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Economic Rebound Will Show R&D Investments Wise

Strategic planning in what you build, to whom you sell, and when you invest in research and development can put you in an enviable position if you make the right assumptions. Sandy Cutler, CEO of Eaton Corporation thinks his firm has done all those things and because of it, is poised for 12% growth over the next 10 years.

Eaton may not be a household name, but if you drive a car, tractor, truck, use electricity or anything hydraulic, depend upon fossil fuels or are tapping alternative energy sources, you're very likely using control and fluid-power components from Eaton. The company is basically a firm that makes hydraulics and electricity work together to move, drill, dig, turn, generate, stop, plant and harvest.

"First, over the past several years -- including the disastrous recession that began in late 2008 -- we didn't cut back on research and development," Cutler told his audience. "Many of our competitors did, and we're now 18 months ahead of them with a host of new products and innovations. That will put us in a very enviable position as the economy begins to build momentum," he explained.

Also, Cutler noted the overall portfolio of customers for Eaton across the world represent three broad categories of industries that include those who begin to grow before a recession is over, those who grow during the recovery, and those who grow fast after the recovery is well underway. And, he notes, with 45% of Eaton's business based in Europe and the Americas, and the other 55% based globally elsewhere, the effects of the recession on Eaton hasn't been as devastating as it could have been had the company been more invested in the West only. A full quarter of the global investment for Eaton is in countries that are expected to "roar ahead" of the industrialized world as the economy slowly improves, he explained.

Twenty-five years ago Eaton was basically in the vehicle component business, making gear boxes, connectors, hydraulic cylinders, etc. But management has taken the manufacturer into the future with a plan to be a major supplier of power-management devices -- things that make the use of energy more efficient and reliable.

"Given the political winds that promise higher energy prices through legislation or market manipulation, that puts us in a very positive position to grow our business and capture more of the market as we improve energy use and consumption," Cutler says.

"We see this past recession as being significantly different from any since World War II, and because of that, we think the reaction to improving economic conditions will require different responses than what industry has done in the past after downturns," he noted. "We think because of our continued R&D expenditures during those bad quarters, we can focus on new areas of growth in the energy use and conservation areas with nearly two year's lead time on our competitors."

Cutler emphasized his positive attitudes about Eaton's future in energy management, noting China has now become the largest consumer of energy in the world, a factor that will lead to higher prices for all energy -- regardless of political forces on the market. "That in itself tells us our investments in hybrid technology, wind, solar and hydro-power, and other electro-hydraulic technologies associated with energy use will put us in a strong competitive position in the near future."

For more on Eaton, a company whose products you probably use everyday but don't know it, visit: www.eaton.com.