NSK Ltd. (Japan; TSE: 6471) and ABC Bearings Ltd. (India; BSE: ABCB) have formed a joint venture to build a greenfield facility and manufacture automotive bearings in India.

The new company, NSK-ABC Bearings Ltd., is building a 7,000 square meter vertically integrated plant in SIPCOT Industrial Park, Kancheepuram District, Tamil Nadu, a suburb of Chennai.

Scheduled for completion in early 2008, production operations will be built out in two stages. The first, budgeted at ¥1.3 billion, is set to be complete and online by early 2008. The second stage, taking the venture to ¥2 billion, is scheduled for completion by 2011.

NSK-ABC said the primary target market will be the Indian automotive industry, specifically targeting Japanese and other transplant customers now setting up manufacturing facilities in India.

The plant will produce automotive wheel bearing hub assembly units, transmission bearings, bearings for magnetic A/C compressor clutches, and similar automotive bearings.

After working together for the past ten years, the relationship between NSK and ABC is not new, although this level of involvement extending to a joint venture was unexpected. Historically, NSK has provided ABC with much-needed technical support to help ABC produce tapered roller bearings.

The automotive sector in India, however, is growing so strongly that NSK said it must now position itself there as a directly operating manufacturer. For NSK, "this provides new opportunities to increase sales to existing customers for those ranges of bearings which are not manufactured by them."

NSK is contributing 75% of the venture's ¥1.3 billion initial capitalization, with ABC contributing the other 25%. NSK will also have managerial and manufacturing control.

With over 35% domestic market share, NSK is Japan's largest bearing manufacturer, and operates 58 manufacturing facilities in 13 other countries. ABC is India's largest tapered roller bearing manufacturer, primarily producing tapered and cylindrical roller bearings for domestic market OEMs.

Both companies have seen their share prices slide in dramatic corrections across recent months, as overall manufacturing and market jitters take their toll. However, both are now well recovered off their recent lows.