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Accuride Corporation (NYSE:ACW)

Deutsche Bank Leveraged Finance Conference Transcript

October 10, 2012, 6:00 pm ET

Executives

Phil Saliba – Deutsche Bank

Rick Dauch – President, Chief Executive Officer

Greg Risch – Vice President, Chief Financial Officer

Phil Saliba

Good afternoon, everyone. I'm Phil Saliba with Deutsche Bank. I've had the pleasure of working with the Accuride team for the last five years, which is a very interesting period of time where the company has come a very long way and I'm very happy to introduce Rick Dauch and Greg Risch who will walk you through the presentation and then open it up for Q&A.

Rick Dauch

Hey, good afternoon, everybody. For those of you who missed this morning, I'm going to stay afterwards. I missed some of the 101s because I was in Detroit last night. We were able to receive the Industry Leader of the Year award for the quality, so that was – I had to be there in person, so I apologize.

A tough day for Accuride today – I'll take you through industry conditions. We have a marked change in the industry right now from first half to second half, so let's look at some basic data, facts and trends about the industry here.

So bottom line is it's a cyclical industry. Orders come in, everybody runs to catch up, once we catch up, orders drop off and everybody's got to slow down the big ship and that's what we're seeing. We see the (fall through) here.

Bottom line is this year 53,000 trucks were produced between February and September this year, so we have a lot of Class A trucks in the market right now. So how is that impacting us: in a negative fashion, second half.

So you see the build rates in red. You see the order backlog in blue. You see the grow in inventory rate. That's all bad news right now, right. So we have to adjust out. It's an unsustainable level.

You see the good news down in the blue line is very few cancellations. So if a fleet makes an order it's very few trucks being cancelled, all right, so that gives us a little bit of glimmer of hope right now going forward. So again, they're unsustainable levels.

The fleets are making money but right now they're on the sidelines. They're not buying too many trucks.

This is – the blue bar is the June forecast that was provided to us by the OEMs, the four big truck guys and you see the build rates there. And then red is the latest in the October numbers, right. You see a significant decline.

And I would tell you right now that the last two bars, November, December, those are unfirm and I think there's a severe risk there, all right. I've spent the last 10 days on the road either at our factories or talking to three of the four OEMs face to face. There's not one truck customer who can tell me they have a firm schedule after the first week of November right now.

So unless we see a big uptick in orders here in the month of October I think you'll see additional cuts in production across the industry.

We hid the names to protect the innocent, I guess here but we've seen – here's the granularity we've seen. You see either reduced build rates or they took out full days of the schedule.

We started seeing some changes back in July, June, July, August, September and we've already seen cuts in October. I was with one customer last Thursday. They talked about a few orders that were coming in and I got back to (inaudible) on Friday and on Monday we saw three more days of downtime at two of their plants: one in Mexico and one here in the United States.

So one of the reasons we didn't put out new guidance today – we pulled our guidance today. We didn't put out guidance because I can't really tell you exactly what the build levels are going to be in November and December. We have a range that we could put out there but we don't want to come out with a number that if someone is going to take a whole month off potentially or someone is going to take off the last three weeks of December. It's bad for us to come out and tell you what we're going to do and we can't do it.

Most of these (inaudible) have come in with very little notice at all. On a Friday for the following Monday, going from line rates of 150 a day plus Saturdays down to 108, no Saturdays, three or four days taken out plant by plant. So it's a tough situation right now.

Basically we started the year – there is the ATT number, FTR. We came out at 265. I can remember people sending me emails and texts back in January that said you guys are sandbagging it, you're going to blow it away this year.

And we did see some pretty high run rates here in the first half of the year. We actually – we're getting close to that 280 rate, right. But second – first half we did 156,000 trucks in North America. Second half is going to be less than 95,000 in trucks. So I think STR and ACT are out. They're at 255, 262. Accuride I think is going to be worse than 245 right now based on the analogy we have, based on the customer schedules we see and based on the face to face conversations we've had in the last 10 days with the three big truck customers.

