|
 |
II. Restructuring of
European operations
 |
|
We deeply regret to have to report that our European
operations have been in the red (at the operating income
level) since 1999, during which time we have been implementing
business restructuring activities in order to put profits
back in the black.
We have been taking drastic
restructuring measures such as the closure of former RHP
Plants and implementing voluntary retirement programs,
transferring production of small-sized and standard-sized
bearings to the Iskra Plant in Poland, formation of a
pan-European organization instead of the separate organizations
for each country, and establishment of a holding company
aimed at the sale of its non-core business in the ISKRA
Plant.
The basis of our European operations
was to sell products made in the U.K., at our production
sites in Peterlee and former RHP factories, to customers
located on the European continent. In other words, we
were selling products whose costs were calculated in U.K.
pounds at sales prices calculated in euros. This system
failed when the value of the pound against the continental
currencies increased, especially from 1999 onward, when
at one point the value of the pound spiked 20% against
the euro. The effects of the changes in exchange rates
cost us more than £3 billion annually.
In
addition, the slowing down of the U.S. economy has started
to effect Europe, increasing the possibility that our
losses in our European business will further increase. |
|
 |
|
|
|
