Financial Information: Annual Report 2002

Rolling bearings have an estimated worldwide demand of ¥2.5 trillion. Regrouping in the global bearing industry has reduced the number of major players to approximately ten. NSK is the No.1 bearing manufacturer in Japan and No.3 worldwide following AB SKF of Sweden and the newly formed INA-FAG group of Germany.
 In the global automotive components market, NSK's electric power assisted steering (EPS) systems occupy the top position. Our EPS systems are used in almost half of the 3.3 million vehicles equipped with these systems. NSK's steering columns are No.1 in Japan and No.2 worldwide after Delphi Corporation of the U.S. NSK holds the leading position for steering joints in Japan and worldwide.
 In the precision machinery and parts market, NSK's ball screws are ranked No.1 in Japan and worldwide. In linear guides, NSK is ranked No.3 worldwide, after THK Co., Ltd. and Nippon Thompson Co., Ltd., both Japanese manufacturers.

(All figures are NSK's estimates)

There is a trend among automakers, our main customers, as well as other manufacturers, to reduce costs related to parts procurement with purchases being made from a few selected suppliers. We will further strengthen the competitiveness of core products, for which we believe we can independently maintain our No.1 and No.2 positions worldwide. At the same time, we are forming strategic alliances with major global market players to enhance the competitiveness of the products for which we would have difficulty sustaining competitive edges independently.

Automotive Bearings

Tapered Roller Bearings:
In August 2001, we formed an alliance with The Timken Company of the U.S., the No.1 worldwide supplier of tapered roller bearings to jointly provide Toyota Motor Corporation and its group companies with these bearings and services. In addition, in April 2002, we made an agreement to establish a joint venture company in China to produce tapered roller bearings from early 2004.

Needle Roller bearings:
We established a joint venture with The Torrington Company of the U.S. in 1963 to produce needle roller bearings in Gunma Prefecture (Japan). This partnership focused on joint sales of these products to automakers in Japan. We are now currently preparing for joint supply of these products on a worldwide basis to respond to the accelerated global expansion of Japanese automakers.

Bearings in Other Industries

Aerospace Bearings:
In April 2002, we agreed to gradually transfer our aerospace bearings business in Europe to AB SKF of Sweden. The transfer is scheduled to be completed by April 2005.

Large-sized Bearings, etc.:
NSK and NTN Corporation of Japan agreed in June 2002 to form a joint venture that will manage large-sized bearings business of both companies. The agreement will cover production and sales as well as raw materials and parts procurement relating to large-sized ball bearings, which are distributed mainly to general industries such as the steel, construction equipment and machine tool sectors. Ownership of the new company will be equal between NSK and NTN. Further details will be finalized by the joint project team, which will be set up with members from each company. Even prior to this new tie-up, NSK has enjoyed a partnership with NTN, dating back to October 1999, with an agreement to purchase ball bearing units from NTN on an OEM basis and to share intellectual property rights on rolling bearings. The strengthened partnership between the leading two bearing manufactures in Japan is expected to bring about enhanced cost competitiveness and operational efficiency.

Automotive Components

Automatic Transmission Components (Friction Materials and One-way Clutches):
Since the establishment in 1964 of a joint venture with BorgWarner Inc. of U.S. for the production of automatic transmission components, we have acquired a large market share by leveraging our unique engineering capabilities. The customers consist primarily of Japanese transmission makers and automakers.

CVTs (Continuously Variable Transmissions):
Toroidal CVTs were first commercialized worldwide in 1999 through our joint development with Nissan Motor Co., Ltd. and Idemitsu Kosan Co., Ltd. CVTs are now used by Nissan in their Cedric and Gloria models. They are also used in the 2002 Skyline models. We believe that there will be increasing worldwide demand for CVTs in the near future.

Seat Belts:
We will complete the transfer of our seat belt business to Autoliv Inc. of Sweden by April 2003, in anticipation of the difficulties in competing independently against global reorganization.