NSK - Investors/Financial information Annual Report 2005

Automotive Products

Sales increased by 11.7% year on year, reflecting the worldwide expansion of automobile production, led by Japanese automotive manufacturers. Costs also increased due to higher raw material prices and expenses increased due to rapid production growth. However, these factors were offset by improved capacity utilization and reduction of external procurement costs. As a result, operating income was 10.4% higher year on year.

Market Environment and Performance for the Year Ended March 31, 2006
Sales of automotive products increased by 11.7% year on year to ¥353.1 billion. This performance resulted from the global sales expansion of Japanese automotive manufacturers as well as from active sales promotion of hub unit bearings, needle roller bearings, electric power steering (EPS) systems, and automatic transmission (AT) components. In the area of automotive bearings, sales of hub unit bearings increased due to growth not only in Japan, but also in Europe. Needle roller bearings also performed well, due to a rise in the proportion of automatic transmissions installed abroad, and increased demand from new applications for engines. We also recorded satisfying results for automotive components. Sales of EPS systems and AT components increased in Japan, while steering columns sold well in the Americas, Thailand and China.

Income improved in successive quarters, for reasons that included improved capacity utilization resulting from volume growth, as well as the reduction of external procurement costs. Improvements in these areas offset increases in expenses, including raw material prices, labor costs, facility costs and selling, general and administrative expenses as response to rapid production growth. Operating income was 10.4% higher at ¥17.4 billion.

Outlook and Priorities for the Year Ending March 31, 2007
In the year ending March 31, 2007, we expect demand for automotive products to remain high, especially among Japanese automotive manufacturers and in emerging markets such as China.

Our priority for this segment is the improvement of profitability through productivity advancement. The most important target is to strengthen our business structure with a view to achieving an operating income margin of 6.0%. This will require the improvement of production efficiency through effective capital investment and the APS (Advanced Production System) activities. We are also working to minimize the cost of preparing for production increases. In the EPS factory located in Poland, which began mass-production in the year ended March 31, 2006, and the needle roller bearing factory in China, we aim to improve profitability by stabilizing production.

By steadily executing these measures in a favorable business environment, we forecast that sales of automotive products for the year ending March 31, 2007 will increase by ¥25.9 billion, or 7.3% year on year, to ¥379.0 billion, and operating income by ¥4.8 billion, or 27. 6% year on year, to ¥22.2 billion, resulting in an operating income margin of 5.9%.

Provide the Highest-quality Products
Backed by the Best Services

Mitsuo Degawa
Head of Automotive Products Division Headquarters

While the basic role of motor vehicles as transportation for people and goods remains unchanged, there have been dramatic changes in the technology behind the core automotive functions of driving, steering and braking. NSK is using its advanced technology development capabilities to respond to major changes in user needs resulting from the increased use of electronic systems, and from growing demand for further improvements in safety, comfort and environmental performance. We are constantly working to supply the highest-quality products, backed by the best services, to meet expanding global demand.

I see this business segment as the core contributor to NSK’s growth, and I am confident that NSK will continue to play a pivotal role in this area as a leading player in world markets. NSK is determined to achieve growth in step with the global expansion of Japan’s extremely successful automotive manufacturers, while also working to raise its profile with European and North American manufacturers.

Hydroformed Steering Column
Major Award for Excellence in Parts Manufacturing — 2005

In 2005, NSK’s weld-free “Hydroformed Steering Column” was selected for the third “Award for Excellence in Parts Manufacturing.” This award is organized by the Nikkan Kogyo Shinbun, an industry newspaper in Japan, and supported by the Ministry of Economy, Trade and Industry and the Japan Chamber of Commerce and Industry.

Each year, the best manufacturing parts developed and commercialized in that year are singled out for special recognition. In addition to this top award, there are also other prizes for excellence, including the Nippon Brand award, the selection committee special award, and prizes for automotive components and electronic components.

Traditionally steering columns were welded from several parts, but optimum design utilizing NSK’s analysis and manufacturing technology made it possible to fabricate a column made from a single part. This was achieved by using the hydroforming process, in which fluid pressure was used to process internal surfaces. Because the column is formed as a single unit, it is more rigid, precise and easier to operate. In addition, the abolishment of welding helped to reduce the load on the environment.


Copyright 2000 - NSK Ltd. All rights reserved.		Term of use

Annual Report 2006