Eaton Corp. is dramatically boosting research and development spending, and is looking for a bigger payoff in increased sales.
'We're trying to focus on something that's going to give us a $50 million hit or more,' said Larry Oman, senior vice president for automotive components. 'We're trying to develop a much more rigorous process that makes certain our r&d dollars are focused where we're going to get a hit and increase the hit rate.'
Last year, Eaton invested $319 mil-lion in r&d projects corporatewide, up 18 percent from 1996. The Cleveland-based company draws 28 percent of its sales from the light-vehicle, heavy-truck and off-highway components markets. It also has a controls business that makes auto parts.
Eaton's research process begins by getting a feel for what an automaker will pay for a component.
That, Oman said, helps assure that 'you don't arrive at the end of the thing with a $200 product with a great whizzy technology that nobody wants to buy unless they can get it for $75.'
Eaton looks for a payback in research spending in three to five years, depending on how much tooling and other capital spending was required to make the product. Quarterly reviews of projects, against a background of market, pricing and technology measurements, determine whether a new product is continued or killed.
Last year, Eaton's vehicle components business reported an operating profit of $455 million, after a $6 million restructuring charge. The company makes a variety of components, including valve train parts, differentials, clutches, superchargers and transmissions.