Farmington-based United Technologies announced yesterday it will kick off a three-year, $1.5 billion restructuring. It expects the plan will ultimately save $900 million annually.
UTC president and CEO Gregory Hayes told investors yesterday in a meeting in New York that the plan is to primarily focus on long-term structural cost reduction including factory relocation. He said the company has 42 million square feet of manufacturing space spread among its operations. He termed 22 million of it in high-cost locations.
He said, in part, the restructuring is being driven by low overall growth. “You focus on doing more with less,” Hayes said.
Part of the reorganization will look at the company’s inventory practices. Hayes said the company has $2 billion in inventory caused by supply management issues. “We’ve been working on inventory for 15 years without much success,” he said.
According to a Hartford Courant report, Connecticut will not be impacted by the reorganization in terms of factory relocations. It appears a lot of the moves will be in its climate, controls and security division.
Hayes also announced 2016 revenue projections, saying the company is targeting between up to $58 billion. Earnings per share are projected at $6.30 to $6.60.
According to company figures, because of declining profits in the commercial and military markets, Pratt & Whitney profits for 2016 are projected to decline by as much as $50 million. Its aerospace systems is expected to show a similar decline in profit.
Otis expects to see declining new elevator sales in the Americas and Asia. Gains in the European market would lead to overall flat sales. Elevator service globally will help the division see low single-digit growth in 2016. Operating profit is expected to drop $200 million to $250 million.
UTC’s climate, control and security business is expected to see growth in the low single digits. Both residential and commercial HVAC will be strong drivers of growth with operational profit estimated at $100 million to $150 million.