Good morning. My name is Christie and I will be your conference operator today. At this time I would like to welcome everyone to Timken's First Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Tschiegg, you may begin your conference.

Thank you and welcome to our first quarter conference call. I am Steve Tschiegg, Manager of Investor Relations. Thank you for joining us today and after our call should you have further questions, please feel free to contact me at 330-471-7446. With me today are Jim Griffith, President and CEO; Glenn Eisenberg, Executive Vice President of Finance and Administration and CFO; Mike Arnold, Executive Vice President and President, Bearings and Power Transmission Group; and Sal Miraglia, President of our Steel Group. We have remarks this morning from Jim and Glenn and we'll then all be available for Q&A. At that time, I would ask that you please limit your questions to one question and one follow-up at a time to allow an opportunity for everyone to participate. Before we begin, I'd like to remind you that during our conversation today, you may hear forward-looking statements related to future financial results, plans and business operations. Actual results may differ materially from those projected or implied due to a variety of factors. These factors are described in greater detail in today's press release and in our reports filed with the SEC which are available on our website www.timken.com. Reconciliations between GAAP and non-GAAP financial information are included as part of the press release. This call is copyrighted by The Timken Company any use, recording or transmission of any portion without the express written consent of the company is prohibited. With that, I'll turn the call over to Jim.

Thanks Steve, and good morning. I am pleased to result that Timken began 2008 with record first quarter results. The top line for the quarter was up 12% and our earnings from continuing operations were $84 million. Excluding special items earnings per diluted share of $0.82 increased 24% over last year, exceeding our earnings estimate for the quarter. The changes we're making to our portfolio are working. We are more industrial, more global, and our portfolio is better aligned for consistent profitable growth. We have made critical changes and investments to improve our ability to execute. Our enterprise strategy is clear, to grow targeted parts of our portfolio while optimizing the rest. The first quarter results reflect this progress to structurally transform our business. Beginning this quarter, we are reporting the results of the company under four business segments. Glenn will take you through the details in a moment. But first, I'd like to review the quarter, in terms of the progress we've achieved to deliver improved performance. Sales and earnings for all three Bearings and Power Transmission segments are up. In mobile industries, our results reflect the positive impact of pricing efforts as we discussed last quarter, in markets where we are not earning a suitable return. Additionally, we've essentially completed our restructuring and are seeing improved operational performance. The realignment of our bearing and power transmission organization translates into better execution and more effective portfolio decisions. I've been very impressed over the last few weeks at the speed at which our organization is reacted to the customer work stoppage underway in Detroit. Reallocating capacity where possible and taking other actions to mitigate the impacts. Sales and process industries were up 25% this quarter, driven by strong demand, particularly in energy, the metals industry and distribution sectors. Our investments…

Thanks Jim. For the first quarter, the company's fully diluted earnings per share from continuing operation were $0.88, excluding special items earnings were $0.82. These special items included $6 million of after-tax income, primarily related to a gain on a real estate divestment, which was partially offset by restructuring and rationalization expense. In the first quarter of 2007, special items totaled after-tax income of $12 million, and included a favorable adjustment to our tax reserves which was partially offset by restructuring and rationalization expense. The rest of my comments will exclude the impact of special items. Sales for the first quarter were $1.4 billion, an increase of 12% over 2007. The increase over last year was due to strong demand across the company's broad industrial markets, aided by capacity expansions, any impact of favorable pricing surcharges in currency. The benefit from the Purdy and BSI acquisitions was offset by the divestiture of the Desford 2 Mill early last year. Gross profit margin for the quarter was 21.8%, an improvement of 90 basis points from last year, reflecting favorable pricing, currency and strong demand, partially offset by higher LIFO expense reflecting the higher cost of purchase scrap within the steel group. The company was also able to leverage SG&A as the margin improved 40 basis points over last year to 12.3%. As a result EBIT for the quarter came in at $113 million or 9.1% of sales, a 110 basis points better than last year. Net interest expense for the quarter was $10 million, up $2 million from last year due to higher debt levels resulting from the company's acquisitions. The tax rate for the quarter was 34.5% comparable to last year and our prior outlook. As a result income from continuing operations for the quarter was $78.9 million or $0.82…

[Operator Instructions]. Your first question comes from the line of Eli Lustgarten of Longbow Securities.

Thank you.

Good morning Eli.

