NTN Corporation

1918–1965

NTN Corporation is one of Japan's largest manufacturers of bearings, second in domestic market share only to longtime rival Nippon Seiko, and one of the largest exporters of friction-reducing products in the world. As a natural extension of its bearing business, it is also Japan's principal manufacturer of constant-velocity joints, which are used in automobile transmissions, railway cars, construction machinery, and steel manufacturing equipment.

Origins and Growth: 1920s-30s

NTN traces its lineage back to Nishizono Ironworks, a factory located in the city of Uchibori in Mie Prefecture, which began developing and manufacturing ball bearings in 1918. The Japanese bearings industry was then in its infancy; Nippon Seiko had become the nation's first producer of ball bearings no more than several years earlier. In 1923 Nishizono Ironworks merged with Osaka-based Tomoe Trading Company to manufacture and sell bearings under the brand name NTN. Four years later, however, the partnership broke up and the Nishizono side of the operation, retaining the NTN name, set up a privately owned company called NTN Manufacturing Company, with an initial capitalization of ¥50,000. It reorganized as a joint-stock company in 1934, and three years later it changed its name to Toyo Bearing Manufacturing and offered shares to the public for the first time.

Also in 1937 Japan invaded Manchuria, beginning eight years of war in the Far East. What little export trade Japanese bearing makers had conducted to this point ended by 1941; but as war increased the demand for bearings and companies made rapid advances in manufacturing techniques, production increased 22-fold between 1937 and 1944, and producers prospered. In 1938 Toyo Bearing established a domestic subsidiary, Showa Bearing Manufacturing Company, in Mukogun, Hyogo Prefecture. The next year Toyo Bearing absorbed Showa Bearing, which became its Mukogawa plant, and merged its operations with those of its newly constructed plant at nearby Kuwana.

Postwar Revival and Diversification: 1950s-70s

By the end of World War II, however, U.S. bombing raids and shortages of steel and other raw materials had brought Japanese bearing makers to a near standstill. The industry began to revive in the late 1940s, as the shattered nation rebuilt, and domestic demand for its products, as well as demand from other Asian nations, increased. In 1950 Toyo established a separate marketing arm, NTN Sales. The company emerged from these years as one of Japan's five largest bearing makers, along with Nippon Seiko, Koyo Seiko, Fujikoshi Kozai, and Asahi Seiko. Together, these firms accounted for 80 percent of the nation's bearing output in 1951. In 1954 NTN was awarded the first Deming Prize, for statistical quality control.

Toyo began to diversify its product lines during the 1950s and continued to do so into the next decade, although all of its products related to its mainstay, bearings. In 1956 it began manufacturing expansion compensating bearings. In 1961 it entered into a licensing agreement with the West German bearing company INA Wälzlager Schaeffler, under which Toyo produced needle bearings using Wälzlager Schaeffler's technology. The two set up a joint venture, NTN Wälzlager Europa, to market the needle bearings in Europe. In 1963 Toyo secured a similar licensing pact with the British firm Hardy Spicer to produce Birfield-type constant-velocity universal joints. The next year it obtained a license from another British company, GKN Transmission, to manufacture its constant-velocity joints in Japan and formed NTN Bearing-GKN to do so; in 1965 it began producing pipe fittings and oil-impregnated sintered bearings.

In 1954 NTN was awarded the first Deming Prize, for statistical quality control.

1961–1983

Such growth and diversification as Toyo underwent in the 1960s might be expected to create unwieldy corporate management, but the company avoided this problem by creating subsidiaries to handle new products, thus distributing the decision-making load through a decentralized command structure. In 1961 Toyo created Kongo Bearing Company to handle the production of pillow blocks. The next year, it founded Senyo Kosakuki Kenkyujo, which made ball bearing equipment. This trend continued into the 1970s; in 1971 it created Toyo Bearing Okayama Company to manufacture roller bearings and automotive tapered bearings, and the next year it founded Shohin Kaihatsu Kenkyusho to manufacture other automotive equipment. The company also changed its name to NTN Toyo Bearing Company in 1972.

