NSK Ltd. (Tokyo, Japan), predicting a fiscal year ¥7.5 billion (USD $61 million) loss, also announced a sweeping worldwide restructuring effort on top of its current restructuring, the Management Innovation Project. NSK is the world's second-largest bearing manufacturer, behind SKF, with a 13% global market share.

In fiscal 2002 first-half results, NSK showed a net profit of ¥3.65 billion ($30 million), down 39% from first half 2001, on sales of ¥252 billion ($2.0 billion).

NSK has now made a number of announcements and clarifications about the new restructuring efforts and cutbacks.

Within the next fiscal year (by March 2003), the company will eliminate 2,500 jobs, 11% of its worldwide workforce. 1,500 of those cut will be lost from European operations by December 2002. In the United States, 500 will be cut. The other 500 jobs will be eliminated in Japan through attrition.

NSK currently operates nine plants and facilities in the U.S. While it is cutting U.S. employment overall by 500, it is also making "large scale" investments at its Ann Arbor and Franklin facilities.

NSK Bearings Europe, headquartered in Nottingham, England, will be hardest hit. With 1,500 of its 6,500 employees to be cut, Europe is losing 23% of its jobs. Four of NSK's nine European plants will be closed, although NSK did not indicate which four - the two RHP U.K. plants have already been closed and their production moved to Iskra in Poland. Only the key Peterlee, England, plant is assumed to be safe.

It is widely believed that NSK's six plants in the U.K. are all in financial difficulty. NSK's President, Tetsuo Sekiya, has repeatedly indicated that the strength of the British Pound relative to the Euro has driven up costs to unacceptable levels in all U.K. facilities. This is compounded by the situation that 60% of U.K. production is sold outside the U.K.

The company is also said to be reviewing employment at its plant in Kielce, Poland - Iskra, 70% purchased by NSK in 1998 - is also receiving additional production investment. Much of Iskra production was shifted there from the two now-shuttered RHP U.K. facilities and Peterlee, England. Peterlee has won numerous awards for quality, but had to send its deep-groove ball bearing production to Poland in 1999 so it could focus on higher value products such as automotive hub assemblies. Under the new programs, even more Peterlee production will find its way to Iskra. To make room at Iskra, miniature ball bearing production there will be shifted to other low-cost facilities and may be spun off into a separate operating division.

NSK will also be aggressively managing its cost structure for raw materials and components. The three-year ¥10 billion, or 10%, cost reduction target by March 2002 for purchased materials and components has been extended beyond 10% in a new program - Strategic Approach for Cost Competitiveness (SACC). The SACC program focuses not only on hitting a specific overall reduction level but also sets strategic cost targets by product and category.

Another of NSK's cost-reduction efforts is similar to the supplier consolidation being pursued in many other industries - NSK will reduce the number of raw materials vendors by half. Also, the company will step up its program to source more components from China.

Many NSK salaried employees will take mandatory pay cuts. Senior management will have their pay cut by 30% to 50%, while mid-level and lower-level management will see their paychecks shrink by anywhere from 6% to 10%.

Finally, NSK will close its Akagi plant in Japan's Gunma Prefecture. The plant manufactures CV joints; NSK announced some months ago that it would be exiting that business segment.

We had earlier reported erroneously that the Torrington plant in Gunma was affected. In fact, NSK's joint venture with Torrington for needle roller bearings remains in place. NSK has said specifically that the company has no plans to withdraw from NSK Torrington's joint venture.