United Tech: Europe's downturn worse than expected
(Reuters) - Europe's downturn has gotten worse than United Technologies Corp (UTX.N) executives expected coming into the year, and the company is concerned about Greece's troubles spreading, a top executive at the diversified U.S. manufacturer said.
"Clearly, the situation in Europe has gotten a lot worse than we had expected," Greg Hayes, the company's chief financial officer, said on Thursday. "As we sit here today facing the Greek elections... we are very concerned about Europe."
The eurozone countries represent about 17 percent of United Tech's revenue, which the company expects to come in at about $61 billion to $62 billion this year, Hayes said. Greece is a small market for the Hartford, Connecticut-based company, with just $50 million to $60 million of revenue, but Spain is more meaningful with about $1 billion in sales.
"The Spanish market continues to convulse," Hayes said, with the company's Otis elevator unit, in particular facing pressure on its selling prices.
Otis' primary competitors are ThyssenKrupp AG (TKAG.DE), Schindler Holding AG (SCHN.S) and Mitsubishi Electric (6503.T).
Spain's 10-year bonds on Thursday hit topped 7 percent, their highest level since the country joined the euro, and above the level where Greece, Ireland and Portugal were driven to seek bailouts.
Elections in Greece on Sunday will help determine whether the debt-burdened country stays in the euro or pulls out of the currency bloc, a move that could send shockwaves across Europe.
"Greece doesn't bother me except for the contagion impact," Hayes said.
LACK OF POLITICAL WILL
"What's unfortunate in Europe is that they have the resources to fix the problem but unfortunately not the political will to do it yet," Hayes said. "And I guess the question is not if but when they will come up with a solution to the problem over there."
The world's biggest market of elevators and air conditioners has experienced a "significant slowdown" in China but "moderate growth" in the United States, Hayes added.
He said he was more confident that U.S. political leaders would head off a budget crisis, which includes $500 billion in automatic additional defense cuts, unless Congress can reach agreement on other savings and revenues.
"Our expectation is the fiscal cliff, the sequestration, it's not going to happen. It's not going to happen because of jobs," said Hayes, whose company makes Black Hawk military helicopters and sells jet engines for military use.
Hayes expressed confidence that after the November U.S. presidential and congressional elections people will put politics aside, leadership will emerge and they will do the right thing.
"But unfortunately there is going to be a lot of uncertainty between now and then. But it's solvable in the U.S. Not so solvable in Europe right now."
United Tech's Pratt & Whitney jet engine unit has seen revenue pressured as airlines cut back on the amount of spare parts they are using for engine maintenance, Hayes said, estimating that revenue was down by about $300,000 to $400,000 each time an engine is brought into for maintenance.
"This is airlines conserving cash, the same kind of behavior we saw back in late 2008, 2009," Hayes said.
(Reporting By Scott Malone; Editing by Bernard Orr and Tim Dobbyn)
- Tweet this
- Share this
- Digg this