Nice quarter, very impressive. A couple of clarifications; one, can you give us the impact of foreign currency, both on top line and bottom line and the actual numbers for the contribution of the various... of the two acquisitions and divestiture?

Yes, Eli. Currency for the quarter call it around, it was around $50 million of our revenues. So it accounted for roughly a third of the top line growth. The acquisitions that we had during the quarter of Purdy and BSI are the full impact of the quarter was essentially offset by the decline that we had by exiting our Desford operation. So, the net between the two was effectively zero, so it had no impact on year-over-year on the top line. And as far as bottom line we leveraged reasonably well, the currency we don't give out specific levels within the EBIT number.

But the currency is clearly contributed to the earnings number?

It did possibly help them.

Okay. And you indicated the pull forward of some revenue I guess it was the process group in the quarter to the Project O.N.E. for prices coming forward. Can you quantify what that might look like and how much do we give back in the next quarter and so we just had a forecast this?

Right. Just from a timing standpoint, again we would say that roughly call it $10 million to $15 million of sales would have been accelerated into the first quarter versus the second. As you may recall, we went through systems implementation last year as well but we did in May. So, we saw similar events. We prepared for the advance of going live on the systems because this was now April 1 the advanced shipments if you will went into first quarter versus the first month of the second quarter.

So that too would have been a couple of pennies a share coming from that?

That's correct.

Good. Do you have any quantification what the strike might have cost you in the numbers and whether we see more impact in the second quarter from the automotive strike and the automotive downturn that we saw in the first quarter because it was very impressive what you did given the condition in the auto industry?

Sure. Again I'll give you the dollars and again Mike can give you any of the color on there what's going on. But we are viewing it roughly around $15 million plus or minus, call it a month of the revenue impact from the strike, and with leverage of around 20% and so again similar, couple of cents a share, if you well per month of that impact.

And did it get worse in the second quarter since this thing begun?

Yes, Eli this is Mike. It really doesn't get worse. It stays at about the same, unless they begin to impact other producers that drives downs to the supply chain. So, the impact that we have seen in the first quarter fundamentally was a March impact. That can run through April and May is almost a monthly impact that we are looking at so.

So we had one month so far and latter in the first quarter we have one months down the second quarter you can say.

We had about $15 million in the first quarter as Glenn said, if we look at the second quarter going through is the strike was finalized at the end of this month we probably look at $15 million to $20 million. We just have to see how that actually works out. And as Jim said earlier in his comments our ability to mitigate that from a margin prospective but also try to move some of that product to other markets has been relatively successful.

Okay. I'll get back in queue. I don't want to hung it.

Thank you.

The next question comes from the line of Martin Pollock of NWQ Management.

Very nice results. If I may, this is the first quarter we are seeing the new recasting of the data, but I am most curious is within the segments mobile industries, if you can give us a sense of what the automotive operations did both in the top line and bottom line also, seems aerospace is little surprisingly with a lower then I would expected and wondering if you can describe what the mix issue there in terms of nature of that business? And process clearly phenomenal numbers, can you essence give us little bit more transparency year-over-year, if we had actually maybe seen some of this data without the recasting of the numbers?

Yeah, Marty. This is Mike let me walk through all three segments and give you some insights. If we take a look at the mobile as Glenn went through the numbers you'll see mobile as a whole was up 4% on sales about 27% on EBIT. We said in previous quarters that we would try and give you some insight to the automotive pieces that we were still recording in the old automotive group. If we took a look at that sales would have been slightly down which you would have expected out of what we now consider to the light vehicle systems inside the mobile industries. So sales were down about 3%, EBIT was actually improved, quarter-on-quarter so year-on-year. So that was good and that was offered by relatively stronger first quarter for the automotive group last year compared to the reminder of the year. So that's actually been very good news on the automotive side inside of the mobile piece. So we are making good progress there. If we go to the process industry is just to give you a little bit insight to write the first quarter was a very strong first quarter and as Glenn had talked about some of that is the pre-shipments that we made in March versus April preparing for the implementation of project running and then sharing our customers had the right level of inventories as we took now some of the operations for the implementation. So there was combination of some volume that was moved in from April. We also have very strong pricing that is continued on as we have discussed over the past couple years. That does continue a very strong markets and strong domain, probably just as important is the volume increase that were getting now from the…

Yes. If I may just a follow-up, back to the automotive and I guess I don't have last year's quarter, but the sale, coming off the fourth quarter where profits were significantly down. Just give us a little bit of a clarity from what kind of loss did we have in Q1 on automotive and this was pricing actions do you think you've got... the kind of tailwind in the pricing here that suggest things are actually going to get better Q2 and since '04. And the other question on truck, we were clearly in a down cycle here but should we be expecting that any improvement later in the year at least going into '09 on that piece of the business and how big is that exposure to you?

