Emerson 2010 Annual Report Download - page 43

2010 Annual Report
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(5) Rationalization of Operations
Rationalization of operations expense reflects costs associated with the Company’s efforts to continuously improve
operational efficiency and expand globally, in order to remain competitive on a worldwide basis. Each year the
Company incurs costs for actions to size its businesses to a level appropriate for current economic conditions and to
improve its cost structure for future growth. Rationalization expenses result from numerous individual actions imple-
mented across the Company’s various operating divisions on an ongoing basis and include costs for moving facilities to
best-cost locations, starting up plants after relocation or geographic expansion to serve local markets, exiting certain
product lines, curtailing/downsizing operations because of changing economic conditions and other costs resulting
from asset redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract
terminations and asset write-downs. In addition to the costs of moving fixed assets, start-up and moving costs include
employee training and relocation. Vacant facility costs include security, maintenance, utility and other costs.
The Company reported rationalization expenses of $126, $284 and $89, respectively for 2010, 2009 and 2008, with the
significantly higher expense in 2009 due to actions taken in response to the severe economic environment worldwide.
The Company currently expects to incur approximately $100 million of rationalization expense in 2011, including
the costs to complete actions initiated before the end of 2010 and actions anticipated to be approved and initiated
during 2011.
The change in the liability for the rationalization of operations during the years ended September 30 follows:
2009 expense paid / utilized 2010
Severance and benefits $112 73 128 57
Lease and other contract terminations 7 9 8 8
Fixed asset write-downs – 9 9 –
Vacant facility and other shutdown costs 2 14 12 4
Start-up and moving costs 1 21 22 –
Total $122 126 179 69
2008 expense paid / utilized 2009
Severance and benefits $33 234 155 112
Lease and other contract terminations 5 9 7 7
Fixed asset write-downs – 14 14 –
Vacant facility and other shutdown costs 1 13 12 2
Start-up and moving costs 1 25 25 1
Total $40 295 213 122
Expense includes $11 and $9 in 2009 and 2008, respectively, related to discontinued operations.
Rationalization of operations expense by segment is summarized as follows:
2008 2009 2010
Process Management $12 55 35
Industrial Automation 20 47 48
Network Power 28 118 25
Climate Technologies 22 48 13
Tools and Storage 7 16 5
Total $89 284 126
Costs incurred during 2010 included actions to exit approximately 25 production, distribution or office facilities and
eliminate approximately 3,500 positions, as well as costs related to facilities exited in previous periods. All the Compa-
ny’s business segments incurred shutdown costs due to workforce reductions and/or the consolidation of facilities.
Start-up and moving costs, vacant facilities and other costs were not material for any segment. Actions during 2010
included Process Management reducing worldwide forcecount and consolidating some North American and European
production; Industrial Automation consolidating production and sales facilities within Europe and North America;
Network Power reducing worldwide forcecount, consolidating North American production and shifting some produc-
tion and engineering capabilities from North America and Europe to Asia; and Climate Technologies consolidating or
downsizing production facilities in North America and Europe.