Emerson Electric Co. (EMR) Earnings Call Transcript & Summary

All right. Hello, everybody. Joe Ritchie, and Dave Farr from Emerson. Super excited to have Dave here. As you guys all know, he doesn't need an introduction, has been CEO of Emerson since 2000. And Dave, thanks so much for being part of this virtual discussion with us today.

You're welcome and look forward to it, Joe, and it's good to be at least talk to some on the sell side and the buy side and investors. It's been a very interesting time that we've gone through the last 60 days.

Yes, for sure. And so maybe just on that end, and I'm sure we'll get into the trends discussion in a few minutes. But about a month ago, Dave, you were named to our President's economic revival task force. And so maybe what can you tell us about kind of like the path forward and reopening America? And what do you think it's going to take for it to be successful?

I appreciate that, Joe. It's -- this is very important. Obviously, when the White House task force made the decision to shut down the economy, that was not an easy decision to make, but an important decision because clearly, the coronavirus got out of control in certain parts of the United States. And we had to, obviously, figure out how to get ahead of it and slow it down. As we all know, it's not gone away. The coronavirus is still out there. We are coming up with remedies to obviously help from the standpoint, if you do get sick. We're finding ways to actually isolate ourselves, deal with this thing, keep cleaning environment and the testing. I think depending on where you are in the country. So if you look at Missouri, we've been -- our curves bent down almost, I would say, about 25 days ago, in St. Louis County, they bent down about 15 days ago. And so -- and the key issue is a regional situation. And as we keep telling the President, the quick testing is very, very important. So our facilities never shut down in the United States. We do have situations from time to time where someone comes in, doesn't feel well. We have to send them home or her home, and then we have to test very quickly. The testing today is much faster, but it's still 36 to 24 hours. What we need is the quick tests that -- so if we have a situation we can test now and then we can deal with it. 2.5 weeks ago, we started opening up actual offices. As all you know on the phone, I never left the office, my top executives were here from day 1, starting back the day the President closed Europe down. And we slowly brought back first 15, 25, 30. Today, we have about 100 of the corporate executives in the building. We'll be going up the full building by the end of the month. But the key issue for me is the testing. I need that quick test. And the reason for it is, is that we've told the President, is it's from the standpoint, we got to comfort employees. Our environment is completely different. We wear mask when we go to open areas. You can survive. And people at the end of this building know it's like, it's very isolated. The way we are isolated here. It's not that hard to do. We're just one big family, and everyone's done a good job of taking care of themselves. But I think it's going to take a long time, Joe. I think it's going to be a tough situation for people to feel comfortable. I have -- I've been doing daily webcast with employees on the campus. There are a couple -- there are 500 or 600 people on this campus right now. And they're obviously concerned about the fact that they could be exposed and then expose their family. So I think it's going to take us a long time. The big issue we may not get a vaccine. As we've talked about, we're working with all the vaccine companies out there right now. And we may not get it. I mean there's obviously a lot of positives, but I think we've got to learn how to operate with the coronavirus safely and comfortably, and we'll deal with that. But the White House is working it. I mean he -- the President walks a very fine line. He can shut down -- keep everyone isolated for the next 2 years. There will be no U.S. economy left. And there's no way the federal government can support the economy. Just borrowing money to support the economy won't work. So we've got to figure out how to get back to work. And the areas like St. Louis is a little bit easier than areas like New York City or Boston. But I do look forward to getting out and about. As you and I talked about, I've not been in a plane since the 13th of March, which was my last trip to Atlanta. I then got everyone together that afternoon, and we made our decision to stay together. So it's very unusual for me to say that I've been in the office for basically 75 straight days without traveling. I've never said that in my life. I love my wife, but this has been an interesting experience. I've seen her more than I -- even when I was dating her back, 50 years ago when -- how long it was. So that's…

I hear you. I'm sure the bond has grown stronger, Dave, but -- so look, I guess, maybe just kind of like -- just a follow-on to that. I mean you guys obviously have a pretty big China operation as well. I mean any lessons that you kind of learned about reopening in China and what you you're taking there as you're thinking about the U.S. as well?

