Q&A with ITT Fluid & Motion Control's McClain

We spoke with her on Earth Day 2009 -- i.e., April 22.

What follows is the full interview in Q&A format:

McClain: Yes, I did. It was April of 2007.

McClain: That is correct.

McClain: That was in December of last year.

McClain: Okay. I have been with ITT since 2005. If you go back a little bit, in terms of my background, I'm a mechanical engineer who got into the aerospace industry, a little bit on the defense side; then got the opportunity to go work for the government at NASA. I worked in the space industry and then got the opportunity to work as a systems engineer and worked my way up to where I was running the International Space Station program. That was a lot of fun working with international partners around the world in a large endeavor. I then got the opportunity to go work for industry back in the commercial aerospace business, where I went to work for Allied Signal which then became Honeywell -- Allied Signal bought Honeywell. I worked there until 2005 when I came on board with ITT. So, I've always been a person who was interested in engineering and working in international big endeavors. When I got a chance to work in the water industry, it was very exciting because it's truly a commercial business and one that is impacting everyone around the world when you think about and talk about water and wastewater. The ability to be able to use my skills to be able to make a difference there was exciting and it's been a great move for me, both professionally as well as personally.

McClain: The way, right now, when you go beyond the fluids piece of it, it really is a diversified, high technology engineering organization. It's all of our commercial businesses within ITT, so it's almost half of the businesses. Defense is slightly larger. So, I cover a vast array of end products all the way from residential markets to industrial processing in the water and wastewater segment, so the movement and treatment of water and wastewater. And, then, moving more into the industrial side of it, high technology solutions touching automotive, rail, bus, aerospace, industrial end markets. There, we're doing a lot of actuators, friction breaks, shocks, energy absorption type solutions -- so it's a broad range of diversified products.

McClain: Absolutely, there's no doubt about it. When you think about the customer base that we serve -- and I'll use the example, we play in the beverage arena around pumps and so you're working with Coca-Cola and Pepsi and some very large OEMs -- not only are we selling them products that they need for their applications, but we can also work with them around their water needs and how they think about their use of water and how they can reduce or eliminate their use of water. So, we play in lots of areas where when you look at a commercial business where you can get synergies and look at their technologies with key accounts and really expand from there to improve efficiencies.

McClain: Absolutely. No question. It's been very enlightening the fact that you work in a broad range of markets with various sets of different products. There are some areas in our fluids business, Fluid Technologies, we have four separate businesses, but they do have a lot of synergies both on the front end and the back end. And then when you put the rest of the businesses in there, the back end -- and when I say back end, I mean what you can do around your factories, your core competencies, the logistics, sourcing, manufacturing, and then you've also got some channel alignments that can play out that can help you position yourself as a large ITT company willing to invest for the needs of its customers.

McClain: There's no question. When you think about strategic planning and positioning yourself for the future -- really thinking about how you do portfolio management and where and how your technology can be best leverage in those markets that are, one, most attractive and, two, where you have a differentiated position against your competition. So, we spend a lot of time thinking about how we manage our businesses and where we put our investments. The tough part is you can't be in everything and do everything well. You've got to pick those areas where you really have a differentiator and you really can bring a solution to your customer and solve their needs.

McClain: Every market has a little bit different of a dynamic as we look at our different businesses. Let me just step back a little bit just to give you a little background on our business. We have eight businesses within the Fluid Technology and Motion & Flow Control Business -- four which I would say are predominantly around fluid technology. You've got Residential & Commercial, Industrial Processing, Water & Wastewater -- which is really around your municipal business -- and then you have the China & India business which is specifically around taking our products and services into those two crucial markets. Then on the Motion & Flow Control side of it, I have a business called Control Technologies, which is really around energy absorption and actuation in the aerospace and industrial market. I've got a business that's Motion Technology, which is around friction products, around braking and shock for the automotive, but also for the railway and truck and bus markets...

McClain: And then the other one that I mentioned is Flow Control, which is around the Marine & RV industry, which is pumping, as well as small pumps which is talked about in the beverage market. And there's Interconnect Solutions, which is really our connectors and a little bit into switches in a global market that serves almost all of the end markets -- including Defense specifically as well. So, when you think about those businesses, you think about where do we want to put our emphasis and you look at the market dynamics. Clearly, on the fluid side, the municipal market continues to be pretty much holding its own, I should say. All of them have been impacted by the down market. The good position is that we're so diversified and we are global. We're in over 140 countries. And that helps to position us to be able to ride this tough market pretty well. But, with that said, there's no question the markets are down. We've come out of eight years of a nice growth stream and so, when you compare anything to last year, there's significant shrinkage in the market compared to where we were. It varies market by market. We still feel pretty strong about the fluid business, specifically in our markets, because as you know -- and as you write about -- there isn't a time that you're not talking about the issues around water and wastewater. In some other markets, there is some weakness, for example, industrial markets and mining. Demand has slowed and stifled a little bit, as compared to the past, but it's just a matter in my mind of waiting until the market turns back around.

