Rockwell International Corp., the largest maker of automatic controls, will rely on automation products to drive sales growth in China as the market for cockpit avionics slows.
Automation products account for two-thirds of the Costa Mesa company's annual China sales of about $70 million. Most of the rest comes from avionics.
Sales have been growing about 20% a year. However, China's decision this year to freeze the number of civil jetliners in service means sales of cockpit avionics are bound to slow, said Earl Washington, senior vice president of marketing and communications.
"We're concerned when your customer is talking about no new orders for a while," Washington said. The company plans to "ride out this temporary lull" by refurbishing aircraft and providing aviation services such as new in-flight entertainment systems, he said.
Many of China's state-owned enterprises are struggling to reform operations to stave off bankruptcy, potentially creating markets for control systems.
In aviation, airline traffic grew 6.3% in 1998, down from 7.3% in 1997. All major airlines lost money last year, prompting the freeze on fleet size. Even so, manufacturers including Boeing Co. and the Airbus consortium expect China to spend almost $120 billion on new aircraft during the next two decades, making it the second biggest market after North America.
Rockwell formally opened its Beijing headquarters Wednesday, and two centers in Shanghai. One Shanghai office will provide service and training for the company's automation products. The other will provide research support to develop new markets in China. The three projects involve an investment of about $20 million, Washington said.
Rockwell automation-products sales are benefiting from the government's push to spend more on new bridges, roads and other infrastructure to rekindle growth. Local clients include steel companies and airport construction projects, Washington said.
The company is having "limited" success selling control products to some of the big state-owned companies beginning reforms, a potentially big market.
Many state enterprises are struggling to shed surplus labor. The introduction of more sophisticated controls could accelerate job cuts but increase social tensions as unemployment grows.