So we're looking next year – right now we've got a big disparity, 284 for ACT. I think they've come back down to 284. FTR at 233, we've had ACT in two months ago. We had FTR in last month. We had global insights in to talk to us.

We're right now building our budget around 220, 230 build rate for Class A trucks next year, pretty conservative numbers. We'll see if we take that up or take that even lower. It depends on what happens in the next 60 days here.

So in addition to the industry headwind we have in the second half, we have some unique issues going on at Accuride as well and none of them are very good news, right.

First is we lost the (anti-dumping) lawsuit on April 1st where the Congress department ruled there was dumping and subsidization of Chinese wheels. We got the pickup in January, February, March of sales because of that dumping ruling.

And then the ITC decided not to enforce that ruling and we've seen a flooding of Chinese steel wheel imports since April this year. Our steel wheel aftermarket business was down about 70%.

The good news is it's not a very big piece of our business, less than 15% of overall steel wheels. The bad news is the Chinese are here and they're selling steel wheels in the low $50 range. We sell our wheels around $60, $65.

Second thing is the OEMs at (Navastar) and (Packar) specifically have decided to take a (inaudible) position at Gunite. It's something we've talked to you guys openly about that we could lose some of that business. We were pretty aggressive last year on pricing. We were losing money on that business.

We had bad quality track record. We had bad delivery track record. We were putting money in the (inaudible) business but the customers went out and got quotes and they're going to use Chinese imported drums starting in third and fourth quarter this year.

The good news, if you go down below, we still have standard position on steel wheels at three of the four. At (aluminum) wheels, two of the four, we think there's a big opportunity for us to win business here. Aluminum wheel business by capacity, we've lost this position and this position but we are retaining the aftermarket business with those customers and our hub business has always been very small, mostly for mobile type trucks.

That's the wheels and Gunite and (inaudible) type businesses. On the (inaudible) business, which we had going in the right direction actually making north of 12% EBITDA in the second quarter and into the early third quarter, we went from basically running flat out, adding four extra crews on the weekends to run through July to basically getting – going to a screeching halt as Caterpillar reduced orders, as (Balon) reduced orders.

(Balon) is tied to the oil and natural gas. They make a lot of parts for the fracking industry and other guys in that sector.

We went from basically $18 million to $22 million monthly sales revenue down to about $10 million in less than 30 days. We've taken out all 198 people who basically run the plant 4.5 days a week now. That's how fast things change in this industry here.

We're not the only guys, all right. Almost all of these companies have come out in the last two weeks with earnings warnings (inaudible) this morning, right. Ours is just a little bit bigger I think for sure and we didn't put guidance, which scared the hell out of you guys, I know that.

That's all the bad news. The good news is there's an underpinning for a fundamental recovery in the Class 5 through 8 truck and trailer market over the next few years. We saw an uptick in manufacturing index in July, so that's good news.

The (aging) fleet is at an all-time record high, about 25 years at 6.7 years and over 500,000 miles. When trucks and trailers get above that level they become heavy maintenance.

We know the fleets are out there waiting to make orders. They're just not dropping orders in right now. We also know the fleets have made good money this year, so they're sitting on some cash.

Interest rates for the large companies that can go out and borrow money, mom and pops are having a hard time getting qualified for that. And we are seeing some glimmers of hope (flake). The auto industry is starting to recover. It's getting back towards more of a 15 million (NYSE:SAR).

We're starting to see some stability in housing prices in different parts of the market. We're starting to see a little uptick in some of the housing builds there. But we're still seeing an overall general weakness in the overall GDP and GDP what drives freight. So until we get through elections and those kinds of things, we'll see how things play out.

So here's the medium duty heavy Class A builds. There's a big disparity between FTR and ACT. Next year, again, 280 (inaudible). We're going to tend to be on the conservative side. The fleets have to come back in. If they don't, we'll be down that 220, 225 rate.

