I. Restructuring of domestic operations

Reorganization of ball bearing production sites

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• Utilization of global price differences by expanding overseas production. • Prevention of possible deterioration of efficiency caused by the scaling-down of domestic production. • Reduction of costs by utilizing the labor cost differences existing between the domestic plants.   Fujisawa Plant Ishibe Plant ••• Average age: 43     Fukushima Plant ••• Average age: 34 • Reinforcement of the domestic plants' role as the mother plant of overseas production sites

The effects of structural changes in the industry can be seen, for example, in our standard ball bearings operations. The domestic customers of our standard ball bearings (e.g. our small-sized ball bearings) have been transferring production out of the country to the ASEAN region and China, accelerating the pace at which Japan's industries are hollowing-out .This hollowing-out phenomena can be seen not only in Japan, but also in the U.S. and Europe. Unfortunately, this makes it clear that it is no longer possible to produce commodity products in Japan. Therefore, our Fukushima Plant (which has been spun-off into NSK Fukushima Co., Ltd. in July 2001) will transfer its miniature and small-sized ball bearings production lines to the Jakarta Plant in Indonesia, and instead shall receive the medium-sized ball bearings production lines from Fujisawa Plant and Ishibe Plant, changing its role from being a mass-production plant to become the mother plant for overseas production sites. Fukushima Plant will scale-down its production capacity and shall be put in-charge of producing small lot products. We are also contemplating the scaling-down of production capacity at the Ohtsu Plant and transferring main mass-production operations to the Kunshan Plant in China.