MRO Today - Manufacturing Industry News Archives

Manufacturing Industry News:
News from the week of Sept. 6, 2004

Timken to sell Kilian bearing businesses
Chemical maker found guilty for Clean Water act violations
Regal-Beloit completes purchase of GE Commercial motors
Tropicana factories return to operations following storms
Snowshoe manufacturer will trek to China
Ergonomic standards announced for poultry processors
Jobless claims decline in recent week
NAM announces first-ever trade mission to China
Lack of e-mail retention can cost companies
NAM Labor Day report bodes well for manufacturers
Factory orders increase in July
Unemployment falls to 5.4 percent in August
Devcon wins American Eagle Award

Timken to sell Kilian bearing businesses
The Timken Co. signed a definitive agreement to sell Kilian Manufacturing Corp. and its affiliate, Kilian Canada ULC, to an affiliate of Genstar Capital L.P., a private investment firm, and members of Kilian's management team.

Kilian produces machined-race bearings, including ball and roller bearings and assemblies, for broad industrial and automotive applications. In 2003, the business had net sales of approximately $40 million.

"Kilian is an excellent business, and we are pleased to have found a strong buyer that will enable it to continue to grow," said James W. Griffith, Timken president and CEO. "While Kilian is not a strategic fit for The Timken Co. since its products and applications are outside our traditional areas, we believe Kilian will benefit from a management team focused solely on its products and its industry. At Timken, we will continue to focus on achieving profitable growth worldwide by providing innovative solutions, products and services that meet the unique needs of our customers."

The transaction is expected to close in October 2004. Timken expects to use the proceeds from the sale of Kilian to pay down debt and for other corporate purposes.

"We are very excited about the potential of this business," said William Duff, president and chief operating officer of Kilian Manufacturing Corp. "Kilian has a wide customer base of nearly 500 OEM's, expertise in designing custom solutions for its large customer base, and strong engineering and manufacturing capabilities. We expect to leverage all of these strengths to further enhance Kilian as a successful, profitable enterprise."

"With management's experience in building basic industrial businesses, Genstar believes that we can further build upon Kilian's market-leading position in North America to capitalize on new opportunities to deliver growth both organically and through add-on acquisitions and ultimately deliver value for Kilian's customers and shareholders," said Jean-Pierre L. Conte, chairman and managing director of Genstar Capital L.P.

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Chemical maker found guilty for Clean Water act violations
Industrial Zeolite Ltd. and its former plant manager Emanuel Drouin were each sentenced Sept. 1 in U.S. District Court for the Western District of Louisiana for violating the Clean Water Act.

LeCompte, La.-based Industrial Zeolite manufacturers a product used in the production of detergents and other products. In February 2004, the company was charged with releasing 1.1 million gallons of wastewater exhibiting a high pH into a ditch that flows into the Callahan Bayou.

Releasing water with a high pH can harm fish and wildlife which live in and use the bayou.

The company was fined $1 million and required to pay nearly $460,000 in remedial payments. The remedial payments will be used to offset the cost of the prosecution and provide local government agencies with training and equipment to deal with hazardous material spills.

The company also was required to remediate damage caused by the spill.

Drouin will serve five months in prison and five months in home confinement. He must also pay a $10,000 fine.

Both defendants were also sentenced for the same offenses in the 9th Judicial District Court of the State of Louisiana. The defendants received the same sentences imposed in federal court and the sentences will be served concurrently.

The case was investigated by the Baton Rouge Office of Environmental Protection Agency's (EPA) Criminal Investigation Division and the Rapides Parish District Attorney's Office.

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Regal-Beloit completes purchase of GE Commercial motors
Regal-Beloit Corp. completed the acquisition of General Electric's (GE) Commercial AC motor business. The acquired business is expected to add $137 million in annual sales on a normalized basis.

The GE business expands Regal-Beloit's offering through extensions of existing product lines and new product applications into existing and new market segments. The customer base also expands Regal-Beloit's OEM and distributor relationships.

Products will be branded "GE Commercial Motors by Regal-Beloit," adding another strong brand to the existing three motor brands.

"We are extremely pleased about this acquisition as it is a significant piece of our strategy to continue our growth in this sector and to expand our product offering and global capability," said Regal-Beloit chairman and CEO James L. Packard. "This represents our fourth acquisition in the electric motor business and the 39th in our company's history."

