Defense

North Korea crisis could boost business at one of America's greatest industrial powerhouses

Key Points
  • North Korea's continued missile tests could boost Honeywell's defense business, Executive Chairman David Cote said on the sidelines of the Singapore Summit
  • The future of the conglomerate's aerospace business will be clarified in the fall, he added
How North Korea is affecting business at Honeywell
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How North Korea is affecting business at Honeywell

North Korea's growing armed belligerence is a strategic opportunity for American multinational Honeywell.

"We fully expect it [North Korea] will help the defense side of our business because Japan, South Korea and others are going want to protect themselves and be a lot more careful because who knows where something like this can go," David Cote, executive chairman at Honeywell, said on the sidelines of the Singapore Summit.

For the second time in less than a month, Pyongyang on Friday fired a ballistic missile that flew over Japan in what was widely seen as payback for the U.N. Security Council's latest sanctions.

Cote, however, struck a cautious note on the prospect of increased sales.

"Anything that starts people focused on spending money on defense as opposed to spending money commercially and improving lives of people, it's just not a good dynamic."

Defense accounts for 8 percent of Honeywell's operations, so "it's not a huge number for us," he added.

Cote said he hoped for a peaceful resolution to the North Korea situation, adding that Beijing, Washington, Tokyo and Seoul need to work together to contain nuclear threats.

Heather Gaines | CNBC

Headquartered in New Jersey, Honeywell was ranked 23rd in a 2015 ranking of top arms-producing and military service companies by the Stockholm International Peace Research Institute. In addition to aerospace and defense, the conglomerate also produces industrial materials, home and building technologies and safety solutions.

Activist investor Dan Loeb's Third Point hedge fund, which has a stake in Honeywell, has been lobbying to spin off the aerospace division. But with North Korea in the mix, there may now be a more convincing argument to keep the unit.

Honeywell management is currently strategically reviewing all departments to improve the firm's overall growth profile and "aerospace will be viewed in that process," Cote said. CEO Darius Adamczyk will make an announcement on the matter in the fall, Cote added.

"I'd say overall, we're impressed with our aerospace business ... we'd disagree that it was under performing."

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