Curt Hutchins, President – Asia Pacific
A Transition in Global Markets:
Asia Pacific is the Future
© 2012 Eaton Corporation. All rights reserved.
Eaton Corporation
Eaton Corporation – A Premier Diversified Power
Management Company
Our products & services deliver reliability, efficiency, and safety for:
Cities &
Buildings
Industrial &
Machinery
Information
Technology
Transportation
Infrastructure
Energy &
Utilities
• Founded in 1911: 2011 sales $16 billion
• World Headquarters in Cleveland, Ohio, USA
• Regional Headquarters in Shanghai, China; Morges, Switzerland; Sao Paulo, Brazil
• Innovation Centers in the USA, China, India and Europe
• Customers in 150 countries; >73,000 employees worldwide
© 2012 Eaton Corporation. All rights reserved.
2
Expanding Presence
in Asia Pacific
APAC Manufacturing
• 34 manufacturing sites
• Employees ~16,000
• Distribution in 17 countries
China Manufacturing
• 18 manufacturing sites
• Employees ~10,000
Support
• 6 R&D centers
• 2 shared service centers
• >100 sales office
2011 Sales>$2B
© 2012 Eaton Corporation. All rights reserved.
The China economic
landscape…is clear
Peter Gerber
Manager, Global Branding, Eaton Corporation
© 2012 Eaton Corporation. All rights reserved.
The rising power of emerging markets…
Share of global GDP (1990-1995 average)
5
Share of global GDP (2011)
China
10
20
China
14
Brazil, Russia &
India
12
Rest of emerging
world
Developed world
Brazil, Russia & India
Rest of emerging
world
23
Developed world
Source: IMF, KPMG
• ~55% of our revenues generated in markets outside of the U.S.
• Revenues in developing economies comprise ~24% of our sales, up from 8% in 2000
• 35% of our total sales growth from 2006 – 2011 was from BRIC countries
© 2012 Eaton Corporation. All rights reserved.
5
Asia Pacific is shaping future global growth…
MNC's top 10 perspective host economies for 2012-2014
China
13,000
5,000
India
US$ B
Nominal GDP in 2015
8.2%, $12T
7.9%, $3.2T
Indonesia
1,500
6.3%, $1.3T
1,000
Small size, moderate growth
Small size, high growth
Thailand
Medium size, high growth
4.9%, $484B
500
Malaysia
Large size, high growth
Vietnam
5.1%, $408B
Philippines
0
4.0%
6.8%, $192B
4.8%, $336B
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
Real GDP CAGR %, 2011-2015
Source: EIU; UNCTAD, World Investment Report 2012
© 2012 Eaton Corporation. All rights reserved.
6
China remains a large and growing source of
revenue for MNCs…
• Urbanization…adding about
18M new urban residents per
year, by 2025
•
•
•
•
1bn living in China cities
200+ cities with 1m+
population
170 new mass transit systems
40bn sqm of floor space built
Source: China Daily, McKinsey Global Institute
• Aging population, declining
work force, rising
income….critical shift in
economy
•
•
Shift to “consuming China”
Shift from “made in China” to
“‘indigenous innovation”
Source:Kharas and Gertz 2010
© 2012 Eaton Corporation. All rights reserved.
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“Consuming China”…
World’s largest market for
passenger cars
World’s largest market for
mobile phones
World’s second largest market
for luxury goods
Car
Mobile
phone
Air-conditioner
(per 100 urban households)
(per 100 rural households)
(per 100 rural households)
2002 to 2011
X 20
X 12
X9
2011 total sales
14.5M
280M
49.5 M
CAGR
5.2%
12%
35.2%
© 2012 Eaton Corporation. All rights reserved.
Source: China’s National Bureau of Statistics
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China’s maturing market…
• Increases in land prices and taxes
• Environmental and safety regulations
• Labor - minimum wages have risen steadily since 2005, and are
now higher than many Asian countries.
Rising Minimum Wages in China
(USD per month, figures for Vietnam and Indonesia are for 2011)
180
160
155
160
140
112
120
100
80
60
76
59
40
20
0
2005
2008
2011
Vietnam
Indonesia
Source: KPMG; China’s National Bureau of Statistics; Indonesia’s Government Statistical
Service; American Chamber of Commerce Vietnam
© 2012 Eaton Corporation. All rights reserved.
