| Robert E. Brooks |
Customarily, the FORGING Buyers Guide is my opportunity to expound on the importance of commerce to promote prosperity, both economic and social. It’s also an opening to remind readers of the critical role that supplier companies have in the progress of the forging industry, and the importance of supporting their efforts. These ideas are beyond obvious; they are near certainties.
But, certainty is hard to find these days. Since late 2008, businesses (and individuals too) have been striving to regain a measure of confidence about their economic stability. Most readers will recognize The Timken Co., if not because it is a supplier of quality steel bars used to produce forgings for oil-and-gas, heavy machinery, or power-generation customers then because it is one of the longest-established brands in U.S. manufacturing. Timken’s steel, bearings, and various other products project the quality and ingenuity of American industry around the world.
After three years of a lackluster economy we can see Timken is doing better than many other companies. Its stock charted a steady upward pattern of over most of the past 12 months, and a series of acquisitions since mid 2010 (QM Bearings, Philadelphia Gear, Drives LLC) prove Timken’s determination to grow: to expand its portfolio of industrial products and to develop new business by accumulating assets that have value the current market does not recognize.
Things have been less steady since late summer. Timken’s growth — along with that of practically the entire U.S. economy — has been much less steady. The possibility of a recession (two consecutive quarters of declining GDP) is strong now. The U.S. economy has stopped growing, and to make matters worse there is no certainty about how to reverse this reversal.
Now, no one is entitled to “certainty,” and as individuals we may find ways to grow despite adversity. We may look back on the experience as “character building.” But, corporations don’t have that alternative: companies must grow or else fade into irrelevance, or out of existence.
Since 2009, many businesses have worked with determination to reduce operating expenses and build up cash reserves to strengthen their financial positions, hedging against unknown developments. Consumers’ lack of confidence reduces their revenue prospects. They must account for higher prices for raw materials and energy, and for the possibility of higher labor, tax, and regulatory compliance costs. It’s difficult to expand an operation or increase the size of a workforce without understanding the full cost of such moves. We may refer to this atmosphere as “uncertain,” but businesses have to account for its likelihood.
Timken is among the companies that have managed uncertainty well. It’s adding an inline forging press at the Faircrest Steel Plant in Canton, OH, which will distinguish its bar offerings in the North American market. Now, the company is seeking a bit more certainty before proceeding with a further $225-million capital improvement at Faircrest, with a new ladle refiner and large bloom caster, to increase steel bar capacity and product selection.
Investments like these help all of us prosper. The tax bases of state and local governments will be enhanced by the capital improvements, and workers will benefit by the increase in employment to staff the operation.
But, Timken needs assurance that the expansion will gain environmental and other regulatory clearances, and that the workers’ union will negotiate a reasonable labor agreement for the new operation. More generally, Timken needs to know that the industrial market will support its decision to expand. Like most businesses, and like all of us, the company isn’t seeking any extraordinary promises, merely an end to the uncertainty.