photos by Keith Berr

At an age when many young executives are still establishing their corporate credentials, Ward J. “Tim” Timken, now 40, is as established as the chairman of The Timken Company as were four generations of his family forbearers, whose fashionably stiff portraits line the hallway and anteroom of the company's senior management suite in Canton, Ohio.

Timken’s job at the company is no mere ceremonial post. For most of the time since 1929, when Henry Heinzelman Timken first split top management into a family chairman and a non-family president and CEO, Timken men have overseen, with an exceedingly long-term eye, the company founded in 1899 by German immigrant Henry Timken.

Henry, from St. Louis, served in the Civil War, rushed for gold at Colorado’s Pike’s Peak and, because of mechanical bent, eventually succeeded as a carriage maker and inventor. One such useful invention was the Timken Cross-Spring, an improvement in carriage support, later replaced by the Timken Side Spring. Working with Reginald Heinzelman, an Illinois carriage maker, Henry also developed and patented a tapered roller bearing, an anti-friction device shaped like a cone with its pointed top cut off (see “The Beginning of an Era”). So successful was this design in reducing drag in carriages and wagons that the Timken Roller Bearing Axle Company was established in December 1899.

Tapered roller bearings, from tiny ones (39 bearings on the head of a pin) used for medical purposes to huge ones that support the propellers of windpowered electrical generators, remain a core business of The Timken Company today. Timken is the largest bearing maker in North America, and third largest in the world.

But that’s not all. To lock in supplies of the specialized metal required to make its products, Timken in 1917 began to make its own steel. The company now uses just 10% of the 1.5 million tons of carefully engineered special bar quality (SBQ) steel it makes annually, selling the rest of it, often in extremely small batches, to users around the world with unusual and especially difficult performance requirements. Timken has become one of the few companies globally to whip up precise, custom-designed steels and related engineered components, a niche that raises margins while potentially protecting against the mass production mindset of the industry’s most voracious and size-minded consolidators.

Which gets us back to Ward J. “Tim” Timken. Henry the carriage maker passed leadership of the company to his son, Henry H. Timken, who was in charge as president and/or chairman until 1940. Like a manufacturing aristocracy, he was succeeded, in turn, by two of his sons, first Henry H. Timken, Jr., who was chairman until 1968, then William R. Timken, who was president and/or chairman until 1975. William R.’s son, William R. Timken, Jr., also known as Tim, was chairman until 2005, when he was named U.S. ambassador to Germany.

By that time, however, only one other Timken remained in the business, Ward J., the ambassador’s nephew and son of brother Jack. One cousin who had worked extensively in the business became a detective instead. A second went into finance in Texas.

But manufacturing was in the blood of young Tim Timken, who for more than 15 years held a variety of leadership jobs with the company. With a marketing degree from Georgetown University in 1989, Timken worked for two years as a manufacturing lobbyist in Washington, D.C., becoming “very cynical about politics” in the process. “I got to the point where I figured that if I didn’t get back into business, I’d probably never vote again,” he says now.

He enrolled in the M.B.A. program at the University of Virginia, graduating in 1993. There, he says, “I developed my belief in the importance of maintaining manufacturing in the United States. If we let our manufacturing base go, we undermine the foundations that have built the quality of life that most Americans are used to today.”

Returning to the company of his own volition—“there was never any pressure growing up that you will work for the company; in fact, just the opposite”—he sold Timken steel to metals service centers, worked with smaller customers for roller bearings in France, led the purchase of a business in Romania, headed Timken’s Latin American operations, played a “pivotal role” in the 2002 acquisition of roller bearing competitor Torrington Company, and served as president of the steel group in 2003 and 2004.

“This was, to me, one of the most rewarding jobs that I’ve had,” says Timken, who serves as chairman of the American Iron and Steel Institute (AISI). “Having started in the steel business, to come back and ultimately have the privilege of leading it was a good time. I got to get in at the bottom, and I got to ride it up to the top.”

No question, the steel boom that began in 2004 has been an important contributor to the company’s fortunes and Tim’s record as a captain of the steel industry. Steel sales in 2007 totaled $1.6 billion, up 10% excluding discontinued operations, fueled by strong demand and surcharges. Steel pre-tax earnings rose 3%, to $213.1 million. Sales for the company as a whole totaled $5.2 billion in 2007, up 5%. Companywide earnings from continuing operations, excluding one-time charges, rose 15% to $229.9 million, or $2.40 a share. Despite shaky economies in North America and elsewhere in the world, Timken has forecast 2008 earnings in a range of $2.75 to $2.95 per fully diluted share.

“Tim had the opportunity to learn the business from the inside,” says Andrew G. Sharkey, III, president and CEO of AISI. “He systematically rotated through the bearing and steel sides of the company. He’s had broad exposure to Timken’s international operations, played a key role in the acquisition of the Torrington Company and served as president of the steel group. He’s done a lot of things in a fairly compressed period of time.”