Marty, let me take a little bit of a cut from the automotive numbers again, relative to prior periods. First thing and foremost probably is that automotive OEM which is the way we reported that before still accounts for around 60% of the segments. So as Mike said, the changes that you see are truly a reflection in part of what's going on within the automotive business. And as Mike alluded to that sales were slightly down, but from a mix standpoint that was attractive. The sales were down because of the of the strike. They were down in the light vehicle but we had nice sales improvement on the heavy side. So from a mix and from an earning standpoint that was favorable plus the benefits we continue to get within the pricing as well as the restructuring that we had. And, again there will continue to be the headwinds that we have experienced with regard to material costs and our expectation is that headwind will continue as we go throughout the year and again, Mike alluded to the uncertainty of the strike or how long it will last or be at obviously we are although flow that. It won't be very long lift. The other thing just to say what's different and how we would have reported the numbers before is the unallocated corporate expense which now comes out, which was effectively a little over 1% of sales to 1.4 varied that would have been pro rata allocated if you will to the businesses. So you can come back to try to get to the same kind of number that we had before by looking at our corporate expenses giving them the pro rata share. What we would tell you though is as best as we can gauge that the old auto OEM group would still be in a loss for the quarter, even with the allocated corporate cost, so identical to what we would have reported before the new segmentation but we would have seen a nice improvement year-over-year in the first quarter and a lot of the improvement within the segment was attributable to the automotive OEM performance. So as Mike said, it has improved, we expect it to continue to improve but realizing that there is still the challenges ahead with material and with the current markets what's going on with GM and with just the strike that's going on. Hope that gives you a some color on it, but again it's an improved part of our business.

Okay, thank you.

Your next question comes from the line of Mark Parr of Keybanc Capital Markets.

Hi, good morning.

Good morning.

Good morning, Mark.

Great quarter. Holy smokes, stock is up almost 15% today, nice work. I wish... it's nice to see that something else besides steel is driving the company for a change.

It's one of those overnight success story that 20 years in counting, right?

Marty, I take offence to that.

Alright sorry Sal. Was that Mike? Mike, great job. Phenomenal results and I just think we are seeing kind of the initial impact of lot of things coming together but at least the early returns on the restructuring appear to be really encouraging. So I just wanted to give that kudo. I did have a question on the steel business, the LIFO charges did have a negative impact and one of the things I would point out is that, the other steel operations that we've seen report first quarter have been able to overcome the higher raw material costs, I am wondering if we should see a reversal of the comparisons in the second quarter or how... given an outlook for flat numbers for the year, again which is the lot more conservative than the rest of the space that I am looking at. How do you see the quarters on full and hope for the balance for the year and are you really just being overly conservative here?

Yes. Good morning Mark, it's Sal.

Hi Sal.

Frankly we are little concerned and I think it has more to do with exactly how rapidly these raw material prices actually change. Just to give you some quantification, we took over $17.5 million charge for LIFO in the first quarter. So if you look at that it is, by all measures we had just a bang up first quarter without one exception in terms of total tons and turns of sales dollars and it is that rapid jump that require that we go through and make a modification for what we believe the full year will be. If we don't see a very radical variation in this especially upward variation in raw materials from here, we just go back to even what appear to be crazy last year with decline but some thing on a bit more controlled rate. We expect the year will be very strong. We look to be at least as good as last year maybe even a little stronger and that is even in the phase of relatively weaker automotive market business stands right now. But, what happened last month, $150 a ton jump in the cost of our raw materials, that was just...

Right.

Off everybody's radar screen.

And Sal based on what we are here at and that will be up at least another 50 bucks this month.

Right and we expect that. But, 50 bucks doesn't sound so bad anymore.

It's a lot. Based on the way your contracts are structured, I mean you are well above 70% contract as far as your overall mix at this point.

Yes, that's close. Right.

Alright. So what sort of lag do you have as far as being able to pass the scrap cost through, you are on a 30 day or 90 day lags, how is that working?

