High costs a blessing and curse-Rockwell CEO

By Steve James

NEW YORK (Reuters) - For a company like Rockwell Automation Inc. (ROK.N: Quote, Profile, Research, Stock Buzz), which makes products to help factories run more efficiently, the current high price of raw materials like copper, coal and steel, is a double-edged sword.

Chairman and Chief Executive Keith Nosbusch believes higher costs not only hurt his company's operations but also can help it by generating new business.

"Certainly over the last year, we've had a lot of struggles with the increases in steel and copper (prices)," he told the Reuters Manufacturing and Transportation Summit on Tuesday.

"On the other side of the equation, we have the opportunity to help our customers save money. So it creates revenue growth opportunities (for us)."

Nosbusch said that unlike other giant manufacturers, Milwaukee-based Rockwell, which had $5 billion in sales in its last fiscal year, could also benefit from higher raw material costs because of the nature of its business -- helping other companies with automation.

For example, higher copper and steel costs had a big impact on its motor control businesses, where the biggest percentage of raw material costs was in those commodities.

"So, we've struggled the last 18 months because of those cost increases and we've put through some price increases in some of our businesses," said Nosbusch.

Along with the high cost of oil and transportation, the chemical feedstocks that produce the plastics it uses are also under pressure on pricing. Although there has been a recent flattening, "now they're talking about them going up again. So we're very concerned about the input cost increases," said Nosbusch.

"We have a large challenge to offset those with productivity inside our businesses."

But because Rockwell has businesses helping customers reduce energy consumption, "we have a product and service portfolio that creates revenue opportunity.

"We get the impact of the increases but it creates the opportunity for our businesses to grow," he said.

"If you net it all out, what we have to be careful of is when the rising costs start impacting the global domestic product. That's when it's not going to be good. But I don't think we've seen that yet."