John D. Cohn
Vice PresidentGlobal Strategy Development
Committee on Banking and Financial Services
U.S. House of Representatives
February 3, 1998
Thank you, Mr. Chairman, for the opportunity to testify before your committee. My name is John D. Cohn. I am Vice PresidentGlobal Strategy Development of Rockwell Collins. Rockwell Collins, whose primary focus is communication and aviation electronic products and systems, is an operating entity of Rockwell, a global electronic controls and communication company with leadership positions in industrial automation, avionics and communications and semiconductor systems. Our Collins business, as you know, Mr. Chairman is headquartered in Cedar Rapids, Iowa.
You have asked us to address issues related to the Asian financial crisis with particular attention to the appropriateness of advancing a replenishment of the IMF. I am pleased to have the opportunity to give you Rockwells perspective on these important issues.
Rockwell has just completed a major transformation. With the divestitures of our Aerospace and Defense and Graphic Systems businesses, as well as the spin-off of our automotive activities, Rockwell has become a sharply focused global electronics company, serving markets around the world. Rockwell sales were nearly $8 billion in our fiscal year 1997.
Rockwells international sales have grown steadily during the 1980s and 1990s. In 1983, international sales accounted for approximately 13% of our total revenues and today it is more than 36%, We have been and will continue to be focused on regional expansion of our business activities in Asia, Europe and Latin America and view them as important growth markets for our businesses. Asia Pacific represented about 13% of Rockwells total sales volume in 1997, Europe accounted for about the same and Latin America a lesser amount. In the future, Asia Pacific, which includes three of the four most populous countriesChina, India and Indonesiais expected to represent significant growth opportunities for our company.
With this in mind, it is important that efforts be made to stabilize the economies of our Asian trading partners and recognize the future potential that Asian markets represent not only to Rockwell, but also to our major OEM customers such as Boeing. Although the Asian situation has not had a detrimental impact on our first quarter and should not have a significant impact on our full FY 1998 year, we believe it would not be in anyones interest, if the United States allowed any of the Asian economies to fail. We further believe that our Asian customers are looking to the United States for support and leadership during this difficult time. We should recognize this and exert our influence to help restore stability to our Asian partners and put them on a strong economic footing with strong underlying fundamentals. This is in the best interests of the United States, particularly in the competitive global business environment.
Another area of concern, related generally to the U.S. economy, is that falling currency values and weakening economies in Asia could harm U.S. competitiveness, as Asian products become less expensive and Asian producers look to export markets to replace falling domestic and regional sales. Further, failures of developing economies in Asia could have a contagious effect on other countries and other regions and could have a depressing impact on business conditions in the United States. Obviously, we are continuing to monitor this situation and its potential impact.
The IMF plays a central role in promoting global economic stability. In fact, it would appear that the IMF is the best suited institution to respond effectively and deal with the Asian economic situation and help get these countries back on track to economic growth. I say this for three main reasons. First, as a multinational organization, the IMF is able to require an economically distressed country to accept conditions that no contributing nation could require on its own. Second, the IMF has the credibility and resources to design and implement effective reform programs and possesses a unique capability to contain damage from financial shocks while directing domestic reforms to help prevent future crises . Third, the IMF advances U.S. interestsits activities support the expansion of global trade, global growth and employment while ensuring that the United States does not bear a disproportionate burden in securing world economic stability. The IMF, therefore, allows the United States to pursue its economic and other national interests in a positive fashion. Failure to provide the IMF with adequate resources poses significant risks to the global financial system and to American interests.
Based on the above, support for our pledge to the IMF and support for a new Emergency Fund, the New Arrangements to Borrow (NAB), to supplement the IMFs resources to deal with the Asian economic situation is necessary to enable the IMF to respond effectively, if this crisis in Asia were to spread and intensify and to deal with future crises that could similarly affect the interests of the United States. In conclusion, the United States providing its share of IMF funding will ensure that our country has a full say in any discussions on IMF policies and programs. The United States has always played a leading role in the IMF. In our view, it should continue to do so.
Mr. Chairman and other members of the committee, I would be glad to address any of your questions.