Eaton Aerospace Unit Hit By Slowing Overseas Orders
April 20 2009 - 4:47PM
Dow Jones News
Eaton Corp.'s (ETN) aerospace business, one of the company's
most resilient segments in the economic downturn, is facing
headwinds from foreign airlines paring their aircraft orders.
The Cleveland-based company, which supplies fuel pumps,
hydraulic systems and other components to the aviation industry,
predicted Monday that its aerospace sales will decline 5% this year
from 2008.
"When we look into the aerospace business, the biggest decline
that we've seen is on commercial [aircraft] outside of the U.S.,"
said Alexander Cutler, chief executive and chairman, during a
conference call with analysts. "We've seen a more precipitated drop
there."
Eaton expects its aerospace sales to foreign end markets to fall
by 14% this year, more than double the 6% decline the company
forecast in February. Eaton's aerospace sales for U.S. customers,
meanwhile, are expected to be flat with 2008.
Eaton, which also produces components for truck and automakers,
electrical equipment and hydraulic gear, said Monday that sales
across all its business segments will decline by 15% to 16% this
year.
Foreign-based airlines, which expanded aggressively to
accommodate the growing demand for long-distance air service to
developing countries, have scaled back their purchases of jets amid
the slowing global economy.
Meanwhile, in the U.S., the private aircraft and regional
commercial jet markets are proving to be the most problematic for
Eaton.
"The business jet segment has been hit hard," Cutler said.
Demand for business jets has been fallen sharply as executives
cut back on travel or opt for commercial flights. The use of
business jets also has attracted criticism from the public and
shareholders who consider the aircraft an unnecessary corporate
perk.
The Aircraft Owners and Pilots Association has launched a
marketing campaign featuring actor Harrison Ford to promote the
economic benefits of U.S. general aviation. The group fears that
negative attitudes about small business aircraft will make it
easier for Congress to levy higher fees on small planes.
Eaton continues to be a supplier for Boeing Co.'s (BA) new 787
passenger aircraft, which has seen 32 order cancellations this year
so far. Cutler offered no details about the aircraft's maiden
flight, which is scheduled for June. Production problems have
delayed the aircraft by almost two years.
"We continue to be very well-positioned in that program," Cutler
said in an interview after the conference call. "It's a very
important program for us."
Eaton's stock traded down 9.68% at $40.42 a share late
Monday.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com