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5. NTN Corporation Business Report FY ended Mar. 2017

NTN Corporation Business Report FY ended Mar. 2017

Mid-term Business Plan "NTN Transformation for Next 100 (NTN100)"

(FY ending Mar. 31, 2016 to FY ending Mar. 31, 2018)
-To mark the 100th anniversary in March 2018 and achieve sustainable growth for the next 100 years, the Group is now promoting key initiatives, under three basic policies of "Manage Growth," "Manage Profitability," and "Manage Foundation." Plans for its automotive division are as follows:

Manage Growth: entering new business fields
-Developing lightweight and compact "new in-wheel motor systems for electric vehicles"
-Established "the Electric Module Product Division" to accelerate the commercialization of products for next-generation vehicles. Planning to release "electric motor・actuators".
-Established "Green Power Park" at the Advanced Technology R&D Center in Kuwana, Mie Prefecture. The facility is an energy circulation model where electricity generated by wind, water, and solar power is stored and then used to charge up EVs and for other purposes.

Manage profitability: restructuring the driveshaft business
-Advanced Drive Shaft (ADS) modules: working to reduce product weight and increase use of common parts
-Entered the high value-added products market with the release of lightweight driveshafts for premium vehicles
-Enhanced its global supply structure with the inauguration of new plants in Xiangyang, China and in Mexico
-Established NTN Driveshaft Anderson, Inc. (NDA) in the U.S.A. Mass production is scheduled to begin in April 2017.

Management fundamentals: strengthening financial structure
-ROE: Aiming for over 4.3% in FY ending March 2018 (Actual in FY ended March 2017 was 1.2%)
-Operating profit margin: Aiming for 5.1% in FY ending March 2018 (Actual in FY ended March 2017 was 5.2%)

Recent Development Outside Japan

-The Company announces that it will construct the second plant of NTK Precision Axle Corporation, a joint venture together with Takao Kogyo Co., Ltd. and Neturen Co., Ltd. The new plant will cover turning and heat treatment processes for shafts, and will be constructed on the western side of NTN Driveshaft Anderson, Inc. (NDA) in Indiana, U.S. NDA, established in 2015, is a plant treating finished driveshaft products. (From a press release on March 17, 2017)

R&D Activities

Core business
-Automotive division: developing low-torque ball bearings and low-torque driveshafts, and lightweight and compact modules and units for bearing-related products

• Advanced Driveshaft Module (ADS Module): a lightweight and high-performance module composed of modularized hub bearings and constant velocity joints (CVJs) using a "press connect" method
• Two Motor On-board Drive System: the system powers the left and right wheels with individual motors. These motors control the left and right driver power properly to suit the vehicle's driving conditions. Compared with a one-motor system, it offers improved driving and safety performance like steering capabilities and stability on slippery roads.

-Bearing and magnetic products: development, production, and sales of ball bearings made from sintered materials and plastic materials, and magnet products made from magnetic materials

• Tapered roller bearings with early fault detection system: equipped with plastic filters and sensors that detect iron powder
• Amorphous magnetic core: magnetic material that supports high-current and high-frequency power unit of electric vehicles

New business
-Electric vehicle business: established the Electric Module Product Division

• In-wheel motor systems
• Electric motor actuators

-The Company unveiled plans for full scale development of its electric vehicle (EV) business as a new field. Under the policy, the company will advance the development of various system products for next-generation vehicles. Ahead of its 100th anniversary in business in March 2018, NTN will foster EVs as one of its core businesses for the next 100 years. The sales target for the EV segment for 2025 has been set at JPY 30 billion. (From an article in the Nikkan Jidosha Shimbun on March 9, 2017)

Expanding R&D Activities Globally
The Company is continuing to expand its R&D activities globally, in order to increase sales outside Japan. While taking advantage of cutting-edge R&D activities conducted among industry, academia, and government, the Company is building a global R&D network to develop new technologies and products on a global basis by collaborating with its R&D centers overseas. It is enhancing the following activities to increase sales: technological service, certification/evaluation, research studies, analysis, and customer service in the Americas, Europe, and Asia.