McClain: You know, I wish I could give you the answer. We are looking for that magic globe that tells us the solution. I think what we're doing is just being very aggressive in the way in which we're managing the business. We're staying very close obviously to our customers. Understanding what their needs are [is essential] as are, as we all know, energy efficient solutions or total cost of ownership. So, we're focusing our time on making sure we've got the right products and systems and solutions that will help them be able to address their needs. We're obviously investing in the long term. So, we think strategically -- we're in this business, we've been in it for many, many years, we love being in the water industry as well as our other commercial businesses. Where we think there are some strategic, long term objectives, we're sticking to our long term investments. We're also tightening the belt. We're making sure that, as you do in any environment, you manage with intensity. You pull back as much as you can, but you also make sure you also don't give up the long term growth.

McClain: Yes, that's a good question. To answer, we're looking very hard at and have been looking very hard at looking to grow in the emerging markets. Just a month ago, we were down in Latin America with all of our commercial businesses and looking at all the opportunities we have in Latin America. It's still a market that has positive GDP growth. We have a fairly good position and we want to make sure we understand what the specific dynamics are in that market, so that we're positioned appropriately to capture the market. Another two key areas for us that we've been expanding and investing in are in China and India. We've put Engineering Technology Centers in both China and India to ultimately help us make sure we're producing the right products for the localized market and also help us produce products that we can bring back to our established regions in North America and Europe. We are looking at that geographical mix to make sure we're positioning in those markets that still are growing. They may be down from where they were the last couple of years, but there's still positive growth. And we also see them as economies of the future.

McClain: Depending on the industry some of the areas we continue to see as very strong and where we'll continue to be strong are there. As you're reading about and have written about, the economic stimulus packages not only in the U.S. but in China and many of the other regions around the world, the need to be able to in established regions fix the aging infrastructure and then in the emerging markets it’s essential to actually have an infrastructure or establish the position to be able to support the populations there with clean water and taking water to where the population is living. And I see that as a strong emphasis and it will continue to be a strong emphasis. We've continued over the last several years to invest in the municipal products that we've produced. Not only are we into the pumping, we're in treatment. We've done some acquisitions over the last few years around treatment, around Sanitaire, which was the biotreatment area, WEDECO, which was our ozone and now also our UV applications specialist. And we continue to look at acquisitions in some of our distribution channels where that makes sense so that we can make sure we're close to our municipal customer so that we can serve them with the right products and right service solutions as they're addressing their needs.

McClain: Okay, great.

McClain: In industrial areas, there are a couple areas as an example that I'm still very excited about. Obviously, we play in the aerospace industry around actuation and energy absorption.

McClain: So, if I think about power management, clearly, there's a key focus there as we think about all the alternative energy sources and the investment in that area. As people look to invest there, there are clear opportunities for us to play with the products and solutions we have in our portfolio for Fluid Technology. That's something we're going to watch very closely and where we'll be investing. When you think about some of the adjacencies that we've gotten into over time, not only do we move and treat the water and the wastewater -- but we've also gotten into sludge processing and removal. That's an area we'll continue to watch as there's other energy sourcing that people are looking at when looking at what they can do with the sludge. Those are key markets that we're looking at. Another that I think is interesting in the water and wastewater area again comes back to our ozone/oxidation strengths. We're all concerned about medical, pharmaceutical or medication products getting into our water stream. What we can do and what products we can provide that can ultimately solve those types of issues [is important]. We believe we've got the right solution and, with our oxidation and ozone solutions, we feel like we've got an application that will help solve these issues that are facing the world in general.

McClain: Yes. You know, another area I should have brought up is really the ag/irrigation market. This a significant area where we play, i.e., in the agriculture and irrigation fields. This is part of our business today in Residential & Commercial. And Lubbock, TX, built the vertical turbine that, if you fly over Texas and you see this circular irrigation, that's typically our vertical pump. That's an area we continue to expand and invest in. That's not only here in the U.S., but also a global market opportunity for us. So, that's another attractive market opportunity for us as we continue to look strategically on where we go forward.

