A CEO's No. 1 job is deciding which businesses to be in, and Emerson Electric's David Farr is making changes. His view of global trends tells him to double down in businesses that help manufacturers worldwide produce their wares more efficiently and precisely, and to focus on cooling -- especially for data centers, which are multiplying fast. He has ditched less promising businesses, even the company's original one, electric motors.
Farr, 58, is only the third CEO Emerson (EMR, Fortune 500) has had in the past 59 years, having succeeded the legendary Chuck Knight in 2000. Intense and voluble, Farr recently unloaded some adult language on a room of Wall Street analysts but behaved himself when he talked recently with Fortune's Geoff Colvin about why not everyone should go to college, the difficulty of redirecting a company, Chinese garbage disposers, and much else. Edited excerpts:
Q: U.S. manufacturing is a hot topic. What are the prospects?
A: The U.S. is facing a unique opportunity to have a renaissance of manufacturing. It doesn't mean you're going to see a lot of jobs flying back here, but what you're seeing is a huge level of innovation and technology that will rebuild some of the manufacturing base that has left the country.
What's the basis of the renaissance?
One will be the influx of oil and gas. Most people don't realize that in the manufacturing world, energy is one of our highest costs. If I look at our manufacturing facilities around the world, typically energy is the No. 1 cost by far. So from the oil and gas renaissance you're going to see a lot of investments going in -- very technology- based investments, typically.
For example, Sasol (SSL), a South African oil company, is looking to invest $20 billion in the U.S. because of the gas -- it has unique technologies in oil and converting gas to liquids. So it's working in Louisiana to make two huge facility investments. That is the type of investment that can happen in this country right now that would create a lot of unique value, and that's the type of customer base that I'm involved in. These investments will drive exports, and they will drive higher education and jobs. Most of us in manufacturing have globalized the business, and now what we have left [in the U.S.] are the very high-end technology-based jobs.
Many people seem to have an outmoded view of what a manufacturing job or plant is today.
Yes. I grew up inside manufacturing facilities -- my dad was a plant manager for Corning(GLW, Fortune 500) for many years, and back then you'd see a lot more labor. What you see today is engineering. Facilities are more technically oriented; there's more automation. This country has been going through this revolution since the mid-1980s, since the Japanese came after us. We as manufacturers have learned how to be globally competitive. And we're sitting today the best we've sat in a long, long time.
Can you find those highly skilled technology-apt workers you need?
That is the No. 1 challenge for us right now. We've got a whole thrust in this country of "Everyone goes to college." Wrong -- not everyone should go to college. We need people in a facility who can weld, who can repair things. Technical schools have really dropped off, and we've been funding a lot of technical schools because that is a skill set we need. The No. 1 threat to growth and manufacturing in the U.S. is not only engineering but the technical base to run factories. You and I can't run a factory. You need the technical skills.