Cutler, Alexander M. 1951–
Alexander M. Cutler
Chairman, president, and chief executive officer, Eaton Corporation
Career: Cutler-Hammer, 1975–1977, financial analyst; 1977–1979, business group controller; Eaton Corporation, 1979–1980, division controller; 1980–1982, assembly plant manager; 1982–1985, manager of U.S. Power Distribution Division; 1985-1986, general manager of U.S. Industrial Control and Power Distribution Operations; 1986–1989, president of Industrials Group; 1989–1991, president of Controls Group; 1991–1993, executive vice president of Operations; 1993–1995, executive vice president and COO of Controls; 1995–2000, president and COO; 2000–, chairman, president, and CEO.
■ In less than 20 years with Eaton Corporation, Alexander M. Cutler became president, chairman, and chief executive officer of the company that had become the second-largest manufacturer of hydraulic equipment and the largest maker of truck transmissions in the United States. Eaton started out as a provider of automotive parts; Cutler's vision and his ability to act upon that vision made him highly instrumental in the diversification of the company into the multinational manufacture of fluid power systems; distribution and control systems; automotive parts; aerospace equipment; and electrical power quality, distribution, and control systems.
COMPANY GROWTH THROUGH MERGERS, ACQUISITIONS, AND DIVESTITURES
Cutler began his career in 1975 as a financial analyst with Cutler-Hammer. Created in Milwaukee, Wisconsin, in 1893 by Harry T. Cutler (who bore no relation to Alexander Cutler), Franklin S. Terry, and Edward West Hammer, the company first patented a starting box for motors. Through an acquisition, it added rheostats and light dimmers for theaters to its product line and eventually became a pioneer in electricity control. Through further acquisitions and the development of 54 patents, Cutler-Hammer's sales soared from $193,000 in 1900 to $12 million in 1920.
The young Eaton Corporation, which began in 1911 in Bloomfield, New Jersey, when J. O. Eaton, Henning O. Taube, and V. V. Torbensen started the Torbensen Gear and Axle Company, also grew largely through acquisitions. In its first year the company manufactured seven truck axles by hand; six years later it produced 33,000 axles. By 1970 it had undergone more than a dozen mergers and acquisitions, vastly expanding its line of automotive products.
Eaton acquired Cutler-Hammer in 1979—and along with it, Cutler, who became a division controller. He was promoted to manager of the Power Distribution Division in 1982 and general manager of the Industrial Control and Power Distribution Operations for the United States. Before long, Cutler had his eye on Westinghouse, the electric-industry giant that in the late 1800s developed the component that led to alternating current surpassing direct current as the world standard in electricity delivery. In the 20th century, Westinghouse became a nuclear-energy powerhouse, supplying nuclear-generated electricity to the navy, national defense systems, television companies, and the general populace.
Cutler was looking to make Eaton a major player in the electrical-distribution and control industry and was impressed with the strategic directional change Westinghouse had made in that sector during the late 1980s and early 1990s. In January 1994 Eaton merged Westinghouse into its Cutler-Hammer division in what became one of the biggest acquisitions in the electric industry's history. Throughout the 1990s Eaton made 50 acquisitions while divesting itself of 48 less profitable divisions. In 2000 Cutler was named chairman, CEO, and president of the company. By 2004 Eaton boasted 48,000 employees and had manufacturing facilities in more than 20 countries and product sales in more than 50.
A MAN OF ACTION
A brief description of Eaton on the National Leadership Council's Web site declared, "Eaton plays for keeps—if it can't win, it doesn't play," a philosophy clearly evident in Cutler's management style. Robert Sherefkin wrote in Crain's Cleveland Business, "Alexander Cutler, the new chief executive officer of Eaton Corporation, has wasted little time shaking up the supplier" (September 11, 2000). After rising to the head of the company, he almost immediately announced plans to sell off Eaton's cockpit-switch business, which manufactured switches used in automobile door locks, mirrors, seats, and windows. Cutler made the decision to sell the business while it was still profitable; its sales the previous year had totaled $330 million. Proceeds from the sale were used to pay off debt or reinvested in the company, allowing Eaton to focus more heavily on its engine and drive-train divisions. Sherefkin wrote that, according to analyst Kent Mortensen of Robert W. Baird & Company of Milwaukee, the probable reason for Cutler's decision was that Eaton had not developed the "critical mass to lead the consolidation of vehicle interiors, where its switches are used. 'So it was fish or cut bait, and they decided to cut bait'" (September 11, 2000).
