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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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