[Engineering Feature]
Key Companies Shake Up This Year's Top Employers
It’s a tough time for the industry, but several companies have grown and even thrived despite the recession. A closer look beyond the numbers shows how they achieved their success.
Once highly dependent on making drivetrains and other engine parts for the auto and heavy trucks sectors, this Cleveland company has cut auto and truck-related sales, shifting its focus to other areas such as power management for data centers and hydraulic systems for jets. It does business in more than 150 countries.
Eaton achieved line scores of six or better in every category except the bonus points awarded based on the Electronic Design Reader Survey. The company also showed two points of improvement or better in sales growth, long-term debt to shareholder’s equity ratio, year-over-year change in patents issued, closing stock price to high stock price ratio, and R&D expense growth.
Over the last eight years, Eaton has evolved from an industrial manufacturing company in the automotive industry to a technology company, focusing on diversified power-management solutions. Since the 1930s, Eaton has grown through acquisitions and continues to do so, acquiring nine companies in 2007 and six companies plus a joint venture in 2008.
The company has stated that it is still underrepresented in Europe and Asia and continues to look to acquire companies there. On the other hand, Eaton has not hesitated historically to divest itself of non-performing businesses or those that don’t fit within an updated corporate strategy fairly quickly. It financed two key acquisitions, Phoenixtec Power and the Moeller Group, through an equity offering, not debt.
Phoenixtec Power Company Ltd., a Taiwan-based manufacturer of single- and three-phase uninterruptible power-supply (UPS) systems, was acquired in February 2008. The Moeller Group, a Germany-based supplier of electrical components for commercial and residential building applications and industrial controls for industrial equipment applications, was acquired in April 2008. Both companies are now part of Eaton’s Electrical segment.
With these acquisitions, about 55% of Eaton’s revenues now come from international customers. Eaton has experienced 25% growth in Latin America and Asia. Around 20% of revenues come from developing economies, which are attractive to Eaton because of growth in infrastructure projects.
Eaton received the CALSTART Blue Sky award in 2008 for its work in developing and commercializing hybrid electric and hybrid hydraulic power systems for commercial vehicles. This area has real growth potential in terms of providing significant savings in fuel costs and reduced emissions for customers, especially those who use vehicles that start and stop or idle a lot.
Companies like Coca Cola, UPS, Fedex, and WalMart are using this hybrid electric technology in their trucks (Fig. 4). Truck and bus manufacturers in Europe and Asia are also coming on board. Meanwhile, Eaton superchargers enable automakers to improve both power and fuel efficiency.
Applying Eaton’s latest TVS supercharger technology, Audi has replaced the V-8 engine in its S4 and A6 models with a smaller V-6 that maintains the larger engine’s performance while delivering 27% better fuel economy and a 30% reduction in emissions. Ford, General Motors, Jaguar, Land Rover, Mercedes Benz, and Volkswagen are also customers.
In Brazil, Eaton helped Fiat move quickly to create the market’s first true offroad small SUV crossover vehicle, the Palio Adventure Locker, with Eaton’s pushbutton ELocker traction control for front-wheel drive. Designed to increase safety and performance over poor roads, the product was an immediate success with consumers in the region, prompting Fiat to launch three more variations of the SUV.
Eaton is now the second largest producer of UPSs in the world. Its “intelligent metering” helps customers, such as offices or apartment buildings, become more efficient in their use of power.
The company provides more than 800 hydraulic, fluid, and fuel-related components for the new Airbus 380, which has been 20% more fuel efficient than other large aircraft and very reliable so far. Eaton is pursuing similar programs for the Boeing 787 Dreamliner and the Embraer Phenom 100 and Phenom 300, helping to lower customers’ overall operating costs.
In 2008, Eaton won multiyear contracts for the new Embraer Legacy series and Cessna Citation Columbus 850 business jets, the Bell-Boeing V-22 Osprey tiltrotor aircraft, the Boeing CH-47 helicopter upgrade program, and the Rolls-Royce Trent XWB jet engine development program designed for the Airbus A350 XWB family. The company also is a key systems supplier on the Lockheed Martin F-35 Lightning II Joint Strike Fighter, the new Sikorsky CH-53K helicopter, and the UH-60M Black Hawk upgrade.
What could derail Eaton besides the recessionary economic impact on its end-user markets? First, it must ensure that all of its acquisitions are seamlessly integrated into the rest of the company. Eaton also must not overpay for these companies. If a mistake is made, Eaton must move quickly to correct it or divest.
Second, since Eaton uses many common raw materials and basic metals in its production, its must make sure it has enough inventories to hedge against any material shortages or commodity price increases. Silver, steel, and iron are recent examples.
Third, Eaton faces much established competition in its markets from United Technologies, Danaher, American Standard Companies, Rockwell Automation, Textron, Cooper Industries, Johnson Controls, Honeywell International, Illinois Tool Works, ITT Corp., and Parker-Hannifin. It must continue to develop innovative products, either internally or through acquisition, that keep it ahead of the technological curve and their competition
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