URS CEO anticipates U.S. manufacturing renaissance
(Reuters) - Martin Koffel, head of engineering company URS Corp (URS.N), feels the United States is poised for a manufacturing renaissance, driven at least in part by demand among the developing world's burgeoning consumer class.
"There is once again a cachet about American-made products," the CEO said in an interview on Tuesday. "In some industries at some levels, there's going to be a Made in America advantage."
Koffel, an Australian who has run URS for more than two decades, noted that the labor cost advantage between the United States and developing countries had shrunk as wages in the country have stagnated and inflation has been low, while at the same time U.S. labor productivity has surged.
Koffel's conversations with clients indicate that general manufacturers and makers of heavy machinery are gearing up to expand at home again to feed foreign demand, and so he was trying to position URS to benefit by hiring the right people.
A large part of URS revenue comes from the U.S. government, including defense and nuclear work, and while federal spending is likely to fall, Koffel expects those two areas to remain fairly stable. "You can not legislate for an extension of a half-life of an isotope," he said.
URS just completed its $1.24 billion acquisition of Canadian oilfield services company Flint Energy Services on Monday, which Koffel said satisfied a long-standing ambition to increase its interest in the energy sector.
URS will now derive over a fifth of its revenue from oil and gas, making it its second-largest sector, behind federal.
Also, spending by utilities on power plants would eventually have to increase, but the economy would need to recover first to increase power demand, Koffel said.
URS does a lot of construction, and a long-delayed federal highway spending bill has meant local spending had to make up the difference, he said. Koffel estimated a typical highway was now about 30 to 40 percent funded by federal money -- half its share in the past, but not necessarily a problem.
"If they have to raise more of their money on their own ingenuity, you're likely to please more people," he said.
Britain is another big market for the San Francisco-based company, and austerity measures there means URS has faced a squeeze on margins, though revenue had held steady, he said.
(Reporting by Braden Reddall in Houston; Editing by Bernard Orr)