Eaton exec: When economy lags, it's time to ramp up business

Alexander M. Cutler isn't the type of executive to be worried by some negative economic reports.

Despite a roller coaster ride the last couple of years in many of the businesses in which the global conglomerate operates, the Eaton Corp. P.L.C. chairman and CEO said his company is targeting 8-percent growth this year.

And that is during a year when global economic growth is forecast at 2.5 percent, with industrial manufacturing production set to gain an even lower 1.5 percent.

"This is not a time to stand still," he told an audience of nearly 1,000 distributors at the 2013 Eaton Distributor Meeting, held Sept. 15-18 in Orlando, Fla. "This is not a time to be discouraged by slow global growth. This is a time to get in the game and partner up and take ourselves to a higher level."

Cutler said Eaton posted sales of $8 billion in 2000, and 2013 revenues are expected to be close to $23 billion. Employment grew from 70,000 a year ago to about 103,000 now as the company spent about $15 billion on acquisitions over the past couple of years, the largest of which was Cooper Industries P.L.C. for $13 billion.

"We're not playing in this industry because we simply want to stay the same," he said. "We're playing in this industry because we want to win. And win means we want to do some things differently to take ourselves to that higher level."

Cutler said Eaton will get to that 8 percent growth rate by following this formula: the "power segment," with which the company identifies itself, should show end market gains of 4 percent, and Eaton plans to outgrow that by 50 percent, bringing it to 6 percent. The last 2 percent, he said, will come from acquisitions.

"Too often when you go through this economic time period, it can arrest our collective confidence," Cutler said. "There is no more dangerous message relative to growth than when people's confidence declines. If you start to become hesitant, it causes you not to hire someone, seek new customers or put new training in place."

Two key industrial numbers are that inventories are down, along with capital spending as a percent of GDP, classic indicators of a lack of confidence, according to the Eaton chairman. But now is not the time to hold back, he insisted.

"Almost every study in every market shows that market share gains are made when markets are weak," Cutler said. "They're not made when markets are strong."

That's because when markets are busy, engineers don't have time to come up with new developments. "When they do have time is when markets are weak," he said. "So this ought to be a rallying cry for all of us in terms of putting the pedal down. Let's go enlarge the window. Let's not do what so many companies are doing right now, which is holding back."

Cutler said the best way for Eaton and its distributors to succeed is to be committed to each other in a true partnership.

"Everyone's been either upstream or downstream of a company's cost reduction initiative at some point in their career," he said. "A partnership can feel like you're in bed with an elephant, and if they roll over, you get squashed."

In a true partnership, he said, both parties grow, make money and have the chance to show off the capability of the people in the organization.

"It's only when you have that kind of partnership that you really get both sides leaning into the equation together," Cutler said. "It's about us committing to you in terms of being a long-term partner, making investments in product and training, and helping your organization be even more effective than you could be on your own."

And in turn, Eaton looks to its distributors to be the "face of Eaton" to end customers and to live up to the firm's values in terms of ethical standards of doing business, the chairman said. "Our best partners lead with our products, and we lead with our best partners," Cutler said. "And that works both ways. We want you to continue to be very frank with us and help break down barriers where we're not doing the job."

Distributors also are vital in aiding Eaton's growth efforts by identifying target customers quickly, because the window of opportunity often is small.

"We need you to highlight the quality and competitive advantages of our products," he said. "Know them immediately. Be our lead partner in taking these new products and capabilities to market."

Making such a deep commitment isn't always comfortable, but in the end is worth it, he said. "In market after market, when channels and suppliers come closer together in a fundamental commitment that prioritizes people and financial resources, we should expect substantial changes in our results," he said. "It's all about leveraging, it's all about growing. And we think there's no better time to make that happen than the present."