Yes. I think that the fact that we were able to reset up our factories much faster because we went -- as you said, we went through the China experience, really helped us. So when it did become pervasive throughout the United States, the lessons that we had to go through with the Chinese government as we reset our plants up relative to spacing, relative to the safety equipment, the safety, health, all the stuff we had to do there was a big help. It gives a big advantage. So we rolled that out as we went into Europe, as we went into the United States, as we've gone into Mexico. That was a big help. The office complex, I think, to be honest, I think that we, as a country, learned a lot. And we do a lot a little bit differently. And I think that the lessons that came out of the White House task force and the inputs from the medical community and all the CEOs, I think, really helped us set the offices up differently. And the way we're dealing things right now relative to webcast and relative to the -- how we -- social distance within office and how we set the partitions up. People have been in our office, we never went to an open office space. People talked about it for years, we stayed with large cubicles office space. And so today, that's a big help for us because if you go down on the floor and into my floor, there are cubicles. And so we may have to move a couple of people out of a cubicle and say, okay, we're only going to have one in this cubic area, but we have the space to do that. So I think we learned a lot from China relative to manufacturing. And I think the U.S. -- the folks in Washington set the stage relative to office setup. And I think it can be done including things like we only allow 2 people in an elevator, and you have to wear a mask in a common area. People don't like that. I don't like that, but it's something you want to do. You don't want to cough by accident because it's allergy season right now and someone panics. So I think that there are a lot of lessons you guys can learn in New York and the high concentrated areas from the other companies like us that are sitting in areas that are not quite so concentrated. But my people feel comfortable. The webcast are quite interesting. I spent about 1.5 hours with about 10 people, just getting their ideas and let them know what the OC we are dealing with here. But it's all about safety and communication right now. I've never felt anything like this before. I'm -- as you guys well know, I'm a person that could easily been a general in the World War 2. I mean I've been right out in front as I am today. But it's -- that's not the attitude of a lot of people in the world today.

Yes. I know that. That makes a lot of sense. And maybe, Dave, just kind of shifting gears a little bit. So I appreciate you guys kind of dropping your April orders today, gives us a lot to talk about. As you kind of like -- as you look at it a high level, it seems that they're down 10% on an underlying basis seems like pretty in line with what your expectation was for the second half of the year. But then when you start looking at the different pieces, and you start thinking about like North America and Automation Solutions down 30% in April. Maybe just kind of step through the different regions and maybe starting in Automation Solutions and whether things kind of trended in line with your expectations or whether things were maybe a little bit worse or better in certain regions?

Okay. So Joe, the reason we did drop it today is because I knew -- first, you're having the conference, and I wanted to make sure that people get -- first of all, regionals perspective and also an industry perspective. I know that a lot of my counterparts out there are not doing this. I think this is needed. I wish some people would do it -- this. I know people are afraid to give their facts off because some people say, will I make a mistake? Should I make a mistake every day? But I think it's important for you to have a sense for what industries are moving, what industries are not moving. And what regions. So in total, the number is exactly, plus or minus, I would say, 100 basis points, what we thought it would be. The pivotal month is May. Right now it's a key issue, and we'll do again this -- we'll update this again for May. So I think the key issue for me is Europe is running better than I thought would run. Middle East is down but running better. Asia is running pretty much what I thought it would run. Latin America. Latin America is struggling right now to be honest, in the country. I agree. The biggest issue for us right now is the oil and gas spending in North America. That was -- if you look at Automation Solutions, we thought it'd be somewhere around this 25%, 30%. We -- it's hard to guess. And the reason for it is we look at the capital spending of our customer base and our customer base, we're dropping around this 30%. So we thought it would be around 25%, 30% in April. But I'd be honest, I would say that's probably 5 points higher than I thought. And then other parts were a little bit better than I thought. So in all honestly, it's about the same relative to Automation Solutions. The industries are not surprising to me. And as I look at where -- what things are doing relative to, as you know, I talk to Lal, he's in the office every day with his team. So I get an update on a daily basis what he sees around the world, and we get inputs on a daily basis. Because it's very important for me to take action with Lal on a daily basis. But North America is pivotal for us. And as I see what May, I would expect the numbers to still be very bad in May in North America. And what I'm hoping to start seeing is some of the other industries are picking back up to help us offset, what I would call, the shale oil and gas spend based on what we're seeing right now. But in total, the same. On commercial and residential around the world, again, I would say, pretty much in line with what we've been -- our customers have been talking about. Clearly, North America, again, has shut down. The key issue for us right now is to get our North America customers back up and producing. The coronavirus hits, what happens is we lose facilities in this industry. They might lose one of their facilities in the United States or Mexico, in North America, and that causes us problems because we work on a daily basis. We -- in North America, commercial and residential, it's a daily basis business. It's very short-term oriented. But I would say that from my perspective, as I look around the world, North America, again, for commercial and residential and construction and HVAC are the 2 areas that we've got to figure out, will they bounce back a little bit in May and June? If not, then we clearly will -- we're going to be driving costs as fast as possible, and I think we're staying up with it. I'll give you a tip, I mean from the standpoint of our margins, just GP margins, operating margins, they're in line. They're flat this year-to-year even though sales are down big time. So that means our cost actions are taking hold. And we've got -- we started doing this, as you well know, back in the fall when we saw things weakening not to this degree, but we've accelerated, and we've been able to stay together and work very quickly on the changing dynamics. The reason we're looking at this, and I'm sharing it with you and our investors is because I need this information to make quick decisions. And so I'm getting this fed to me on an ongoing basis, the OC meets together at 2:00 every day in the boardroom. And we talk about do we need to accelerate restructuring here, here, here? Or do we want to slow it down here? And what are those windows? So that's how we're looking at this information. And I think it's very relevant for the investors to have a sense for what we see even though not many other people are doing it this way, I think it's important for you all to understand what -- how we're playing out the playbook here because this game is going to be all about driving those costs and that margin, that cash for the year, and we'll accelerate this as we get into '21.

