Automotive and Truck Division Market Trends

Automotive and Truck Division Market Trends

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Market trends that Eaton Corporation will be faced with will be reviewed and analyzed. Eaton Corporation is divided into Electrical, Truck, Automotive, and Fluid Power. I will focus on the automotive and truck division throughout this paper. Impacts of market structure, technology, prices, competitors, cost structure, benefits and price elasticity are some of the topics that will be discussed throughout the paper.
The automotive division of Eaton Corporation is an OEM manufacturer for air, transmission and fuel management controls, automotive fluid connectors, engine air management systems, cylinder head modules, engine valves, lifters, limited-slip and locking differentials; clutches and brakes for industrial machines and golf grips. . Eaton’s automotive division provides 90% to domestic OEM’s and 10% to the foreign market. Eaton automotive produces OEM’s for GM and Ford. Toyota took over the domestic market share from GM and Ford in August of this year. Eaton’s market structure will change by targeting hybrid trucks that create new savings, efficiencies, and produce less pollution which are what trucking companies want says John Beering, director of global marketing for the
Impacts of new companies entering the market are significantly decreasing the sales of domestic automotive sales. Chery and Geely are prime examples of automotive companies in China planning on importing cars to the U.S that will be priced under $10,000. Consumers will be thrilled, but it could be devastating to General Motors and Ford. New foreign automotive businesses entering the market in the near future will have a huge impact on domestic automotive businesses. Eaton produces OEM’s for Ford and GM trucks. The new business entering the automotive market is foreign cars. There will always be a demand for trucks. The demand for truck sales may decrease due to increase gasoline prices. Demand and Supply for domestic vehicles is going to decrease in the future. Increasing foreign car sales will impact domestic automakers by laying off more employees and shutting down more and more plants. Thousands of people have already lost jobs and thousands more will. Eaton has sold their mirror business and will continue to sell off more automotive businesses if sales do not increase sales by 14% every year. Eaton will have to purchase or win new business for foreign vehicles in the future. Eaton is currently doing 10% business with foreign vehicles and needs to increase foreign sales by 20% or more.

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Eaton is currently and will continue as a Premier Diversified Industrial company with a thorough knowledge of the automotive market and customers.
Technology will continue to improve as time goes on. Technology impacts the market by offering easier ways of communication, production and products. For nearly a century, Eaton has strived to understand what matters most too automotive manufacturers. Eaton rationalizes that top priority is to create vehicles that people want to drive, a vehicle with the best possible performance, efficiency and control. Whether it’s a V8-powered SUV that gets the fuel mileage of a six cylinder; a 1.0-liter compact that produces the horsepower of a 2.0-liter; a four-wheel-drive system that performs as well in extreme off-road conditions, automakers trust Eaton to come through with the right products. (Eaton Website). Eaton will have to continue to strive with innovation. Eaton’s operating philosophy will continue to create an atmosphere and culture that fosters vast ideas that can be distilled into solid business plans and successfully commercialized to deliver value to the customers. Eaton will continue to encourage and support employees continuing with education. More patens will be created by Eaton’s team members. More than 280 patents have been accounted for since 2000. This fall Eaton will kick off hybrid electric powered trucks. The current technologies with hybrids appear to be a practical alternative to conventional power train. Hybrids offer performance reliability, fuel efficiency, emission reduction and cost. Each diesel electric truck is estimated to save $9,000 annually on fuel. Companies must keep up with technology in order to survive.
The law of diminishing marginal productivity is defined as that as “more and more of a variable input (workers) is added to a existing fixed input (assembly line) eventually the additional output (product) one gets from additional input is going to fall.” (Colander p.209) Eaton has key metrics that are measured monthly. On time delivery, scrap and productivity are some of the metrics that are measured. Productivity is measured by employees and production. Productivity is measured by how many hours worked by employees to produce parts. Eaton monitors how many hours worked by jobs per hour (JPH). Eaton controls productivity by sending employees home on a Friday if all orders are completed on Thursday. Eaton key metrics are tied into variable pay plan (end of the year bonus), by monitoring chosen metrics monthly. The key metrics help monitor and control the metrics so the company does not go over budget. Eaton will continue to use gross utilization to maximize production and profits.
Eaton has competitive wages and benefits. Eaton offers a pension plan, matched 401K plan, tuition reimbursement, competitive medical and dental insurance, and paid vacation. Eaton values the employees and offers great benefits. Eaton wants the best of the best so competitive wages are needed. Eaton has been a very successful business and will continue offer competitive wages and benefits.
The products produced in the automotive division at Eaton Corporation are elastic. Competitors in the market that offer the same product or OEM parts cause elasticity. A shift in demand has been seen due to an increase of demand for foreign cars. The demand for domestic cars has decreased and will continue to decrease with all the foreign vehicles entering the market next year.
Government regulations have an impact on how businesses can run. The government acts a referee and makes changes when necessary. Regulations have been put in place for equal opportunity rights, labor laws, and safety. Eaton has an Ethics Guide for all employees around the world know and comply with the Code of Ethics in every day activities. Obeying the law is listed first and foremost. International Trade Import and Export Control must be followed by all employees. National laws, regulations, and restrictions have to be followed when importing and exporting. If the regulations are not followed Eaton will be fined and the responsible employee could face imprisonment. A business can be shut down by the government if legal activity is found. More Trade Acts will be seen in the future. Asia, India, and Thailand are expected to double their GDC in the automotive market. NAFTA and CAFTA are trade acts that have been passed to allow free trade between certain countries and more are expected to pass in the future.
In the business of automotive there are many competitors in the market. Borg Warner, Dana and Delphi are the most competitive companies within the automotive division. Competitors share the market. Eaton believes in competitive gain through advanced performance. Tactics used to eliminate competition are against the Eaton company policy. Eaton uses innovation, technology, quality and great customer service to gain competitive advantage. Eaton has created over 200 patents in the last 20 years. GM and Ford are going to have to make changes in the near future with the decrease in sales, loss of domestic market share and new foreign automotive companies entering the market. Changes that take place with GM and Ford are also going to have an affect on the OEM suppliers as well. Eaton will have to continue offering innovative products that can be offered to all automotive companies in the market. Eaton will continue to approach creating products that offer performance, control, fuel efficiency and lower environmental impact. Eaton is going to have to become a more diversified supplier to all automotive companies.
The economy is driven by supply and demand. A supply and demand analysis is done to determine why change has taken in effect regarding supply or demand. Currently Eaton’s automotive and truck division has seen a decline in sales for the year of 2006 and 2007. Some of the factors of the decrease in sales are due to high gasoline prices, and the fact of Toyota taking over the market share. Eaton supplies most of their products to the domestic automakers, GM and Ford. First time in history the domestic automakers have lost the market share to a foreign company. Foreign car markets have focused their market on hybrids that will get 30 plus miles to gallon, 100,000 mile warranties and quality. There has been a decrease in demand for domestic cars causing shift in demand decreasing sales of domestic OEM automotive parts. In the future the same factors are going to cause a shift in the demand for domestic cars until GM and Ford jump on the bandwagon and start offering competitive priced quality vehicles with the same benefits and warranties that the foreign carmakers are offering.
Eaton Corporation. (2007). Eaton Business System. Retrieved July 27, 2007, from http://www.eaton.com/EatonCom/OurCompany/AboutUs/CorporateInformation/EatonBusinessSystem/index.htm
Poje, T. (2007). Hybrid Power: Getting hybrid right. World, 3, 13.
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