International Expansion in the 1970s and 1980s

After riding out the effects of sluggish demand at home, especially in automotive industry, Toyo began pursuing the export market in earnest in the 1960s. In 1963 it established its first sales subsidiary outside Japan--NTN Bearing Corporation of America, followed in 1964 by NTN France. In 1968 it established a sales subsidiary in Canada, NTN Bearing Corporation of Canada. A manufacturing subsidiary, NTN Manufacturing Canada, followed in 1973. In 1971 it founded American NTN Bearing Manufacturing Corporation and opened a plant in Schiller Park, Illinois, its first manufacturing operation in North America. It also established a sales subsidiary in Hong Kong, NTN Trading--Hong Kong, and a West German manufacturing subsidiary, NTN Kugellagerfabrik.

Like its compatriots, NTN made its mark in the high-volume sector of the European and U.S. markets, exporting ball and roller bearings used in automobile parts and electrical equipment. The Japanese bearing exporters became successful enough and their products pervasive enough to produce resentment among their competitors, especially in Great Britain. In 1972 the British government, acting on complaints from its own bearing industry that the Japanese had captured almost one-fifth of the domestic market for standard ball bearings and over two-thirds of the market for bearings for small electric motors, pressed Japanese companies to restrict their exports for two years; but European bearing makers could not avoid the fact that these bearings were of superior quality--a far cry from the 1950s, when Japanese bearing companies were plagued by a scarcity of high-grade steel. In fact, many European companies were buying Japanese bearings, including those made by NTN Kugellagerfabrik, for their own use. NTN Toyo's overseas expansion continued unabated in the mid-1970s. In 1975 it established two sales subsidiaries in Latin America, NTN de Mexico and Panama-based NTN Suramericana. It also opened another factory in Illinois, this time in Elgin.

In fiscal 1977, however, NTN Toyo posted an operating loss of nearly ¥1 billion, as a strong yen made exports prohibitively expensive. Most of its bearings sold in foreign countries were still made in Japan, not by overseas subsidiaries, making them vulnerable to exchange rate fluctuations. In addition, NTN Toyo and other Japanese bearing makers were fined by the European Economic Community for dumping, the practice of gaining an unfair advantage by selling one's products at less than fair value. In 1978 the company was forced to suspend dividend payments for the first time in 12 years.

The strong yen soon weakened, and NTN Toyo's exports surged once again. Strong domestic demand from automobile manufacturers, themselves experiencing an export boom because of the weak yen, also served to boost sales. In fiscal 1979 the company posted a profit of ¥3.4 billion with strong increases in sales and all of its overseas plants reported to be running at full capacity.

With its financial health restored, NTN Toyo targeted its constant-velocity-joint business and its operations in the United States for expansion in the 1980s. In 1982 it added a facility for producing the automotive joints to its Okayama plant. It also entered into a joint venture with the Korean automaker Hyundai Motors, under which Hyundai would manufacture the joints on a license from NTN Toyo. In 1983 NTN Toyo licensed its constant-velocity-joint technology to two more foreign companies, Lepco Company of Australia and Taiway of Taiwan.

1984–1989

The company focused on producing tapered roller bearings in the United States over the next two years. It expanded its Elgin plant in 1984 to increase its capacity to produce the tapered bearings. The next year, it entered into a joint venture with Detroit-based Federal-Mogul Corporation--one of NTN's many U.S. distributors--to manufacture tapered bearings and cylindrical roller bearings. The new company was called NTN-Bower Corporation, with the second name coming from a division of Federal-Mogul, and was given two Federal-Mogul plants and a related research facility. NTN Toyo controlled 60 percent of the joint venture. In 1987 NTN Toyo exercised its option to buy the remaining 40 percent of NTN-Bower and became sole owner.

In 1985 NTN opened its Nagano works, specializing in precision miniature bearings. The following year, the company built its Kuwana plant, Japan's first plant dedicated to bearings for use in aerospace products.