Super helpful. And I think myself and others that I'm sure that are listening are super appreciative that you guys are providing this level of detail. I think maybe just going back to the Automation Solutions comments and specifically to North America, since it seems to be such an important part of how things maybe progress throughout the rest of the year. If you look at you're down 30% number in April, and I guess I'm wondering if you could just kind of parse that out a little bit more, right? Like you gave a lot of detail on the conference call around KOB 3 and versus like the project part of your business and how much more resilient that is. I'm just curious just because, like, you don't have on-premise access right now. Is that a part of your business that is going to be down acutely, but could bounce back quicker? Just any color around that would be helpful.

Yes. I think that clearly, right now our business is being supported by the strong presence in automation by our KOB 3, and that's really holding up. And so from the perspective of the repair work that's going on in the facilities, in cases, we are getting access, but it's very limited access. We have local partners that work with their facilities. But I think that, that piece will bounce back the fastest. Clearly, when the facility start opening up and feeling comfortable allow more and more people in. What we're seeing right now is our businesses are going through -- our customer base are going through software updates, be it in the control systems for the chemical industry or the power industry, those businesses are continuing to go because we can do the updates without going on the premises. So our installed base right now, we're seeing a lot of people going through updates. They're going through getting the most recent versions of, say, Ovation or DeltaV, and they're making those changes because they can do that without us going on the premise. And that's been one of the good things about this is our systems business actually has grown year-to-date. We -- both in orders and sales, we've not had a downturn, and that's quite unique from the perspective of this process right now. But as I look at the world, our KOB 3 continues to hold up, I still think we'll finish north of 60% on KOB 3 when we're all set and done. I think that you'll see that the KOB 3 and the KOB 2 will bounce back. We have not seen in this month, Joe, we've not seen any move-outs of the projects business. So pretty much what we've laughed and talked about on the call, those are locked and loaded right now. All our customers are pretty well reset their spending for the year as we look at both our major industries, they've reset it. And they're holding to it. So the key thing for me is they are returning to work, going back to earlier comments, more and more people are going back to work at the end of this month, May. And so what that tells me is, okay, are we going to start seeing some clarification around the May orders. I was over in our solution center operation here on the campus the other day, Tuesday, or Monday, I guess, Monday. And they're operating right now. They're finishing out a couple of projects for around the United States. But what I asked them, I said, are you guiding clarification on the projects for Golden Pass or on the [ Glen Lyon ] projects we're working on right now. They're just starting to release the dates and the orders for us to start producing in the month of June. So that's what I'm watching right now. Will our customer base start releasing the schedules for us to say, okay, we can assemble, we can start producing, and then we can start doing witness testing? And so that's the fine line we're walking right now. And I think as we go into the end of this month, as we communicate in June, on a schedule like this, we will do it again. I think we'll see -- we'll start seeing some. But I need to see some bounce back on the order pattern as we go into it. Right now it's very heavily KOB 3-driven and a couple of upgrades in KOB 2.

