The eBearing News
April 24, 2001
Timken Unveils Second Consecutive
Global Restructuring Program
copyright © 2001 eBearing Inc.
In a global restructuring announced last Tuesday, The Timken Company
(Canton, Ohio) is implementing programs that, "...rank among the most
far-reaching in our history," said Jim Griffith, President and CEO.
This is Timken's second global restructuring effort, beginning just
as the prior program is finishing. Begun in early 2000, it cost
$55 million and focused on the company's structural initiatives.
• read the first 2000 Timken restructuring article
• read the second 2000 Timken restructuring article
The new effort is primarily a strategic refocusing of manufacturing
operations, on a global scale. Direct and indirect cost and asset
reductions, driving to
productivity gains, are key areas addressed by the new programs.
Mr. Griffith said, "Indeed, this refocusing of manufacturing
operations will build on the organizational changes that were implemented
last year to enable us to forge closer links for our customers
between cost and value. We are at an inflection point and slowing
market growth makes this the right time to take this step."
From a financial viewpoint, reducing employed and direct assets,
including inventories, helps push up the various operating efficiency ratios.
SKF (Gothenburg, Sweden) has been engaged in a similar program, aggressively
stripping away indirect assets and costs, to the point of recently
eliminating the entire IT department in favor of outsourcing; it has
also sold, then leased back, several of its buildings.
Over the next two years, Timken's programs are expected to cost the
company $100 million to $110 million, resulting in annual pretax
savings of approximately $100 million.
Timken expects that the global manufacturing rationalization will
result in closing two plants, selling a third, and reducing total
manufacturing-dedicated floorspace by more than a million square
feet worldwide. As a result, approximately 1,500 people will lose
their jobs.
A few of the program's other action items:
• Creating focused factories for each product line or
component. This will involve awarding production of an item
or group of items to the plant which is the global
low-cost production facility. The chosen facility will
then become the only source for that item.
• Replacing the production of cups and cones by machining
them from 52100 seamless tube to machining them from forged
blanks. Timken recently entered into a joint venture with
SKF in Brazil to supply forged blanks to facilities there.
• Implementing quality and productivity tools and systems such
as the Six Sigma quality programs embraced by Motorola and GE.
Mr. Griffith said, "From the launch of our transformation last
year, our chief goal has been to achieve growth by developing
more value-added products and services for our customers around
the globe. However, our profitability has not been sufficient to
generate cash adequate to fund that growth. Improving operating
margins and generating more cash are keys to fueling growth --
growth that also will best serve the interests of our company's
associates and shareholders."
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