In his CEO message on Eaton's Web site, Cutler wrote, "Eaton has changed. We have transformed our company from a manufacturer of vehicle components into a diversified industrial enterprise." Cutler always searched for the most lucrative mix of products, acquiring and divesting appropriately in order to achieve that goal. As the demand for cars and trucks decreased, he focused more heavily on the industrial and commercial controls divisions. He led Eaton to take advantage of two huge challenges that the auto industry faced: improving both gas mileage and emission controls. He also readily positioned the company to avail itself of the opportunity that was presented, and missed by many electric companies, when the industry deregulated and the demand for power surged. In an article in Tirekicking Today, Cutler was reported as saying, "It's necessary to know what adds true value to a product, and what does not. Who are the value creators and who are the value destroyers?" (September 1998).
GROWTH UNDER HIS LEADERSHIP
After Cutler became chairman and CEO, Eaton spun off its semiconductor-equipment business, which became Axcelis Technologies and of which Cutler became a board member. In a series of moves that evoked images of a game of Monopoly on an international scale, in 2001 Eaton purchased Sumifomo Heavy Industries' 50 percent share in a fluid-power joint venture, which became Eaton's first wholly owned Japanese business. Eaton then sold its Switch/Electronics Division for $300 million and later became Lockheed Martin's primary fluid-power system supplier for the billion-dollar Joint Strike Fighter program. The subsequent additions of several other such contracts brought Eaton's aerospace-industry sales to almost $2 billion within a six-month period. Cutler noted that the Joint Strike Fighter contract in particular was a major win for Eaton, proving that they were forerunners in the research and development of high-pressure fluid-power systems for aircraft.
Attesting to Cutler's vision for streamlining Eaton's product line, the company sold its Navy Controls business in 2002 for $92.2 million; bought the remaining 40 percent interest in its Jining Eaton Hydraulica Company in China; acquired the hose, tubing, and fluid-power systems connector division of Dana Corporation for $130 million; and bought Mechanical Products' line of aerospace circuit breakers. Eaton later won an $84 million contract with the Boeing Company to provide high-pressure hydraulic and other systems for the U.S. Air Force. In 2003 it acquired Commonwealth Sprague Capacitor's power systems and the electrical division of London-based Delta.
When introducing Cutler to a class of students at the Tuck School of Business at Dartmouth College, instructor Sydney Finkelstein noted that one of the major principles in mergers and acquisitions (M&A) was that they must "augment, regenerate, or create new competitive advantages." Finkelstein pointed out that, spearheaded by Cutler, Eaton had done just that and, "as such, represents a great opportunity to see the M&A principle in action."
PERSPECTIVE ON PEOPLE, PRINCIPLES, AND PARTNERSHIPS
In an interview with Design News, Cutler stressed the importance of teamwork among design engineers and the need for those engineers to get out of the lab, into the marketplace, and around customers. He said that people who design products for a consumer must know what the consumer wants and understand his problems, and that meeting with customers was not just necessary, it was mandatory. "That's really how you get the creative juices running, and it's how you ensure that you're solving the problems your customers really need solved," he said (March 6, 1995).
During the interview, Cutler said that the rapidly changing environment "puts a tremendous premium on employee speed and flexibility." His philosophy, however, was "simplify first, automate second." Rather than using technology to replace employees, he preferred to use technology as a way to help them become more productive and flexible. When asked by the interviewer how such a huge company could remain efficient, Cutler commented that the most important factor was communication, which meant moving away from the traditional management style and becoming "a facilitator, a coach, a communicator, whatever word you want to use" (March 6, 1995).