Got it. That's super helpful. And so just maybe just following up on that a little bit. So when you think about what's down a lot more than the 30% if KOB 3 is doing well, is it fair to say that, like some of the projects at least have been deferred -- the upstream side of the business is really what's kind of driving those declines. So that's the swing factor? Or is it more like KOB 3 work is continuing, and we're hoping that the refiners do more outages at -- towards the end of the year to help drive better growth?

Yes. So what -- the KOB 3 numbers are -- the actual dollars, let's talk actual dollars. The actual dollars are still down for KOB 3. Obviously, the mix is holding us up. It's still down and a lot of it is the, what I would call the turnarounds, the quick -- the turnarounds of the facilities. So that's what's driving the KOB 2 and KOB 3 when facilities were scheduled to go down. And in April, May and June and the early part of the year, what they're doing right now is all they're looking at is doing software updates. And they're not looking at changing either the hardware or any, what I call, plant modifications, which would go into KOB 2. And so what's going on right now is, they're being very cautious, and they're spending money on KOB 3, even less money. And to your earlier point, that will bounce back the quickest. As we start seeing them open the facilities up, the capital budgets are now set because they've done their capital allocation, as we all do before we make sure we have the right balance of where we're going to spend our money. And that will be bounced back. So I think right now you're seeing the hardest part down is KOB 1. The project has been pushed. They've been cut back in scope. I think KOB 2 spending has been pushed and cut back, not as much as KOB 1, and KOB 3 spending is still down, but the percentage of the mix is at a very, very high level. And that's what's going on at this point in time. So what we'll watch is our daily order pace. So what we'll look at is the -- we look at daily orders and the magnitude of those daily orders as they start inching their way but up, that's going to be driven off of KOB 3 as they start -- really starting to spend the money, and they allow us to come back in the facilities. They allow some of these upgrades go on. And that's what we're going to watch as we see that order pace come back into the end of May into early June. We're already seeing that in Asia. We're already seeing that in Middle East. We've not -- and we're seeing a little bit of that in Europe. We're not seeing it in United -- in North America yet. And that's what we're watching.

Got it. That makes total sense. I've got a couple of questions from the audience. And just a reminder for folks, if you do have questions for me, feel free to either submit them via the web link or just shoot me an e-mail at [email protected]. But the first question was really around China. So you've seen your trailing 3 months basically down 10% in both of your businesses. Maybe talk a little bit more about the trends within Automation Solutions because previously, you guys have talked about that business stabilizing. And then also within C&RS, you guys have also talked about stimulus as being a potential help to that business as well.

Yes, very true. So if I look at what I shared with my board on China, I'm trying to get the chart here, give me a second here on automation for China. So as I look at the -- in China on the month of -- yes. We're trying to do that number.

From the release, Page 33.

Okay. So as I look at April, and I look at the magnitude of where we were versus prior year, we're pretty close. And I still believe that as we go through the rest of this month by month, we're right on track. Lal talked about in the call that we would be, by year-end, would be positive year-over-year in orders and slightly flat or positive on sales for the year. So as I look at the orders and I look at the sales, our actual sales were basically flat versus prior year in April, orders are down a tad versus prior year. So I would say Automation Solutions is slightly ahead of the pace that we saw and talked about on the call in April. Very strong updates around, again, software, and it's very strong around space on what I would call industries that the Chinese are trying to become more self-sufficient on, be it pharmaceutical, be it some of the chemical areas. Some of these areas that we've seen, they're making investments that will help them contain what they need and make in their own country for what they need. So right now that -- those numbers are tracking extremely close to what Lal thought that we talked about in April, and actual sales were slightly ahead for the month of April. And I still believe by the time we finish this year, our orders and sales will be slightly ahead of prior year even through this deep, deep, deep dip. Now Automation Solutions, not automation, but Commercial & Residential Solutions, the big issue here is we've got to have -- the government's meeting at the end this month. And Commercial & Residential, I think if you look at the consumer spending, if you look at the type of spending that our Commercial & Residential business in China gets, that marketplace is not really changed much over the last couple of months. It's still trending very similar to what it was relative to orders, relative to sales. And if you look at what we said in April, we thought we'd be down around 10% to 15%. That's pretty much where we are. What we're watching right now is if they come out in May with some stimulation from the government around certain investments around clean air, around better environmental conditions for people to work in, to live in, that will create an incentive for our customer base to start spending money. So what we're watching right now to be honest, Joe, is China sales, China orders, trying to get closer to minus 5%, less than minus 10% for the month of May. Be somewhere between that 5% to 10% and then try to hopefully see them getting close to flat by the time we get to June. That is what we're watching right now for China. But I think the key issue for us right now is the government impact on spending, and where we see that happening and across China. And those -- that meeting being held and being held at the end this month is key to us. So right now China is trending pretty well. I like the mix at Automation Solutions. And Bob and his business basically are just basically waiting to see where the stimulation is going to -- stimulus is going to be relative to the China government. I don't think it's going to change our Automation Solutions this year, next year. This year, it will definitely have an impact on Commercial & Residential Solutions. So at this point in time, our China structure is in pretty good shape. But I'm waiting to see where they're going to spend money for -- relative to Bob's markets. And I think that's the key issue for us right now in China.