Product Development

Series of Sensors for Next-generation Vehicles
-The Company will expand its lineup of automotive sensors for next-generation vehicles including autonomous vehicles. The company has developed technology to increase dissolution of wheel speed sensors by up to 40 times from that of the existing sensors by enhancing the sensing method and magnetic encoders. Enhanced detection capability will contribute to the reduction of vehicle braking distances. Hub bearings featuring this technology will be effective in shortening braking distance for emergency braking. NTN also developed a sensor with better detection accuracy, which will be applied as a rotation angle sensor (resolver) to detect motor rotation. The company aims to win orders for these sensors around 2020, expecting a growth in demand for next-generation vehicles. (From an article in the Nikkan Jidosha Shimbun on March 30, 2017)

High hardness sintered alloy
-The Company announced that it has developed high strength sintered metal for automotive parts like cams and sprockets. The company has realized a density of 7.6 grams per cubic centimeter and a "fatigue strength" of more than 660 megapascals by optimizing materials like alloy powders and heat treatment processes. While application of conventional sintered material to mechanical parts like gears and bushes where cutting is required is limited, the new high strength sintered metal can be used. The Company is aiming to achieve sales of JPY 1 billion from the new product in fiscal year 2020 (ends in March 2021). (From an article in the Nikkan Jidosha Shimbun on June 30, 2016)

Electric motor・ actuator
-The Company has developed a general-purpose electric motor actuator series suited to drive-by-wire control for controlling braking, shifting gears and other operations via electric signals. The new actuator series comes in a choice of three motor-axis arrangements: coaxial in‐line type, coaxial hollow type, and parallel axis type. The actuators are available in three sizes from small to large. Mass-production is slated to begin in 2018. The Company expects to achieve sales of JPY 30 billion in fiscal year 2025 (ending in March 2026). (From an article in the Nikkan Jidosha Shimbun on May 31, 2016)


Low torque seal ring for AT
-The Company has developed a new low torque seal ring for automatic transmissions (ATs), which features friction resistance that is 60% lower than conventional products. The Company received orders for the new product from Japanese OEMs and parts suppliers. The new seal ring reduces the amount of wear to one-tenth while lowering friction resistance. The Company will offer it to a wide range of European and U.S. OEMs and parts suppliers as well as Japanese customers in an effort to achieve sales of JPY 1.5 billion in fiscal year 2020 (ending in March 2021). The new low torque seal ring is made from polyether ether ketone (PEEK) plastics containing a special filling material. The new seal ring has V-shaped lubrication grooves on its side face. As a result, it offers both low torque and high sealing properties, and substantially reduces the amount of wear. Miniaturization has been achieved by reducing the seal ring width 30%. (From an article in the Nikkan Jidosha Shimbun on March 28, 2016)

R&D Structure

-World four-regions R&D activities are conducted in Japan, Europe, the Americas, and China
-Japan and Europe: basic study and the research of the most advanced technology
-China: the Company is promoting development through government-industry-academia collaboration, while performing various testing to provide products that suit local climate conditions and meet the needs of local customers
-Complete local service that covers product assessment, research, and analysis for each product to meet the needs of customers in each region

R&D Facilities

-Capital expenditure for FY ending March 2018 is expected reach JPY 44,000 million

Main Investments in FY ended Mar. 2017

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

-In the fiscal year ending in March 2018, there could be an economic slowdown in Japan, China, and emerging markets resulting from US policies. In addition, the outlook for Europe is uncertain due to pending national elections.

-The outlook by region is provided below.

• Japan: Business performance will remain basically the same, with the positive effects of new-vehicle launches offset by the transferring of production offshore to North America.
• Americas: New-vehicle production plans have been revised, but production for the launch of new models in Mexico will increase.
• Europe: Unit production will remain flat, while sales resulting from strong demand from customers will increase.
• Asia: Sales will increase due to the ongoing growth in China and strong product demand for motorcycles built by Japanese OEMs in the ASEAN Region.