Honeywell aims for half of sales outside U.S

By Scott Malone

NEW YORK (Reuters) - Diversified manufacturer Honeywell International Inc. (HON.N: Quote, Profile, Research, Stock Buzz) aims to generate half its forecast $32.81 billion in 2007 sales outside the United States, driven by strong growth in the Middle East, China and India.

But there are risks that the red-hot economies of China and India could overheat, said David Cote, chairman and chief executive officer, speaking at the Reuters Manufacturing Summit in New York.

"Two-thirds of the world's (gross domestic product) is outside the U.S. and until we at least get to that point, I think there's still upside," in international sales growth, Cote said.

While the Asian markets have attracted the attention of many companies, Cote said the Middle East also holds important potential.

"The Middle East for us ends up being great not because of the number of people, but the amount of money," Cote said. "And they seem to be spending this time on stuff that looks like it will be creating jobs and doing things to build an economy rather than just investing in stocks."

He cited Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates as key markets where heavy investments are being made in power and air infrastructure.

One of the biggest challenges to India's growth, he said, is the red tape that can snarl foreign companies' efforts to work there.

"It's tougher to get stuff done in India, no doubt about it," Cote said. "China, you just have to talk to the three or four right people, get agreement and, man, then they execute.

"Whereas in India you have a conversation which will frequently lead to another conversation which can lead to another conversation and then nothing will happen. And that's entirely possible. And they know it. It's just one of those things that they keep working through."

One of the biggest risks to China's growth is if the rising wealth of the country's middle class causes it to challenge the current autocratic political system.

"They have a vast, emerging middle class and I'm a believer that a middle class generates a power of its own," Cote said. "They start thinking for themselves and are not always willing to follow, and they've got kind of a totalitarian system ... You could end up with a very big emerging middle class that says 'Don't want to do it that way anymore,' And that could create a schism of its own."