The 2020 Mid-Year Economic Update_long

ITW’s ‘Self-Help’ Plan for a Flat Economy

Executive: Hope for recovery in second half of 2013 fading.
Angela

The second half of 2013 will be “pretty flat” according to David Parry, vice chairman for Glenview, IL-based Illinois Tool Works. Speaking at the DbAccess Global Industrials and Basic Materials Conference in Chicago, Parry said he doesn’t see any sign of the slight recovery some had hoped for in 2013’s final half.

“That’s why I think our strategy is so applicable. It’s driven around self-help,” Parry said. The company’s current strategy, which ITW has been pursuing since the start of 2012, focuses on things the company can control rather than relying on improvement in the global economy.

The three elements of ITW’s current strategy are:

  1. Portfolio management. This is a simple matter of deciding which businesses within the company’s portfolio to invest in and which to get rid of, Parry says. After the "economic fiasco” of 2008 and 2009, he says, ITW took a close look at which businesses had strong differentiation and which didn’t, and this analysis has continued into 2013. ITW agreed to divest its Folkart business in May and announced plans to explore strategic alternatives for its industrial packaging segment in February.
  2. Business structure simplification. Parry says ITW plans to restructure its 800-850 business units down to 105 global divisions. This process started in 2012 and is expected to continue through 2014.
  3. Strategic sourcing. ITW has focused on strategic sourcing in the past, but Parry says the company is delivering a renewed effort to leverage its scale in pursuit of raw materials savings. Coil and wire purchasing, he says, is one area where the initiative will have an impact. “The number of suppliers there is around about 170 – or was. Today, we're down to probably about 90. And by the time we finish the exercise, we'll probably be down to 30,” he says.

Parry says ITW expects to realize between $600 million and $800 million in savings over a five-year period as a result of the three initiatives.

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