New 'Fortune 500' List Shows Record Earnings
MELISSA BLOCK, HOST:
The overall U.S. economy may be moving at a sluggish pace, but for corporate America, 2011 was a banner year. The Fortune 500 list came out today, and it shows record high earnings for the top 500 companies. Their profits increased more than 16 percent from last year to total more than $824 billion. The 500 companies are ranked by revenue, and Exxon Mobil tops the list with a staggering $453 billion. Fortune's managing editor, Andy Serwer, joins me to talk about the numbers and what they mean. Andy, welcome to the program.
ANDY SERWER: Thank you.
BLOCK: And we see Exxon taking the top spot back from Wal-Mart, these huge revenues, also huge profits - $41 billion in profits last year. A good year for oil companies in general, right?
SERWER: Absolutely. In fact, so many of the top companies are oil companies. Exxon Mobil number one, Chevron number three, ConocoPhillips number four. And the reason's simple: high oil prices. They're making a lot of money.
BLOCK: A newcomer in the top five this year was General Motors. It bounced up from eighth place last year to fifth this year, also saw record profits in 2011, $9 billion. What does that mean for GM and for its workers?
SERWER: Well, I guess, you know, you have to say it. GM is back and the Obama administration is going to say that they saved the company and I think you have to acknowledge that they certainly did. The government still owns a nice slug of General Motors. In fact, you can still call it Government Motors. There are people who will object to the buyout, but the fact is the buyout saved the company and, most importantly - and I think most people would agree - saved a lot of jobs.
BLOCK: And there are a number of other companies on the Fortune 500 list that also got government bailout money. We see Bank of America at number 13, CitiGroup number 20. AIG, the insurance company, at number 33 and let's talk about that one, because I think a lot of people would have assumed that AIG was going down. Not so. They've been doing very well the last few years.
SERWER: Exactly. Now, this is another company that the government still has a stake in and, in fact, they recently sold some and made a fair amount of money and so the government's investment, if you will, in AIG - I mean, they bailed the company out and took a stake in it in return. That stake has worked out very well for the government, which is to say it's worked out very well for taxpayers. So, you know, that company is quietly on the mend.
BLOCK: And I think, if I read the numbers right for AIG, their revenues are down. So it's a smaller company, but their profits are greater. Smaller, but more profitable.
SERWER: Right. That's exactly correct.
BLOCK: What's the lesson here, do you think, about hiring? Because we've been seeing a lot of companies that have record profits that have been sitting on cash that have not turned that cash into new jobs. Is that the case here, too?
SERWER: Yeah. I mean, that - and it's really - you know, it's tough to look at that, but what happens in a recovery is companies start to make a lot of money first and then hiring lags. That happens every single time when you have a cycle like this. So we're saying that these levels of profits are not going to continue because companies are A, they're going to have to give raises out and, B, they're going to have to hire more people as their businesses expand. So, eventually, that money will get to American workers.
BLOCK: But there's a lag time, you're saying?
SERWER: Yes, there is. And the lag time is a little bit more extreme this time, but that also makes sense because the economic downturn was more severe.
BLOCK: There's been this concern, too, though, Andy, that companies, through this recession, have figured out how to be more profitable and more productive with fewer workers, that that lesson may carry over.
SERWER: Yeah. I mean, and that's definitely a trend. There's no question about that. And they say, you know, we're more productive than ever. Read: We have less employees and the employees we do have work harder than ever. So definitely a double-edged sword there, particularly if you're an employee.
But having said that, you know, we've been saying this for the past 20, 30, 40 years. Companies have continued to get more productive and yet, when the cycle comes, they have to hire more people. When Silicon Valley startups get big, like Facebook, they hire hundreds and then thousands of people. It happens every time.
BLOCK: Well, Andy Serwer, managing editor with Fortune magazine, thanks so much for talking with us.
SERWER: Thank you.
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