Honeywell transport unit sees flat sales in 2007

By Scott Malone

DETROIT (Reuters) - Honeywell International Inc.'s (HON.N: Quote, Profile, Research, Stock Buzz) Transportation Systems unit expects to face another year of tough conditions in 2007 but aims to return to a growth footing by 2008, the division's top executive said on Tuesday.

Changing regulatory requirements on diesel engines and slowing sales of consumer car-maintenance products in the face of rising gasoline prices are taking a toll on the business, Adriane Brown, president and chief executive officer of that business, said at the Reuters Autos Summit in Detroit.

"We provided guidance that the turbo business was going to go through a couple of years where it was not going to have the same growth profile that it had in the past," mainly due to slowing growth in the core European market, where turbochargers are commonly used in diesel engines, Brown said.

Honeywell has forecast that this year the transportation systems unit will experience a 2 percent drop in sales, to about $4.4 billion, with profit flat to up 3 percent, in a range of $550 million to $570 million, in 2006.

The Torrance, California-based Transportation Systems unit has businesses ranging from turbochargers, which are used primarily in diesel engines, to consumer products such as Autolite spark plugs and Prestone antifreeze.

Growth at the business hinges on wider acceptance of diesel engines in the United States, where that technology is used in about 3 percent of new cars, Brown said. About 58 percent of the unit's turbocharger sales are to Europe, 30 percent to the United States and 12 percent to Asia, she said.

With gasoline prices remaining near historical highs in the United States, the chance for better fuel economy could inspire more drivers to turn to diesel vehicles, Brown said.

"High gas prices help, but I don't think it's a precursor; I don't think it's absolutely necessary," she said.  Continued...