Timken to exit unprofitable lines
CHICAGO (Reuters) - Timken Co (TKR.N: Quote, Profile, Research), a maker of bearings and specialty steel that still gets a large portion of its revenues from the automobile industry, is looking to exit some unprofitable businesses if it cannot fix them this year, Timken’s CEO said on Tuesday.
The company, in pricing negotiations with auto manufacturers, is pursuing “aggressive” price increases to recover rising commodity prices, James Griffith told the Reuters Manufacturing Summit in Chicago.
“We are seeing a shift in pricing that gives us confidence that we are going to see a short-term fix,” Griffith said.
The company has shifted its emphasis away from restructuring its auto operations to a “fix or exit” approach. Between a fifth and a quarter of Timken’s auto contracts come up for renewal in any given year, Griffith said.
“By the end of 2008, you will either see a radical change in profitability of that business or you will see steps that cause us, that reflect us, moving out of some segments of that business.”
Griffith said high raw material prices were otherwise driving profitability at the company, by boosting industrial demand for its products and services, and through its steel business.
The company has forecast 2008 profits in a range of $2.75 per share to $2.95 per share, up from $2.40 in 2007. Its strategy relies in part on targeting faster-growing sectors like aerospace, energy, mining, and heavy industry, where demand for “aftermarket” parts and services is strong.
Timken has recently unveiled a new corporate structure, made up of the steel business on one side and a bearings and power transmission business on the other.
Mobile industries, which makes up the biggest piece of the bearings and power transmission unit, gets more than half its sales from the unprofitable auto and light truck segments, partly offset by profitable rail, off-highway machine and other segments. Continued…
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