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Nicklaus: Emerson, in daily contact with White House, ramps up for ventilator and mask production

Nicklaus: Emerson, in daily contact with White House, ramps up for ventilator and mask production

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In the scramble to produce critical medical supplies for the coronavirus crisis, some key calls are being made from an office in Ferguson.

In that office sits David Farr, chief executive of $18 billion manufacturer Emerson. His company doesn’t make ventilators or face masks, but it makes components for the former and equipment to produce the latter.

In a telephone interview, Farr said he’s been in daily contact with the White House’s coronavirus task force and with leading medical equipment manufacturers. He has even offered to let the government take over some Emerson facilities if necessary.

So far, that offer has been declined, but Farr said Emerson is running the plants to prioritize medical production.

As Honeywell expands respirator mask capacity in Arizona and Rhode Island, it needs electronic gear that Emerson makes in Charlottesville, Virginia. Emerson has delayed other customers’ orders to get Honeywell its equipment quickly.

Similarly, Ford and GE need Emerson valves for the 50,000 respirators they plan to make at a Michigan auto plant. Emerson’s Aiken, South Carolina, factory shifted resources from other products to make more respirator valves.

When Johnson & Johnson announced a rapid expansion of vaccine production capacity, Emerson got in touch to see what kind of electronic controls it would need. At the same time, the company is figuring out how much air-conditioning equipment it can supply to temporary tent hospitals.

“We’re making live decisions every day to make sure we’re doing the right thing,” Farr said.

Medical customers aren’t the only ones demanding his attention. Emerson is a key supplier to the food industry, which has seen its supply chain stretched as demand shifts from restaurants to supermarkets, and to power plants and other infrastructure.

To factory employees who wonder if they can stay home to protect themselves from the coronavirus, Farr emphasizes that the company’s products are essential to the health care workers, supermarket workers and others on the front lines of this crisis.

Emerson’s U.S. plants are all operating, and the company is at 80% of capacity worldwide. Ninety percent of headquarters employees are working from home, but Farr and a dozen other senior executives report to the office daily.

They meet face-to-face — but 6 feet apart — to address three priorities: Managing liquidity to make sure the company can survive, managing production to respond to the national emergency, and helping communities where Emerson operates.

Emerson recently pledged $1 million to aid St. Louis area food banks, agencies assisting the homeless and other nonprofits that are seeing an increased need for their services. Farr is confident that retired Emerson executives and their families will add another $1 million.

Financially, Farr said, the company will post lower earnings this year but is in good shape.

Emerson has $1 billion in cash, and it has had no trouble issuing commercial paper to meet liquidity needs. While companies such as Boeing and Macy’s have suspended their dividends, Farr intends to continue Emerson’s 64-year streak of making quarterly payments to shareholders.

“Companies like Emerson are going to stay alive,” he said. “They’re going to support the government, and they’re going to support the institutions in the community that need help.”

Just six months ago, an activist investor criticized Emerson’s conservative financial practices. The company’s defense was that it was built for the long run, not to take advantage of short-term opportunities for financial engineering.

Farr is not one to gloat, but if he were, this crisis might just be his I-told-you-so moment.

Editor’s note: Emerson has made quarterly shareholder payments for 64 straight years. This story corrects an earlier version.

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