Michigan public companies having a rockier year than overall stock market

• With six weeks left in the year, nine of Michigan’s 35 largest publicly traded companies have out-performed the stock market average
• Yet half lost ground from 2022 and, as a group, these companies lost $47.1 billion in 2023
• Many of these companies are fueling value growth in part through layoffs and other cost-cutting

Michigan’s largest public companies have endured a rockier year than the overall stock market as they head toward a year-end that began with high hopes for gains as the pandemic receded.

Overall, the 35 largest public companies that make Michigan home or their North American headquarters lost $47.1 billion so far this year. In comparison, the New York Stock Exchange and NASDAQ show overall gains, including a robust 34 percent for NASDAQ.

With just six weeks until year-end, change is still possible.To date, however, a Bridge Michigan analysis of stock performance shows a range of results: 

• Nine of the 35 companies reviewed beat the 18 percent gain by the S&P 500, representing the 500 largest companies in the U.S. The top increase among Michigan-based public companies was Steelcase’s 60.4 percent gain.
• Six more did not reach the S&P 500 level of gains but exceeded the increase of the Dow Jones Industrial Average, another market barometer, which gained 3.91 percent. Among them was W.K. Kellogg Co., at 11.2 percent. The company is the new Battle Creek cereal company spinoff from the former Kellogg Inc., which renamed its snack division Kellanova and moved to Chicago.
• Losses have been posted by 19 companies, ranging from strike-plagued Ford and General Motors, two of the top four publicly traded companies in the state, to the steepest loss, 59 percent from the Shyft Group of Charlotte, a commercial vehicle retrofitter formerly named Spartan Motors. 
• Among the top 10 Michigan companies by market capitalization, or overall stock value, just three show gains: Automaker Stellantis (30.9 percent), Detroit-based fintech Rocket Companies (20.6 percent) and building product-maker Masco (21 percent). 

The most recent quarter should include an asterisk for Detroit Three auto companies and their public suppliers due to the six-week United Auto Workers strike that slowed production and prompted layoffs. The full impact will be recorded in the next quarter’s financial filings. 

And across industries, many Michigan companies are cutting their workforce and consolidating operations to increase efficiency and save costs. Some recent layoff announcements have come from shoe retailer Wolverine Worldwide and pharma giant Pfizer. 

>> Read: Wolverine Worldwide faces tough times selling shoes. Then came more PFAS

Here are more late-year insights and strategies from public filings that show some of the dynamics affecting Michigan’s public companies:

Forestry company readies ‘war chest’ for acquisitions

UFP Industries Inc., based in Grand Rapids and formerly known as Universal Forest Products, is ready to grow after its stock value increased 34 percent this year. That powered the international building supply company to an all-time high value of $6.83 billion.

CEO Matt Missad said during an analyst call that company earnings of $2.10 per share in the third quarter exceeded internal forecasts, though UFP expects to enter a period of some sales slowdowns in 2024 among its segments, which include prefab homes. 

UFP across all of its segments reported a 21 percent drop in sales to $1.8 billion in the most recent quarter, due in part to a 12 percent reduction in prices as costs for lumber declined. Preparation for the decline in previous quarters included consolidating manufacturing and turning to automation to cut labor costs.

However, the company’s focus on profitable growth has Missad waiting — and funded — for the chance to buy other companies that may not be able to cope with the slowdown due to high interest rates driving repayments higher.

“We have accumulated a $900 million war chest,” he said on the call. 

But, Missad said, he’s not in a hurry.

“While we might be tempted to force capital spending like a drunken sailor, I'm reminded of the words of (“Friends” TV show character) Chandler Bing, who said, ‘You have to stop the Q-tip when there is resistance.’

“So we will continue to be prudent and patient.”

Mortgage rebound after downsizing

Rocket Companies, Dan Gilbert's Detroit-based parent company of Rocket Mortgage, suffered the fate of many other mortgage lenders as so-called “cheap money” disappeared amid 2022’s interest rate hikes meant to quell inflation. 

Related:

• Michigan to lose more white-collar automotive jobs with Stellantis buyouts
• Ford and GM answer Wall Street questions about when EVs will be profitable
• UAW strike ends: Higher pay, more EV worries, tighter margins for Big Three
• Most Michigan-based stocks roaring back in 2023 after a brutal year
• Value of Michigan’s largest public companies dropped by over $120B in 2022

Rate increases went well into 2023, doubling the borrowing cost of a 30-year mortgage as interest rates topped 7 percent. Refinancings dried up, and new mortgages slowed as the housing market turned tighter than ever: This fall’s  U.S. housing market is the least affordable since 1984.

Rocket, worth about $17.8 billion and the seventh-most valuable public company in Michigan this fall, pursued restructuring, including year-end 2022 layoffs that cut staffing to 18,500 people, down from 26,000 a year earlier.

But the company is not just cutting: Rocket also is examining how to apply artificial intelligence (AI) to its loan application, underwriting and decision-making processes, CEO Varun Krishna said during a third-quarter analysts call. 