Class 5 through 8 tied to the housing market and mostly to government in terms of dump trucks, school busses, et cetera. We're seeing there's starting a little pickup between 180, 190 next year and (turner builds) we've seen weaken in the last 90 to 120 days. They're running around a 250,000 run rate earlier in the year. Right now they're running about 220,000. We think next year it's somewhere around 210,000, 215,000.

So what are we doing? We're not sitting there twiddling our thumbs. So we are taking out costs. We had a reduction of our SG&A loss about two weeks ago, 14%, about $5 million came out, so those are permanent cuts. They're gone.

Took out some IT people, took out a couple senior leaders that had helped me get our hands around the Gunite business and looked at some opportunities overseas. We also cut out $4 million of just expenses in terms of travel, marketing dollars, convention-type stuff. All that money is gone for now.

All these staffing reductions are around 350, 198 of them (inaudible), just over 60 in the wheels business, about 60 at Gunnite, not counting (inaudible), and about another 90 over at the Imperial business right now, so we're doing the cuts in a way that doesn't jeopardize our long-term business.

The business I inherited on February 1st was cut too deeply during the recession and it wasn't the talent level to fix the broken business. You can't run a business of this magnitude without a quality department. You can't run it without an engineering department. You can't run it with people who don't know how to run manufacturing plants.

Those of you who have been around and listened to me talk, we put the right people in place to do that and they're showing it up on (factory floor). If I could pick you up and take you to our plants, our plants are light years ahead of where they were a year ago and they'll be – we'll be well positioned when the upturn does come, so much better than we were last year.

We're taking out structural costs as well. Our London wheels plant is not competitive plant. They're losing money since 2007. We were able to come up – we looked at three options. One was to close the plant in 2012, would cost about $20 million, $25 million.

Two was to relocate the equipment from the London plant down to our Henderson plant. That would cost about $20 million, $22 million as well plus $5 million of capital to move the equipment.

Or we could come up with a commercial (deal) with our customer and our unions that made sense. We've done that in the last 60 days. We got a price increase from our major customer up there and we got a large concession from our union and that all kicks in and we'll have a positive pre-tax income at that plant next year and we have a real roadmap to what we're going to do with that plant in the future, in the next four or five years.

The (Alcard) plant, went and talked with the workforce (technical difficulty) five-year lease, which will save us about $1.5 million a year starting in January next year and that will take out an additional 50 or 60 heads out of the Imperial operation as well.

So we think we can get Imperial back to making money over the next year if the bottoms come back.

Liquidity, we ended the second quarter with about $102 million of liquidity. You can ask reg. It looks like we'll finish the year somewhere around $80 million, $85 million of liquidity.

We're not a risk – I see our stock price down there today. We're taking out the inventory. We're taking out the fixed cost structure. The sales have dropped down, so we have less there going forward but we'll be okay and we've done stress tests all the way down to 180,000, 170,000 Class A truck builds, including if one of the OEMs didn't make it, some of the AR would be at risk. We could make it through even the most dire situation right now.

So that should give some people some confidence that we know what we're doing around here.

Our big projects are basically on schedule and they'll all be done by Christmas time this year, all right. The aluminum wheel business is all but done. We have two machines left to put into our Mexican plant.

The plant at (Camden) is now – we've tripled our capacity. It's (inaudible) at Volvo. It's (inaudible) at Daimer. It's starting to shift to OEMs to the first time in its history. It's a very cost competitive plant. We were there just this past week on Thursday.

The Mexican plant limited capacity (inaudible) aluminum until last year. We'll have triple our capacity down there as well. We're qualified both at (Navastar) and Daimer. So we're very comfortable now that we have $1.1 million aluminum wheel capacity on straight time (technical difficulty) different part numbers.

