U.S. Multinationals Get Boost From Weak Dollar

Correction July 28, 2008

Earlier, the Web version of this story attributed an inaccurate quote to John Huizinga of the University of Chicago's Graduate School of Business: "Instead of being $1 to the euro, it's $2 to the euro.” In fact, in discussing a hypothetical U.S. company selling products abroad, he said: “Now suppose the dollar depreciates and instead of being $1 to the euro, it's $2 to the euro.”

Some major U.S. corporations are doing well this year in spite of the sluggish economy. A lot of them are finding their success abroad and bringing big profits home.

For example, McDonald's Corp., 3M and Amazon.com Inc. — all of which sell products overseas — are doing well this year in spite of the troubled economic situation at home, thanks in part to the depreciated dollar.

To illustrate, John Huizinga of the University of Chicago's Graduate School of Business descibes a hypothetical U.S. widget factory owner that sells widgets in Europe.

"Now suppose the dollar depreciates and instead of being $1 to the euro, it's $2 to the euro," Huizinga says. "The price to Europeans went from two euros down to one. They think in euros and think, 'Wow, I can now buy those widgets at half the price I used to.' "

It's a good time for companies to have an international reach.

"It's easier to expand your sales when you've already established a footprint in a foreign company, but there will be new companies that haven't been exporters that can now turn into exporters," Huizinga says.

Amazon announced a 47 percent increase in international sales in the second quarter, which ended June 30.

Pharmaceutical companies such as Pfizer and Abbott saw better-than-expected results, buoyed by overseas sales.

But it's not all about the weak dollar. These days, there are more foreign consumers with more money to spend.

Construction equipment and engine maker Caterpillar Inc. reported record sales and revenues this week — its best quarter in 80 years.

Company spokesman Jim Dugan says there are a couple reasons why it did so well: The company benefits from high commodity prices and from strong growth in emerging markets in Latin America, across Asia Pacific as well as in the Middle East.

Caterpillar's geographic sales mix is shifting. Sales outside North America increased 30 percent from a year ago. Exports to China have jumped by 200 percent in the last five years.

Dugan says that has an impact here at home.

"A big part of the increase in employment in the United States for Caterpillar is related to trade," Dugan says.

Caterpillar has upped its expectations for the year. So have many other domestic corporations as their overseas sales strategies — many of them put in place years ago — are looking better and better.

Those sales are giving the sagging U.S. economy a little lift.

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