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Eaton Corporation - Northeast Ohio’s Global Power Player

Monday, December 26, 2011 at 4:00 AM

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Seismic changes in the global economy have forced some Northeast Ohio companies to close or move. But, a number of area businesses have been able to weather the financial tremors. As a part of an occasional series on long-lived local companies in our region --- and their secrets for survival --- ideastream's David C. Barnett brings us the story of Eaton Corporation, a multi-billion-dollar global player that got its start one hundred years ago in a New Jersey machine shop.

Photo Gallery

Eaton first rode to success on the Torbensen truck axle Joseph Oriel Eaton Viggo Torbensen Eaton Parma Sales Manager, Gary Jennings Sandy Cutler and the Eaton team get a birthday salute from the New York Stock Exchange

SOUND: Historic Ford pick-up truck starts

Cleveland’s Eaton Corporation rode into existence on a truck axle invented by a Danish immigrant named Viggo Torbensen.  America’s earliest cars and trucks were driven by heavy duty bicycle chains, and Torbensen figured that a rear axle powered by internal gears could withstand heavier loads.  He found a financial backer in a young entrepreneur named Joseph Oriel Eaton, who saw a strong future for automobiles.  But, Case Western Reserve economist Susan Helper says Eaton didn’t think that future was on the east coast.

SUSAN HELPER: J.O. Eaton moved to where he thought the market was. He moved from New Jersey --- where the company was founded in 1911 --- to Cleveland.

At the time, Northeast Ohio was part of a burgeoning regional transportation industry.  Cars and trucks were rolling off assembly lines both here and in Detroit, and Akron factories were supplying the tires.  New roads were being built to accommodate the growing automotive traffic, which led to a demand for more cars.  Eaton carefully began acquiring companies that helped meet that demand --- everything from gas caps to engine valves.  Susan Helper says that policy of judicious acquisitions has been a key to the company’s success.

SUSAN HELPER: They continue to evolve, and continue to think about, “Does this make sense for our company?” There’s been a logic to everything they’ve made.  They haven’t gone and bought… I don’t know… a pet rock manufacturer, just because the pet rock industry is doing well. 

SANDY CUTLER: We don’t diversify simply for the purpose of diversification. 

Alexander “Sandy” Cutler heads the company that J.O. Eaton started a century ago.  He stepped in as CEO in 2000, at a time when Midwest manufacturing was on its knees and the economic sucker punch brought on by crises in the financial and housing sectors was yet to come.  A new round of strategic diversification took place.  Cutler took the company beyond the automotive field into aerospace, hydraulics and electrical systems.  But, he says there’s still a central focus to the company --- it’s just shifted a bit.

SANDY CUTLER: And, so while it looks like we’re in many different businesses, the theme that unites it all is: power management.

He says everything the company does now centers on the creation and distribution of power.  Take for example, the Eaton operation in Parma.

SOUND: walking onto the Parma production floor UP & UNDER

Sales manager Garry Jennings walks us up to a machine that is punching holes in metal plates.

GARRY JENNINGS:  This area is where we manufacture or assemble panel boards --- basically, a panel board is a way to distribute electricity within a building.

It’s just a bigger version of that breaker box in your basement…only this one will have a lot more juice coursing through it.

GARRY JENNINGS: It can range anywhere from an industrial user --- like a steel plant --- to universities…healthcare facilities…shopping centers.  Basically, anything that requires electricity, our equipment is going to be there. 

And be there on a few days notice.  CEO Sandy Cutler says rapid turnaround is crucial to staying competitive.

SANDY CUTLER: The Parma facility’s one of about 28 such facilities in the US that allows us to support customers on a daily basis with very quick reaction time.

That quick reaction time now extends globally.  Eaton’s 1800 employees in Northeast Ohio are part of a workforce of 73,000, worldwide.  And in the same way that J.O. Eaton followed the automotive market to Cleveland in 1911, the company that bears his name has customers in 150 countries.

SANDY CUTLER:  Really, in the past 12 years, Eaton has become very global --- we’re about 55% out of the US in terms of our sales today.  We expect to be 60% by 2015, with about half of that in the emerging nations.

Economist Susan Helper says Eaton has been able to survive for a century by continuing to re-invent itself.

SUSAN HELPER: It’s kind of a nimble moving around --- some invention of new products… a lot of acquisition…

And knowing what to set aside.  As a part of redirecting Eaton’s corporate focus, the company sold its founding truck axle business.  Sandy Cutler says that was the price of progress.

SANDY CUTLER: We replaced that with some 58 acquisitions we’ve done since then, plus all of our internal development and as a result, we’ve got a faster-growing company, that’s more profitable, that doesn’t tend to bounce up and down through the economic cycles.

SOUND: Stock Market opening bell

Wall Street celebrated Eaton’s 100 year history this past Fall by letting Sandy Cutler ring the New York Stock Exchange’s opening bell on the anniversary of the company’s founding.  Eaton’s total revenue this year is more than 16-billion-dollars…profit margins are strong… and it’s still sitting on a considerable pile of cash. Resources like that will no doubt help Eaton continue to survive as European markets teeter and growth slows around the world.  The Cleveland company is now looking to double its annual sales in China --- from one billion to two billion dollars --- in the next three years. 

Additional Information

ECONOMIC SURVIVOR Pierre’s Ice Cream

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Economy, Regional Economy/Business - Analysis and Trends, Energy, Environment, Technology

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