McClain: I think for us to be known as a global water leader we need to be more involved and more active in terms of being seen as a thought leader and helping solve the world's problems not only with the products that we have but also just talking about, communicating and being engaged in how we solve these issues that are facing the world. One small part that we've done, which we're all very excited about, is the Watermark project that we launched last year. It's a way for our employees around the world to contribute to helping other people who don't have access -- I should say young children who don't have access -- to freshwater at their schools nor the sanitation to relieve the situation so they can get the education they need and bring other solutions back to their homes and their villages. We're doing our share in that area both by volunteering time, where we have employees going into these rural areas to get the equipment put into place and doing the training. Some employees are giving money. And then, ultimately, using some of those materials and tools we're using in the rural areas, just to take it back into our own communities [to apply as solutions there]. It's exciting. Our folks, especially in the Fluids area, are excited because that's what they work in every day. And now they can use that to apply back to their communities. But it's also -- around the whole ITT Corp. -- bringing us together as one team in really rallying around a cause that's important to all of us. Whether it's our children or children's children that are going to be dealing with the issues, this is something we feel excited about.

McClain: We're very excited about it. What we're really excited about is the technology this company brings to us and what it allows us to do in terms of energy efficient solutions, to expand ourselves in Europe as well as bringing that technology back into the Americas where we have a very nice position in the heating, ventilation and air conditioning in the U.S. It's an exciting opportunity for us. It clearly builds off our core markets, the Building Services. And it expands us back into a leadership role with energy efficiency solutions that we can apply there as well as take that technology and apply it across the board. Our customers are looking for that and that's obviously something we want to make sure that we're up front on.

McClain: You know, ITT is the market leader in energy efficient pumps. We've got studies that show that 30-50% of the energy consumed by pump systems can be saved through equipment and control system changes. And so what we've done in terms of our systems application knowledge, which I think is one of the reasons why we are the leader in this area in the market, is work with our customers not only to provide the right products but to make sure the whole system is optimized for the most energy efficient solution. This is something that is important. There's no question energy efficiency is critical. And when you play in water and move the large amount of water and wastewater that you do, finding the best solution -- and it's a systems solution -- is going to be critical in solving and helping resolve the issues that are facing us around energy globally.

McClain: I approach it from this perspective. You know, to me, that's always a challenge. It doesn't matter if you're in this industry or another. You always are struggling with the purchase price vs. the total life cycle cost when you make these decisions. So, one of the things that we've spent time focusing on is making sure that we're doing the right amount of training and educational awareness of what a systems solution can ultimately provide, and the advantages that brings. We're involved in the associations in the various regions, whether it be Europump in Europe or the Hydraulic Institute here in the U.S. and other institutions and associations. We work with them to try to get the right education and the right requirements understood around how you optimize a solution and how you work with the engineering consulting firms that clearly understand the benefits of a systems solution vs. just a product efficiency. I think it's just a matter of the industry coming together and really working and understanding the overall solution. I think municipalities today are really focused on their total cost solutions more than at any time as they're looking at the decisions they've got to make as well. They're making decisions on whether they can maintain the engineers they've had and so they are looking at how they can effectively draw the overall cost down in the long term. I think it really gets down to education and communication, though.

McClain: Oh, absolutely. We've spent a lot of time trying to stay very close to what the stimulus bill was going to be about. We have launched an online resource that's designed to educate viewers about the stimulus package. We're doing that one for our own internal people, also for all of our distribution channels and engineering firms that we work with. And together we think that's going to help us position ourselves and make people aware of the products that do meet the requirements for the stimulus package, not to mention being creative and innovative in terms of what are other solutions that we can provide. You know, when you've got the portfolio and the breadth that we have across the Fluid Technology businesses, it's not only the pumps but the valves and controls. And, as you really think about real-time information and the need to be able to address energy efficiency and having a system that is always working at its optimum performance, having the controls and that data immediacy is really what provides you the opportunity to bring the best solution you have to bear.

McClain: No. I guess the last thing I'd say is just that water business is a great business to be in. We're really excited about it. We love being in this market. We're going to continue to push to find the right solutions that are going to help us solve the problems that are facing the world in water and wastewater and, ultimately, which will allow us to continue to be the leader and grow in a very attractive market.

McClain: Thank you for the opportunity. And good luck...

--

CONTACT:

Gretchen McClain

ITT Fluid & Motion Control

1133 Westchester Avenue

White Plains, New York 10604

Tel: 914-641-2000

Fax: 914-696-2950

Background: Already president of ITT Fluid Technology since April 2007, McClain also assumed leadership of the former ITT Motion & Flow Control division in December 2008. The merged grouping is now known as ITT Fluid & Motion Control and encompasses eight businesses: Residential & Commercial Water, Industrial Process, Water & Wastewater, China & India, Control Technologies, Motion Technologies, Flow Control, and Interconnect Solutions. She also serves as senior vice president at ITT Corp.

###