|
 |
Financial Information:
Annual Report 2003
Review of Operations
| Precision
Machinery and Parts |
Shuichi Kobayashi, General Manager,
Precision Machinery & Parts Division |
|
Sales
of Precision Machinery and Parts |
 |
|
 |
Precision machinery and parts integrate NSK’s core
tribological technology and electronics technology in the areas
of precision positioning and electromagnetic systems. Our products
can be categorized into linear products, such as ball screws and
linear guides, and mechatronics products, such as XY tables and
Megatorque Motors. These products are mainly used in industrial
machinery and production equipment in a variety of industries.
We are making our production process faster and more flexible
in response to recent customer requests for shorter delivery times,
lower prices and increasing demand for standardized products.
| Sales
Performance for Fiscal 2002 |
|
Overall sales rose ¥0.9 billion (2.7%) from the previous
year to ¥34.9 billion, while operating loss widened by ¥1.0
billion to ¥6.3 billion. Demand from the domestic semiconductor
production equipment and machine tool sectors recovered. Overseas,
sales increased in Asia, but fell in Europe and the Americas as
recovery in demand remained weak.
Earnings from precision machinery and parts have been greatly
affected by the extreme volatility of demand from semiconductor/liquid
crystal display (LCD) manufacturing equipment and machine tool
manufacturers, who have been our main customers. To improve the
profitability and lessen the volatility of this business, we spun
off our precision machinery and parts business as NSK Precision
Co., Ltd. in October 2002 and we are taking the following measures:
- Business restructuring
Restructuring measures
include reforming the cost structure of this business, lowering
procurement costs, revising the employment structure, improving
productivity, and shifting production to low-cost bases. The
break-even point for profitability was sales of ¥40.0
billion at the end of fiscal 2002, and our plan is to lower
this to ¥30.0 billion at the end of fiscal 2003 (refer
to the following Topics for further
details).
- Attracting new customers
While maintaining our
existing share of key markets, we are working to expand sales
to new customers in more stable markets that are expected
to enjoy sustainable growth going forward. These markets include
automobiles, glass, medical equipment, social welfare, biotechnology,
and environment/safety equipment. To this end, we are launching
company-wide projects that integrate manufacturing, sales,
and technological development as a means to strengthen customized
sales efforts.
We are also strengthening our sales efforts overseas.
In China we are mainly targeting the machine tool industry.
In South Korea and Taiwan, we are focusing on the semiconductor/LCD
manufacturing equipment industry, and in the U.S., our emphasis
is on the medical equipment and biotechnology industries.
As a result of these efforts, we were able to increase
the volume of ball screws and linear system products we supply
to the global production sites of Michelin et Cie, the French
tire manufacturer, in December 2002. We are expecting annual
sales to Michelin, previously around ¥50 million, to triple
from fiscal 2003.
- Product strategy
We intend to retain
and boost our No. 1 share of the global market for ball screws.
To this end, we are working to improve our competitiveness
technologically by establishing expertise in the areas of
high-speed drive and precision positioning control technology
that can rival linear motors. In terms of production, we are
working to shorten lead-times and to reduce the amount of
work-in-process. We aim to expand sales of linear guides,
mainly targeting the automotive industry, to ¥25.0 billion
annually. We are also standardizing our ball screw and linear
guide products.
NSK also aims to retain and strengthen its No.1 position
in the market for Megatorque Motors. Here, we are working
to develop and increase sales of standardized products for
each respective market segment as well as of new high-function
products. In the area of XY tables, we are increasing output
of product units such as robot modules and developing vacuum
tables for ion implantation systems that will be employed
in next-generation semiconductor production equipment. We
are also marketing new sixth-generation aligning equipment
used in LCD production processes.
As for our spindle products, we have developed grease
lubrication type spindles capable of maximum speeds of 20,000rpm
(40% higher than conventional products) with a lifespan up
to 100 times longer. We look for sales of these products to
reach ¥400 million in fiscal 2003 and ¥1.5 billion
in fiscal 2005.