We chose to have it run off on the customer's – on the supplier's floor and delay the integration. That line actually breaks down this week and starts shifting in. It'll take about two weeks to install it and then we'll start running parts in early November and we'll have all the drums then out of (El Carte) and 100% at (Rockford).

We have a new slack assembly line there. We used to have two manual lines. One manual line is completely shut down. One is only running one shift. We've got a few quality issues to work through on that line but we're running about 80% of what we bought it for. We think we've got it all tweaked in by the end of October as well.

The last piece of Gunite machine is moving the equipment out of (inaudible). Half the machines were already sent out refurbished, repainted. They're being installed as we speak.

The other big machine is being built in Italy. It doesn't ship in until December 7th. We won't have it online until January. It takes about 60 days to get all 170 part numbers that that machine can run qualified, so it'll take us most of the first quarter.

We built a bank. That bank will be complete between (inaudible) and (El Carte) by November 30th, which will allow us to exit the (inaudible) machine and the (El Carte) completely, again, by Thanksgiving.

(Inaudible) had the Gunite consolidations from first quarter into fourth quarter this year. Imperial consolidation, the plants are both expanded. We've buttoned up some of the interior work and we start moving the equipment October 15th.

(Brin), again, we are running at 12% run rate plus on EBITDA almost 15% one month and then the values aren't there right now, so we still think we can make more than $20 million EBITDA in that business this year. That's a business over 10 years lost $140 million. This year we'll have net positive cash flow out of that business.

We think it's an asset that doesn't make the cut long term. If we can monetize it for the right value we'll sell that and shore up our balance sheet even stronger.

ERP, we just started the process back in June. We're doing all of the hard work to get all of the databases purified, to get all the part numbers, build materials, ladders, all the standards updated. That's a hell of a lot of work that hadn't been done for a long time to 2014 to get that done.

The heavy capital intensive restructuring of Accuride will be done by Christmas time. We spent $58 million last year. We're going to spend $69 million to $70 million this year. Next year we'll bow our CapEx back down to $35 million plus or minus $5 million.

I can take you through all the business. I need a pay line for steel in Henderson, otherwise Henderson is in great shape. I can move a blanking (prep) out of London for $3 million and save about $3.5 million of (freight), about a 1.5 year payback or less or I can wait one year to do that.

Mexico, I need a new assembly line, (Rim) line. That may be deferred a couple years. Steel wheel's in good shape. Aluminum wheels, I need no capital investment right now. I can live with what I have today. Eventually I need to rebuild or replace one of the (4G) presses and I'd like to buy another megaline for $12 million but I can live with what I have now for a couple years.

Imperial business, I probably need $3 million to $5 million to rebuild and repair some presses that were in really rough shape. That's all we need in that business. (Brin) is in pretty good shape. They'd like a new casting line but that's about $35 million. We'll let the next owners of (Brin) put that money in or we'll let a customer help pay for that capital and we have two or three customers who have talked to us about putting that, the majority of the capital – putting that line into (Brin).

And Gunite, for all practical purposes is fixed from a machine standpoint. We have some casting stuff we need us to keep working on but I think we can – our maintenance capital is around $10 million, $15 million a year. We've got basically productivity opportunities for about $15 million, $20 million.

We started this journey last year – I got here in February. By April we gave the board and our customers a rough draft and in July last year we said here's what we're going to do. We're going to create a global company in the wheel in systems. We want to be number one or number two.

We want a 20% return on invested capital. We want to diversify outside of North America. We want to keep our people. We want to create new products because we want to build our engineering team and we've got our stock (price).

We started the bottom of the period with people. We've replaced the majority of the leadership team. We've got very capable plant managers. We've got a VP of Quality. We have product engineers back on the team.

We are teaching them the lean manufacturing. We're moving in the right direction. We listen to our customers. A lot of our investments are tied to what the customers wanted. We are going to be a supplier of choice.

