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TESTIMONY OF
Douglas E. Krzywicki, Chief Financial Officer
A.J. Rose Manufacturing Company
Hearing Concerning Investigation 332-452,
"Steel-Consuming Industries: Competitive Conditions with Respect to Steel Safeguard Measures"
Before the
United States International Trade Commission
June 19, 2003
Good morning. Thank you very much for inviting me to participate in this hearing. My name is Doug Krzywicki, and I am Chief Financial Officer of A.J. Rose Manufacturing Company.
A.J. Rose, headquartered in Avon, Ohio, is a third generation, family-owned company that was established in 1922. We currently have 368 employees (down from 410 in April, 2000) of which 248 are members of the United States Steel Workers' Local 735.
We specialize in manufacturing tight tolerance metal stampings, air bag components and spun-formed products for the automotive market, OEM and aftermarket industry. Over 90 percent of our products are components used in motor vehicles, running at very high RPM's. The need to produce safe and reliable products is of the utmost importance.
We applied for exclusions (Product Exclusion Request No. N-330.01-.07), but received none. Our 27 year supply relationship with Corus, along with their predecessor company, and our U.S. processor, Imports International / Chesterfield Steel has allowed us the time to develop unique steels to make our products the best and safest on the market. Corus supplies us with hot-rolled material with the guaranteed tight tolerances and unique characteristics that we need to keep our competitive niche in the market.
As detailed in Appendix A, Chesterfield Steel has made numerous efforts to obtain the steel we need from domestic sources. The domestic industry has either been unable or unwilling to provide the exact specifications we need. The hot-rolled steel claimed by the domestic industry to be interchangeable is not interchangeable and does not meet A.J. Rose's requirements, or the requirements of our customers. Additionally, we have been forced to try other various steel under our Tier 1 customer's resale programs to avoid the Steel 201 tariffs. This testing has caused A.J. Rose to incur additional internal costs that can- not be passed to the customer.
A.J. Rose has endured financial hardship over past 24 months. As detailed in the questionnaire submitted to this commission, we have incurred significant financial losses. We have been forced to reduce employment levels over 10% (both union and non-union), reduce employee benefits and cut capital investing. Although all of these financial hard times cannot be blamed solely on the imposition of the tariffs, they play a significant role. We compete in an industry were nearly 50% of our product cost is material. In today's global economy, we cannot absorb the tariff cost and remain competitive.
Initially, we had limited success passing the additional tariff cost to our customers. As the tariff's have wore on, more of our customers are refusing to pay this additional cost. We are continually threatened with our jobs being moved to over-sees competitors unless we eliminate the tariff add-on from our product's price. Additionally, we have become un-competitive in quoting new work due to our higher material costs. As detailed in the questionnaire submitted to this commission, we have lost bids on new work totaling over $30,000,000 to foreign competitors. We have also had one customer move work valued at $4,000,000 to Korea to save costs.
The continued erosion of our profit margins, expedited by the tariffs, has now begun to impede our financing options. During recent negotiations with our bank to secure credit facilities, I was met with proposals for significantly higher borrowing rates, restrictive covenants and limited borrowing ability. The reason&our bank stated that they view our business, "U.S. manufacturing tied to the auto industry, as a high lending risk". Naturally, A.J. Rose is being forced to absorb these additional operating costs. It is a sad commentary when banks view American manufacturing as a "high risk" investment!
American manufacturers like A.J. Rose are accustomed to competition. The expanding global economy may ultimately reshape our industry but the Steel 201 tariffs have added an artificial barrier that has made us more vulnerable to foreign competition. The hardship of this tariff and our inability to pass on any price increases to the automotive companies will not only cost jobs, but also most certainly, affect A.J. Rose Manufacturing Company's ability to survive.
Thank you for providing me the opportunity to testify.
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