United Technologies (UTC), the $54.8-billion (Rs 2,74,000 crore) diversified industrial conglomerate, and its 51-year-old President and CEO Louis R. Chênevert, are no strangers to India. The company’s relationship with India dates back to 1899, when elevator and escalator maker Otis made its first installation in Chennai. Since then, UTC has grown to become a $500-million (Rs 2,500 crore) entity this year. Chênevert, a (former) long-time employee of troubled carmaker General Motors, first came to India in the 1990s and has been a frequent visitor to the country ever since. His latest visit to India, to inaugurate a sourcing office in Bangalore for UTC’s aerospace business, comes just as the global economy heads for a bruising downturn. He took time out of a packed schedule to speak to BT’s Rahul Sachitanand on a range of issues. While UTC, which sells everything from aircraft engines to air conditioning equipment, is in the midst of a restructuring to survive the slowdown, it is also stepping up its presence in high-growth emerging economies, he says. Excerpts:
In the last 12 months since you visited India, the world seems to have turned upside down, rapidly moving from booming growth to a looming recession. A lot has changed in the past year…
Yes, a lot has changed but at the same time there are lots of opportunities for a company like UTC in energy and environment. We are globally diversified, with 60 per cent of our business outside the US. This is an important visit to India for me and UTC. We’ve opened a Bangalore sourcing office for our aerospace business. I see a lot of positive developments with local suppliers and partners. They bring better value to our end-customers and create strong job opportunities for our suppliers.
• Otis Elevator: First one installed in India (Chennai) in 1899
• Carrier Air Conditioners: Willis Carrier invented the mechanical air conditioner in 1902; Carrier was acquired by UTC in 1979
• Aircraft Engine: Pratt & Whitney engines power the space shuttle
• The Hartford (Connecticut, US)-headquartered company employs 225,600 people across 180 countries
How has the slowdown affected United Technologies and has this given you an opportunity to cut costs?
We have seen downturns before, but not similar to this one. UTC is restructuring its operations to outperform in any market. We have a magnificent track record of outperforming in any market, so we are prepared for any challenges.
Despite a slowing market, five of six businesses have reported margin expansions. Some people within UTC must be wondering if there is a slowdown at all… where do you think the global markets are headed and are they even predictable anymore?
There are lots of rapid changes globally… if you look at our financials carefully, you would have seen organic growth decelerate. In 2006, our business grew organically at 9 per cent per annum and maintained this growth rate in 2007 as well. However, we have since seen growth rates dim to 7 per cent in 2008 and then to 6 per cent as the global economic slowdown worsens. On top of the revenue softening, we have seen softness in the US residential market and the credit crisis has also affected the commercial market, leading to delayed projects. There is no denying there is a slowdown. However, we have strong order backlogs across our businesses, with two years pending at Sirkorsky Helicopters, for example.
Does the slowdown give you an opportunity to make cheap acquisitions?
You recently walked away from a $2-billion (Rs 10,000 crore) deal to buy ATM-maker Diebold. Do you continue to be interested in inorganic growth? Always. On the M&A agenda, you need a willing buyer, which we are, but you also need a willing seller. In the case of Diebold, I guess they were not a willing seller and the circumstances changed. But there is no doubt that the current environment will create interesting opportunities for a company like ours, which has a strong balance sheet and strong cash flow generation. We try to acquire the pieces that bring our portfolio closer together.