By increasing its manufacturing capacity in the United States, NTN Toyo reduced its reliance on bearings exported from Japan for its presence in the U.S. market. It could not cut that reliance entirely, and its bearing exports caused some friction. In 1987 the U.S. bearing manufacturer Timken brought a suit before the U.S. Department of Commerce charging that NTN Toyo, Koyo Seiko, and other Japanese bearing makers were dumping their goods. The Commerce Department found the Japanese companies guilty and ordered NTN Toyo to pay a fine of 47 percent of the price of the products it had exported to the United States.

In 1988 the company established a technical center in Ann Arbor, Michigan, and once again expanded its U.S. manufacturing operations, adding a bearing-hub production facility to its Elgin plant. It also entered into a joint venture to manufacture constant-velocity joints in Australia with Borg-Warner Australia and GKN Transmission. The new company was called Unidrive and was 50 percent owned by Borg-Warner Australia, with 30 percent going to GKN and 20 percent to NTN Toyo.

In 1989 NTN Toyo shortened its name to NTN Corporation. The company also established NTN Driveshaft in Columbus, Indiana, to manufacture constant-velocity joints and opened a new research and development center.

By the late 1980s, NTN was still able to achieve substantial success by doing one thing very well and sticking to it. While other large corporations viewed far-flung diversification as the key to success, NTN continued to make nothing but bearings and bearing-related products. Since becoming a major exporter in the late 1960s, its presence in foreign markets caused occasional controversy, which was not unexpected. What counted was that NTN had found its bearings and was sticking to them.

International Competition in the 1990s

1990–2001

The emergence of the global economy in the 1990s presented a number of unique challenges to NTN. On the one hand, the dissolution of traditional economic boundaries exposed the company to increased competition from foreign companies, especially in regions where NTN had always held a formidable market share. At the same time, the proliferation of multinational manufacturing operations in the United States, Europe, and Asia, particularly in the automobile and computer industries, made it clear that a strong international presence would be more critical than ever to the company's long-term success. Since globalization was having a major impact on the ball bearing industry, with bearing specifications being determined more and more by international standards, it became imperative for the company not only to consolidate its existing overseas operations, but also to strive for the further expansion of its businesses into emerging markets.

One region where the company aimed to centralize its operations was in the United States. In 1990, to facilitate the expansion of its manufacturing and sales capabilities in North America, the company invested $50 million to form NTN USA Corp., with the aim of creating a holding firm for its existing U.S. subsidiaries. The new company, headquartered in Delaware, assumed complete control over the stock of the existing businesses. At the same time, NTN established an office to oversee the manufacturing operations of the existing plants. One of the company's primary goals was to commence production of constant-velocity joints in North America. The company took further steps to enhance its U.S. presence by acquiring the ball bearings division of Federal-Mogul, a Michigan-based machine tool manufacturer, in 1996.

NTN's expansion during this period was not limited to North America. In February 2001 the company entered into a partnership with FAG Kugelfischer Georg Schafer AG, a German manufacturer, to market ball and roller bearings in both North America and Europe. The agreement outlined a number of joint research and development projects, in addition to establishing a system by which the two companies could pool their procurement and sales resources. Furthermore, the deal laid the groundwork for the creation of manufacturing operations in Hungary and Portugal. Closer to home, NTN was busy firming up its presence in Southeast Asia with the formation of NTN Manufacturing Company Limited, a bearing and CV joint manufacturing facility based in Thailand, in February 2000.

In order to manage its international expansion, which was dubbed the "Four Base Production and Sales System," NTN was compelled to undergo a restructuring at the beginning of the new century. NTN implemented the first major change in May 2000, when it absorbed the NTN Sales Corporation into the parent company. A far more radical step came in April 2001, when NTN launched its Management System Transformation Project, with the aim of streamlining its operations both in Japan and abroad. The plan called for the creation of a Program Office responsible for the management of numerous subprojects, each of which was designed to increase efficiency and improve customer service. With these changes already in place by the beginning of the new century, NTN was poised to meet the challenges involved with remaining an industry leader in the highly competitive international marketplace.