NSK Ltd. Business report FY2008

Business Highlights

Financial overview ( in millions of JPY )
  FY2008 FY2007 Rate of Change (%) Factors
Overall
Sales 647,593 772,036 (16.1) -In the first half, the Company received many orders for its automotive and industrial machinery products. However, except for some types of industrial machinery bearings for energy and infrastructure related purposes, orders decreased for automotive, electric appliances and machine tool products in the second half, due to decreased production by automakers and a sharp decline in capital investment demand. As a result, total sales decreased year-on-year.
Operating income 22,106 69,343 (68.1) -
Ordinary income 16,964 64,854 (73.8) -
Current net income 4,561 42,613 (89.3) -
Automotive related division
Sales 352,453 435,705 (19.1) <Bearings>
- In the first half, the Company enjoyed brisk sales of hub unit bearings in China. In the second half, while performance in China remained favorable, sales decreased in other regions as a result of a sharp decrease in production at automakers.

<Automotive parts>
-In the first half, the Company had steady demand except for in the Americas. Sales increased as a result of the launch of new electric power steering in Europe and Japan. In the second half, sales were affected by a decrease in production at automakers.

Operating income 6,812 30,660 (77.8) - While the Company worked to reduce outsourcing and labor costs, operating income decreased as a result of decreased availability and a higher cost of materials, and worsened export profitability due to a strong yen.

Business Strategy

- The Company will strengthen its activities to market its electric power steering (EPS) system targeting the A-segment compact vehicles, which are positioned as "global strategic vehicles" by automakers. Each car manufacturer is accelerating development of these models for the global market including emerging countries. The focus of the project is the Company's new compact and high-power EPS, which is expected to meet new needs of the auto industries especially in Japan, Europe, and BRIC countries, namely, Brazil, Russia, India and China. Based on its product and sales strategy with emphasis on the A-segment models, the company aims to sell yearly 500,000 units of new EPSs by 2010. The advanced EPS is a column-assist type with a motor-integrated steering column. It boasts the world's shortest EPS unit in entire length, offering a great degree of mounting efficiency. The downsizing was made possible by integrating the electric control unit and the gear box, which was considered difficult in relation to thermal issues. (From an article in the Nikkan Jidosha Shimbun on Feb. 17, 2009)

- The Cpmpany will boost promotion efforts on its new technology which improves reliability and performance of the electromechanical braking system, which is expected to be applied increasingly in hybrid vehicles as well as electric vehicles. In controlling the brake oil pressure the system converts the motor motion into a linear motion by a ball screw, which eliminates the complex gear mechanism and therefore downsizes the system itself. It also leads to improved endurance and response. By emphasizing these merits, the Company aims to win new orders for the ball screw towards 1.5 billion yen sales to be achieved in 2012, for application in automobile and other braking systems. The Company is the first to commercialize a ball screw for braking systems, which has been incorporated in Honda's high performance sport bike using the electromechanical braking system. Reliability has been increased as the slot depth of the screw has been delicately adjusted by different parts of the screw so that the ball will never move from the proper position. Downsizing to 70g has also been achieved. These efforts have led to application of ball screws in the field of braking systems. (From an article in the Nikkan Jidosha Shimbun on Mar. 6, 2009)

Priority Strategies in the Fiscal Year ending March, 2010
Enhancing and restructuring the business base
Strategy Purpose Measures
Restructuring the global production system (bearings) To improve profitability by restructuring and integrating production facilities Global: To reduce cost by producing appropriate products at the most appropriate location Small-diameter bearings Transfer production from NSK Fukushima (Japan) to NSK Indonesia
Medium-diameter bearings Transfer production from Clarinda Plant in the USA to NSK Indonesia and Kunshan NSK (China)
Automotive bearings Transfer production from Peterlee Plant in UK from Ishibe Plant Japan
Tappet roller Transfer production from NSK Needle Bearing to Changshu NSK (China)
Japan: To reinforce production capacity of roller bearings Transfer of model type Transfer from Fujisawa Plant to Saitama Plant and NSK Fukushima
Chinese research and development company, NSK (China) Research and Development Co., Ltd.,started operation at new facilities Technology base that supports enhancement and expansion of growing business in China - Establishment of an integrated structure in China (that covers from design and development through to technical support to customers)
- Covering all segments (automobile/industrial machinery bearing/precision machinery products)
- Strengthening sales skills

