BEFORE THE INTERNATIONAL TRADE COMMISSION

TAPERED ROLLER BEARINGS FROM THE REPUBLIC OF KOREA INV. NO. 731-TA-1380 (FINAL)

TESTIMONY OF JOHN DIX PRESIDENT, ILJIN USA CORPORATION JUNE 5, 2018

1. Good afternoon, and thank you for the opportunity to testify today.

My name is John Dix. Since 2012, I have served as the President of MTN USA

Corporation, an importer and distributor of highly-engineered precision tapered roller bearings and manufacturer of other bearings and products. We are headquartered in Novi, Michigan. We are affiliated with Bearing Art, a Korean producer of TRBs. I previously served as Vice President and then Director of

Automotive Sales at The , which I joined in 1980. I have over

35 years of experience in the antifriction bearings market.

2. First, I'd like to talk a bit about Timken in the U.S. market. This is deeply personal for me because many of the folks you heard from this morning were my colleagues for many years. Additionally, I left Timken after 30 years primarily because of the ramifications of the "Fix or Exit" strategy you have heard so much about.

3. In 2009, Timken believed that the U.S. automotive sector was in a long-term decline. Timken's CEO publicly stated that it was pursuing a "Fix or

1 Exit" policy that led to the abandonment of much of Timken's automotive business unless customers agreed to massive price hikes. This strategy was driven by Timken's CEO's goal to reduce Timken's exposure to the collapse of the auto market following the Great Recession. Timken also was chasing the strong performance in the industrial markets including bearings for mining, construction, agriculture, and railway. Overall, Timken was catering to the financial markets by taking deliberate moves to reduce exposure in automotive sales while increasing industrial sales. Timken's strategy continued until 2014 and was widely reported in the press.

4. I was Timken's Vice President and Director of Automotive Sales from 2003 to 2010. 1 can report firsthand that many of Timken's long-term automotive customers were deeply angered by Timken's "Fix or Exit" policy.

Neither fixing nor exiting made customers happy. By "fix," Timken meant immediate price hikes of 20 to 40 percent. "Exit" meant abruptly abandoning supply programs and leaving long-teun customers desperate for supply.

S. This policy, launched by Timken as the U.S. auto companies were facing bankruptcy, was very disruptive and upset many of Timken's automotive sector customers. Several long-term customers told me directly that they were so angered by the experience that they would not work with Timken ever again. GM,

Ford, and moved most of their business away from Timken at this time.

2 In fact, one of these major automotive manufacturers told me they would never buy a Timken OEM bearing ever again. To my knowledge this manufacturer today still does not buy OEM bearings from Timken. It was a tough time for me to lead Timken's auto sales, and an even tougher time for my automotive customers.

6. The industry was forced to diversify its supply options and turned to mostly Japanese and European-owned suppliers. ILJIN's recent entry into the

U.S. TRB market has been .almost exclusively in these same lines of business that

Timken dropped years ago.

7. We have rarely encountered Timken in our new U.S. business. To my knowledge there are only two programs where we have competed. Timken won one, and we won the other.

8. It is puzzling that Timken is now arguing that we are causing it injury in the U.S. market. Timken still dominates the U.S. market, notwithstanding its abandonment of automotive customers following the Great Recession. If Timken has been slow to regain this business, it is entirely unrelated to small amounts of imports from Korea.

9. Second, I'd like to tell you about how tapered roller bearings are sold. TRBs are highly engineered precision products, designed specifically for a customer's needs, and must meet rigorous safety standards. We sell our TRBs to

3 the , which is defined as passenger , SUVs and light

trucks. A customer cannot simply buy off the shelf and insert a TRB into an

application. Our products must undergo a very long design and testing process which can take up to three years from start to finish.

10. Even if a TRB is technically qualified, other non-price factors come

into play in securing this kind of business. Most of our TRB sales are to supply a specific part for a specific end use program that must operate safely, reliably, and consistently over dile entire lifespan of the program. Those programs typically last four to six years. This complex chain cannot tolerate any weak link, because it will disrupt the entire chain.

11. A customer purchasing bearings from us is thus doing much more than simply purchasing a bearing. They are entering into a long-term relationship where our ability to adapt to changing circumstances counts for far more than the price of the bearing. As a result, our technology, product quality, and 100 percent on-time delivery are the key competitive factors we strive towards to win and retain our customers. Price is not the major factor for our customers. This is typically why our customers have only 2 or 3 approved TRB suppliers.

12. Third, let M e tell you a tittle more about the ILJIN Group hi

Korea. The TRB business is a new and relatively small part of the ILJIN Group's

4 overall operations. The ILAN Group traces its origins to a small forging operation established in the 1970s.

13. ILJIN's TRB business is effectively a start-up, with commercial production starting in 2014. We seek a balanced global portfolio through an expanded presence in the Korean home market and growing non-U.S. export markets such as Europe, China, and Thailand. We plan to maintain our current, limited level of U.S. sales in the immediate future.

14. Finally, let me describe our broader operations in tie United

States. We are not simply a resale operation for Korean-manufactured TRBs.

The ILJIN Group also manufactures and sells several other products to the United

States, such as chassis components and other antifriction bearings, including ball bearings and wheel hub units. These non-TRB operations account for more than

90 percent of our U.S. sales.

15. We employ more than 200 Americans in our U.S. operations. Our facility in Greer, South Carolina employs 66 workers wind turbine bearings and chassis components. Our factory in Phoenix City, Alabama employs

78 workers manufacturing automotive ball-bearing wheel hub units for automotive customers GM, Chrysler, and Hyundai. We plan to further grow our operations here in the United States, including additional American jobs.

16. Thank you.

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