Eaton Corporation Business Report FY2010

Business Highlights

Financial Overview

(in million dollars)

	FY2010	FY2009	Rate of change (%)	Factors
Overall
Sales	13,715	11,873	15.5	-
Gross profit	4,082	3,091	32.1	-
Net income	929	383	142.6	-
Automotive
Sales	1,547	1,229	25.9	-The increase reflects a rebound in global automotive markets, with growth in United States markets exceeding growth in non-United States markets.
Operating profit	163	(10)	-	-Operating profit in 2010 increased from 2009 primarily due to the increase in sales in 2010, net savings resulting from workforce reductions taken in 2009, and manufacturing efficiencies resulting from higher sales volumes.
Truck
Sales	1,997	1,457	37.1	-The increase in core sales reflects the sharp rebound in global end markets, led by a recovery in NAFTA heavy-duty truck markets and strong markets in Brazil truck and agriculture vehicle production.
Operating profit	245	39	528.2	-Operating profit in 2010 increased 528% from 2009 primarily due to the increase in sales in 2010, net savings resulting from the workforce reductions taken in 2009, and manufacturing efficiencies resulting from higher sales volumes.

Contract

-The Company has supplied hybrid system to Daimler Trucks' Mercedes Benz BlueTec(R) Atego Hybrid. The company supplies a hybrid system including the lithium-ion battery pack and electric motor. (From a press release on October 11, 2010)

-The Company will supply its MLocker mechanical locking differential for the new SUV Haval H5 from Great Wall Motors. MLocker, featuring a carbon friction disc technology, enhances traction and durability. (From a press release on September 22, 2010)

Outlook for 2011

-As of late February in 2011, Eaton estimates its end markets for all of 2011 will grow 9%, with markets in all six segments registering growth, the first year since 2006 in which the markets for all of its segments have grown.

-End markets for the Automotive segment are expected to grow 6% in 2011, with United States Automotive production up 7% and non-United States production up 5%.

-End markets for the Truck segment are expected to grow 20% in 2011, with United States markets up 40% and non-United States markets up 7%.

R&D

R&D Expenditures

(in million dollars)

	FY2010	FY2009	FY2008
Overall	425	395	417

-Over the past five years, the Company has invested approximately 1.9 billion USD in R&D.

R&D Facilities

-The Company has opened a new innovation center in Shanghai, China. The center, located at Eaton's Asia Pacific regional headquarters, will initially focus on the areas of vehicle electrification and smart grid. (From a press release on October 18, 2010)

Technological Alliance

-The Company announced the formation of the New Energy Sustainable Transportation International Alliance (NESTIA), with six member companies, to accelerate the deployment of electric vehicles in China. Other participants include two US firms - IBM and a leading engineering services provider AECOM Technology Corporation as well as Chinese partners - vehicle manufacturer Beiqi Foton Motor, lithium ion battery maker CITIC GUOAN Mengguli Corporation (MGL) and motor provider Zhongshan Broad-Ocean Motor Co., Ltd. NESTIA's first project is to design and deploy electric buses that will utilize components from Eaton, Broad Ocean and MGL. Its activities will include the development of electric vehicles and EV service equipment and the implementation of public EV charging infrastructure. NESTIA is part of a broader alliance between Eaton, AECOM and IBM to advance the adoption of clean energy vehicles. (From a press release on August 30, 2010)

-The Company entered into technical collaboration with Takaoka Electric Manufacturing Company, Ltd. of Japan in the business of electric vehicle (EV) chargers. Based on the agreement, Eaton will manufacture and sell DC Quick Charger, which incorporates EV charging method called "CHAdeMO", for the North American market (United States, Canada and Mexico). Takaoka Electric provides electrical equipment and power distribution solutions. (From a press release on April 28, 2010)