Got it. No, that all makes sense. Another question from the audience, Dave. They want to understand a little bit better what you're seeing in your discrete automation business.

Our discrete automation business has driven a lot of -- from the factory automation, it's driven off of a lot of medical because we do a lot of medical area. So from an order standpoint, they continue to improve month-over-month, the pace is pretty good. And actually, in Europe, our discrete automation orders were positive for the month. I think we're probably rolling, the last 2 or 3 months, we're positive now. So I think the key issue for us is that trend line, that's a key early indication to us. And we're not an automotive player. We play across a broad perspective of factory automation, some automotive, but not much. It's primarily the medical, primarily food and beverage. And so that order pattern has definitely improved. And I think that as I see that right now from month-to-month, that's going to be a key trend line for us relative to the long-term investments and where people are starting to spend money. And again, the trend has been good. Our cost structure is pretty good. And what we're trying to do right now is we have some major restructuring underway in that businesses, and we've got to get that done. Because what I sense right now if that business starts picking back up, it will restrict how much the restructuring get done by the second half of this year and the first half of '21. And so Lal and his leader Hakan, is very much focused on how we get that restructuring done, primarily in North America and Western Europe, which are 2 areas that you've got to get done very quickly when the governments are going to support you because at some point in time, the government will turn against us.

So Dave, that's a really good segue, right? So you guys announced some accelerated cost actions this past quarter. I just want to make sure I've got some of the numbers straight. I mean I think you guys are looking for roughly $230 million in savings in Automation Solutions and $360 million or so for the total company. If I got that right, that's like roughly equal to the restructuring spend that you've done in the last 2 years. So my first question is how are you able to maybe accelerate or pull forward some of those benefits from 2021? And maybe we'll start there and then go from there.

So you have the savings numbers, you have the spending numbers correct. You have that -- you do have those numbers correct. So how we did it is, basically, with the OC sitting down here, we're in the room together, meeting on a daily basis. As we looked at the marketplace, as we looked at some of the restructuring we were going to do at, what I would say, at the structural changes in the organization, trying to take some layers out, some of the work that we had done through the McKinsey work, I probably shouldn't say that, but -- so the work we do with external consultant.

I think we all know it was McKinsey.