Even so, the company went public in 1922. The Timken family today holds just 12% of the stock. Does a Timken chairman still matter?

“The company has had a long history of a strong, highly capable member of the Timken family serving as chairman and an exceptional outside professional serving as president and CEO,” says Sharkey. “Tim Timken and Jim [James W.] Griffith have really carried on that tradition.”

Forward spoke with Timken about the rationale for family involvement and other industry topics in his office in Canton.

FORWARD: The Timken Company isn’t a family business anymore, is it? Why continue the tradition of a family member as chairman?
It has always been the practice of our company that the chairman is a family member and the CEO is a non-family member. We do that for a number of reasons.

We feel that we have created long-term shareholder value by the continuity and vision and values that the family members bring to this seat. My uncle before me had it for 30 plus years. I’ll likely hold on to it for quite awhile, and I think what that has allowed us to do is focus our business on the long term. A lot of companies these days are getting swept up in short-term decisions driven by external shareholder pressure. I believe the vision we bring to the company has allowed us the leeway to make substantial investments in our company for the long term.

Our Faircrest facility [a steel minimill in Canton] is a classic example. We built Faircrest in the middle ’80s, which is the absolute worst time you could have possibly built a steel mill. We turned it on in ’86. The investment at the time [$500 million] was about two-thirds of the equity value of the company, all in one plant. Quite frankly, a lot of people thought we were crazy. My uncle and the management team said you’ve got to push it through.

These are the kind of things that set us apart. If my uncle hadn’t done that, we wouldn’t be in the steel industry today. We went from being a relatively captive supplier to our bearing business to being a pretty substantial business on the SBQ side of the industry.

I take great pride in what my family has created in 108 years, and I’m looking forward to kind of putting my stamp on it, as well. We believe that long term, we can create more shareholder value than somebody else who would potentially be running this place.

FORWARD: Has your last name helped your career?
Absolutely. Clearly, who I am created a lot of opportunities for me to succeed. I like to think that I performed in each role that I was given.

I think I understand this business as well as anybody around the place. I’ve got not only the financial incentive to make it successful, but I’ve got the personal incentive to make it successful, as well. I don’t want it to be on my watch that this company craters.

A lot of family businesses have done that. You get into significant generational changes, and they say it’s mostly between the second and third generation that family companies are either bought or sold or run into trouble. Fortunately we’ve made it past that. So far, the transition from the fourth to the fifth generation has been smooth.

I was born in the steel business. Growing up, at the dinner table, I’d hear an awful lot from my dad who worked for the company. My uncle also worked for the company. You hear what the issues are, whether it’s labor-related issues or whether it’s growth overseas and the report of the trip they just got back from. I was around that all my life.

So for me, it’s a huge privilege. It’s a great honor to me to be sitting in this chair, and I take my responsibility very seriously.

FORWARD: Even in the relatively short time that you’ve been a leader of the company, the steel industry has changed substantially. How would you characterize its development?
I don’t think there is a regional steel industry any more. I think now, given the set of assets that some of these major players are beginning to put together, we are beginning to really truly see the development of a global steel industry. I think that’s probably going to force a lot of people to rethink their growth strategies.

Looking forward, [the consolidators] are going to start running out of small stuff to buy. All the formerly bankrupt assets and shuttered stuff is gone. So I think we’re going to start seeing the next phase where you begin going from 50 global steel players to 10 or 15, or whatever the number finally is.

This either creates opportunities for North American companies to look outside the market, or it puts them squarely in the crosshairs. I think that’s the math that everybody’s doing right now. Of course, that’s all speculation on my part; it’s not the kind of conversations that I have with my peers.

Whether we end up as five big steel companies or 15, I’m not sure that’s as relevant as their ownership linkages go. I think [Brazil’s Gerdau Group] is a great example. They’re a very good company. They have taken a very measured approach, but it’s picking up pace. They picked up Chaparral Steel and then they went after [the MACSTEEL business of Quanex] and paid very healthy prices for both. So I don’t think we’re out of the storm yet on consolidation.

[Lakshmi] Mittal’s not done; he’s going to continue to buy. Others will continue to buy. It’s an interesting time to be in this industry. Think about it: There’s not an independent Canadian steel company left.

So—and again this is not something we talk about—I think our domestic guys have got to be looking around, because Canada and Mexico are more or less done.

FORWARD: So how does a small producer such as Timken survive in this kind of environment?
That’s a great question. That’s a question that we debate an awful lot.

I believe there’s a future for us because we operate in a funny little part of the steel industry. SBQ is different than flat roll or merchant bar or anything else. It is a different market to serve. If you look at the consolidation, it has been mostly around us, although MACSTEEL, purchased by Gerdau, is probably one step into our markets.

I think given the position that we have within the markets that we serve, I could paint a scenario that says, ‘Yeah, you can be a small guy in the land of the giants as long as you’re creating enough value.’ That’s the challenge that we put forward to our people every day.

