Timken CEO sees strong industrial economy

By Nick Zieminski

NEW YORK (Reuters) - The U.S. capital goods sector is on a strong footing, with growth in industries like aerospace, mining and energy helping to offset slumps tied to consumer-driven sectors, like housing and autos, the chief executive of Timken Co. (TKR.N: Quote, Profile, Research, Stock Buzz) said on Wednesday.

Timken, the maker of bearings and specialty steel, has been boosting sales to industrial markets and aerospace customers, while reducing its reliance on Detroit carmakers, CEO Jim Griffith said, speaking at the Reuters Manufacturing Summit in New York.

"It is a heavy capital goods market," Griffith said. "I think the bell that's tolling over the U.S. economy is tolling very incorrectly.

"What we're seeing is that the piece that's been weak for the last decade is booming right now, and the piece that's carried us is having a correction," he added. "I think that's healthy for the economy."

Heavy industry is a major focus for the company, with aerospace its fastest-growing market, up 30 percent last year. Timken has completed a series of small acquisitions to increase its aerospace aftermarket components business.

Timken hopes to make more aerospace acquisitions, Griffith said.

Timken's industrial group, with $2.1 billion in 2006 sales, is the biggest of its three units. The automotive group recorded 2006 revenue of $1.6 billion, slightly ahead of its steel division.

The 107-year-old company, which began remaking its mix of products and end-markets at the start of the decade, is looking to cap its exposure to any one sector at about 25 percent.

The company now generates about 40 percent of its sales from the auto sector.

Griffith said the company would get to the 25 percent target by finding new business in industrial markets rather than by walking away from the automotive markets.

Timken, based in Canton, Ohio, aims for the Detroit Big Three -- General Motors Corp. (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co. (F.N: Quote, Profile, Research, Stock Buzz) and DaimlerChrysler AG's DCXGn.DE DCX.N Chrysler brand -- to account for less than one-half its auto sector sales, partly by expanding services to Japanese automakers like Nissan Motor Co. (7201.T: Quote, Profile, Research, Stock Buzz) and Toyota Motor Corp. (7203.T: Quote, Profile, Research, Stock Buzz)

By diversifying, the company can seek business in another industry when automakers push too hard to negotiate lower prices.

"In the last two years, we walked away net from almost $100 million dollars worth of business in that sense," Griffith said.

Separately, Griffith said he would be disappointed if sales in Asia did not maintain their recent 20 percent to 30 percent organic growth, adding that he expects growth in China to come equally from ongoing businesses and from new acquisitions.

China accounts for about two-thirds of Timken's annual Asia sales of about $300 million.