Okay. So the work that we did. We basically said, okay, guys, can we -- given the slowdown now, let's go about doing that. And so a lot of the pull forward, and we pulled maybe from a physical location movement, equipment movement, we probably pulled that forward 3 months, and the thing -- and the areas we could do it. It's -- once you get things locked and loaded relative to moving plans and schedules and capital and buildings, those are very, very hard to accelerate. The one -- the areas that we went after were around the structural -- permanent structural changes within the organization, including maybe consolidating a couple of businesses together, including taking out layers. And I had organizational review session with Lal and his team 3 weeks ago. I did Bob, the last 2 days, and that's where we've accelerated. And I basically told the guys I want it done before the end of this fiscal year. I want it done, all that done, a lot of that we pulled in. It's all people-oriented and allows us to get fairly quick savings and allows us also to get savings even in the first half of '21, where I still think we're going to have struggling. I think the cycle is going to take longer. As I've said, big believe in the sharp V, I've always believed this thing. It's going to take a long time now I'm hearing about this. The Nike Swoosh, when it's -- I would think that's basically the curve that we've laid out, it's a Swoosh, if you want to look at it. But that's how we've always felt. But that's what we've done. We've pulled in people-oriented and costs, which cost us money, but also I get the savings pretty quickly. And we definitely get those savings as we run into the first half of 2021. And right now I don't see -- I mean as I look at the close of April, as we do a hard close, now we pretty much hit what we want to hit from restructuring. The European stuff maybe I missed by 2 weeks, but they're going to get it done what we want to get done this quarter, and they definitely will get it done by the time we get into the -- by the end of the fiscal year, which is 9/30. But as I said earlier, what I'm looking at is, our underlying sales are down significantly year-to-date. And our -- my GP margins, my operating margins are flat year-to-date. That tells me this restructuring is working. I also look at cash. I mean people that don't see the connection between cash and margin, they're not paying attention. There is a direct correlation between cash and margins and really underlying profitability. And so it's hard to go for many months without having a correlation between margins, cash and profitability. And so -- unless you're doing things -- funny things. So from my perspective right now I look at the movement on margins. I look at the movement on operating savings, and I look at the movement on cash. And the fact that our year-to-date cash is ahead of last year, year-to-date tells me we really got ahead of this. Now I know volume is going to overwhelm that cash, and I'll have a problem in the second half of the year, even though the cash will be strong, I will still have a problem because my volume is going to drop pretty heavily in the third and fourth quarters.

Yes. No, that makes a ton of sense. By the way, you must be watching a ton of The Last Dance with the Nike Swoosh comment there. But I'm just curious on the structural versus temporary nature of these actions, right? So it sounds like in listening to you, it sounds like a lot of these are structural. But then also, as you kind of talk about like being able to get these done and whether you're getting any pushback from any governments at this point, I'd be curious to hear any color around that, specifically in Europe.

So clearly, we have done some temporary savings. I mean things like cutting pays to the Board, myself, executives, pay freezes, bonus reductions, the furloughs. So we've done -- we've clearly done some of that because the volume has dropped so rapidly. But the majority, if I look at -- and I haven't calculated, but it's got to be at least 90-plus percent are structural changes. Clearly, if volume starts coming back at a strong level, I'm going to have to put people in a couple of places because it always comes back in the wrong places that we guessed or as we thought it was going to come back first. But most of our actions are structural. And because we started this before the coronavirus hit us, before the significant downturn. We knew things are going to be tough this year. As you all know, we planned for a flat underlying growth rate all year. And we wanted to raise margins. Now we're going to be down, I think, 7%, 8%, 9% underlying sales. And how do we drive some reasonable profit margin in that environment. So the only pushback we're seeing right now is in Western Europe. And we're in a process, we have to negotiate with the unions and the unions will not hesitate to go get the government involved. No one's stopping us. It's just a function of the speed. And from my perspective, we're looking for ways to maybe 2-step things and keep the facility open a little longer, but start moving it inside and leave the facility open with just a minor group of people and look at going somewhere else. We're looking at different ways we can skin this cat. But my European pushback right now is not unusual, but it's -- there's a lot of turmoil in Europe right now. And from the standpoint of the government, and they're not really unified, but my unions are working this situation such that I think they're going to slow us down probably 2, 3 months, but they're not going to stop it. And so now what I'm looking at, how do I get some of the partial savings in the early part of '21 by doing 2-step moves. And that's where we are at this point in time. And fortunately, we have enough savings coming in from the quick action relative -- around people that allowed us to -- we -- savings won't be the issue this year. It's going to be what's the volume. I still feel very comfortable about our earnings forecast, our cash forecast and obviously, even if sales are a little bit weaker, I still feel very good about that. As I look at the closes, as I look at how the leverage we're getting or deleverage we're getting from that perspective. So it's been -- that's a key sign for me right now. As I looked at the April close and I look at the year-to-date closes, it's been pretty well in line with what it should be, even though the volumes are way off.

