(For other news from Reuters Global Manufacturing and
Transportation Summit, click here)
* Confident eurozone leaders will find a crisis
* GE, Danaher plan restructuring
* Less worried in part because Europe demand already weak
By Scott Malone
NEW YORK, Dec 15 Corporate America is worried
about Europe's spreading sovereign debt crisis, but CEOs aren't
pushing the panic button just yet. After years of market
turmoil, they have become used to uncertainty.
From the world's largest package delivery company United
Parcel Service Inc (UPS.N) to avionics maker Rockwell Collins
Inc (COL.N), top U.S. industrial companies are bracing for lower
European sales, but do not expect the continent's troubles to
undermine the rest of the global economy.
"The European situation is very serious, but I think most of
us feel that the political leadership in Europe will not let
this get out of hand," James McNerney, chief executive of Boeing
Co (BA.N), told reporters on a conference call this week. "It's
too big a problem for the European leadership to let fail."
The continent's sovereign-debt crisis, which has already
claimed the governments of Italy, Spain and Greece, threatens to
send Europe into recession as states slash spending to austerity
levels. The euro EUR= this week tested 11-month lows as
policymakers from the 17 nations that use the currency struggled
to find consensus on whether to establish a permanent bailout
fund to protect EU governments from default. [ID:nL1E7NF6MB]
Still, big companies are bracing for a downturn. General
Electric Co (GE.N) CEO Jeff Immelt told investors on Tuesday
that the largest U.S. conglomerate would restructure in Europe,
including closing some offices.
"I'm not going to forecast Europe," Immelt told an investor
meeting in New York. "We're going to restructure some of the
industrial business in Europe to get ready."
Industrial and healthcare conglomerate Danaher Corp (DHR.N)
also said it would restructure in the face of "real sluggishness
Honeywell International Inc (HON.N) Chief Financial Officer
David Anderson said on Thursday that the diversified U.S.
manufacturer had already seen orders in Europe decline in the
"From the data indicators we are watching it is pretty clear
that we will experience European recession in 2012," Anderson
said, adding that the recession may have already begun.
For more on the state of the manufacturing sector:
For a related suite of graphics, click:
For full coverage of the eurozone crisis: [ID:nL5E7LR1WL]
Graphic on US industrial output: link.reuters.com/tyc65s
Despite those concerns, executives speaking at the Reuters
Global Manufacturing & Transportation Summit in New York this
week said they were not expecting Europe's troubles to derail
their companies next year.
"We're monitoring it as closely as everyone is," said Clay
Jones, CEO of Rockwell Collins. He said he was confident his
company would ride out Europe's troubles in part because most
new plane orders are currently coming from rapidly developing
economies in Asia and Latin America.
"Most of the Boeing and Airbus airplanes are not going to
Europe," Jones said.
Likewise, Caterpillar Inc (CAT.N) Group President Stu
Levenick said his company has been expecting "pretty paltry
growth" in Europe. What is driving sales on the continent is the
fact that after years of holding off on investments, the
companies that use the Peoria, Illinois-based company's heavy
equipment have to replace aging fleets of bulldozers and dump
"We've finally gotten to the point that we're getting
replacement orders," Levenick said
RISK OF CONTAGION?
The biggest worry facing top executives is what toll the
European slowdown will take on the U.S. and Asian economies.
Part of Asia's rapid growth over the past two decades has been
driven by exports to Europe.
"Anybody who thinks that (the Rapid Developing Economies)
are independent has his head in the sand," said Jim Albaugh, who
heads Boeing's commercial airplanes unit. "There is no question
about what is happening in Europe being very serious and is
affecting the economy in United States as well. It is surprising
that the American market has held up as well as it had."
Others pointed out that for all the current focus on
Europe's financial crisis, U.S. executives also need to worry
about their home economy, which is still struggling with a long
housing slump, stubbornly high unemployment and tight federal
and state government budgets.
"Here in America, we look at the world very much with
American eyes and we have a tendency to forget what our problems
are," said Martin Richenhagen, CEO of No. 3 agricultural
equipment maker Agco Corp (AGCO.N). "If you were to look at the
situation here in the U.S., you would see that America is not
German-born Richenhagen, who this year became a U.S.
citizen, said his company is managing through the slide of the
euro the same way most of its multinational peers are -- relying
on plants in Europe to serve that market.
But he said he believed the slide of the euro against the
dollar -- it is currently worth about $1.30 -- would reverse,
and predicted the euro would trade back to be worth $1.40
sometime next year.
"Things in Europe will normalize, people in the U.S. will
see they also have a problem and things will get balanced,"
(For more on the Reuters Manufacturing and Transportation
(For summit blog: blogs.reuters.com/summits/)
(Reporting by Scott Malone in New York; editing by Matthew
((Boston.Newsroom@thomsonreuters.com; + 1 617-856-4342;
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Keywords: MANUFACTURING SUMMIT/EUROPE
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