Our formula is 30 days. It sets the index for the following month based on the prices published in the American Metal Market this month. So the beginning of the month that's what the index will be for the following month. We are on that, just about 30 day delay for the change in surcharge. We are about... and when it comes to timing, we are 98% covered on this stuff. There is only a few places were we lose little bit on it Mark. So it will make us wait through, it's just a matter of timing.

Okay, alright. So you see...

But the LIFO is a real permanent charge until things start coming back down on some other side of the demand scale.

Alright. Okay, I hear you. Okay, terrific and thanks for that color guys and congratulations on a great quarter.

Thanks Mark.

Thanks a lot Mark.

[Operator Instructions]. Your next question comes from the line Eli Lustgarten of Longbow Securities.

Can you quantify how much incremental capacity will have available in the second half of the year from the new plants or is the next couple of quarters?

Do we miss... I think we missed the first part of your question Eli. Would you repeat it please?

My first part I just made a comment so that comment so that everybody must be so impressed that I can ask questions today.

We actually heard it. We just wanted you to repeat it.

We sit there almost in all of the quarter, not that we want to pick up the voice of guidance so conservatively beat everybody's estimate by $0.08. Later $0.08 any way but we want to touch that.

Yes, Eli let me just see your question was basically how much more capacity would be coming online and how that will leverage the remainder of the year?

Yes, that kind of volume increase will go years in the new capacity how does it go...

Yes, we looked at the beginning of the year some places in the neighborhood about $75 million which regards to increase capacity during this year. So there will be that clearly will be coming on, we'll continue to push those new manufacturing facilities for additional product but we know that we will get to that level, you'll begin to see that as you did in the first quarter with regards to volume because if you remember in process industries we are still constrained on many of our product lines. So this new capacity goes right to the market and it gets clear leverage.

Okay, and going back that's... for the first time Sal, I may have to work for living and actually perform that opposed to coasting for last couple of years. We can leverage for the past two of the high material cost that's going to take place. Is that going to offset by the weakness automotive in the second quarter and you really wanted improvement till the second half of the year?

I don't believe so Eli. We already saw some weakness in the first half... in the first quarter. And it's all in weakness. So it was about... we probably would have had 3% higher shipments for the quarter if automotive were anything like normal. So all in that was about it and we still had records across the board.

Yes, and I guess I'm looking at the production schedules are weaker in the second quarter and the strike is still going. Strike doesn't disappear very quickly.

That's right.

So, just looking at the impact but at this point we should be able to see some of the improvement in margin beginning in the second quarter run out?

We believe so, yes.

Okay. The interest charges are going to stay relatively flat at the current level? Is that the expectations?

Yes, the interest rates... obviously we're going to envision generating free cash flow, so the debt balances should come down, but the interest rates should remain relatively the same.

Okay. Alright, thank you.

Your next question comes from the line of Holden Lewis of BB&T. Holden Lewis - BB&T: Thank you. When you talk about the two items which maybe somewhat trained in nature, does the pull forward of demand and process in the automotive strike, one manages roughly $15 million, one cost roughly $15 million. So really the impact on revenues from those... deal on the Q1. But how should we look at the impact of those two things from an EPS driven from a margin standpoint because it already strikes me that, the process is very profitable and no debt drove some of that. Whereas automotive, assuming this is impacting some of your North American guys the most its not that you made a lot of money on those clients anyway. So you get always neutral revenues. Can you give us a sense of what those transcend items might have had in terms of margin and EPS effect?

Holden, we would say frankly that it would be relatively neutral for both. We're probably leveraging it around 20% give or take but again revenues were identical. The bigger impact will be obviously in the second quarter as the T1 shift obviously will negatively impact the revenues and therefore some earnings in the second quarter while the strike continues there'll both be moving in the wrong direction. So you will see the bigger impact in the second but just assume that it was respectively a loss if you are just looking at those items in the first quarter. Holden Lewis - BB&T: Okay. So there is the benefits that came from the pull forward were largely neutralized by losses from the automotive?

Close enough. Holden Lewis - BB&T: Okay. And then can you... you talked about logistics expenses, in at least three of your segments. You're just referring to energy costs or are there some mismatches in terms of where you have capacity and shipping that sort of thing. Can you just expand on that a bit?

