By Timothy Aeppel 

Cheaper oil is creating winners and losers among America's factories.

Manufacturers who use oil and products derived from it are saving big money. But energy development has been a hot spot in the post-recession U.S. economy, benefiting producers of everything from steel pipes and valves to earthmovers. Those companies are now being squeezed.

Among those feeling the pinch is Dover Corp., which earns a quarter of its revenue from selling pumps and other heavy equipment to energy companies.

"Clearly there are near-term challenges in front of us," Chief Executive Bob Livingston told investors in New York on Monday. Dover said it hasn't yet seen a pullback in oil drilling, but the company is cutting costs and re-evaluating some investments in anticipation of reduced oil exploration in the U.S. next year. General Electric Co. in October cut projections for future growth in its oil and gas business, adding it was monitoring the sector with "caution."

Rockwell Automation Inc. also is weighing what cheaper oil means for its bottom line. The industrial equipment maker counts on the oil and gas industry for about 12% of its sales. CEO Keith Nosbusch said there is a "teeter-totter" taking place across the economy as businesses that benefit from cheaper oil prepare for more sales, while others move to retrench.

"Everyone who uses oil as a feed stock--from chemicals to consumer industries--are going to benefit," he said. That could mean more sales of Rockwell's industrial controls, motors and sensors to those industries. Meanwhile, oil drillers won't stop investments entirely, he said, and are likely to spend more on productivity-enhancing equipment. Rockwell, for instance, sells devices that let drillers monitor the output from wells without sending workers around in pickups to record measurements at each drilling site, shaving labor costs.

U.S. manufacturing has been a bright spot in the recovery, though it is far from booming. Manufacturing output grew 3.4% over the past year and finally recovered this past summer to its prerecession level, according to the Federal Reserve.

How falling oil prices impact manufacturers will depend on how low crude goes and how long it stays there. Oil continued its slide Wednesday after the Organization of the Petroleum Exporting Countries cut forecasts for global demand for its oil next year. The benchmark U.S. oil price on Wednesday fell to $60.94 a barrel, the lowest level since July 2009 on the New York Mercantile Exchange.

If prices fall much further and stay down, it will mean sharp cuts in investments that reverberate through the manufacturing supply chain. ConocoPhillips became the first oil major to announce such a move, earlier this week saying it would cut its capital spending to $13.5 billion next year, down 20% from this year's level.

Still, the larger picture for manufacturers remains positive.

"The fall in oil definitely cuts both ways, but I see the net demand for manufacturers going up," as it stimulates more spending in other parts of the economy, said Dan North, lead economist for North America at Euler Hermes Economic Research in Owings Mill, Md. He points to auto sales, which notched their strongest November sales rate since 2003 last month.

"I don't think it's a coincidence that we're getting sharp increases in [auto] sales at a time of sharp decreases in gas prices," said Mr. North.

Goodyear Tire & Rubber Co. supplies tires to companies that do oil exploration and acknowledges its sales to those companies may decline in the months ahead. But that is far outweighed by the benefits Goodyear gets from cheaper oil, said spokesman Keith Price. Two-thirds of the company's raw materials are derived from petroleum, including synthetic rubber and carbon black.

The company reported its raw material costs fell 6% year-over-year in the third quarter, though part of that reflects cheaper natural rubber. It takes time for lower oil prices to filter through to its suppliers, which is why Goodyear predicts its raw material bill will keep falling through the first half of next year.

"But what really helps us," said Mr. Price, "is that as gas prices fall, people tend to drive more--so their tires wear out faster."

Don Norman, director of economic studies at the MAPI Foundation, a manufacturing research group in Arlington, Va., agrees cheaper oil benefits most manufacturers. "Overall it's a positive," he said. "Manufacturers benefit because of lower prices, including lower shipping costs. And consumers spending less on gas and heating oil means they'll be out shopping."

The farther a business is removed from the actual production of oil, the more clear the benefits. At Northland Aluminum Products Inc. in Minneapolis, for instance, orders for its trademark bunt pans and other baking gear surged in late September and CEO David Dalquist thinks falling oil prices are to thank.

With prices falling at the gas pump, Mr. Dalquist said retailers suddenly boosted orders for the holiday season. Business has now surged 15% above his projections made this summer. "We see a one-to-one relation between discretionary income and the price of gasoline," he said. Northland hasn't seen any declines in raw material prices, but Mr. Dalquist said he expects that eventually.

Ted Mann contributed to this article.

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