Companies mum after call to use cash reserves to create jobs

HACKENSACK, N.J. — Last month, President Barack Obama summoned corporate bosses to the White House. On the agenda: how to get U.S. companies to use their nearly $2 trillion in cash to create jobs.

Among those in attendance was David Cote, who heads Morris Township, N.J.-based conglomerate Honeywell International Inc., which was sitting on $2.6 billion in cash at the end of the third quarter — $811 million more than the company had at the end of 2007, when the recession began.

“We’ve actually already started hiring. If you take a look at about the last six months, we’ve been a net hirer in the U.S,” Cote told CNN after the White House meeting, offering no specifics.

While unemployment remains near 10 percent, corporate cash-hoarding has hit a record high, according to the Federal Reserve. American companies had $1.9 trillion of cash on their balance sheets in the third quarter, up from $1.5 trillion in 2007.

The record cash stockpiling is rooted in the 2008 financial crisis, when borrowing money became tough, and companies — much like consumers — tightened their purse strings. Now, some companies find themselves urged to spend that money to help the economy but wary of diving in before a strong recovery is under way.

Companies have used some of their cash to invest in their businesses (such as capital expenditures for new equipment), returning cash to investors (through buying back stock or paying dividends) or acquiring other businesses.

Companies appear reluctant to significantly expand their businesses because consumer spending has yet to roar back, said Alexandre Olbrecht, a professor of economics at Ramapo College in Mahwah, N.J.

“They need people to buy their products,” Olbrecht said.

That poses something of a dilemma. Companies could provide the jobs unemployed consumers need for money, which they theoretically would spend on companies’ products and services.

“They’re going to add payroll … when they feel like their business is going to support those jobs,” Olbrecht added.

Honeywell’s Cote offered no specifics on his company’s plan to hire, and a company spokesman declined to say how many workers the company might hire and when.

“Honeywell’s cash deployment plans include making continued investments in its business globally, research and development, increased dividends, and for acquisitions that support business growth,” the spokesman said in a statement.

Johnson & Johnson, which a spokesman said has about 114,000 employees worldwide, down from 120,000 in the third quarter of 2007, declined to comment.

Verizon also declined to comment, and Merck did not respond to requests for comment.

Hertz Global Holdings Inc., the car and equipment rental firm, has an unusually large amount of cash on its books – $1.5 billion.

That’s mainly because the company plans to pay $700 million to retire bonds this month, spokesman Rich Broome said. But the company also has become more conservative because of the financial crisis.

“The capital markets were closed to a lot of companies, and that’s a scary situation for a capital-intensive company — any company — every company needs financing,” he said.