The acquisition is expected to be neutral to earnings per share in 2004 and accretive to earnings per share in 2005 in the range of 22 cents to 26 cents. The purchase price was $72.5 million. The company will finance the purchase through available capacity under its existing bank credit facility.

Regal-Beloit's new acquisition is headquartered in Fort Wayne, Ind., operates a 335,000-square-foot manufacturing facility in Juarez, Mexico, and has technology resources located in Hyderabad, India. The business will also continue with a joint venture relationship in China.

"This is a solid business with 900 outstanding employees," said Regal-Beloit president and chief operating officer Henry Knueppel. "It gives us a significant presence in Mexico and an important technology and engineering capability in India. This is very important to us and plays a significant role in our overall strategy."

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Tropicana factories return to operations following storms
Tropicana Beverages North America's manufacturing and distribution facilities in Bradenton, Fla., and Ft. Pierce, Fla., sustained only minor damage from Hurricane Frances and are rapidly returning to full operations.

While experiencing some challenges in transporting its products out of Florida, the company expects to return to full capabilities within the next few days.

Tropicana is working to determine the impact of the storm on its employees and their families and is coordinating with local relief agencies to provide donated product and other assistance to those areas hardest hit by the storm.

The company also is working with industry experts and its grower partners to evaluate the facts and assess the potential impact to the citrus crop from Hurricane Charlie and Hurricane Frances.

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Snowshoe manufacturer will trek to China
Tubbs Snowshoe Co. will move manufacturing operations from Stowe, Vt., to China next year, which will eliminate 60 to 70 part-time and full-time jobs from its operations in Vermont. Administrative jobs will move from Vermont to Washington.

The Tubbs Snowshoes brand was created in 1906 and was purchased last October by K-2, a global manufacturer of sports equipment, in a deal that landed K-2 a number of snowshoeing brands.

For an idea of the size of the company, Tubbs former owner, Winterquest, held a 75 percent market share in the snowshoe business before the K-2 acquisition.

Kathy Murphy, general manager of Tubbs Snowshoes, said the pending move was motivated by low production costs in China.

"Frankly, it's just a function of the opportunity China provides in terms of cost," said Murphy. "These products are labor-related products. So, there is an advantage in China for cost reduction."

At least five jobs in sales, marketing and product development will stay in Vermont.

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Ergonomic standards announced for poultry processors
Employers and workers in the poultry processing industry have a set of guidelines to draw on to help reduce ergonomic-related injuries, said Occupational Safety and Health Administration administrator John Henshaw.

Guidelines for Poultry Processing offers practical recommendations for employers to reduce the number and severity of musculoskeletal disorders (MSDs) throughout the industry.

"Most poultry processing facilities have made substantial efforts to address work-related MSDs," said Henshaw. "Those results demonstrate that methods are available to better protect workers from injury during poultry processing operations. The guidelines we're announcing today will not hinder those efforts; on the contrary, they incorporate many of those successful solutions.

"These are voluntary guidelines intended to build upon progress made in the poultry processing industry," Henshaw continued. "We will continue working with those who've helped us deliver this important product -- individual firms in the industry, trade and professional associations, labor organizations, and the medical community -- to reduce ergonomic-related injuries, which is always our principal goal."

Poultry processing joins the nursing home and retail grocery store industries that now benefit from industry-specific ergonomics guidelines, one part of OSHA's comprehensive strategy to reduce ergonomic-related injuries.

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Jobless claims decline in recent week
Initial claims for unemployment insurance fell 44,000 to 319,000 for the week ended Sept. 4, according to the Labor Department. The four-week moving average for jobless claims was 339,250, a decrease of 3,750 from the previous week.

The four-week moving average is generally considered by economists to be the more reliable of the two because it smoothes out week-to-week volatility. Both rates remained below 400,000, which is the level economists use to define a weak labor market and a stable one.

Continuing claims for unemployment insurance increased 20,000 to 2.9 million for the week ended Aug. 28. Continuing claims are those older than two weeks.

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NAM announces first-ever trade mission to China
As part of ongoing efforts to promote U.S. manufacturing and exports by small-to-midsize companies, the National Association of Manufacturers (NAM) will lead its first-ever trade mission to China and Singapore. The trip will take place Sept. 9-19.

“The main focus of the mission will be to expand U.S. business in China, particularly our exports, and make it easier for our small and midsize companies to enter this massive market,” said NAM president Jerry Jasinowski. “If our companies can get a bigger share of the Chinese market, this is going to boost manufacturing in the U.S. and create jobs. But we need a stronger public-private partnership to take full advantage of all opportunities there.”

