19/11/2012 17:45:00

Honeywell Planning for U.S. Defense Cuts

Related content

Honeywell International Inc. (HON) said Monday it expects the bulk of looming U.S. defense cuts to be implemented, and in a sharp break with rivals said it welcomes the reductions.

The diversified U.S. industrial and aerospace group said it is planning for 80% of the cuts triggered by budget sequestration on Jan. 2 to happen, though they won't really start to bite until 2014 and could involve the shape of the armed forces returning more to the profile seen before the terrorist attacks of September 2011.

Big U.S. defense contractors have spent months lobbying fiercely against the sequestration cuts that see almost $500 billion removed from military spending over the next decade, doubling the existing measures contained in the Budget Control Act.

Vocal opponents such as Lockheed Martin Corp. (LMT), the largest Pentagon contractor, have warned sequestration would be a "disaster" for U.S. military capabilities and domestic manufacturing and lead to thousands of job cuts.

"We recognize these cuts are going to happen," said Mike Madsen, president of Honeywell's defense and space unit. "We're not really fighting these -- they need to occur," he said at an investor meeting.

Honeywell Chief Executive Dave Cote has been among the business executives consulted by President Barack Obama over future spending and tax priorities, attending a White House summit last week, and Mr. Madsen said the company's view of defense priorities reflected the broader need to address the fiscal budget crisis.

Most large U.S. defense contractors have indicated they expect a compromise to be reached on defense sequestration, though in recent weeks many executives have dialed back some of the more dire warnings about the immediate impact on spending and program cuts.

Honeywell has gone a step further, incorporating sequestration in its public planning and attempting to outline the impact on particular parts of the military budget.

The sequestration process would trigger a 10% across-the-board cut in defense spending, but Pentagon planners have started to provide more indications to contractors about how they would seek to prioritize expenditures.

Mr. Madsen said the "mix" of armed forces that emerges will be more akin to that seen before 2011, as ground troops are withdrawn from Iraq and Afghanistan and the Pentagon pursues the priorities for a more nimble military with a greater focus on potential threats in Asia Pacific.

Defense contractors with greater exposure to what he called "enduring" platforms -- aircraft carriers, long-range bombers and fighter jets -- as well as security systems -- are seen by analysts to be less vulnerable to whatever level of cuts finally emerges.

The Pentagon is already accelerating efforts to crimp escalating costs by pushing tougher contract terms on suppliers and sharing more risk under the banner of the Better Buying Power 2.0 initiative unveiled by the department last week.

Mr. Madsen said one impact would be more focus on fuel efficiency -- the Pentagon is the country's largest consumer of fuel -- and trimming maintenance costs, which could help bolster programs for new aircraft and vehicle engines.

Honeywell's defense and space unit is expected to have revenue of around $5.1 billion this year, and ranks 14th among global military contractors by sales, according to Defense News.

-write to Doug Cameron at doug.cameron@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 19, 2012 12:45 ET (17:45 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

Post comment

Related debate

  • 1 week
  • 1 month
  • 1 Year
Ingen indlæg

Regulatory news

Tech Companies Send Criticism Along With NSA-Related Data -- Update

04/02/2014 00:06:00
By Danny Yadron Technology companies including Google Inc. and Microsoft Corp. released new figures on the amount of data requests they received from U.S. ..

U.S. Hot Stocks: Hot Stocks to Watch

03/02/2014 14:07:00
Among the companies with shares expected to actively trade in Monday's session is Herbalife Ltd. (HLF). Herbalife Ltd. (HLF) raised its fourth-quarter outl..

Pfizer Study Meets Primary Endpoints

03/02/2014 13:05:00
Pfizer Inc. (PFE) said Monday that a Phase 2 trial of its advanced breast cancer treatment met its primary endpoint. Pfizer said a study comparing the effec..

Most read news

  • 24 hours
  • 48 hours
  • 1 week
1
Starbreeze AB announces intent to acquire Geminose Inc. and sets up North American operations
2
EUROCOMMERCIAL PROPERTIES N.V. CONCLUSION OF TRANSACTIONS BUYBACK PROGRAMME
3
ALK's partner Torii initiates final stage of clinical development of Japanese cedar SLIT-tablet
4
ALSTOM SA: Alstom completes the sale of its Steam Auxiliary Components activities to Triton
5
Michelin : Michelin completes the acquisition of Sascar

Related stock quotes

Buy and sell signals

  • Trend
  • Moneymachine

Related companies
Get access to information and recommendations of related companies with our PLUS package.

You get access to 7 valuable investment tools.

Click here to read more about the PLUS package.
Euroinvestor around the globe: Euroinvestor.dk | Euroinvestor.se | Euroinvestor.no | Euroinvestor.fr | Forexinvestor.com| Wisselkoersen.nl | Valuta.se | Valutaveksel.no | Divisas.es | Valute.it
Copyright Euroinvestor A/S 2014   Disclaimer and Terms of Use
Quote information is delivered by Interactive Data.
Data is delayed 15-20 minutes according to the distribution agreements set by the different exchanges.
 
02 September 2014 07:42:03
(UTC) Dublin, Edinburgh, Lisbon, London
Version: LiveBranchBuild_20140825.1 - EUROWEB5 - 2014-09-02 08:42:03 - 2014-09-02 07:42:03 - 1000 - Website: OKAY