Our wheels business gets A plus ratings from every one of our customers. Gunite got an F minus and we've paid the price for our piss poor performance in 2010 and 2011. We've got to go back and earn back our reputation in Gunite.

Imperial is absolutely critical to pack out. I can't run a balance right now. We've proved it to ourselves (within) the fourth quarter and first quarter last year. We need to be disrupting the operation.

And (Brin) is gaining share with key customers outside the truck market. We wield the best in non-core assets but only when we want to. We're not in tire sale mode. We'll sell them when we get good, extra value and we want to put them in the hands of owners who will actually treat the assets correctly.

The assets I inherited February 1st were run by a bunch of guys who didn't invest in the business for quite some time, not with a few years, 15, 20 years. You can't run a manufacturing business if you don't invest in it here in North America.

We are putting lean manufacturing. I can transport you tomorrow. I'll put Henderson Kentucky plant against any wheel plant in the world. I'll put Eerie up against any aluminum forging and machining plant in the world. It needs a little bit more capital in the machine side.

Gunite is not quite there yet. Imperial is another 12 to 18 months from being where we want to get it to. (Brin) is like night and day. I was just there two days ago. There's four big plants there.

One plant is I gave them a B minus. Last year I gave all of those plants F minus. I have one plant with a D minus, we'll get to A in the next 24 months. The other plant needs some capital to get fixed. Then we'll start drilling the company globally and there are real assets that are available that would fit our portfolio that would diversify our customers, diversify our footprint and we can go in and fix those businesses and that will drive our stock price.

So bottom line is industry conditions short term are wind in our face. Someone asked me last year on one of the conference calls, Rick, is it easier to fix the company when the volumes are going up or when the volumes are going down? I kind of laughed. They're both difficult but it's a hell of a lot tougher when you don't have the volume to cover your fixed cost structure until you get the cost structure right.

(We respond) by taking our costs where we can but we're not jeopardizing to fix the business plan that we have right now. We have adequate liquidity, even with the high capital spending. We still have some excess inventory we take on. We're fine there.

Our aluminum wheel and our Gunite (inaudible) are almost done, 95% to 85% done, all done by Christmas and we're confident that we can fix Accuride so that when the upturn does come we're a much more dependable and profitable company for both our customers and our shareholders.

And I think that's it. And Greg and I will take all your questions. Fire away.

Question-and-Answer Session

Unidentified Analyst

(inaudible – off mike)

Rick Dauch

I think that's the main driver, right. We don't see a downturn in auto. That drives a lot of (freight). We're starting to see some stability in the housing, so that should drive some Class 5 through 7.

As municipalities are taking in some taxes, like I said, buying dump trucks and snow plows and busses, we're seeing uptick in busses next year for school busses. So I think it's just the general GDP and the concern over the European economy and our election, what's going to happen here.

So that's what I see today. You guys see the same newspapers and the same text every day but that's what we see. We talk with fleets. They know they've got to replace their trucks. They're getting to the age they need to do it. They made money this year. A lot of fleets are saying they had record years but they're not buying trucks right now. We can't quite figure that out yet.

Unidentified Analyst

(inaudible – off mike)

Rick Dauch

I think Europe scares the hell out of everybody that it's going to lead to a 2008, 2009 type recession and no one wants to go level up and buy a bunch of trucks that are going to sit idle. I think that's the biggest issue, to be quite honest.

And when you see riots in Spain or riots in Greece, that scares Americans that do (inaudible). Let's just see what happens, right. That's what I think right now. That's me speaking. Yes, question.

Unidentified Analyst

(inaudible – off mike)

Rick Dauch

Yes. Greg, do you want to take that one? I can do it but I'll let Greg because he came out here to speak as well.

Greg Risch

(inaudible – off mike)

Rick Dauch

Does that answer your question? OK, yes sir?

Unidentified Analyst

(inaudible – off mike)

Rick Dauch

Yes, the question was can you comment on the difference between where ATT and FTR are right now, right? So we had ATT come in in the month of July. We had FTR come in the month of August and we had Global Insights come in in September.