Jasinowski plans to propose several new initiatives to help U.S. manufacturers expand their business in China. They include:
• more robust U.S. government export promotion programs;
• special help for smaller U.S. companies just entering the China market;
• Chinese sponsorship of buying missions in the U.S.; and,
• partnerships with Chinese business organizations, such as the China Council for the Promotion of International Trade.

The trade mission will also highlight the importance of maintaining a level playing field on trade, notably through Chinese compliance with international trade rules and WTO obligations.

Jasinowski will accompany 11 member companies on the China-Singapore trade mission, including Ingersoll-Rand Co., Dow Chemical, MeadWestvaco Corp., The Timken Co., Softbrands-China, FMC Corp. and AsiaDemand.

The NAM mission will also include the following small-to-midsize companies:
• Sandmeyer Steel Co. of Philadelphia -- Sandmeyer is seeking export markets for high-end stainless steel and nickel alloy plate.
• Al-Jon Inc. of Ottumwa, Iowa. -- Al-Jon sells seeking manufacturing steel recycling and solid-waste processing equipment.
• Copper Products of Rome, N.Y., and New Bedford, Mass. -- America’s oldest manufacturer, founded by Paul Revere, is seeking markets for premium quality copper and copper based alloys used in semiconductors and refrigeration equipment.
• Behlen Manufacturing Co. of Columbus, Neb.; Cullman, Ala.; Huntingdon, Tenn.; and Baker City, Ore. -- Behlen manufactures , a leader in livestock equipment, grain storage, drying and handling systems.

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Lack of e-mail retention can cost companies
Twenty percent of U.S. companies had employee e-mail subpoenaed in the course of a lawsuit or regulatory investigation in 2004, up from 14 percent in 2003. Another 13 percent battled workplace lawsuits triggered by employee e-mail.

While e-mail and instant messages (IM) are a primary source of evidence, many employers remain largely unprepared to manage e-mail and IM risks, according to the 2004 Workplace E-Mail and Instant Messaging Survey from the American Management Association and The ePolicy Institute.

"Most alarming is the business community's failure to retain e-mail and instant messages according to written retention and deletion policies," said Nancy Flynn, executive director of The ePolicy Institute.

Only 6 percent of organizations retain and archive IM business records, and only 35 percent have an e-mail retention policy in place, an increase of 1 percent since 2003.

The failure to properly retain e-mail and IM reflects employer failure to educate employees about e-mail and IM risks, rules and policies.

"The fact that 37 percent of respondents do not know or are unsure about the difference between an electronic business record that must be retained vs. an insignificant message that may be deleted suggests that employers are dropping the ball when it comes to effectively managing e-mail and IM use," said Flynn.

In manufacturing and distribution, many employees perform job functions fully or partially regulated by the federal government. Many regulated employees do not adhere to regulations governing e-mail retention or don't know if they are in compliance.

"The failure to properly retain e-mail and IM can, and regularly does, lead to six-figure fines, criminal charges, civil lawsuits and damaging publicity," said Flynn. "Employers simply cannot afford to approach e-mail and IM retention as a hit-or-miss proposition."

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NAM Labor Day report bodes well for manufacturers
The state of manufacturing, the overall economy and the American worker are better now than a year ago, according to Jerry Jasinowski, president of the National Association of Manufacturers (NAM).

Releasing the NAM's annual Labor Day report, Jasinowski said manufacturing was rocked by a series of shocks in recent years: the terrorist attacks on 9/11, accounting scandals in 2002 and the buildup to the war in Iraq in 2003.

"These shocks held back an economy struggling to emerge from recession," Jasinowski said. "However, economic conditions have improved significantly over the past year."

The NAM chief cited the optimistic consumer as a bellwether of a strengthening economy.

"Consumer confidence is up 38 percent while real disposable incomes have increased by a solid 3.6 percent," he said. "Factor in low interest rates and tax incentives to encourage business expansion and the result is solid growth. Business investment on equipment and software has increased by 14 percent over the past year, the fastest pace in half a decade."

Jasinowski said improving international conditions also are helping lift the economy.

"Foreign GDP growth is accelerating while the value of the dollar has fallen by 10 percent, making U.S. exports more competitive," he said. "Exports have surged 10.5 percent over the past four quarters, the fastest pace in seven years."

