Bearing industry is one of the most profitable businesses to obtain. This industry wasn’t in prosperity for the whole time. Seventy years ago, policies that favored steel industry didn’t pay any attention or showed any interest in bearing industry. From my point of view this was a bad idea because secondary steel products (bearing) were in the middle of production chain. The other problem which this business faced was foreign competitors. Those companies always tried to establish the market by providing the same products but with fewer prices. But American distributors survived. Historically confirmed, federal government was a permanent costumer. Bearings were the essential components of equipment. Rather it is civilian or military. Bearing demand raised a lot during World War II. Needle bearings were used in guns and weapons. Both Timken and Torrington were specialized on that kind of industry and government were interested to keep money in the country, as it won’t cause of economy shuffle. In 2002 on directors meeting Timken Company put up the question of purchasing the Torrington Company. At that time Torrington was carried by Ingersoll-Rand. The whole thing started because this two companies have a business – bearing. These two companies shared the same costumers but had a small difference – a few things in common. Clients would really appreciate if Timken and Torrington group into one big company. Timken Company had faced serious difficulties. One of them is synergies. If Timken paid a big price for Torrington, Ingersoll-Rand instead of owner would seizure all values of synergies. The second bad part of the story lies down with debt. If Torrington Company requested a payment with cast, Timken would be obligated to bank and raise money with new debt. This debt deal would allow prompt credit agents to lower Timken’s actual investment-grade system.
Timken was mainly interested in Torrington`s industrial side of business. When Timken raised a question to purchase Ingersoll-Rand their first aim was to obtain Torrington industrial business. Such a purchase would follow to Timken’s market potential growth. This was a big concern because Timken company management wasn’t happy with its company auto industry profit. The Torrington`s automotive business seemed powerful enough to resolve the matter of Timken`s exposure to the auto industry. But everything changed in 2002. Timken Company took a closer look and analyzed Torrington and got a result that their competitor’s automotive business was much stronger then they assumed. If, for example, the cylindrical bearings, produced by Timken Company could be married with flap-like parts, produced by Torrington Company. Such decision would distinguish Timken Company among its foreign competitors, because customers had to combine the friction and the lubrication functions themselves before. Timken would reach success because they specialized on tapered roller bearing while Torrington was a global producer of needle roller bearings. It was expected that combining two companies in one big would lead to increase of costumer up to seventy-five percent. This result would be achieved because new company would be able to create more value for customers with bigger product line and establish new-product line development.
In 2003 Timken decided to purchase Torrington despite any troubles that they may face. This was a serious step since they could face serious problems afterwards.
Reference List
Timken.com. ‘Timken Bearings’. N.p., 2015. Web. 28 June 2015.
Daltonbearing.com. ‘Torrington Needle Roller Bearings Offered By Dalton Bearing Service Inc.’. N.p., 2015. Web. 28 June 2015.
