Timken reiterates its values, for the U.S. record
Canton, OH -- Recent political advertising leading up to the forthcoming presidential election in the United States...
Canton, OH — Recent political advertising leading up to the forthcoming presidential election in the United States, along with certain news reports, have raised the concern of the Timken Company of Canton, Ohio. In response, the company released the following statement on Oct. 23, 2004, in order to clarify its position.
“The Timken Company is a successful example of a U.S.-based global manufacturer that is transforming itself not only to survive — but also to thrive. One thing that has not changed, however, is the fundamental integrity that has been a core value of this company since its founding more than a century ago.
“For 105 years, we have been recognized for our strong sense of ethics. We are concerned that recent political advertising and news reports are casting a shadow on our integrity, and we want to set the record straight.”
Global competitiveness: “The rules of manufacturing have changed. American manufacturing has to change with it in order to survive. Customers and competitors are global, and competition is fierce. All of our facilities must be globally competitive to survive.
“The undeniable fact is that, despite significant investments and our associates’ best efforts to improve productivity, our Canton bearing operations are not competitive, as they exist today. For more than a year, we have engaged in good-faith discussions with the United Steelworkers of America about the core issues affecting the future of these facilities. Those talks are continuing. It is a business decision — not a political issue.
“We have an obligation to our customers, associates and shareholders to manufacture products in competitive plants. This is not an issue of sending jobs overseas. About 80% of the work from the Canton plants would be transferred to other more competitive Timken plants right here in the United States.”
Growth: “Timken operates in global markets. Being competitive means being able to secure new business in the markets we serve. If we fail in this effort, it will mean that our customers will buy from other sources — ones that are based overseas.
“Much has been made of the fact that we are building a plant in China; this has no connection with the decision to close the Canton bearing operations. The plant is a response to our success in winning new business in the rapidly growing Chinese market. The Timken Company sales to China have been growing at a rate of 35% over the past three years, and being there to serve local customer demand is critical to our success.”
Tax matters: “The Timken Company has received no special federal tax advantages. Because we paid approximately $371 million to fund our pensions over the past three years, benefiting our 15,000 U.S. associates and 12,000 retirees, we properly deducted the entire amount for income tax purposes. Other valid deductions offset the remainder of our federal tax liability for 2001 and 2003. However, we continue to pay millions in state, local and other taxes.”
Defense contracts: “Aerospace sales, especially to the military, are highly regulated. In keeping with our nation’s vital security needs, since 1933 the Defense Federal Acquisition Regulation, known as DFAR, has required that certain materials used in national defense be made by North American-based companies. As a manufacturer of highly engineered aerospace bearings, Timken in many cases is the only qualified North American producer of certain specialized parts for military aircraft. Accordingly, the Department of Defense turns to Timken. This small but important part of our business has shown only single-digit growth in the past four years.”
Payments under the Continued Dumping and Subsidy Offset Act: “Timken has received payments under the Continued Dumping and Subsidy Offset Act (CDSOA). This law was introduced by Democratic Senator Robert Byrd of West Virginia, passed by a bi-partisan vote of Congress and signed into law by President Clinton. It should be noted that President Bush has consistently opposed this law and recommended its repeal.
There is absolutely no connection of the steel tariffs invoked by President Bush to the payments received by Timken under CDSOA. In 2002, a large part of the U.S. steel industry faced bankruptcy due to foreign competition. In response, Congress passed laws imposing fines on foreign steel makers that dumped steel in the U.S. market. Given the highly specialized nature of the Timken business, most of our products were not covered or exempted. Section 201 had virtually no impact on our business.”
Commitment to Canton: “Whatever the outcome of our local negotiations over the future of the Canton bearing plants, Timken will remain a very significant presence in Canton and Stark County. This is our global headquarters and the home of steel operations as well as our state-of-the-art technical centre. In the lpst two years, we have added 170 professionals and technologists to the local workforce and have openings for at least 100 more.”
In conclusion: “Timken, like all U.S.-based manufacturers, will continue to face many challenges in the evolving global marketplace. Continuously becoming more competitive will help keep Timken a formidable player around the world. We will continue to change — as we have over our 105 year history — while remaining true to our core values of ethics and integrity for the benefit of our customers, shareholders, associates and communities.”
In other news, Timken on Oct. 25, 2004, announced sales of $1.1 billion for the third quarter of 2004, up 17% compared with the prior year. For the first nine months, sales were $3.3 billion, an increase of 20% from the prior year. Earnings in the third quarter were $0.19 per diluted share, compared with a loss of $0.01 a year ago. Excluding special items, adjusted earnings per diluted share were $0.27, compared to $0.04 last year. This was consistent with prior company estimates of $0.25 to $0.30 per diluted share, excluding special items. These special items, which related primarily to the Torrington integration, included $11 million of pretax expense in the third quarter of 2004, compared to $8 million of pretax expense a year ago.
Timken is a global manufacturer of highly engineered bearings and alloy steels and a provider of related products and services with operations in 27 countries.