U.S. Bearing Maker On a Roll in Bid to Open Japan Market : Trade: Timken Co., known for quality, innovation and low-cost products, is among 20 American firms chosen for a five-year Commerce Department effort to boost exports.
If anybody ought to be able to sell to the Japanese, experts say, it is Timken Co.
“They’ve got quality out the gazoo. They’ve got product innovation out the gazoo. They’re the low-cost producer. They do everything right,” says Robert Orsini of the Corporate Futures Group, a Cleveland consulting firm.
Now the venerable, family-run maker of antifriction bearings will get its chance. Timken is among 20 U.S. firms chosen to take part in a concerted five-year campaign sponsored by the Commerce Department to win a spot for their products in the notoriously tough Japanese market.
Not that Timken hasn’t been trying. The 92-year-old firm, its roots deeply planted in the industrial Midwest but its branches entwining the globe, opened a Tokyo sales office in 1974. It is staffed by 10 Japanese nationals.
Yet despite Timken’s claim to be the world’s highest-quality manufacturer of its obscure but vital products--an assessment shared by many industry observers--the Canton firm says it has managed to nail down less than 1% of the Japanese market. At the same time, bearing makers from Japan have set up shop and begun gaining market share here.
Nearly invisible to the public, the bearing industry has been a trade battleground. Counterfeit bearings have been rolling into the country, triggering FBI investigations. Timken and other firms have won some big anti-dumping cases against Japanese and other foreign makers.
This all makes Timken a logical candidate for the Commerce Department’s latest export initiative, called the Japan Corporate Program, which embraces a cross-section of would-be U.S. exporters.
The idea is for political and diplomatic pressure to grease the skids, helping U.S. business agents obtain access to Japanese customers. That way, the American firms can win the opportunity they say they’ve been denied--and show that they can beat their Japanese competitors.
In return for promises that they will avoid the mistakes Americans often make in dealing with Japan--failing to promote their products in the Japanese language, for example--the firms will get beefed-up Commerce Department help. That will include help and advice on meeting customers, setting up distribution, franchise or joint-venture pacts, and getting past such obstacles as patents, trademarks and government standards.
The program may virtually guarantee success for the chosen handful of firms. The credibility of both nations seems to be on the line as the Japanese try to prove that their markets are open and the Bush Administration carries out its emphasis on exports instead of protectionism.
There has been modest criticism of the narrow scope of the assistance program and the favoritism it shows to the selected firms. But Commerce officials predict that it will pave the way for exports to Japan by hundreds of other companies.
“We believe the program will influence Japan’s perception of American firms’ ability to compete and U.S. business’ perception about the limited prospects for entering the Japanese market,” Commerce Secretary Robert A. Mosbacher says.
So far, so good, says Timken Chairman W. R. (Tim) Timken Jr., who was in an entourage that traveled to Japan with Mosbacher this month. Timken met with every company he asked to see, held “frank talks” with the Ministry of International Trade and Industry and joined in an unexpected meeting with Prime Minister Toshiki Kaifu.
“We perceived a significantly different attitude on the part of MITI,” says Timken, referring to the agency that guides Japan’s trade policies. “They helped us make appointments with customers we hadn’t had many dealings with. They invited eight (to a cocktail party), and all eight showed up. I believe they are definitely coming around.”
Timken, 52, representing the fourth generation of his family to run the publicly held company, holds the view that the Japanese need to buy American products to be competitive themselves.
At a time when the quality of American goods remains under fire, Timken considers itself the world’s best maker of bearings. Indeed, it has set itself the immodest goal of becoming the world’s best manufacturer of anything--though it is not clear how it intends to prove it.
“All that quality crap never applied to us,” Timken said in an interview at the company’s well-worn headquarters in Canton, a manufacturing town better known as the birthplace of the National Football League.