Yes, there is two things really going on. Clearly the energy cost on just even surcharges on fuels and the shipping costs etcetera have gotten quite expensive. The second thing is we still are running our plans maximized. We are shipping product to customers across the world and when you are doing that, you are still incurring significant cost probably above what we would expect long term as we get our manufacturing base very much created across the world and a better sense that product being produced in Asia is being sold in Asia similar currencies, lower logistics costs overall versus moving a lot of product especially the large product going into the process industries across the world. Holden Lewis - BB&T: Okay. And then lastly you also sort of referenced, better portfolio decisions in auto and particular. Obviously there were no high visibility portfolio decisions that were made. Can you just expand on some of the stuff that, to which you are referring in that statement?

Well let met just give you a little glimpse of maybe the mobile group and the mix of the sales and the impact in the changes of that mix. If you look at what we call the light vehicle systems which basically as the passenger car side of the business, first quarter, quarter-on-quarter comparing back to '07 was down 8%. The heavy truck piece of our business was up 25% and our after-market piece was up about 14%. So what you'll begin to see and whether you look at it, first quarter of '08 versus fourth quarter of '07 or looking back into quarter one of '07, we are fundamentally driving a mix of our sales much more towards the markets that we believe that we can be the most profitable end. Obviously we get impacted by things like the strike in American Axle and the shut down of the General Motor's plants and that impacts it. But this is a fundamental direction that we are driving our capacity home. Holden Lewis - BB&T: Okay, thank you.

Okay.

Your next question comes from the line of Martin Pollock of NWQ Management.

Yes. I am looking at last year's quarter. The first quarter that you indicated that automotive had a life and not grow the issues of life, what was the cost I don't know, if that would be material to that was but could you mention that LIFO was is an expense for, in this release for the steel segment. I am just wondering if you can effectively describe is... are you... what's your reserve action on policies on LIFO? Are you effectively doing it on under quarter-by basis, do you have an estimate for the year and then you are essentially working with about which could change. So essentially is LIFO some thing that's higher or in line with your original expectations and maybe by segment were in LIFO seems to your comment here in steel as where you saw the LIFO hit. I don't see that comp material automotive which is with... where the fourth quarter was?

Alright Martin, I guess with regard to LIFO maybe cover the last part first which is our expectation. I think Sal have made a reference. But we had no expectation that LIFO expense would be as large as it did because it's very directly correlated to the high price of the scrap that we're seeing again we did envision seeing. So clearly we are managing through an environment of higher LIFO expense then what we would have thought coming in to the year even the quarter. What we did always we do look out for the full year and what our expectations will be and therefore and then we bring it back into each of the quarters by building up the reserve. So, effectively when you look at the guidance that we had out there the reaffirming of the full year and obviously the first time we have met the new guidance or... outlook for the second quarter that reflects now what our current expectation of material cost will be. LIFO does effect all of our business that clearly the biggest piece is in the steel business that Sal alluded to you and frankly within the bearings side the biggest keys would be in the automotive keys of that to your point earlier. But year-over-year fourth quarter to first quarter, the number you've quoted for auto would probably be pretty comparable to what they would had for an expense in the first quarter.

Okay. If I may on the steel just back to the steel, at this point, is really the performance of steel is a little bit unfavorable. Is it still lagging on your pricing actions at this point lagging, in terms of those results that affect you, not yet picked fully implemented those price actions?

No, Martin our price actions have been implemented. Our surcharging mechanisms are renewed in our contracts. We have a timing issue of... made for these things of through to the marketplace but it probably the quickest of all the timing within any of our businesses. Frankly it's almost exclusively that LIFO impact in our first quarter.

But that suggested Q2 could see the bigger benefit there?

Correct. Yes.

Okay and last CapEx running fairly high well above depreciation, are you at a point if you can decide whether CapEx is it, is at a level where we are seeing maximum level for this year and what would normalized CapEx be in fact what would be normalized maintenance if they are realized, there is normalized growth in your expectations. So that effectively CapEx will still be fairly high?

Mart, we would say if you will that, normalize that will be... that's a tough thing to say because obviously when you invest in capacity or in continuous improvement initiatives you are getting good returns on it. So you don't mind allocating your capital that way. But clearly we would target longer term I think we have said before around 4% of sales is probably on more normalized level. We currently have depreciation and amortization of around 230ish to 40ish million a year. So clearly we are spending above that level although we spend at that level for the first quarter but it will grow. So we'll spend roughly what we did last year again the biggest piece of that spending is on the new capacity additions that we're doing the Project O.N.E. implementation that we are putting in. So key strategic initiatives of the company as were that capital is going. From our maintenance standpoint again that will fluctuate around the bit that we probably think so that been in the past that is roughly around $80 million give or take of maintenance within the business on that depreciation and amortization level of that call it 235. So it's higher than normal, but it's clearly funding key strategies of the company.

