Transfer Princing at Timken

Sihan Guo
MGMT 505 Section 9-10:15
Case Summary: Transfer Pricing at Timken
The Timken Corporation was a worldwide producer of antifriction bearings and steel which it has business in Automotive Bearings, Industrial Bearings and Steel. Its steel division produce not only to external customers, also to the other two divisions. Timken is a company invest heavily on R&D. One thing really accelerate Timken’s growth is through acquisitions. After acquire Torrington who is a worldwide producer of steel products not only increased Timken’s revenue by 50 percent, also strengthened Timken’s automotive segment.
In the history of Timken, there were varies of bold moves, one of them is definitely vertical integration with manufacture secondary steel products. Another big change was the change of business structure from functional to divisional after Timken was organized into the three strategic business units and four corporate centers.
One of Timken’s the business unit is Steel Business, which has the best technologies and practices from all over the world due to Timken’s heavy handed on R&D. The Faircrest they have brought the operating efficiency from 7 labor hours to 2 labor hours. On top of that, it increase the quality of its steel with no additional cost. As Timken kept expanding, it expanded into medium-bar market as components to auto manufactures. But as economic slowdown and transportation cost high, Timken lost its shipment but became largest North American producer.
Timken’s flagship product – Tapered roller bearing is part of the automotive business and brought about $800million to Timken by 2002. But it is different when it comes to selling in different market, it sells as complete set in Europe and separately in the North America market. Also since cages are less demanding, Timken outsourced cage production. Both the automotive and industrial business at Timken relied almost exclusively on Timken Steel to provide raw materials. But...