He added: "As a result, the economy has risen by 4.7 percent over the past year, 30 percent faster than the average pace of economic growth during the 1992-2000 expansion. At the same time, manufacturing output has increased by 5.8 percent, the fastest pace in seven years."

Jasinowski said job creation in manufacturing was weaker than in previous recoveries primarily because very strong productivity growth enabled companies to meet growing demand with fewer additional workers.

"While overall business output is growing 50 percent faster than in 1992, the first year of the last employment recovery, productivity growth is growing close to 200 percent faster," Jasinowski said. "We are seeing some job growth in manufacturing, mostly in computers, machinery and fabricated metals. The turnaround in exports and business investment has had the greatest effect to date on these industries, since machinery and computer equipment make up a large percentage of both U.S. exports and business investment."

Looking ahead, the NAM report said the nature of the current economic recovery bodes well for manufacturing in the near term.

"The fundamentals point to a continued recovery in export growth (11 percent), business investment (12 percent), as well as solid consumer spending (3.5 percent) in the year ahead," Jasinowski said. "Together, this will propel the economy forward at a healthy pace of 4 percent over the coming year."

Jasinowski said manufacturers will likely add 350,000 workers over the coming year and overall employment will increase by 2.3 million. He said the unemployment rate should fall modestly to 5.2 percent by this time next year.

To view the annual Labor Day report, click here.

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Factory orders increase in July
New orders for manufactured goods increased in July by $4.8 billion, or 1.3 percent, to $369.6 billion, according to the Commerce Department. This followed a 1.2 percent June increase.

New orders for manufactured durable goods increased $3.1 billion in July, or 1.6 percent, to $195.8 billion, revised from the previously published $3.2 billion increase.

Durable goods are costly manufactured items expected to last three or more years.

Transportation equipment, up four of the last six months, had the largest increase, $3.3 billion, or 5.9 percent, to $59.2 billion, due to non-defense aircraft and parts, which increased $6.2 billion. Primary metals, up six of the last seven months, increased $900 million, or 6.3 percent, to $14.9 billion.

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Unemployment falls to 5.4 percent in August
The national unemployment rate slipped to 5.4 percent in August from 5.5 percent in July as the nation's payrolls increased by 144,000 jobs, according to the Labor Department.

The jobless rate is down from its recent high of 6.3 percent in June 2003; most of this decline occurred in the second half of last year.

The number of persons who were marginally attached to the labor force was 1.6 million in August, about the same as a year earlier. These individuals wanted and were available to work and looked for a job sometime in the prior 12 months. They were not counted as unemployed, because they did not actively search for work in the four weeks preceding the survey.

In the goods-producing sector, employment in manufacturing edged up 22,000 in August. Employment in transportation equipment increased 28,000 from a loss in the previous month, but this increase mostly reflected auto workers returning to work from the larger-than-usual annual retooling shutdowns in July.

Since January, manufacturing added 107,000 jobs, due to growth in its durable goods component. However, manufacturing jobs are still down by more than 2 million since 2000.

"Conditions are improving, but to build a long-term durable expansion, it is absolutely critical that we create a better business environment here in the United States," Jasinowski said. "The global marketplace is more competitive than ever before. To keep our economy growing and create more jobs, we simply must reduce the excessive costs of doing business in America related to litigation, health care, taxes, energy and excessive regulation."

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Devcon wins American Eagle Award
Repair compound and adhesive maker Devcon received an American Eagle Award for its commitment to education. The awards, bestowed annually by the Industrial Supply Association (ISA), formerly the Industrial Supply Manufacturers Association (ISMA), recognize corporate activities that best promote the principles of the American free enterprise system.

Devcon reimburses its employees for job-related courses and offers scholarships to their dependents. When a sales representative died recently, the company established a scholarship fund for his daughter and many salespeople pledged to make annual contributions for five years.

Devcon is also a mainstay of New England's Junior Achievement program, which helps students understand the American economic system. The company donates at least $1,400 to the program every year, and two Devcon executives donate their time teaching classes in applied economics at the local high school. They help each class form a small business, pick a product or service, and turn a profit. For seed money, the students sell stock in their mini-venture to teachers, parents and friends, even issuing stock certificates.

"Education is the key to a brighter future," said David Bongiorni, Devcon market development manager. "Whether we help an employee learn a new computer program, help that employee's kid get to college or reach out to the community with other projects, it all pays off eventually. It's a long-term investment in people."

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