Capital flight

With the economy in a slump, caution is the watchword for American companies, and many have tightened the tap on capital spending.

Among those surveyed for this month's CFO Forum, 48.2 percent say their companies decreased spending in the past 12 months; only 20.7 percent say they spent more. The wounds run deep among those making cuts, with 51.2 percent slashing their budgets by more than 10 percent.

Not surprisingly, 96 percent of respondents who reduced their capital spending attribute the cuts to a slowing industry or economy. Among those who increased spending, 54.5 percent are playing catch-up on inadequate capacity, while 27.3 percent say their industry has grown. Meanwhile, 18.2 percent are taking advantage of competitors' fears and adding capacity to gain market share.

Of those who have increased their budgets, 46.2 percent have done so to modernize existing capacity, while 30.8 percent say they are building to meet higher demand. Separately, 22.6 percent of CFOs who have cut their budgets say they are delaying new construction in order to conserve capital. Of those paring their budgets, 62.5 percent have done so as part of a continuing effort to cut costs. If demand rises, 86.2 percent of this group say that they will speed up new construction. But 6.9 percent say they are willing to accept losing orders in the future to trim spending now.

Technology spending was hurt least. For those firms that are ramping up spending, 71.4 percent are investing in more software, while 42.9 percent are buying technology hardware. Only 20 percent plan to build factories.

For the cost-cutters, factories are taking the biggest hit, with 57.1 percent of respondents saying that is where they'll cut spending the most; only 37.1 percent are trimming software investments.

Has your company's capital spending changed from what it was 12 months ago?

It is much higher 5.2%

It is higher 15.5

It is about the same 31.0

It is lower 31.0

It is much lower 17.2

If it is higher, is that because:

The industry hasgrown 27.3%

The industry had inadequate capacity to meet demand 0.0

Your company had inadequate capacity to meet demand 54.5

Your company wanted to gain market share 18.2

If it is lower, is that because:

The industry has slowed 60.0%

The economy has slowed 36.0

Your company's share of the market has declined 0.0

Your company has decided to exit parts of its business 4.0

Has your company's capital spending changed from what it was three years ago?

It is much higher 5.2%

It is higher 25.9

It is about the same 20.7

It is lower 29.3

It is much lower 19.0

If it is higher, is that because:

The industry has grown 23.5%

The industry had inadequate capacity to meet demand 0.0

Your company had inadequate capacity to meet demand 64.7

Your company wanted to gain market share 11.8

If it is lower, is that because:

The industry has slowed 50.0%

The economy has slowed 37.5

Your company's share of the market has declined 4.2

Your company has decided to exit parts of its business 8.3

Has your company changed its capital spending plans in the past 12 months?

Yes 51.7%

No 48.3

If not, is your company considering doing so in the next 12 months?

Yes 16.1%

No 83.9

If your company has changed its budget, has it:

Increased by more than 10 percent 22.0%

Increased by 6 to 10 percent 4.9

Increased by 1 to 5 percent 7.3

Decreased by 1 to 5 percent 7.3

Decreased by 6 to 10 percent 7.3

Decreased by more than 10 percent 51.2

If your company has increased its capital spending budget, is the reason:

Building capacity to meet higher demand 30.8%

Building capacity in anticipation of higher demand 15.4

Replacing existing capacity 7.7

现代化的现有产能46.2

A weakening economy is the time to add capacity 0.0

If your company has reduced its capital spending budget, is the reason:

A decline in orders 12.9%

Anticipation of a decline in orders 3.2

General concern about a weaker economy 35.5

Don't need more capacity 25.8

Delaying construction in order to conservecapital 22.6

If your company has increased its capital spending budget, is that part of an annual increase in capital spending?

Yes 76.9%

No 23.1

If your company has decreased its capital spending budget, is that part of a continuing effort to reduce capital spending?

Yes 62.5%

No 37.5

If demand rises and your company has decreased its capital spending budget, will it:

Speed up new construction 86.2%

Delay deliveries 6.9

Refuse orders 0.0

Accept losing orders 6.9

在哪些方面你的公司增加资本pending?

Technology software 71.4%

Technology hardware 42.9

Factories 20.0

Machinery 40.0

In what areas has your company decreased capital spending?

Technology software 37.1%

Technology hardware 51.4

Factories 57.1

Machinery 45.7

The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.