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Posted by: Joe Weber on May 18
It can be awfully tough these days to believe in one of America’s core promises: that tomorrow will be better than today. Pick up any newspaper or tune into any newscast and the odds are that bleak news about the economy, war or the latest character assassination in politics is getting far better play than upbeat developments.
But if you look beyond the dire headlines, there is a solid case to be made for optimism. Sure, an economic recovery will take time and there will be a step or two back for every two forward. Still, history suggests that a turnaround is inevitable. No matter how jagged the lines on the graph are, the trend line has always been up. Even now, there’s no reason to believe that won’t continue to be true.
We plan in this blog to call attention to forward motion and to share the news with you. Don’t expect us to be Pollyannas; we’ll keep an eye on the clouds for you, too. But we will point out the sometimes brilliant skies that so often get overlooked. We will mark the developments that give one reason to believe in the idea of progress.
We hope this will be an interactive affair. We want to hear your thoughts on the pieces we run and your suggestions on what we should be sharing with all our readers. Please join the conversation which we begin, fittingly, with word on how one of nature’s most powerful forces is being harnessed to help one company weather this economic storm:
Even while much of its specialty-steel business remains hobbled by the recession, Timken Co. can point to a surprisingly lively growth spot: wind. As sleek, towering windmills rise by the thousands across the U.S. and Asia, the Canton (Ohio) company is racing to add plants that can churn out some key parts of the machinery inside the big windmills.
“We’ve taken dedicated engineers, the best we have, and put them into a group to go after the wind-energy market on a global basis,” says Hans Landin, who heads the wind business at the company. The company now has over 2,000 people working in facilities serving the wind-gear operation, and that is expected to grow. That is out of about 24,000 employees overall.
Timken makes bearings, giant ring-shaped or cone-like devices that sit in gear boxes high atop the windmill towers. As massive propeller-like blades turn hundreds of feet off the ground, the rotating bearings smooth their movement and help transmit the motion to gears that link to generators that convert the movement into power.
With governments across the world pushing for the growth of such alternative energy sources, thousands of such wind turbines – as the windmills are properly called – are sprouting atop hills, in cornfields and even above ocean platforms worldwide. Nearly 20,000 turbines were put up last year alone, Timken officials say.
Just how many of them boast Timken gear isn’t clear. But, expecting that many more turbines will rise in coming years, the company has spent about $200 million in wind-related investments in the last three years to build and equip factories to turn out the gear. The company last year expanded its Tyger River plant in Union (S.C.), to better serve the North American market. For Asia, Timken early last year expanded a plant in Wuxi, just west of Shanghai, and it and a Chinese partner early this year broke ground on a plant in Xiangtan, located in China’s Hunan Province. It also opened a plant last year in Chennai, India. For Europe, Timken in 2007 has expanded facilities in a Romanian plant.
The plants, which together will employ over 2,250 workers, make for a bright spot in an otherwise depressing picture for the company. Timken is cutting some 7,000 jobs, and slashing pay for many of those staying on. Warning of likely strains for the rest of 2009, it recently said it would cut its annual dividend in half, to 9 cents a share. After a banner year in 2008, with a 22% rise in net income to $267.7 million on an 8% rise in sales, to $5.66 billion, it lost money in the closing quarter of last year and barely stayed in the black in the opening quarter this year. Timken's stock, above $38 a share last spring, now trades below $16.
But at the wheezy old age of 110, this outfit is making some forward-looking moves that could serve it well once we get to the backside of these tough times. As recently as five years ago, executives say, supplying equipment to carmakers accounted for some 40% of its sales. That now accounts for less than 25% of sales. “We quite purposefully decided to walk away from the automotive business,” says Landin.
For now, serving up equipment for the wind-energy business is still a tiny part of the company. Executives won’t say just how much it contributes in revenues, but note that it is part of a $1.3 billion-a-year group that boasts a 19.3% profit margin. They expect sales in the group, driven by the wind business, to grow sharply in 2010 based on such deals as a $30 million bearings order from the Chinese global player, Nanjing High Speed Gear Manufacturing Inc., and $100 million in exports expected from the Xiangtan plant. This is a company, like the wind-energy industry, that just may have a nice breeze at its back.
BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.
See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.