* Worries about risk of Greek "contagion" in Europe
* Sees lack of political will in Europe, more hope in U.S.
* United Tech CFO: Spain "continues to convulse"
By Scott Malone
June 14 Europe's downturn has gotten worse than
United Technologies Corp 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
"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,
Schindler Holding AG and Mitsubishi Electric.
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
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,"
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
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
"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.