By JERRY GLEESON
THE JOURNAL NEWS
WHITE PLAINS, NY

(Original publication: Oct. 19, 2001)

By the end of that awful Tuesday in September, Louis J. Giuliano, chief executive of ITT Industries Inc., was relieved to know that none of the company's 42,000 employees worldwide had been hurt or killed in connection with the attacks in New York and Washington.

What's less certain to Giuliano, who took over as CEO on March 1, is the shape of things to come for ITT, a $4.8 billion maker of pumps, defense equipment, electrical connectors and related products.

"The answer has yet to unfold. It depends on what the U.S. reaction will be, and the counteractions around the world," Giuliano, 55, said in an interview last week. "This is going to change the world in ways we can't yet understand. We can't eliminate this event. It's too horrific, too large. Our task is to figure out how to adjust to that."

The company will announce its third-quarter results on Thursday. Already one analyst, John A. Baliotti at UBS Warburg in Manhattan, has reduced his earnings estimates for fiscal 2001 and 2002, although he has raised his 12-month target price on the stock and considers it a strong buy.

The slowing economy compelled ITT in July to scale back its earnings growth estimate for the year. Baliotti said executives can't be expected to predict the future, but they can be expected to know their own business well.

"I think it's as much as you can ask of a CEO," he said. "I think Lou actually fits the profile very well."

A Pelham native and graduate of Pelham High School, Giuliano studied chemistry at Syracuse University but decided against the life of a scientist, so he enrolled in the university's graduate program and earned a

master's degree in business administration. After 19 years in a number of roles at the defense contractor Allied-Signal, Giuliano joined ITT in 1988 as vice president of defense operations at ITT Defense.

A variety of roles followed. He became president of ITT's Avionics Systems Group, which developed electronics used in aviation. He went on to lead the company's defense and electronics businesses until 1998, when he was named president and chief operating officer of the corporation. In February he was named chairman, president and CEO, taking over from then-CEO Travis Engen in a cordial transfer of power that allowed Engen to become CEO at Alcan Inc., a Canadian aluminum and packaging business.

Early last month, Giuliano said his emphasis will be on ITT's growth through new product development, improved operations, acquisitions with an eye on the Asia-Pacific region, and management development.

Giuliano indicated in a later interview that none of the events of Sept. 11 had changed his philosophies.

"We think our business mix makes sense. Our core strategies and business direction haven't changed," he said. The company is still considering acquisitions, he said, and it still considers the ability to react quickly

to changing market conditions as key to success.

"It's too easy to sit around and say, 'Let's wait and see what happens. I need more data.' Usually by the time you do that, it's too late," he said. "Anytime there's a danger or a risk, there's an opportunity somewhere else."

Part of Giuliano's strategy for ensuring that change is the Value-Based Six Sigma, an organizational excellence program that's playing a bigger role in fashioning leadership at the company. Six Sigma is a good example of Giuliano's management style and what he focuses on, said Harriet C. Baldwin, an analyst who follows ITT for Deutsche Bank and has a "buy" recommendation on the company.

"We've all seen companies that don't quite know who they are, and they make mistakes," Baldwin said. "He understands the business."

In difficult economic times, many managers are inclined to act conservatively and stick to the playbooks they know best. But Giuliano said it's important for managers to seek out change, especially when profits are under pressure.

"It's hard to do, but not impossible. I think it's more important to do in an economic slowdown," he said. "I know that it works. I've seen it work time after time."

People are more willing to try different things if they hear such a message from top managers, Giuliano said, so he makes a practice of doing so.

When ITT was seeking managers to join a Six Sigma program, there was resistance by some who felt it would put them off their career tracks. But managers who were willing to take a risk by joining, Giuliano said, were the ones who possessed the quality needed by those who are willing to change how things are done.

"The selection process itself helped find the key people," he said.

Although UBS Warburg's Baliotti reduced his earnings estimates for the company, he said he raised his 12-month price target to $60 a share from $54 because the company's pumps and defense business have possibilities for more growth.

ITT shares closed at $47.15, down $2.20 yesterday, on the New York Stock Exchange.

The company's defense segment made up 28 percent of revenues in fiscal 2000. By the end of this year ITT will have a defense backlog of $2.5 billion to $3 billion, which would take about seven years to work through, Baliotti estimates - a good cushion during times of recession.

ITT's defense products aren't the kind that shake buildings or take off with a roar.

Most have applications of a more stealthy nature, such as night vision goggles, secure voice and data transmission systems for ground troops, and electronic countermeasures to help aircraft evade radar-guided threats. Giuliano doesn't expect any short-term boost in revenues in this area from coming U.S. military action, but "it might provide some upside over time."