Special Report

America's Great Shrinking Companies

After three years of powerful economic expansion prior to 2008, the Great Recession caused the revenues of many American companies to plunge to multi-year lows. While sales at most big companies have rebounded to pre-recession levels by 2012, sales plummeted at a small number of companies.

Some of those public corporations that have struggled to regain pre-recession sales levels are in the industries most hurt by the downturn. First among them is the auto industry. Two of the Big Three American car manufacturers went into bankruptcy as their annual sales dropped rapidly. Even Ford (NYSE: F), which managed to stay out of Chapter 11, barely made it through 2008 and 2009. Then, even as the U.S. market recovered and car sales rebounded significantly, Europe remained in the doldrums, still hurting international revenues for the American manufacturers.

Another industry that, for the most part, has not fully recovered is homebuilding companies. The recession robbed homes in some cities of 50% of their value. There was a significant top line erosion among large builders such as D.R. Horton (NYSE: DHI), Pulte, and Lennar, and all three have struggled to recover the lost sales.

Perhaps hardest hit were America’s banks, brokerage firms, and insurance companies. Congress passed the Troubled Asset Relief Program (TARP) in 2008 as a means to rescue dozens of financial institutions. Some, like Lehman Brothers, disappeared. Others, like AIG (NYSE:AIG), almost did. Even hardy financial firms, including Goldman Sachs (NYSE: GS), took government aid.

The last significant group of companies where sales have eroded is companies that have restructured. Often, the restructuring happened because managements and boards of directors believed shareholders would be better off if these companies were split in two or more pieces, rather than remain whole.

In some cases, this decision was made because one part of a company did not fit well with the rest. The best example of this among very large companies is GE’s (NYSE: GE) sale of network and studio business NBCUniversal to Comcast. The shareholders of the cable company were considered more likely to benefit from holding these assets than the shareholders of a conglomerate like GE.

Another example of a spin off occurred with decades-old Motorola. While it was most well known for its cell phone business, Motorola also had divisions that sold products to other companies and enterprises but not to consumers. Motorola’s board believed investors would be better off if the consumer and enterprise businesses were separated and the company broken into two pieces.

In the cases of some of these shrinking businesses, including AIG, Tyco, and Citi, they have been in the practice of spinning off operations by the dozens. Tyco International (NYSE:TYC) CEO Edward Breen has been selling off components of the company since he took over in 2002.

In order to identify the companies with shrinking revenue, 24/7 Wall St. reviewed the S&P 500 companies that have had the largest declines in revenue during their last five full fiscal years. Companies that filed for bankruptcy were excluded from the analysis.

These are America’s great shrinking companies.

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