ATLANTA, July 14 (Reuters) - The head of ITT Corp’s (ITT.N) defense division on Thursday cited a need for Congress to resolve issues over the government borrowing limit to make sure the United States does not face a default.
“It’s important that there be some resolution to this issue even though it’s looking a little bit grim right now,” David Melcher, president of ITT’s defense and information solutions business, told Reuters.
The U.S. Treasury has said it will run out of money to pay all of the country’s bills if a deal is not reached to raise the debt ceiling before Aug. 2. Moody’s Investor Service warned late Wednesday that it might strip the United States of its gold-plated credit rating in coming weeks if the debt limit was not boosted.
“If the government for whatever reason has to default or cannot raise the debt ceiling and goes into some austere spending mode, that certainly means that any company that does work with the government is going to experience a significant decline in the amount of activity with the government,” Melcher said in an interview.
Other business leaders have warned that even a technical default would not only rattle financial markets but would also increase costs of mortgages and other consumer loans.
ITT Corp’s defense unit derives about 70 percent of its revenue from the U.S. Department of Defense. Melcher will be chief executive of the new defense company to be called ITT Exelis that is expected to be spun off from ITT, which announced plans to split into three companies in January.
ITT Exelis will be listed on the New York Stock Exchange under the symbol “XLS” XLS.N. The water management company that will be created in ITT Corp’s planned split will be called Xylem, with the symbol “XYL” (XYL.N).
ITT Corp will continue as a company that supplies engineered services to aerospace, transportation and industrial markets.
Shareholders of ITT will own shares in all three companies after the tax-free spin-offs.
Melcher said the new ITT Exelis would look to expand its air traffic management business for commercial applications, continue to grow the composite aerostructures business that supplies military and commercial aircraft and would seek new contracts in core electronics markets such as jammers, devices that prevent roadside bombs.
“We’re looking at our portfolio now, taking a look at the kinds of things that we might consider pruning out of the portfolio,” Melcher added.