R&D

R&D Expenditure ( in millions of JPY )
  FY2008 FY2007 FY2006
Overall 10,691 10,240 10,100
Automotive related division 5,778 5,994 6,013

R&D Structure of Automotive Products Division
- The Company announced that it held a groundbreaking ceremony for a new building of NSK (China) Research and Development Co., Ltd., its new research and development center in Kunshan, China. The construction is scheduled to complete in the summer of 2009. By 2011, the new R&D base will have approximately 300 local researchers, almost five-times as many as now, and contribute to enhancement of the company's operation in China. The Company has a plan to expand its business in China to 100 billion yen by 2010. To meet that goal, the Company will strengthen its product development and service activities for the local market and invest 4.4 billion yen in the enhancement of its R&D facilities. (From an article in the Nikkan Jidosha Shimbun on July 9, 2008)

Major achievements in the automotive sector
- Hub unit bearing with integrated disc brake caliper mounting bracket
The Company announced that it has developed and put into actual use a lightweight axle unit, which consists of a wheel hub bearing unit and a disc brake, by integrating a disc brake caliper mounting bracket into a hub bearing unit. The Company's innovative technology, which is the first of its kind in the industry, offers more than a 250-gram reduction in weight per wheel. In conventional methods, a brake caliper bracket and a hub unit were installed separately on a knuckle. Unifying the bracket also improves the installation accuracy by 5 to 10 times, which results in reduced brake judders, improved brake feeling, and fewer assembly workloads. The advanced technology is already used as rear wheel axle units of vehicles sold in Europe. The Company plans to propose this new technology targeting Japanese automakers. By 2013, it aims to lift global sales of its hub unit bearings to 110 billion yen, an increase of 37.5 percent compared with the current level. (From an article in the Nikkan Jidosha Shimbun on Aug. 6, 2008)

- Hub unit bearing with a built-in ABS sensor for small and highly-reliable drive wheels
The Company announced that it has developed a new hub unit bearing with a built-in ABS sensor for drive wheels. The new product is smaller and performs better in the natural environment in emerging countries like BRICs. In such countries, where vehicles often run in muddy water on rough or unpaved roads, the built-in sensor can be damaged and become less sensitive sooner than usual. The Company, therefore, added its original seals to the product and improved reliability. The Company, at the same time, made the bearing smaller by adjusting the positioning of an ABS sensor. As a result, the new bearing fits perfectly in the same space as conventional hub unit bearings with no sensors, which was traditionally superior in terms of occupying space and installation. With the new product, the Company plans to increase its hub unit sales in the global market by approximately 1.4 times to 110 billion yen in 2013. (From an article in the Nikkan Jidosha Shimbun on Sep. 25, 2008)

- Hub unit bearing for BRICs markets
The Company has developed a new manufacturing method to produce hub unit bearings designed for use in passenger vehicles in emerging countries. The new technology will allow the Company to utilize steel materials sourced locally in emerging countries, which contain a larger amount of impurities compared with those procured in Japan. A hub unit bearing is a drivetrain component, integrating the hub between the tire wheel and the driveshaft, and the bearing. The Company achieved a high level of product quality even through the application of impure materials by adjusting forging pressure applied to steel bars used in the main body. The technique prevents a steel part with a high level of impurities from coming to the track surface of the ball bearing. The Company's new production, which uses locally procured, low-cost materials, offers both functional benefit and cost competitiveness. (From an article in the Nikkan Jidosha Shimbun on Mar. 9, 2009)

- Column-type electric power steering that combined the mechatronics mechanism and brush motor
The Company developed short, light-weight and compact electric power steering (EPS) that contributes to reducing the size of fuel-economy vehicles.

Investment Activities

Capital Expenditure ( in millions of JPY )
  FY2008 FY2007 FY2006
Overall 44,138 53,905 37,689
Automotive related division 18,679 22,982 19,550

- The Company made major investments in the large and extra-large bearings and automotive bearings businesses.

