Eaton Counting On Cost Cuts To Make '09 Earnings Guidance
May 27 2009 - 5:30PM
Dow Jones News
Eaton Corp. (ETN) is counting on lower expenses to help the
company meet its 2009 earnings guidance in the midst of a decline
in demand from the automotive industry and other major markets,
Chairman and Chief Executive Alexander Cutler said Wednesday.
Cutler said workforce reductions of more than 8,000 people since
late 2008 will save Eaton at least $200 million this year. Unpaid
time off for employees still on the job, suspending pension
contributions and other expense reductions will save an additional
$170 million this year.
As a result, he said the company should be able meet its 2009
earnings forecast of $2.50 to $3 per share, despite earnings for
the first and second quarters that are expected to be no better
than break even. In the first quarter, the company posted a loss of
$52 million, or 30 cents a share.
The Cleveland-based company, which manufacturers components for
the electrical, hydraulic, aerospace and auto industry, is facing
lower end-market demand in the near term.
Cutler told an investor conference in New York sponsored by
Sanford C. Bernstein that temporary shutdowns by General Motors
Corp. (GM) and Chrysler LLC will reduce North American auto
production in the second quarter by about 470,000 vehicles.
He sees no more than a minimal increase in commercial truck
purchases ahead of new diesel-engine emissions regulations in 2010
that will raise the price of new trucks.
"The economic uncertainly [in trucking] is more than
overwhelming the concerns about new technology," he said.
Cutler, who has headed the company since 2000, predicted Eaton
will benefit from federal economic stimulus spending on energy
efficiency for commercial building beginning in 2010. The company's
aerospace business also is positioned to benefit from an increase
in Pentagon funding for the new joint strike force fighter jet.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com