Question-and-Answer Session
Operator
(Operator Instructions).Your first question comes from the line of Peter Lisnic.
Peter Lisnic
Good morning, gentlemen.
David Roberts
Good morning, Pete
Steve Ford
Hey Peter.
Peter Lisnic
Dave, First question. If you look at the operating margin outlook, what you are saying is '09 to be up from '08 if I am reading the press release accurately, can you just give us a sense as to what the pluses and minuses there are, one, from operational perspective and then two, just how materials cost are flowing through the equation there?
David Roberts
Yes, I think those two drivers of operating margins improvement this year, certainly a reduction in raw material costs. I mentioned $140 million at the start of our meeting here. We actually are seeing prices of materials coming back to where they were in 2007. So we think that will continue to flow through certainly in all of the divisions starting in the first quarter. I think Tire and Wheel will probably be sometime very every second quarter, as those flow through the business. You know the pricing actions that we put in place, we will probably have to give some of those back. I think the markets are going to become more competitive, but certainly it is our intent to hold onto those as long as we can to recover the material cost increases that we had in 2008. The other will come through operational improvements. You know I mentioned the Aiken plant, but frankly we have been implementing COS in every one of our facilities. There is not a facility out there that we have not seen margin improvement that we will be able to get. Once all the actions are put in place and you know we anticipate that occurring certainly in some facilities early in 2009, we will start to realize the savings and as we go through 2009.
So, I think I mentioned there were $14 million in COS savings in the year. Frankly I think that is a conservative number. Now with all that said if the volume drops significantly then we are going to have certainly under utilized facilities, unabsorbed overhead, and we are looking at a series of working three weeks, down a week, which helped us in some facilities, four day work weeks to try to offset that. I still think we are going to see operating margins improve this year unless there is a dramatic decline in the volume.
- To read the full transcript on Seeking Alpha, click here »