Cutler wrote in his CEO Web-site message that while Eaton's business had changed, their principles had not. He noted three fundamental principles he believed helped Eaton grow as a business and its employees grow as individuals: innovation—"We value innovation and change as a source of strength"; impact—"High-performance products, employees, and operations make a positive impact on the world around us"; and integrity—"We care about how we get results." He wrote: "Eaton values, Eaton people, and the power of one integrated operating company are what make us strong. They're also what drives our success."
MANAGING ASSETS AND EDUCATION
Cutler believed that to keep his company on the cutting edge, it was essential to provide its employees with continuing education and efficiently manage its assets. With the goal of transforming his workforce in mind, he was a major proponent of the Eaton Business System, an extensive and sweeping program to systematically monitor the company's assets and employees. Cutler's idea was to remove what he called the "silos," or barriers, from between each business unit in order for managers to learn from each other's experiences.
Eaton University was launched shortly after Cutler's rise to chairman and CEO. It began as an instructor-based management-training program but soon became an e-learning facility. Quickly added to the original e-library was a wealth of material acquired from an outside organization, and general business courses were later added that trained managers to set performance goals, reward employee performance, develop coaching skills, and provide general career development. On the Alchemy Web site, Cutler commented that the program was about "capturing the benefits of diversity, scale, and rapid transfer for best practices and turning that into the 'power of one'" (December 3, 2002).
TRIM TO SURVIVE
In the process of keeping Eaton profitable and on the cutting edge, Cutler had the unpleasant responsibility of cutting jobs. Between 2001 and 2002, Eaton closed 34 factories and slashed 12,000 jobs. Even though the cockpit-switch works was only a small part of Eaton's huge Automotive Components Group, its sale eliminated more than four thousand employees in eight plants in North America, South America, and Europe. While Cutler did what he felt was necessary for his company's overall health, he remained aware of the effects it had on individuals. The Taipei Times reported that Cutler said in an interview, "When you go through the kind of human trauma that organizations go through when they downsize, there's a very natural tendency to be very, very careful about how you add back resources" (November 4, 2001).
After the general downturn of the U.S. economy in the early 2000s, Cutler announced in 2004 that the previous year had been a very good one. Fourth-quarter earnings in 2003 surpassed expectations, with sales growth of 17 percent and a net-income increase of 70 percent—from $67 million in 2002 to $114 million in 2003.
See also entry on Eaton Corporation in International Directory of Company Histories.
sources for further information
Cutler, Alexander, "From the CEO," http://web.eaton.com/NASApp/cs/ContentServer?pagename=EatonCom%2FPage%2FEC_T_ArticleFull&c=Page&c=1007421202658.
——, "Simplify First, Automate Second," Design News, March 6, 1995, http://www.designnews.com/index.asp?layout=searchResults&content=all.
Davis, Dan, "Special Online Feature: Learning Lessons, Enterprises Increasingly Turn to E-learning Technology as Part of Strategic Efforts to Broaden Workforce Skills," Alchemy, December 3, 2002, http://www.softwarestrategies.com/Web_First/ss.nsf/ArticleID/DDAS-5F6RYE?OpenDocument&click=.
"Eaton Corporation Molds a Century of History into a $2.4 Billion Electrical Distribution and Control Giant," http://www.eatonelectrical.com/NASApp/cs/ContentServer?pagename=C-H/Common/AssetTemplateLink&c=Apubarticles&c=993227143100&sec=company&uid=Variables.uid.
Finkelstein, Sydney, "Mergers and Acquisitions," http://oraclewww.dartmouth.edu/dart/groucho/tuck_mba_program.syllabus?p_id=MMA.
Flammang, James M., "Automakers Search for Efficiency," Tirekicking Today, September, 1998, http://www.tirekick.com/sep98/EFFICIENCSEP98.HTM.
National Leadership Council, http://www.business-linc.org.
Sherefkin, Robert, "New CEO Moving Fast at Eaton," Crain's Cleveland Business, September 11, 2000, p. 20.
"Unemployment Rate Soars, Payrolls Fall," Taipei Times, November 4, 2001, p. 11.
—Marie L. Thompson