Okay, thank you.

[Operator Instructions]. Your next question comes from the line of David Raso of CitiGroup.

Quick question, I was trying to back into the non-auto part of mobile. In a way you were at the year-over-year profit improvement in auto or essentially what are the exact number year ago first quarter because of the MRO now include it. But essentially if the loss was less in the first quarter just reported than a year ago... trying to back into the non-auto business implies the margins were down year-over-year in the non-auto part of mobile. Is that a correct statement?

Well Dave, I think it's close to that. Again we're not... we will not be breaking down the margin side of the various pieces of mobile. But what we set out to do was essentially focused very much on improving those underperforming areas of the business which was a lot of the old automotive and that's where we've seen the improvement and through the period of time now where we are seeing material pricing escalating, logistics cost etcetera and we are completing out some of these plans, maintaining those margins and what are actually attractive parts of the mobile industry was really that Raso. So, what you are seeing in the first quarter is an example of that.

The duct in auto given the biggest piece of mobile that's obviously, the biggest positive swing back, better improve that then show little improvement in non-auto...

That's correct.

It was just interesting that, the non-auto was down at least the way I am on the numbers down that's not a best slot. Can you give us some color on going forward? How should we think about that or is that a classic volumes that are still very good. Because the volumes were up pretty darn big year-over-year, if I am doing it right. That for the profits to be flat to down is that simply an input cost issue and how we are handling that on price going forward?

Yes, a couple of things. I think that as we look going forward through out the year you are going to see some of that swing back as we see improvements in the other side of the mobile business. But remember the mobile business is made up of basically the pass car which... this is an area that we have to focus on what we are doing at both through mix meaning, we are getting out of some business that is in fact not attractive moving prices where it can be and we are still in that process of doing that. But is like said earlier our sales quarter-on-quarter '07 versus '08 is actually down. The remainder of that segment remember there is a heavy truck segment that actually was part of automotive and that has been an area we are in fact we've decided to continue our participation certainly in that industry and a scenario where the sales have been up significantly going into '08. We expect the strong year for that and in addition pricing has been strong, so that's been a big piece of not only the automotive fix but also how we look at mobile. And then the other pieces are our highway which remains strong both from the prospective of sales and margin, rail we are seeing some drop from late '07, so that is impacting us on downside. That has been a very attractive of market for us so from a mix prospective actually coming out of '07 into '08 is slightly down. And then the other is our automotive aftermarket which is an area where we do see improvements throughout the year. So, I think you'll see that mix begin to change in the last three quarters.

And for clarification that down 8% on passenger vehicle, I'll call it generically auto that include auto aftermarket but does not include the heavy truck right? That's total auto OEM and aftermarket.

No, that down 8% is just sales to original equipment manufacturers.

Okay. That's helpful. And quickly in the aerospace you mentioned that hopefully that's the lowest quarter margin that we'll see. How quickly should we expect the margins to get up to where you would started the business as a solid, low double-digit margin business?

I think you should be looking towards the third and forth quarter. We'll still some a little bit weakness on those earnings in the second quarter. They are seeing a lot of material impact from the marketplace etcetera. So, I think you will begin to see interesting jump third quarters.

Okay. Thank you very much.

You bet.

Your next question comes from the line of Brian Carlson of Atlantic Investments.

Hi guys. Thank you for taking my call. And I wondered if you could just clarify couple of good points. PASCAR revenue down 8% to OEMs, that's globally right?

That's correct.

Okay. And then you mentioned that the LIFO charge in steel was $17.5 million, the LIFO in auto will be similar to Q4, is that correct?

That's right, figure around $4 million is with that in order.

And with this embedded in the current guidance would be, what kind of expectations I mean with the guidance expects scraps deal to rise by another $50, say and to sort of stay at that level? Would it include continued increases of small amounts or is any there moderation expected in it?

