Glenn Eisenberg, executive vice president of finance and administration at Timken Co., faced a challenging task back in 2005: Implement a $220 million capital investment program, called Project One, that involved upgrading the company’s IT and implementing SAP software for supply chain management.
The goal was to complete the project by the end of 2010, along the way achieving reductions of $85 million a year in working capital and $75 million a year in expenses, for total annual savings of $160 million.
Of course, the period of 2005 to 2010 was not typical. Events intervened, like the recession that began in late 2007 and the financial crisis and market crash of late 2008. With sales down and the economic outlook cloudy, it could have been a time for pulling back, but Eisenberg and his team kept on track with the program.
“We reduced our costs but continued with our strategic investments,” he says. “Instead of deferring the pieces of the project that we hadn’t done yet, we continued with the fourth year of the program in 2009.”
Project One was completed on schedule in 2010, ultimately exceeding both savings goals.
Meanwhile, 100-year-old Canton, Ohio-based Timken grew from a $2.5-billion, fairly narrowly focused and largely domestic tapered bearing and specialty alloy steel maker in 2005 into a global company with a wider range of products and sales now approaching $5 billion. During that time, the company’s market expanded from $500 million to a $40 billion universe, Eisenberg says.
“We used Project One to redesign the company,” he says, “especially in the area of customer service.” Incentive compensation plans have been revamped to include customer service, Eisenberg notes, which he says led to a “much improved” ability to deliver products by a customer’s requested date.
Over Eisenberg’s nine years at Timken’s finance helm, the company has also done 20 deals—both acquisitions and divestitures—including the $1 billion acquisition of the Torrington Co., a maker of sewing-machine needles using a cold-steel process. More recently, Timken purchased family-owned Philadelphia Gear, a maker of aftermarket gear drives, for $200 million, and sold its roller-bearing factory for $330 million in 2009.
By the end of 2009, Eisenberg reports, Timken had more cash than debt—a situation that continues today. Timken currently has $600 million in cash, $500 million in debt and liquidity of $1.5 billion.
Looking ahead, he says the challenge will be redeploying assets to make new strategic acquisitions—at the right price.
“It’s a good time to be a seller right now,” he concedes. His approach is to “stay disciplined,” he says. “We participate in auctions, but we generally don’t win. Most of our deals are privately negotiated.”
It helps in these negotiations that prior to joining Timken, Eisenberg served as president and COO of United Dominion Industries, where he helped work on some 100 M&A transactions.