CLEVELAND, Ohio (Jan. 15, 2001) — Eaton Corp. said it plans to take a $55 million charge in 2001 to restructure its worldwide truck components business and weather “unprecedented volatility” in the heavy truck market, according to Alexander Cutler, Eaton’s chairman and CEO.

Fixed capital intensity of the business will be “significantly reduced” and the organization structure will be simplified, he said, including 100 additional layoffs among the salaried workforce at the truck components group. The business unit has pared 1800 positions in the past year.

Eaton said it will go ahead with construction of a new plant in San Luis Potosi, Mexico, but completion will be postponed by about six months. It will cease production of its European “S” Series transmissions sometime this year and may close the Eaton S.A. facility in St. Nazaire, France.

The medium-duty transmission plant in Aycliffe, U.K., will be closed by mid-year as part of a restructuring announced earlier. All operations will be transferred to Eaton’s plant in Gdansk, Poland.

“Eaton’s Truck Components business needs to evolve to a business model that is less vertically integrated, takes better advantage of our global presence, and focuses on those areas where Eaton brings genuine distinctiveness to the marketplace,” said Cutler.

The company expects to take $40 million of the restructuring charge in the first quarter, with the remaining $15 million taken through the year. Recurring annual savings from the restructuring are anticipated to reach $40 million with a payback period of approximately 18 months. When the restructuring is completed in two or three years, “the result will be a heavy transmission business that is far more flexible, with 20% less fixed capital employed,” Cutler said.