cutting costs, and puts them on a stronger competitive footing abroad. At home, they can raise prices without fearing that foreign rivals will undercut them.

Earnings reports from globe-trotting companies point to the advantage. At Upjohn Co., international sales soared 24%, with exchange-rate fluctuations accounting for one-third of the gain. Upjohn also benefited from double-digit overseas sales growth of drugs such as Halcion. Cleveland-based Parker Hannifin Corp., a manufacturer of motion-control products, saw international industrial sales surge by more than 73% from the same quarter a year ago. About one-fifth of that increase was courtesy of currency rate changes. The rest came from acquisitions and stronger demand from improving economies overseas.

Currency fluctuations are aiding U.S. companies in other ways. The greenback's decline, for example, increases the dollar price of steel imports, which make up about 25% of the U.S. market. That allows U.S. producers to raise prices without losing sales to foreign companies. Such dynamics sent AK Steel Holding Corp.'s first-quarter earnings up to $68.3 million, from $10.3 million a year ago. Analysts also expect big profit gains for Bethlehem Steel Corp. and LTV Corp.

RECORD LEVELS. Not every company is a currency winner. The gains chipmaker Advanced Micro Devices Inc. derives from the 56% of its revenues that comes from overseas are balanced by the bigger tab for Japanese equipment it must buy for its new plant in Austin, Tex. And Ford Motor Co. says the higher prices it paid for Japanese and German parts cost it $100 million in the first quarter.

For many companies, though, the currency effect should intensify in the second quarter. Manitowoc Co., a Wisconsin heavy equipment maker, says future bookings are running at record levels, fueled by sales to Singapore, Vietnam, and South Korea. Earnings for Manitowoc and ether exporters could soar--unless the dollar firms, of course. Then, Corporate America will be hard-pressed to keep the gains just won.