Automotive products
- The Company made an investment to upgrade production facilities for automotive transmission needle bearings, and to overhaul and rationalize facilities.

Overseas Investment
<Bearing plant>
- The Company invested in the upgrade of production facilities for in-house manufacturing in China and improvement of automotive bearing production lines in India and Thailand.

- The Company announced that Rane NSK Steering Systems Ltd., its joint venture in Haryana Province, India, has started producing electric power steering (EPS) systems. With the annual production capacity for 200,000 vehicles, it plans to achieve more than two billion rupee (approx. 4.4 billion yen) sales by 2010. This steering system subsidiary jointly established in 1997 with Rane Group of the auto industry sector in India will expand its product lineup to include EPS with an aim to win the largest share in the local EPS market in 2012. Its EPS plant has a 3,600 sq.m. building at the site of 20,000 sq.m. and employs 100 people. A total of 377 million rupees (approx. 800 million yen) has been invested. (From an article in the Nikkan Jidosha Shimbun on May 16, 2008)

<Steering manufacturing plant>
- The Company made an investment to upgrade production lines in production bases in Europe and the Americas and to self-manufacture components in production bases in Asia.


Major new facilities for the automotive parts related business
  Planned investment (million JPY)

Started

Completed

Purpose

NSK Ltd.Ohtsu Plant (Shiga Pref., Japan)
Manufacturing facilities for automotive bearings and ball bearings for general use 1,085 Apr., 2008 Mar., 2010 Upgrading production infrastructure, increasing capacity, and streamlining operations
NSK Ltd.Ishibe Plant (Shiga Pref., Japan)
Manufacturing facilities for automotive bearings 2,106 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK Ltd. Saitama Plant (Saitama Pref., Japan)
Manufacturing facilities for automotive bearings 1,774 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK Steering Systems (Gunma Pref., Japan)
Manufacturing facilities for steering systems 2,041 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK Needle Bearing Co., Ltd. (Gunma Pref., Japan)
Manufacturing facilities for needle bearings 2,409 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK Corporation (Michigan, USA)
Manufacturing facilities for automotive bearings 1,134 Apr., 2008 Mar., 2010 Reorganizing production and streamlining operations
NSK Steeling Systems America. Inc. (Vermont, USA)
Manufacturing facilities for steering systems 786 Apr., 2008 Mar., 2010 Increasing capacity
NSK Brazil Ltda. (Suzano, Brazil)
Manufacturing facilities for automotive bearings and ball bearings for general use 954 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK Bearings Europe Ltd. (Berkshire, UK)
Manufacturing facilities for automotive bearings and ball bearings for general use 921 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK Steering Systems Europe (Polska) Sp.Zo.o (Walbrzych, Poland)
Manufacturing facilities for steering systems 994 Apr., 2008 Mar., 2010 Increasing capacity
NSK Bearings Manufacturing (Thailand) Co., Ltd. (Chonburi, Thailand)
Manufacturing facilities for automotive bearings 566 Apr., 2008 Mar., 2010 Streamlining operations
Siam NSK Steering Systems Co., Ltd. (Chachoengsao, Thailand)
Manufacturing facilities for steering systems 1,230 Apr., 2008 Mar., 2010 Increasing capacity
Kunshan NSK Co., Ltd. (Kunshan, China)
Manufacturing facilities for automotive bearings and ball bearings for general use 2,243 Apr., 2008 Mar., 2010 Streamlining operations
Changshu NSK Needle Bearing Co., Ltd. (Changshu, China)
Manufacturing facilities for needle bearings 851 Apr., 2008 Mar., 2010 Increasing capacity
Zhangjiagang NSK Precision Machinery Co., Ltd. (Zhangjiagang, China)
Manufacturing facilities for automotive bearings and ball bearings for general use 1,052 Apr., 2008 Mar., 2010 Increasing capacity
NSK Korea Co., Ltd. (Changwon, Korea)
Manufacturing facilities for automotive bearings 443 Apr., 2008 Mar., 2010 Upgrading production infrastructure and streamlining operations
NSK-ABC Bearings Ltd. (TamilNadu, India)
Manufacturing facilities for automotive bearings 1,010 Apr., 2008 Mar., 2010 Increasing capacity