US manufacturing execs a sea of calm confidence

By Ben Klayman

NEW YORK (Reuters) - Stock market investors have been reeling this week as inflation fears have gained a foothold, but some of the top names in American industry painted a much more optimistic picture about how the future is looking.

Citing strong demand in most corners of the globe, especially China, as well as an ability to pass on rising commodity costs to customers through higher prices, executives at the Reuters Manufacturing and Transportation Summit in New York mostly struggled to come up with reasons for worry.

"If you had, four years ago, said, 'Gee, what happens with $70 a barrel oil?' I'd have been saying: 'Disaster; global disaster; global recession; no way business can stand that.' And here we sit and everything is going along fine," said Dave Cote, chief executive of Honeywell International Inc. (HON.N: Quote, Profile, Research, Stock Buzz)

"Despite what you read, everything I see is pretty darn good out there, with the exception of Western Europe," he added.

U.S. stocks plunged on Wednesday, wiping out $64 billion in market value from the 30 companies that make up the Dow Jones industrial index .DJI and giving the blue-chip average its biggest one-day drop in 3 years, as investors bet the Federal Reserve would keep raising interest rates.

The executives at the summit, however, painted a picture about the global economy that was far cheerier.

"I've been in China, India, Dubai, Europe and Mexico since the beginning of the year, and everyplace feels pretty good," said John Rice, a vice chairman with General Electric Co. (GE.N: Quote, Profile, Research, Stock Buzz) and head of the conglomerate's industrial business.

"There is still a fair amount of pent-up consumer demand," he added. "I don't see a huge storm cloud."

BY THE NUMBERS

Some data back up Rice and his peers. Output at U.S. factories, mines and utilities rose more than expected in April, as capacity use rates climbed above forecasts to the highest level since July 2000, the Fed said on Tuesday.

In fact, before this week's declines, many industrial stocks hit all-time highs and numerous manufacturers boosted their 2006 profit forecasts on the back of rising demand.

"Clearly, what we saw here in the first quarter in North America -- particularly in the U.S. -- was beyond what we had built into any of our plans and forecasts as we looked at 2006 unfolding," said David Speer, CEO with Illinois Tool Works Inc. (ITW.N: Quote, Profile, Research, Stock Buzz)

ABB Ltd.'s (ABBN.VX: Quote, Profile, Research, Stock Buzz) North American CEO, Dinesh Paliwal, said the robust demand has pushed out the slowdown the Swiss engineering firm was expecting in 2007 or 2008.

"I don't see a slowdown in 2006, and it's hard for me to fathom the idea that at the beginning of 2007 everything will collapse," he said.

That said, the executives wouldn't have their jobs if they didn't always have disaster scenarios in the backs of their minds. "We get paid to worry about things," Rice said.  Continued...