They just had different views of where things are, right. We talked to (Kenny) quite a bit and he basically – he doesn't see the same economic rebound and so he was very – actually, when he was done speaking, we said, well, thank you for all that beautiful, great news, right, and walked him out the door. No, we said, hey, we got it.

I really can't tell you why they're so different. And they're not just different on trucks. Look at trailers. There's a difference of about 40,000 there. They're pretty close on the Class A but it's mostly their economic miles they use that are secret I guess.

I tend to be more towards FTR right now when I go see the customers. When I have customers telling me they only have firm build schedules to less than three weeks at one place and less than three days at one plant, that's really concerning to me, right.

You tell me how to run a (technical difficulty) customer wants the product. He kind of got to say, well, we've got a big market share and we'll get it to you when we get it there. That's not the way we're going to run the business.

We've identified a root cause in our company is we don't have robust scheduling systems or inventory management systems. That is mind-numbing, boring, mathematical work to be done between the manufacturing team, the customer service team and supply chain team. Go part number by part number. What's the economic order quantities that make sense for manufacturing? What's the lead time from a supplier to our factories to a customer and what do we want to keep in warehouse and what do we want to keep in the plants?

And I'm telling you, it's 12,000 part numbers of Imperial, it's lower than 4000 at Gunite, it's about 270,000 aluminum wheels, 28,000 at Henderson, it's 8000 at Camden and it's about just under 400,000 down in Mexico.

So if you don't have manufacturing engineering, industrial engineering and the right people in supply chain, you can't do that work. If you don't have that math inside your computer systems and your computer systems don't talk to each other, then you're scheduling on the fly with faxes and emails and that's how Accuride has been run for a long time.

We're going to fix that. It's going to take us another 12 to 18 months to get all that (low cost stuff) fixed. But when you do, then you start making money. I've seen it happen before. I've seen it happen at American Axle. I've seen it happen at Acumen. And I've done it before, so we'll get it done here, too. Yes, sir.

Unidentified Analyst

(inaudible – off mike)

Rick Dauch

No, the customers aren't going to go away. The question is is there any risk of any of our AR going away because a customer has an issue, right? We've done that stress test. Do you want to comment on that?

Greg Risch

Yes, without getting into too many specifics, we've run a lot of different stress tests with a varying amount of truck builds, trailer builds, after market share as well as specific customers. So we feel good that we're putting in the work to be prepared.

Unidentified Analyst

(inaudible – off mike)

Rick Dauch

If you get back down to a run rate where you were back in 2008, 2009, where it was 115,000, 120,000, 140,000 trucks, that's where it starts getting a little dicey there. If you were not a deemed a critical supplier in a Chapter 11 situation, that would be a difficult situation, right.

So you plan for the worst and hope for the best, right. But we're – we're making sure we can do something. If we can monetize an asset and put that money on the balance sheet, so be it, right. But we're not going to give an asset away, either.

I kind of feel like 19-year-old kid who played football in college on Sunday morning, right, after the last 60 days, pretty banged up, right. There wasn't much good news in the industry in the last 60 days but there's better days ahead, that's for sure.

There's a question over here. I saw a hand go up, yes.

Unidentified Analyst

(inaudible – off mike)

Greg Risch

Sure, the question is where is working capital going to go from June 30 through the end of this year, correct? And then maybe a little thoughts on beyond that, so specifically if we think about the three main pieces of our trade, let's talk about our trade receivables.

We have set terms with our customers. We don't anticipate they will change and so as far as the number of days outstanding it would just be a function of what are the sales in the month or so leading up to the end of the quarter.

So certainly as we look at June to December, we'll see receivables draw down and then Quarter 1 that usually goes back up fairly cyclical and seasonal with our business.

Inventories are something that have been going down and so you should expect they'll draw down from where we were in June to September and ongoing through December as well.