“I believe we are now approaching a critical inflection point in the world when artificial intelligence…will change every aspect of our industry and our lives,” Krishna said. “I believe AI will be at the center of how clients buy, sell and finance homes. “

AI, including Rocket’s proprietary data, generated about 3.7 billion customer interactions and decisions in the past year, Krishna said. 

“This is just the start,” he added.

The market seems to be rewarding the company for its return to profitability and forward use of AI, sending it up 20.6 percent so far in 2023. In the third quarter, Rocket Companies — formerly Quicken Loans — reached $1.2 billion in profits for the second straight month, after two earlier quarters of earnings far below that: $695 million in and $516 million in December.

Still, Rocket’s rebound doesn’t touch the earnings recorded during the pandemic, when mortgage interest rates still hovered around 3 percent and potential homebuyers likely still had access to their federal stimulus funds. In March 2021, for example, Rocket hit $4.1 billion in quarterly earnings, just over three times the most recent quarter.

Plenty of pressures remain for Detroit Three 

The UAW push for higher wages and better benefits looks like a win for its members after a six-week strike, now that Ford, General Motors and Stellantis employees have voted to ratify the agreements. 

But all three companies still have a lot riding on the electrification of their fleets  — and all three are slowing their pace toward increased EV production.

All three are looking at budget cuts. 

Among them, Stellantis this month offered voluntary buyouts for about half of its 12,700 unionized salaried workers, who must leave at the end of the year if they take the offer.

The Dutch automaker that operates in North America from Auburn Hills is among the largest stock gainers in Michigan, at about 31 percent for the year. It also has the second-highest overall value, with a market cap of nearly $64 billion.

Ford has lost 18.4 percent of its stock value so far this year, while General Motors lost 21.9 percent. 

Ford broke out its company performance for its EV division, but its third-quarter filing showed that the company grew 11 percent — despite losses from EVs totalling $1.3 billion in the quarter. 

Profitability at Ford is driven this year by large SUVs and trucks, both light-duty and performance. 

GM officials, meanwhile, told analysts it still plans to cut $2 billion in fixed costs over two years. The trims started early this year with 5,000 white-collar jobs, after the automaker offered buyouts to 35,000 workers, many from its Detroit area operations.

EVs drive losses outside of the Detroit Three

The Shyft Group, based in Charlotte, announced a $16 million expansion in Michigan in February, when it was awarded an $800,000 performance-based grant from the Michigan Economic Development Corporation to produce electric commercial vehicles under its Blue Arc brand.

The plan called for 680 new manufacturing jobs from the expansion at its campus southwest of Lansing, where it retrofits specialty commercial vehicles for customers like Amazon. 

The electrification plan tested well with customers in the third quarter, but hit a glitch, CFO Jon Douyard said in an Oct. 26 earnings call. While testing commercial EV trucks, the batteries had undisclosed “quality issues related to production.”

“Unfortunately, due to these battery issues, we have had to delay customer deliveries into 2024,” Douyard said.

Over 2023 so far, the company has lost 59 percent of its stock value, bringing its market cap this week to just under $400 million. Third quarter net income was $4.5 million, compared to $17.3 million in the same quarter a year earlier.

Among other issues at Shyft, the company experienced uncertainty on fleet orders while both last-mile delivery and motor home inventories were high. Sales declines of walk-in delivery vans prompted a fleet sales drop of 32.6 percent. 

“We'll manage the business aggressively as we close out the year,” Douyard said.

Office furniture makers rally 

Despite ongoing questions about the future of office space after the pandemic, both Steelcase and MillerKnoll — the company created from Herman Miller’s 2021 acquisition of Knoll — are among the state’s public companies showing stock growth.

Steelcase stock has jumped 60.4 percent this year, bringing it to a value of $1.39 billion. And MillerKnoll has gone up 15.3 percent, or 3.6 percentage points below the S&P 500 increase for the year. 

Both companies made their most recent quarterly reports in September, with Steelcase raising its full-year guidance after exceeding expectations and staying on track for $50 million in cost cuts. The trims include hundreds of U.S. and international jobs earlier this year, along with closing a distribution center in Georgia.

Steelcase President and CEO Sara Armbruster said more corporate leaders are talking about the importance of returning to offices, which is helping fuel sales as they turn to the furniture company to improve functionality.

“They recognize that (workers) being together is a key contributor to shaping their culture and driving business outcomes,” she said. “They're investing to support in-person collaboration and they realize people need privacy for phone and video calls, along with our focused individual work.”

At the same time, consumer sales — which increased during work-from-home — is slowing, she added.

At MillerKnoll, CEO Andi Owen said recovery is still early. Office furniture sales are improving, but the company also is boosting its direct-to-consumer sales for home furnishings and continues to adjust to $35 million in cuts made in fall 2022.

The Zeeland-based company is still seeking cost reductions and “has pricing power” if revenue dips.

Savings so far, Owen said, meant the company had $200 million more cash in the last quarter than a year earlier, allowing MillerKnoll to pay down $66 million in debt.

More office furniture sales growth will come, she added, as decisions about returning to office are solidified across the world. CEOs need to show confidence in their decision-making, she said, and stop “waiting to see what everyone else is doing and … boldly go into what’s right for their organization.”