We have to drive a differentiation game in our business, and quite frankly, given the assets that we have invested in, the technology and innovation that we bring to the market, I believe that we can position this business to remain independent. We’re different even from the other SBQ guys. We serve the impossible applications. We like the really, really nasty stuff, you know, the stuff down in the sour environments, a mile below the earth. That’s the kind of stuff that we do extraordinarily well, and it sets us apart.

We keep investing in that differentiation. I walked through our new investment here on Harrison Avenue [a $60 million alloy steel bar rolling mill]. When that mill comes up, it’s going to generate surface finishes that nobody else in the United States can make. It will be positioned very well to serve the growing transplant market. They are looking for surface finishes that they just can’t buy today. It will turn out to be a very, very good investment for us, and it’s exciting … it gets my blood going a little bit. Interestingly, we’re building it on the foundation of our original bearing plants.

Those are, again, the kinds of long-term investments that you need to make to stay competitive. The more of those unique applications that you develop and the less dependent you become on just running the hell out of your mill, the better you weather the storm. That’s our objective.

FORWARD: You are in the unusual position of operating eight factories in China, expanding now into manufacturing of bearings for wind farms there. Yet at the same time, you are publicly critical of the way China is doing business today. Isn’t that a little awkward?
The wild card in the situation today is Asia and the massive buildup that we’ve seen there. I think that’s kind of the joker in the deck right now. Clearly, they’re not playing by the rules.

We [at Timken] do have a challenge. Right now, we have eight facilities in China. It’s clearly a growth avenue for us. I think we’ve got 15% or 20% of our workforce in Asia right now, which would include India and China [4,500 employees]. It is a huge market and growing at expediential rates, so it creates a lot of opportunities for us, and we’re making very good money there.

At the same time, obviously we compete with products out of China, and probably more so on the steel side than the bearing side, although certainly we see it there, as well. My approach on trade in general in China specifically has always been that if you give me a level playing field to compete, I’ll win. I think we’re that good. The investments that we’ve made, the quality of the people that make our products, I think positions us to be globally competitive.

Unfortunately, right now we don’t have a level playing field, whether it’s currency manipulation, whether it’s export incentives, whether it is the non-tariff barriers that we run into in permits and these kinds of things. It is not a level playing field.

So we continue to fight for that. We work obviously a lot in Washington. We work with the trade groups inside of China to get that message across. But it is a challenge, and it’s a global challenge. It used to be that Americans were the only ones worried about this and the only ones bringing trade cases. We’re starting to see Europeans do it, as well. They’re sweating it, and the Japanese aren’t too far behind. The Japanese, I believe, are scared to death of China, because they’re not too far away.

This isn’t a big secret. It’s not like I’m the only one that knows this is going on. Everybody knows this is going on, and at the end of the day, if China is going to be part of the global economy, they’re going to have to play by the rules.

I’ll give you a great example. This whole discussion around [capping greenhouse gas emissions and trading emission quotas], the global climate change issue. The Chinese logic basically is, ‘You in the United States had all your time to pollute, you went through your industrial revolution. It’s our turn to do that, leave us alone.’

The fact of the matter is, if we’re going to solve climate change on a global basis, you cannot take that approach. You cannot exempt China, India, Brazil and Russia. You’ve got to have the BRIC countries at the table if you’re actually going to solve this problem long term.

So this whole notion that they can carve themselves out and exempt themselves from globally accepted trade practices and environmental practices, safety practices, quality practices, is crazy. You cannot convince me that China is a developing economy. I’ve been there. I’ve spent a lot of time there already, and the fact of the matter is, they are a powerhouse, with more money than anybody else in the world. You’re telling me that they can’t play by the rules? I don’t buy it.

Long term, I want to be in China. I want to be a productive member of the Chinese economy. I think I am today. I employ an awful lot of people, and I pay them extremely well. But at the same time, I’m a global citizen and I’m not willing to sit back and have our economy destroyed because the Chinese or the Indians or the Russians or whomever don’t want to play by the rules. It’s just not acceptable, and I think more people ought to be speaking up about it.

FORWARD: Are your products made in China for sale there or for export elsewhere?
We send 12 times as many products to China from here than we import from there. Almost everything is for use in Asia. The challenge we have in China right now is, quite frankly, we can’t make enough product to serve the market given the assets we have on the ground. The market is growing that quickly. As soon as we ramp up a facility—and we’ve got two coming up right now—they are sold out. It creates a lot of interesting market opportunities for us.

We’re even selling steel into China right now. It’s products that the Chinese steel industry can’t make. I’ve been into four or five steel mills in China, and they’re all beautiful. But they have challenges making quality product all the time. You just don’t know whether you’re going to get the good stuff or the bad stuff.

That’s why a lot of the steel we buy for our bearing operations in China is actually coming in from Japan. Their industry hasn’t stabilized yet. I saw a rolling mill in one of the Chinese steelmakers that was probably the most state-of-the-art mill I’ve ever seen, just beautiful. They were having trouble running it. Now sooner or later, they’re going to figure it out, but right now they’re having their challenges.