In addition, we are strengthening development of new
products and plan for sales of new products to account for
20% of precision machinery and parts sales in fiscal 2005
and 30% of sales in fiscal 2007.
| Sales
by Industry |
|
Sales
by Region |
|
|
| |
(Sales are recognized by customers’
location) |
 |
 |
- Japan
- In addition to increasing efforts to improve customer
satisfaction, NSK is reorganizing the sales structure of its
subsidiary, NSK Sales Co., Ltd. and has formed integrated
project teams to boost sales to each targeted industry across
all regions in Japan. We are also actively supporting advertising
and promotional activities on a global basis.
- The Americas
- We are working to expand local production of ball screws,
linear guides, and unitized products. In addition we are strengthening
marketing efforts by increasing sales staff and expanding
our network of sales offices in this region.
- Europe
- NSK is preparing to expand production of linear guides
in Europe. As for their sales, we are increasing sales staff
and expanding the network of distributors in the region.
- Asia
- In China, we are increasing the number of expatriates
and local staff for the purpose of strengthening our sales
activities. We are also investigating the possibility of ball
screw and linear guide production in China. In South Korea,
we have significantly shortened the delivery time from Japan
and the goal is to achieve lead-times on a par with that in
Japan. We are also looking at producing unitized products
locally for South Korean semiconductor and LCD production
equipment manufacturers.
| Sales
by Production Region for FY2002 |
|
| Sales
of Precision Machinery and Parts (Semi–annual)j |
|
Precision
machinery and parts sales increased 2.7% year-on-year
in fiscal 2002, from ¥34.0 billion to ¥34.9 billion.
On a semi-annual basis, sales bottomed out in the second
half of fiscal 2001 at ¥13.1 billion and along with
profits, have since steadily recovered. |
|
 |
| Topics:
Improving Profitability Through Business Restructuring
Measures |
|
Restructuring is crucial to improving the profitability
of NSK’s precision machinery and parts business.
Cost innovation activities, implemented as part
of the 2nd phase of our "Business Restructuring
Program," will position us for profitability
in times of fluctuating demand. These activities
include reducing personnel costs and converting
fixed labor costs to variable costs through reorganization
of production operations and raising the proportion
of contract employees. In fiscal 2003, we will
accelerate efforts to return to profitability
and to lower the break-even point from ¥40.0
billion at the end of fiscal 2002 to ¥30.0
billion at the end of fiscal 2003. Steps will
include the following:
1.
Reduction of external procurement costs
Our objective was to reduce procurement costs
by 30% during fiscal years 2002 and 2003. In fiscal
2002, we achieved cost reductions of ¥2.0
billion, or 15%. In order to meet the remainder
of our target, we are reducing the number of suppliers,
developing relationships with those suppliers
that are cost competitive, and increasing procurement
from South Korea and China.
2.
Reforming the employment system
With expansion of an early retirement program
in September 2002, 340 employees opted to take
early retirement. We will continue to work toward
better cost efficiency through implementation
of a new employment system.
3.
Improving productivity
NSK’s objective is to boost productivity
by 20% over the next two years. To this end, the
production division will expand its APS (Advanced
Production System) activities. Administrative
divisions will lower expenses by 10% through rationalization
or outsourcing.
4.
Shifting ball screw production to NSK Kyushu Co.,
Ltd.
To establish a new production model for precision
machinery and parts, NSK Kyushu has implemented
new production procedures as well as a new employment
structure that best fit its precision machinery
and parts production facility. Efficiency has
been greatly enhanced through the reduction of
personnel costs by employing more part-time and
contract employees as well as shortening product
lead-times. In fiscal 2003, ball screw production
capacity at the plant will be increased by 45%
to 22,000 units per month.
5.
Restructuring our U.S. ball screw business
As part of efforts to increase overseas sales,
we are simultaneously increasing sales staff,
enhancing our marketing capabilities, as well
as increasing local production in the U.S.
|
|
|
