* European demand no worse than expected-execs
* Caterpillar, 3M officials ready to react
* Euro crisis, U.S. job worries fuel investor angst
By Scott Malone and Nick Zieminski
June 5 Facing a rising current of economic
worry, manufacturing executives are taking their cue from yoga.
Flexibility is their mantra.
Officials from big U.S. industrials including Caterpillar
Inc and 3M Co said they have not seen a sharp
deterioration in European demand -- which they had expected to
be weak -- but stand ready to cut back if things get worse.
The lessons of the 2007-2009 recession, which big
manufacturers weathered by slashing tens of thousands of
workers, are burned in their brains.
"You do have to be prepared and you do a lot of work ahead
of time on flexibility," said Rich Lavin, group president at
Caterpillar who oversees emerging markets and construction
But he noted the Peoria, Illinois-based company has not seen
demand for its earth-moving equipment decline. The company looks
for profit to rise about 2 8 percent this year to $9.50 per
"In our particular case, we have a significant chunk of our
workforce which is flexible, temporary, contract agency people,"
Lavin told an investor conference organized by J.P. Morgan. "We
have quite a bit of flexibility within our labor agreements to
do temporary facility shutdowns, if need be."
Caterpillar, the world's largest maker of earth-moving
equipment, employs about 127,000 full-time and 28,000 "flexible"
Investors have become increasingly concerned over the past
few weeks that Europe's financial crisis will throw the
17-nation currency bloc into a sharper downturn and derail the
United States' tepid recovery from the recession.
That has taken a toll on stocks. The widely watched Standard
& Poor's 500 index has fallen almost 7 percent over the
past month and its industrial component is down 9
Adding to worries, Friday's U.S. payrolls report showed
fewer jobs were added than expected jobs in May, and the
unemployment rate ticked up to 8.2 percent from 8.1 percent.
One of Lavin's peers, 3M Co Chief Financial Officer
David Meline, said the company was also ready to react if the
"We have the flexibility should there be a significant
downturn in the economy. We don't believe that to be the case
right now," said Meline.
He told the J.P. Morgan conference he had just returned from
a trip through Germany and France and had not seen any
significant change in European demand for 3M products, which
range from films for TV screens to Post-it notes.
"Right now, I don't have anything to indicate we've seen
some significant inflection," Meline said.
NO MARKED CHANGE
Despite investors' fears, executives overall haven't seen a
sudden change in European demand -- which was expected to be
weak this year.
"We haven't seen a marked change in end-market demand
overall," said Jeremy Smeltser, a SPX Corp vice
president who will become CFO this summer. "Europe has been
softer than the rest of the world for us, year to date, but we
haven't seen major change."
Lavin emphasized that while Caterpillar would be ready to
cut production in the face of a drop in demand, it has no plans
to jump the gun on a downturn.
"This is the third year in a row we've had this summer
crisis of confidence in the world economy," Lavin said. "You
don't completely discount it, but you have to manage your
business based on what you're actually seeing on the ground and
it really hasn't changed that much."