The Timken Company (NYSE: TKR) has announced it is realigning its organization to improve efficiency and reduce costs.
“We are taking actions to align our organization for effectiveness and to right-size our cost structure to increase our competitiveness in today’s global markets,” said James W. Griffith, president and chief executive officer. “As we pursue long-term value creation for our stakeholders, we believe this reorganization will simplify our operating structure, improving our effectiveness in managing through these challenging economic times.”
The company has targeted pretax savings of $30 to $40 million in annual selling and administrative costs. The company expects implementation of these savings to begin immediately and essentially be completed by the end of the third quarter. The impact of this cost-saving initiative was included in the earnings estimate for 2009 the company provided in January. Full-year savings will be achieved in 2010. As the company streamlines its operating structure, it expects to cut its salaried workforce by up to 400 positions in 2009, incurring severance costs of approximately $10 to $15 million.
Over the past 15 months, the company has lowered production and cut its manufacturing workforce by approximately 2,500 positions. Other steps, such as short work weeks and reduced operating hours, have been taken to better align output to demand. Additional permanent adjustments will be made as necessary to right-size capacity to market needs.
“We’re balancing capacity through reduced labor and output,” Mr. Griffith said. “Our focus now is to align our administrative and sales functions to be more effective in today’s challenging environment. As we operate with a leaner organization, we will continue to focus on improving profitability and cash flow – as we strengthen the Timken brand across the globe.”