SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 11, 2001
EATON CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 1-1396 34-0196300
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Eaton Center
Cleveland, Ohio 44114
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(Address of principal executive offices) (Zip Code)
(216) 523-5000
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Registrant's telephone number,
including area code
Item 5. Other Events
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Press Release dated January 11, 2001
Eaton to Restructure Truck Components Business
CLEVELAND, OHIO Eaton Corporation (NYSE:ETN) today announced that it
expects to take a $55 million charge during 2001 to restructure its
worldwide Truck Components business. The company expects to recognize
about a $40 million charge in the first quarter of 2001, with the
balance of the expense recognized over the remainder of the year. The
company also expects to realize divestiture gains in the first quarter
that will offset these restructuring costs. Recurring annual
savings from the restructuring are anticipated to reach $40 million,
with a payback period of approximately 18 months.
Alexander M. Cutler, Eaton Corporation chairman and chief executive
officer, said, "The market for heavy-duty trucks has shown
unprecedented volatility given the generally favorable economic
conditions that have prevailed in recent years. This has been
especially true in the NAFTA region. Eaton, as a world leader, has
inevitably been affected by this extraordinary volatility in the
demand for our transmissions, clutches and advanced drivetrain
systems. We are very proud of the fact that, over the past several
years, we have met our customers' demanding production schedules.
Indeed, we have continued to gain share in the marketplace because of
our innovative products and our ability to satisfy customers. We are
also focused on the fact that, through the cycles, this market
continues to show attractive growth prospects. But the costs of
serving demanding customer needs in the context of unprecedented
market volatility have become unacceptably high.
"Eaton's Truck Components business needs to evolve to a business model
that is less vertically integrated, takes better advantage of our
global presence, and focuses on those areas where Eaton brings genuine
distinctiveness to the marketplace. The result will be a more
flexible, more profitable organization that is less affected by the
inevitable ups and downs of this dynamic, global growth market, and
can better serve the needs of our customers, suppliers, employees and
owners."
Eaton intends to take the following actions:
The heavy-duty transmission business will refocus production for
the NAFTA market on transmission system technologies critical to
product performance and customer satisfaction. The fixed capital
intensity of the business will be significantly reduced, and the
organizational structure will be simplified.
The salaried workforce within Truck Components will be reduced by
about 100. This is in addition to approximately 1,800 salaried and
non-salaried positions eliminated since early-2000.
The company will continue to invest in its previously announced new
plant in San Luis Potosi, Mexico but completion will be postponed by
roughly six months in view of expected continued market weakness
through 2001.
Eaton expects to cease manufacture of its European "S" Series
transmissions during 2001 and will investigate closing the Eaton S.A.
facility in St. Nazaire, France.
The medium-duty transmission plant in Aycliffe, United Kingdom will be
closed by mid-2001 in the final phase of a previously announced
restructuring. All operations will be transferred to Eaton's Gdansk,
Poland plant, which represents a $60 million investment in the latest
precision component manufacturing technology, and extends Eaton's
already extensive worldwide supply network to Eastern Europe.
Said Cutler, "Follow-on activities related to completing the
fundamental reconfiguration of our heavy transmission business are not
expected to require additional charges beyond 2001, and will be self-
financing. When completed in 2-3 years, the result will be a heavy
transmission business that is far more flexible, with 20% less fixed
capital employed."
Thomas W. O'Boyle, senior vice president and group executive for Truck
Components, said, "Through the cycle, this is a strong and vibrant
global business. We have a full range of manual and automated
transmission / clutch products that have proven market acceptance. We
have development efforts underway for several exciting new products.
We have the leading sales and service organization in the industry and
strong customer relationships, including long-term agreements with all
of the major North American OEMs.
"Recently, we won a multi-year, $250 million contract to supply
DaimlerChysler AG medium-duty transmission components from Brazil,
which testifies to our underlying competitiveness. With these
restructuring moves, our solid manufacturing capability will become
even more focused, efficient, and flexible. We are structuring the
business to weather the current cyclical downturn, and to take best
advantage of the secular growth we see continuing well into the
future."
With 1999 sales of $8.4 billion, Eaton is a global diversified
industrial manufacturer of highly engineered products that serve
industrial, vehicle, construction, commercial and aerospace markets.
Principal products include hydraulic products and fluid connectors,
electrical power distribution and control equipment, truck drivetrain
systems, engine components and a wide variety of controls. The
company has 59,000 employees and 195 manufacturing sites in 24
countries.
This news release contains forward-looking statements about the
company's charge to restructure its worldwide Truck Components
business and related matters, including annual savings, payback
period, divestiture gains, refocusing, workforce reductions, ceasing
to manufacture "S" Series transmissions and closing, investigating the
closing and postponing the completion of separate manufacturing
plants. These statements are subject to various risks and
uncertainties, many of which are outside the company's control. The
following factors could cause actual results to differ materially from
those in the forward-looking statements: unanticipated costs in
implementing the restructuring and the operations of the business
thereafter, the inability to divest operations at expected prices, an
unanticipated change in the heavy- and medium-duty truck markets, a
significant downturn in business relationships with major truck
customers or their purchases from us, competitive pressure on sales
and pricing, increases in the cost of material and other production
costs that cannot be recouped in product pricing, or a deterioration
in global economic and financial conditions. We assume no obligation
to update these forward-looking statements.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Eaton Corporation
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S/S Adrian T. Dillon
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Adrian T. Dillon
Executive Vice President--Chief
Financial and Planning Officer
Date: January 12, 2001
