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Eaton CEO: Company Will Rely On Overseas Revenue

Diversified manufacturer's chief exec says the housing slump is spilling into the automotive business.

NEW YORK (AP) — The chief executive of diversified industrial manufacturer Eaton Corp. said Tuesday that while the woes related to the residential construction slump have spilled over into the automotive industry, he's still optimistic about his company's growth prospects.
 
Alexander M. Cutler told analysts at the Morgan Stanley conference he now expects that residential construction won't hit the bottom until late in the second quarter of 2008, compared with prior predictions of mid-2007.
 
''Obviously the pain is broader than people appreciated, and it's probably going to be a little deeper, so we think that residential construction will decline again in 2008 over 2007, whereas before we had not seen that,'' Cutler said.
 
The resulting effects of the housing slump will lower North American automotive sales by 300,000 to 500,000 vehicles — though not all of that decline will come in 2007 — and also curtail an expected rebound in demand for construction equipment, he said.
 
But Cutler noted that Eaton draws about 50 percent of its revenue from economies outside of the United States, making its less sensitive to those effects.
 
The executive said he doesn't expect the company's long-cycle businesses, including aerospace and nonresidential construction, to be affected. Cutler also expects the company's automotive business to get a near-term boost from growing demand for emissions products.
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