The antithesis of glitzy, the company has been “Japanese” in style from its beginnings in 1899. It has invested heavily in technology and new plants and equipment, refined and improved its products, eschewed diversification, globalized, exported and taken the long view from what might be the most Spartan suite of executive offices in the Fortune 500.
“Timken is a manufacturer that represents the kind of girl your mom always hoped you’d bring home,” analyst Orsini says. “The only thing wrong is they’re in the wrong business.”
Timken’s business is tapered roller bearings. Period. True, the company bought a small precision-bearing firm last year. And it produces steel too--but mainly for making bearings. This narrow-to-nonexistent product mix makes the company heavily dependent on the troubled U.S. manufacturing sector, especially autos.
But Timken maneuvered its way through the 1980s, surviving offshore competition and pressure from U.S. plants operated by the Japanese, Swedes and Germans. For the second time in a decade, it has embarked on a huge modernization program to upgrade its bearing production.
Founded by retired carriage maker Henry Timken in 1899 to build and sell his own invention--the tapered roller bearing--the company won a place on the wheels of Henry Ford’s Model T and hasn’t stopped rolling.
Until Henry Timken came along, wheels routinely fell off when vehicles rounded a corner because their round ball bearings took the full weight at one point and couldn’t support the shifting load.
The Timken family has been making the same basic product ever since: a cone-shaped steel ring embedded with tapered, cylindrical rollers. The tapered roller bearing, used in countless products, comes in about 26,000 versions, including one that goes for about $90,000 and stands seven feet in diameter.
Tim Timken--Henry’s great-grandson--likes to hand out little chrome-plated roller bearings to visitors as mementos. In them, he finds the meaning one might expect from a proud manufacturer.
“This thing is made of the finest alloy steels. It’s machined to tolerances of tens of thousandths of an inch. It lasts longer than the car. And we sell it to the auto companies for $2,” he says. “My wife and I went out for a pizza the other night. We paid $12, and it was gone in 15 minutes. We are providing the world a real value.”
Timken has performed a few stunts to promote its roller bearings over the years: In 1930, it built a full-sized locomotive with bearings that enabled three women pulling on a rope to move it down a track. But mostly the company attracts attention with its long-term strategy.
In 1981, at the nadir of the manufacturing recession, Timken announced that it would spend nearly $500 million--about half its annual sales--on a new steel plant to control the quality of the metal it uses in its bearings. In relative terms, that was like General Motors building roughly 100 new assembly plants.
The “clean steel” from the state-of-the-art mill is said to be a major reason that the life of the company’s bearings has more than doubled. Yet prices, thanks to efficiencies that include pay concessions by workers, are about what they were 10 years ago.
“It’s an outstanding little company with good foresight and a lot of courage. The steel plant is proof of that,” says Henry Steinhagen, analyst at Seidler Amdec Securities in Los Angeles.
If they’re as good as reported, Timken roller bearings should be tailor-made for the Japanese market. Tariffs and other obstacles to imported bearings have been eliminated, and Tim Timken notes that his customers are not consumers, but sophisticated engineers who should appreciate his products.
But owing to what Timken describes as cultural and technological inertia that has outlasted Japan’s long era of protecting a fledgling bearing industry, the Japanese buy from their old industrial colleagues at home. Moreover, they cling to alternative gadgets proven inferior to the tapered roller bearing, says the man whose flesh and blood invented it.
The tapered roller bearing represents one portion of a bearing market in which Japan today exports 30% of its production and imports just 7% of its needs. In the United States, those ratios are reversed.
Timken, estimated to hold three-fourths of the $1-billion American market for tapered roller bearings, also claims 35% of the world market outside Japan. Getting that much in Japan would mean $200 million to $250 million in annual sales on top of today’s $1.7 billion--well worth the effort.
To get there, the company will tend to its knitting as usual, betting that the Commerce Department will help the Japanese find the path to truth and reduced friction.
Says Tim Timken: “We’re going to continue to push the state of the art in tapered roller bearings.”
