Why Did Eaton Sell Its Hydraulic Business And What Impact Will It Have On The Hydraulic Industry?

Eaton Corporation is an American multinational power management company aiming to providing customers with effective, safe and sustainable solutions for the management of electrical power, hydraulic power and mechanical power. Its main products are hydraulic valves, hydraulic pumps, hydraulic cylinders, hydraulic differentials and hydraulic power units.

 

Why did Eaton sell its hydraulic business?

 

First, sales of the hydraulic business in 2019 were $2.2 billion, and profit of the hydraulic business in the fourth quarter was $54 million, down 36% from the same period last year. This means that Eaton Hydraulics is losing its advantage and its profits are not as big as they used to be. What’s more, it's going to keep going down.

 

 

Second, orders fell 11% in the fourth quarter. Take Eaton cycloid motor for example, Eaton took the first place in the country before, but now of course it is still very good, but the space for domestic enterprises has been very small. There are rumors for a long time that Eaton would shrink its hydraulic businesses. It was just a rumor before but now it turns to be truth.

 

Third, in 2016, Eaton’s hydraulics sales revenue was $2.22 billion, accounting for 11% of the entire Eaton Group. Since 2014, Eaton's revenues have been falling every year, and the hydraulic sector is not likely to get better. It is estimated that the hydraulic business may account for less than 10% of the group's revenues in 2019. That's why the hydraulic business is being sold. It's less profitable and has less business. In other words, it's not profitable.

 

Eaton not only sold, it also bought three businesses, invested $1.2 billion and acquired a Power Distribution, Inc. Eaton's CEO said the decision was an important step in Eaton's transformation into a growing, consistently profitable business. In other words, getting rid of the business that doesn't make money and moving to the business that makes money.

 

This shows that a company of Eaton's size is not optimistic about the future of hydraulics. The fall in Eaton's profit was due to the continued weakness of the global market for walking machinery and the reduction of inventories at original equipment manufacturers and dealers. Because of the bad situation, everyone tries to reduce the inventory, while for Eaton, it believes in zero inventory, if the supplier does not establish inventory, it will definitely affect the delivery time of Eaton products.

 

Our domestic hydraulic enterprises should also grasp the development trend of the industry, it is estimated that the hydraulic industry will experience a winter in the future. We should be prepared for the winter. In particular, the impact of the epidemic may bring many negative factors.