Got it. Maybe just to put a bow on this on the cost discussion, the restructuring. You guys gave a bunch of color around decremental margins for the rest of the year already. But like as you're thinking about 2021, I know at the Investor Day, you're originally planning for, call it, like around $125 million in savings. Has that number shifted at all? Has that changed at all? And maybe like -- or is it too early basically to tell what the number could be from a benefit standpoint next year?

Let me take a go get on that. I would say that -- my intuition tells me the savings will be higher. But let me -- I need to do a refresh on that, Joe. I'll make a commitment to you that we'll refresh that and tell you as we close the June quarter and we talk in August. I'll force the guys to take a hard look at 2021 savings. But my intuition tells me that with the acceleration we're taking right now because of the downturn, my underlying savings should be higher in '21 because I'm taking the people actions right now. But I need to get -- let me -- rather than take a wild ass guess, my intuition, given my years of experience in this, I won't say we're going to be higher. But let me get you a hard number, but I feel very good about '21 savings right now. And the fact that we're driving a very strong down in the second half, and we're taking actions around that. And any light that we get in some of our core markets will help us get better savings as we go into '21. But I feel good about '21 right now. But my action has come back to you all and give you a harder number. And Pete, let's make sure we'll turn that to the Board, too. So what I'll do is we'll go to the Board in August and update the '21 numbers. And so that way I can share with outside world.

Awesome. No, I appreciate that. And I know we're basically going to be bumping up on time here, but I wanted to ask you one last question, right? Like you've been CEO for the better part…

2 years.

Last 2 decades -- Yes, a couple of years, a couple of years. And look, you guys have been localizing your supply chains for a while, right, really kind of throughout your tenure. There's a lot of discussion right now around reshoring and what that's going to potentially mean for U.S.-based companies and automation companies specifically. What are your thoughts? Do you think that this is a needle mover? Or how are you thinking about this?

It's a needle mover. I think the Board -- I don't think we need the government involved in this thing. I think the Board's -- every -- we -- obviously, we've communicated to our Board a long time along this. But I've seen the conversation at the CEO level and at the Board level becomes significant. And I think you're going to see certain industries do rebalance. I think that we've always had that balance, and I called my tic-tac-toe chart. And I think what you're going to see is that you're going to see other industries that didn't really pay attention to that, and they really didn't pay -- the enterprise risk strategies, which we're supposed to do based on the SEC requirements. I think you're going to see more companies paying attention to it. And I have more conversations relative to getting production back into the U.S., one way or another, which will be very good for automation. The other area, too, Joe, that you should be -- I think you should pay attention to is that Europeans are having the same conversation. I think the Europeans also realized that they've gone a little bit out of [ what ] kilter relative to their -- where they're sourcing things and they also realize they don't have the same cloud as American companies or the American government comes when it comes to getting stuff. They quickly saw that they became the second and third fiddle in the formulas. And I think you're going to see them change too because I'm seeing that conversation go on with some of our European customers right now. So I'm very positive on this. We've been rebalancing. I had a conversation just internally. I'll give you an example. This -- internally the other day, within one of -- I think it was Bob's business, it was Bob's business. And they're looking at some reallocation of production. And I thought that I looked at, I said, "Look at guys, I know you're going after the lowest cost. And I think if you look at our strategy, you're violating my tic-tac-toe chart." And so even me as a CEO are starting to force my people think -- rethink that. And I think you're seeing this conversation very extensively. So automation will benefit from this. And obviously, the question will be, will companies -- the cost structure will change for companies. In order for them to offset it, they're going to have to automate, but also it's going to be higher cost. And I think the consumers in the United States will be glad to pay that higher cost for more certainty and also confidence of where their supply is -- is coming.

Dave, awesome talking to you as always. Thanks for being a part of the conference, and have a great rest of your week.

Joe, and I look forward to seeing you in New York and have that damn beer that you promised me.

Any time, man. When we -- when things open up a little bit, I'd happy to treat you.

And I guarantee, I'll give you a high 5 or something. [ My wack have started to hit ], but that's -- I'm not a guy that -- I'm not going to be a non-handshake guy, trust me. There are ways you can shake people's hand. I mean I have a confidence that -- with people 50 feet…

No. We know you're a hugger, Dave, we know you're a hugger.

I'm a frequent hugger. And you can go to the bathroom and wash your hands after I hug you as I give you the coronavirus, okay?

On that note, thank you guys for participating.