9
Addressing Challenges
with strategies
for the market …
Peter Gerber
Manager, Global Branding, Eaton Corporation
© 2012 Eaton Corporation. All rights reserved.
APAC & China…are key to
our growth strategy
Sustained investment to
accelerate localization:
• R&D capabilities
• Manufacturing
• Management systems
Eaton R&D
Center
(China)
Eaton Shared
Service Center
(India)
2007-2008
Eaton Regional HQ
(Shanghai, China)
Eaton Manufacturing
Facilities (China)
Eaton Offices
(China, India)
2009
2010
2011-2012
© 2012 Eaton Corporation. All rights reserved.
11
Design and scale influence manufacturing
Value
Proposition
Mature Market
Design
Emerging
Market Design
PRODUCT DEVELOPMENT……
• Must be close to customer
• Must be close to our competitors
• Align value proposition with market
• Jointly innovate with customers
C2
Cost
© 2012 Eaton Corporation. All rights reserved.
C1
12
Innovation capability in China
Suzhou
Electrical
R&D Center
China
Innovation
Center
/Vehicle R&D
Center
Shanghai
Taipei
Electrical R&D
Center
Shenzhen
• 4 China R&D Centers – 1,200+ Engineers
Electrical
R&D Center
• 1 Global Innovation Center
• Collaborating with 8 Universities for Joint Technology
© 2012 Eaton Corporation. All rights reserved.
13
Manufacturing.…
Mfg
Sites
Space
(sqm)
Hourly
Worker
APAC
34
>577k
>9k
China
18
>302k
>6k
Challenges
• Strategy
• Leveraging best practices
• Turnover
• Wage inflation
• Variability in performance
© 2012 Eaton Corporation. All rights reserved.
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Key observations for success
Talent
•
•
•
•
Speed
• Decision making
• Execution
• Localization
Innovation
Talent acquisition & retention
Structural support
Leadership development
Continuous improvement culture
• Beyond traditional thinking
• Scale
• Leveraging Creativity
© 2012 Eaton Corporation. All rights reserved.
15
Incorporating
sustainable
development objectives…
Peter Gerber
Manager, Global Branding, Eaton Corporation
© 2012 Eaton Corporation. All rights reserved.
“Doing Business Right”
Building a robust compliance culture:
• Management visibility and oversight into all
compliance activities
• Deployment of systematic structure &
programs
• Navigating key risks
• FCPA
IPR
• EHS
Labor
• Taxation
Purchasing
Manufacturing EHS compliance
© 2012 Eaton Corporation. All rights reserved.
17
Governments are mandating improvements in
sustainability…
China
12th 5-year Plan sets aggressive sustainability
targets by 2015:
• Lower emissions per unit GDP by 17%
• Reduce energy consumption per unit GDP by 16%
• 11.4% of energy needs from renewables
India
• Lower emissions by 24% by 2020
• Generate 20GW from solar power by 2020
Increased attention to sustainable development
considerations from both public and private sectors
© 2012 Eaton Corporation. All rights reserved.
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It’s creating new industries and opportunities…
Alternative
Energy
•
•
•
•
Solar power
Wind power
Wave power
Bioenergy
Water Use
and Reuse
•
•
•
•
Desalination
Rain harvesting
Wastewater
treatment
Water recycling
Fuel Efficient
Transportation
•
•
•
Hybrid and
•
electric vehicles
Charging stations •
More efficient
Aircraft
Financial
Markets
Carbon / Emissions
trading protocols
Socially
Responsible
Investing
McKinsey estimates the clean-tech product market will reach $1.6 trillion by 2020
© 2012 Eaton Corporation. All rights reserved.
19
Achieving sustainable growth in Asia Pacific
• Market opportunities are clear
• Strategy is key to address
challenges
• Leveraging sustainability value
© 2012 Eaton Corporation. All rights reserved.
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© 2012 Eaton Corporation. All rights reserved.
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