Financial Information: Annual Report 2002

NSK currently has 19 production bases throughout the country and R&D bases in Fujisawa, Kirihara, Maebashi, and Soja. Our Japanese organization serves domestic client demands and supports our overseas production bases as their "mother plants." We have 43 sales offices in Japan. We are proactively spinning off manufacturing plants, business units, and administrative divisions to clearly define profit accountability and improve management efficiency.

For the fiscal year ended March 2002, the Japanese economy signficantly deteriorated. The economic slowdown in the U.S. and decreased demand for IT-related products resulted in a decline in exports and production and the unemployment rate to rise to all time highs. With the exception of sales to the automotive industry, NSK's domestic sales decreased sharply and resulted in an increase of our fixed cost ratio. In spite of implementing business restructuring activities and efforts to reduce capital investments, costs and expenses, NSK's domestic operations posted substantial decreases in both sales and profits. For the year ending March 2003, the Japanese economy is expected to gradually recover. NSK expects sales outside of the automotive industry to increase incrementally.

NSK is actively implementing the 2nd phase of our "Business Restructuring Program." We are transferring production of commodity-type products to China and other low-cost countries to cope with intensifying price competition. We are also reinforcing our domestic plants' support roles as "mother plants" of overseas production bases. Our aim is to rebuild the foundations of "Japanese craftsmanship (Monozukuri)" in Japan and improve our competitiveness through spin-offs, employment and salary reforms, and reduction of external procurement costs. We are also reinforcing our Tokyo Head Office's control over the entire NSK Group.