Eaton's new transmission plant will play critical role

Eaton Corporation has announced the opening of its new transmission plant in Ranjangaon near Pune. The facility will make medium- and heavy-duty truck transmissions primarily for the export market. “This is a reflection of our confidence of the development of the commercial vehicle segment in India and the ability of the market to develop and manufacture sophisticated transmissions,” said Alexander Cutler, CEO, Eaton Corporation.

The company is also expanding the hydraulics facility in Pune, not just from a manufacturing point of view but to ensure that it becomes a full suite of test facilities that will ensure continuity from a global operations perspective. “This will be an important step in making this unit fully operational from a product development point of view as well,” he added.

Eaton does not publicise its investment numbers but Cutler said that the Ranjangaon plant would participate as part of its global manufacturing footprint. There were also no plans to shift production here from high-cost sites in the West. “We are not closing any factory anywhere. This is additional capacity we are building as part of our expansion in the Asia-Pacific region,” he reiterated.

Cutler refused to indicate production capacity but said that most of the output would be used for exports. “This facility will showcase our ability to bring higher torque transmissions which ensure better fuel economy and lower emissions. These will become critical as engine sizes increase,” he said.

Exports are intended for the US and Western Europe with some earmarked for Brazil as well. It is also very likely that the transmissions plant will also manufacture clutches in the future. There was a time when clutches were regarded as relatively independent of transmissions. Today, clutches and transmissions are fairly well integrated in modern engines as a system.

Of Eaton’s four business divisions, two (trucks and hydraulics) are already in India but its automotive components business is yet to come here. Cutler expects this to change soon with more global OEMs setting up business here. “We will ensure that we support them here as we do elsewhere in the world,” he said.

##### GOOD BUSINESS SENSE

On product sourcing, it was his view that manufacturing scales were important to setting up operations because they are very capital-intensive. “The reason why we are not here with a particular product line is because of volumes. At the moment it makes business sense for us to be here with trucks and not automotive components but this can change very rapidly,” he said.

Eaton is a $12.5 billion corporation involved in four primary lines of business. The company has gone through a remarkable transformation during the last 5-6 years and is now considered a “diversified industrial”, which means that it produces more than one line of major products. This is a major change because it has traditionally been known as an automotive components manufacturer. Today, its largest money spinner is its electrical business (34 percent of turnover), followed by fluid power (32 percent) and trucks (20 percent).

Components accounts for barely 14 percent which is a remarkable turnaround from the time Eaton was founded in 1911 as largely a components company. What has also changed significantly over the last five years is that it has come to be regarded as an integrated operations company which operates on a system called the Eaton Business System. “Six years ago we compared ourselves with 16 other “diversified industrial” listed on Nasdaq and were rated at the very bottom of that group. Last year we were rated number one,” Cutler said.

The company employs more than 60,000 people in 125 countries around the world. “Our vision is to be the most admired company in each of our niche markets. We are different in what drives us. We are value-based at a time when many others like to be known as performance-driven. “The most important thing we do is to maintain a uniform set of values for global operations.

We believe in doing business ethically and make sure that our workplace is an extraordinary one where our employees come and expand their careers. “We have a very strong commitment to our communities and believe that our business should be sustainable and that the communities we operate in are better for the fact that we are there and helping them prosper,” he said.

##### INDIA STORY

The geographic breakdown of Eaton’s business shows that it is growing more quickly outside its traditional strongholds in America and Europe. In Asia-Pacific, for example, the revenue stands at just under $900 million but is expected to grow to $2.5 billion by 2010. Eaton’s India story began in 1999 and it has been growing steadily ever since. It employs about 900 people here and has two manufacturing sites and 11 sales offices. In April 1999, the company acquired the global operations of Aeroquip Vickers and this included two manufacturing plants in Mumbai and Pune.

The Mumbai plant was integrated into the Pune operations in January 2002. The primary focus of the Pune facility is to manufacture a wide range of hydraulic components and systems. A steady expansion in business has seen the addition of many new entities including the Eaton India Engineering Center (EIEC) in Pune which is designed to do high-end engineering work for all of the company’s business segments.

The EIEC is also home to a number of technical centres of excellence (CoEs) in the areas of modeling & simulation, software engineering, reliability engineering, and dynamics & controls. This centre employs 300 people and is likely to increase this number three-fold by 2010. Eaton’s second facility is based in New Delhi. In June 2004, the company completed the acquisition of Powerware from Invensys, a manufacturer of uninterruptible power systems. The New Delhi-based facilities of Powerware were also integrated into Eaton’s India operations.

AEROSPACE ARENA

The other area of growth the company sees in aerospace. “Many of the biggest orders placed in the last few years for commercial airplanes have been by Indian operators. This will quickly lead to a localisation of the maintenance requirements and both big manufacturers have already announced plans for India. As a company that works closely with both, it is but natural that we will be here to help them, too,” Cutler said.

In the trucks business, he believes that the biggest advancements will be in hybrids. Manufacturers worldwide are asking for improvements in fuel economy and emissions and these can be met with hybridisation. “We are already achieving 36 percent more fuel economy and almost 90 percent decrease in emissions with our hybrid transmissions. We see a good market for clutches, and being linked to transmissions this market will become more sophisticated in the days ahead,” he said.

Cutler said that his company usually set five year goals and put plans into place to achieve them. The goal for the current five-year period ending 2010 is to achieve a 10 percent per annum growth in topline and profits by 15 percent per year. He is also keen on achieving 15 percent return on capital invested every year. Eaton has a bigger presence in China but Cutler maintained that the company needed to be present and grow in both markets. The biggest area of growth in India will be in Professional Services, which employs about 550 people and expected to triple by 2010.