Layoffs At Eaton Truck

CLEVELAND--About 100 salaried workers will be laid-off at Eaton Corp.’s Truck Components division as the company expects to take a $55 million charge during 2001 to restructure its worldwide Truck Components business. The latest layoffs are in addition to the 1,800 salaried and non-salaried positions eliminated since early last year.

“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,” said Alexander M. Cutler, chairman and chief executive officer.

“With these restructuring moves, our solid manufacturing capability will become even more focused, efficient, and flexible,” according to Thomas W. O’Boyle, senior vice president and group executive for truck components. “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.”

“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,” said Cutler. “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.”

In addition to the layoffs:

• 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 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 this year 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 and extends Eaton’s supply network to Eastern Europe.

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 about 18 months.

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 two to three years, the result will be a heavy transmission business that is far more flexible, with 20 percent less fixed capital employed.”

For more information, contact www.eaton.com.