Yes. We would say at least what's again we obviously provide guidance with a range and the range is the uncertainties and things that we can't control which is exactly what the scrap prices are. But our general assumption would be that we would expect that prices scrap would come down throughout the year, maybe not significantly but at least the trend shouldn't be a sustained. So it may go up before it goes down but as it goes through the year, we wouldn't think that they would stay at this high of a level. It may, but again that's our current excuse.

Okay. And is it possible for Mike for you to give us an update on the sort of negotiations you have had in terms of pricing with the contracts and so what percentage of the contracts were opened and sort of I think that at the Analyst Day you were suggesting that things are going a little bit better than you originally expected, is that still the case?

I think the progress is going very well. Obviously, we have completed all of the '08 contracts and I think they have been good for both us and our customers with regards to certainly the value we would provide in the marketplace, we have opened many of the 2009 contracts from the perspective of those discussions or happening. Clearly, we are making sure that as part of those discussions, these significant material price issues are dealt within those contracts or in fact, we will decide that we will exit some of that business. So, I would tell you that compared to a quarter ago when we've talked about this that this effort is progressing very positively, and I think both from the perspective of the mix of our business and how much of that we actually do want to be in the automotive industry, but also with regards to the price levels and you are already seeing the impact in the first quarter our margins for the old automotive group.

It seems to be progressing well.

Yes.

And can you give us any update in terms of Timken's expectations for North American auto production?

Well, we are still sticking with the I think the industry number of $14.3 million is what we are still using. However, we talk last quarter about two things that could impact a lot of that. One is just the strength of the recession in North America but also $4 a gallon gas and I think it's the time we talked about $4 of gallon gas and it's kind of chuckled and we're 361 now. So, I think that's a concern, we are we have model that and so we to the best of our ability are already beginning to manage with regards to that and I think you have seen the recent announcement from General Motors that is taking their expectations with regards to production down for '08. But probably more importantly there are bigger percentage drops in the areas such as light trucks and SUVs which is an area in which we participate heavily. So, the macro number of 14.3 or 14.2 isn't as important to us, it's actually the light truck and SUV numbers and that's what we watch very, very carefully.

Okay. And then the last question I had was just as regard to steel. I know that the automotive demand was probably a little bit less than perhaps you guys had anticipated. But my impression was that if there is any weakness on the auto side that demand from the energy sector was such that there were a clearly customers looking for that steel, and than that you have a positive mix shift in that you can take an auto, piece of auto steel or take I don't know some capacity there and reallocate it. Sal, can you just comment on that? I mean if you would had more auto sales in the quarter, even if been higher?

Actually would have been because we have made shifts where the shifting is appropriate. But then there are some areas and some sizes and ranges and grade, where they really isn't an alternative. It is just pretty much automotive related and those weaknesses in shipments are among that category. That would have been purely automotive. So, had not there been a strike our results this quarter would have been even better.

Can you give us a sense of the percentage of the steel capacity which would be solely tight to auto?

No. I really can't give you that number because it may not just be auto. Its areas that used that sort of size range, but for the most one I can tell you that much of the automotive product is in the smaller size ranges, in the smaller SPQ arenas. So in the up to 3 and 4 inch down to 1, 0.5 inch size ranges in general, that is probably 65% automotive best in throughout the whole of the industry.

Okay.

And that's our the strength of our size range. We are there but not with the extreme capacity quantities.

And just as a general comment, very happy to see some of the capacity expansions starting to bear some fruit. Good job. Look forward to seeing more of that. Thanks Brain.

Thank you.

Your next question comes the line of Mark Parr of Keybanc Capital Markets.

Yes. Just, I hate to keep pounding on this LIFO thing in steel. But I think I understand now is that, the LIFO charge that you took is in excess of what you actually realize in the first quarter, because of your full year expectations for scrap cost. Is that fair Glenn?

That is.

Okay, terrific. That really helps clarify the situation and thanks very much.

Thanks Mark.

There are no remaining questions at this time. I will now turn the call Jim Griffith for any closing remarks.

All right. Thank you again for your interest in the Timken Company. I am pleased to see that you all took Eli's challenge and came up with the full hours with the questions for us. To reiterate the message we are seeing strong global demand, especially from those industrial markets involved and helping build the Asian infrastructure and we are taking advantage of that to improve our portfolio. There are plenty of challenges in the market today, but we are tackling on the head on with the goal of driving improved performance for our shareholders. Thank you.

Thank you for participating in today's Timken's first quarter 2007 earnings release conference call. You may now disconnect.