Industryweek 1645 14755sandycutler

Thought Leaders -- An Era Of Incredible Productivity

Aug. 10, 2007
Eaton's Sandy Cutler says U.S. manufacturers need to let the world know how well they're really doing.

As chairman and CEO of Cleveland-based Eaton Corp., Alexander M. (Sandy) Cutler oversees a $12.4 billion industrial manufacturer subject to the whims of a fickle buying public. Thanks to its diversified product line and an increasingly global customer base, Eaton has seen total sales climb nearly 72% over the past five years. That strategy has allowed the company to reduce its emphasis on the automotive sector (automotive components now account for just 14% of Eaton's sales, down from 21% in 2002), while shifting its attention to the electrical segment, which now accounts for more than one-third (34%) of Eaton's business.

Cutler has been deeply involved with numerous facets of industrial manufacturing since beginning his career at Cutler-Hammer in 1975 as a financial analyst (Cutler-Hammer was acquired by Eaton in 1978). Since then, he's been a plant manager of an assembly plant, division manager of Eaton's Power Distribution Division, president of the Industrial Group, executive vice president of operations, chief operating officer and president, amongst other roles, and has been chairman and CEO since 2000.

IndustryWeek recently sat down with Sandy Cutler to get his thoughts on the current state of manufacturing in the United States.

IW: We hear a lot of talk these days about the so-called "decline of U.S. manufacturing," and yet your company seems to be doing just fine. From your vantage point, how do you think manufacturing as a whole is doing?

Cutler: The biggest challenge for manufacturers is getting the facts out as to what manufacturing is really like. This is an extraordinary time for North American production, but you don't hear about that. It's a time of incredible productivity, but you don't hear about that, either. All you hear about is the reduction in labor, not the increase in productivity. There's been a real change from what we used to call "strong back" production -- where you needed 1,000 strong backs to build something -- to a more automated, streamlined, efficient process.

Manufacturing in the 21st Century is analogous to agriculture in the early 20th Century, which became much more efficient and productive over the past 100 years, while in the process many traditional agricultural labor jobs went away.

IW: What will it take to get the facts out?

Alexander M. (Sandy) Cutler, chairman and CEO, Eaton Corp. Cutler: You can't have a meaningful debate on manufacturing in the United States unless you have an understanding of economics. The world's economy operates on economics, not on social platforms. Show me an example of closed borders that has created more jobs -- you can't find one. The problem is, advocacy has gotten way out ahead of the facts. That's why I say manufacturing's biggest challenge is to get the facts out to the public.

IW: Would you say there's a shortage of available manufacturing talent in the U.S. today?

Cutler: As I see it, the United States is falling short on educating the next generation of manufacturing workers. We need more engineering talent in the U.S., and many of the fast-growing economies in the world -- especially China and India -- are consuming much of the world's available engineering talent, so the competition for that talent is more acute than in years past, especially as the U.S. economy grows while its engineering talent grows older.

Manufacturing today is global, not regional. We need the assets that will allow us to compete internationally. We have a tremendous dearth of engineering jobs today. We don't have enough engineers in this country, and we don't have enough skilled labor in this country.

The people [in the U.S.] who are unemployed are not trained to fill all the engineering job openings. The Republicans and Democrats have got to do a better job of retraining the workforce. We're not growing talent fast enough here. This is a great time for students to be taking engineering courses.

IW: What else should government and policy makers be focusing on?

Cutler: The public is concerned that businesses are run on the up and up. How do you create a standard of living in an economy and sustain it? What government model can sustain that standard of living? Capital [i.e., equipment and infrastructure] can't move quickly enough to handle changes in policy every four years. We need a consistent energy policy, for instance, that focuses on reduced emissions without endangering the economy and standard of living. You can't legislate productivity.

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