I think the interesting thing, (Jonathon), will be looking at our inventories as the truck demand comes back up. I think you're going to see one more portion of the ne wand improved Accuride as far as being a dependable supplier with a lower amount of inventories. Rick may comment a little bit more about that.

And then as far as payables, we've been building our payables days back up from somewhat of a low point from a couple of years ago and so we expect that will be steady to go as well.

But obviously with keeping less inventory might have a little bit less payables too. And maybe it did go along with that on the payables with the lower CapEx spend in say '13 and beyond, a little bit less there as well.

Rick Dauch

So let me throw in a few comments. The two candidates that we thought were pretty stable, we kicked off (Lee Manufacturing) last June, Henderson and Eerie. If I remember right, our Henderson started at about 18 days from the time they received the finished goods to the time they shipped out a wheel.

We've cut that down to 10 days now. The year started out at 21 days. We actually on paper can get it down to 5.4 days. Right now we're running around 12. We used to have six days of raw material in front of the plant. Today we have less than one day. We get shipments every six hours from our aluminum suppliers.

It basically takes less than day to forge, heat treat and spin and it takes about a day to machine and polish and then we keep it for about 10 days of inventory in our finished goods.

When we got there last year, we had absolutely no finished goods. Up until August 15th this year, we were still air freighting aluminum wheels to certain customers and making decisions every day between our VP of Operations and our VP of Sales on which customer to take care of, which after market customer to piss off.

We were running seven days a week. Today when you're in the plant, we have a finished goods market of every part number that's in that plant of the high runners, then max, we know what we have. We're figuring out the other 150, 200 part numbers. We want to build those to order on two week schedules, four week, six weeks or every quarter and we're running the plants 4.5 days a week, right.

So when the volumes do come back and the shift comes to aluminum, or we gain share from aluminum, we should be running these plants not seven days a week but 4.5, five days a week and a perfect, really, run six days a week with four crews. That would be perfect, right, so then you really make money. That's what we did in (Brin) in second quarter, early third quarter.

We ran the plant seven days a week but everybody got two days off. Four guys, they work four 10s or three 12s and they rotated and you saw our numbers go up from about 78% EBIT to about 12%, 14%. We're using our capital, we're pushing our (inaudible) out the door about 14% (more higher), right, not paying time and a half on Saturday, not paying double time on Sunday and they all go home on Monday and Tuesday and take their vacations.

The weekends off then, right, and then (inaudible). So I'm pretty confident we can become, on the wheels business, for sure, have the leanest value stream in North America; I'm pretty sure in Gunite. We have to prove it to ourselves but if we get our casting right, we can cast the machine all within 72 hours.

Our competitor in North America has to buy its castings from three outside sources: one in Northern Michigan, one's in Miami and one's in Indiana and its plants are in Indiana, Arkansas and Alabama.

Assuming we have competitive labor rates, that the machines we bought are world class and our casting costs are accurate, Greg and I sent a bunch of accountants up to Gunite to make sure we really have the right standards and that kind of stuff to really understand the business fully, right.

We've got a big (inaudible) and we've got to make sure we can turn that big – we're going to restructure that business down to $180 million business, $200 million then we can still make 10% to 12% EBIT on that business, so that's what the numbers tell us today.

If it's not, then I'll come back and tell you we made a mistake but I don't think so. I told our guys to quit whining about the Chinese imports. If you run out and follow Wall Street on Chinese imports, our Gunite business, we're saying we didn't deliver on time and our quality sucked.

Wait until we get good deliver, good quality. We'll take that battle on down the road. I do think there's dumping but the time to fight it is not right now. So other questions?

So I flew in this morning. I knew when we got off the plane there was going to be a blood bath in terms of our stock price and sure enough it was and (inaudible) back up, so those of you who bought today, stick with us. Those of you who sold, hopefully we'll prove you wrong and we'll get it back up there.

So thanks for your attention and have a good day.

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