Much of the productivity gains were achieved through investment in automated machinery.

"But it wasn't only capital," says Zugaldia. "It's also making things very differently -- reorganizing the way we operate on a day by day basis -- what the Japanese call kaisen. We removed medium management levels, set up teams and changed the way we use the people. One person can serve more machines now. By the end of this process we'll be making in two lines what we used to make in four. The attitude of the employees toward the changes was extremely positive."

The Navarran character is very receptive to mutual trust, says Zugaldia, and that has important implications for employee commitment to reach company goals. "It's very important that your people understand your business and the market pressures it faces," says Zugaldia. "I find that when you agree to something around the table -- no matter how hard the negotiations have been -- the people are reliable in their commitment to achieve the goals.

The realities of the marketplace are that most of the axle business in Europe is captive -- that is, the OEMs make the axles themselves. So Eaton has to show a cost advantage big enough for the OEMs to cover the social costs associated with outsourcing production.

Eaton, like other companies in Navarre, taps a considerable pool of temporaries in its work force. There is no payment by the company for laying them off. They can be hired for night and weekend work as well as week-day and holiday work, thus extending the number of days in a year the plant is up and running. They can be used for seasonal work, or they can stay in a temporary capacity for two years or more.

The company typically works 15 shifts but has scheduled as high as 21. When heavy production demands dictate, the company calls on Navarre's Human Resources Dept. to look into its database of potential workers. Thus the company can keep a stable permanent work force and in times of heavy workload fill in with temporaries.

Continuous training was another key to productivity improvement. When Eaton assessed its situation in 1991, it clearly identified that one of the weaknesses in the operation was training. "We have made a very big effort in training," says Zugaldia.

While most of the training is conducted in house, the company does use the services of Navarre's many training institutions. "There's a very good offer for specialized training for the plants, with the course tailored to the needs of each plant," says Zugaldia. "There are also a lot of grants for training."

Eaton moved its axle engineering function from the UK to Spain in 1993. Three key factors in the decision were the Navarre factory's low employee turnover, employee satisfaction (with wages, work environment, incentive schemes, employee involvement) and low accident rate.

"This has been my personal battle -- to demonstrate that we had good universities and engineers and could handle the projects as efficiently or more so than in the UK," says Zugaldia.

As manager of both the UK and Navarre factories, Zugaldia is in a unique position to weigh the strengths and weaknesses of workers in the UK vs. Navarre. "The average British employee is very disciplined," he says. "Once you set up a system, the British employee will continue doing his task for ages. The Pamplona employee, on the other hand, is certainly more creative at finding process improvements and reacts very fast to solve problems. Because our employees are more creative, the inclination is to change procedures more often. If you're asking for continuous process improvement you want that creativity in the work force. I believe that's one of our core competencies."

Zugaldia cites another advantage in the Navarre work force "The people here are tremendously dedicated," he says. "We saw one good example recently when a machine failed on the weekend. The maintenance employee was supposed to work eight hours, then call someone to come in and continue the repair. He worked 32 hours straight until the problem was solved. That's typical behavior here -- people don't carry watches; they carry the company logo in their brain."