(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 (Reuters) - 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 in Europe.”
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 fourth quarter.
“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:
[ID:nL1E7NCA09] For a related suite of graphics, click:
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 trunks.
“We’ve finally gotten to the point that we’re getting replacement orders,” Levenick said
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 doing better.”
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,” Richenhagen said.
(For more on the Reuters Manufacturing and Transportation Summit: [ID:nL1E7NCA09]
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(Reporting by Scott Malone in New York; editing by Matthew Lewis)
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