Global trends in the bearings industry

Global Trends In The Global Trends In The Bearings IndustryBearings Industry

Prabhash GokarnPrabhash Gokarn

Bearings M&S, Tata SteelBearings M&S, Tata Steel

Prabhash Gokarn Bearings M&SWednesday 19-May-2004Wednesday 19-May-2004 22

Global Bearings MarketGlobal Bearings Market

Global Bearings Market Size : Global Bearings Market Size :

US$27 billionUS$27 billion

CAGR estimated CAGR estimated 5-7%5-7% (2004-07) (2004-07)

Ball Bearings expected to remain at Ball Bearings expected to remain at 45%45%, ,

Roller Bearings (TRB, SRB, CRB) Roller Bearings (TRB, SRB, CRB) 40%40%


Geographical Shift

Industry shifting from developed economies Industry shifting from developed economies (Germany, Italy, UK, France) to the (Germany, Italy, UK, France) to the Asia/Pacific (Asian Tigers, China & India), Asia/Pacific (Asian Tigers, China & India), Latin America (Brazil) and East Europe Latin America (Brazil) and East Europe (Poland & Czech republics). (Poland & Czech republics).


Industry Highly Consolidated Industry Highly Consolidated

Industry highly Industry highly consolidated already, consolidated already, still merging by buyouts still merging by buyouts & JVs.& JVs.

Top 20 firms => 82% of Top 20 firms => 82% of

the marketthe market

SKF, $4.5, 18%

NSK, $2.9, 12%

INA, $2.1, 8%

FAG, $2.0, 8%Koyo, $2.0,

8%

Timken, $1.8, 7%

Torrington, $1.7, 7%

Minebea, $0.9, 4%

NTN, $2.0, 8%

SNR, $0.5, 2%

Others, $4.8, 18%


Globalization best Globalization best characterized by SKFcharacterized by SKF

Over 50 factories in 20 countries o 50% in Europeo 30% in Americao 20 % in Asia

New plants being set-upo East Europeo Expansion in China


Industry TrendsIndustry Trends

1. Increased output per employee1. Increased output per employee

Increase in output per employee as Increase in output per employee as

plants become more automated :plants become more automated :

…….2.4 fold increase in last 30 years.2.4 fold increase in last 30 years


Industry TrendsIndustry Trends2. Increased Globalization & 2. Increased Globalization & Geographical ShiftGeographical Shift

Increased globalization & shift to low Increased globalization & shift to low

cost production facilities cost production facilities

- - Bearing majors setting up plants in Bearing majors setting up plants in

newly industrialized countriesnewly industrialized countries


Industry TrendsIndustry Trends3. Structural Shift to Smaller Bearings3. Structural Shift to Smaller Bearings

Structural shifts leading to sharp increase in use Structural shifts leading to sharp increase in use

of smaller bearings of smaller bearings (upto 30 mm & upto 52 mm) (upto 30 mm & upto 52 mm) due due

to increase in :to increase in :light weight high performance automobiles,light weight high performance automobiles, transaxle planetary gear transmissions, transaxle planetary gear transmissions, FHP motors in automation (eg automatic FHP motors in automation (eg automatic windows), windows), computer peripherals (eg disc drives), computer peripherals (eg disc drives), white goods.white goods.


In 1960 -70s – merging of small plants or In 1960 -70s – merging of small plants or growth of these small plants to large ones growth of these small plants to large ones producing large number of bearings in 1980 – producing large number of bearings in 1980 – 1990s.1990s.

……..Nowadays..Nowadays

Emerging trend of specialized small plants- Emerging trend of specialized small plants- produce fewer varieties of bearings located near produce fewer varieties of bearings located near major consumers. major consumers.

Industry TrendsIndustry Trends4. Factory Size4. Factory Size


Throughout 1980s – 2000s - over capacity and Throughout 1980s – 2000s - over capacity and increased competition characterize bearings industry.increased competition characterize bearings industry. Competition has matched on time/ just in time Competition has matched on time/ just in time delivery and quality aspects.delivery and quality aspects.Breakup of former communist countries reduced Breakup of former communist countries reduced domestic demand for factories in East Europe & domestic demand for factories in East Europe & effect of dumping by China lowering price further.effect of dumping by China lowering price further.

Industry TrendsIndustry Trends5. Increased Competition & Excess Capacity5. Increased Competition & Excess Capacity


Automation , high speed turning and CBN Automation , high speed turning and CBN

grindinggrinding

High productivity with reduced operating costs. High productivity with reduced operating costs.

Industry TrendsIndustry Trends6. Increasing Capital Expenditure6. Increasing Capital Expenditure


Higher productivityHigher productivity

Move to developing countries like ChinaMove to developing countries like China

Higher throughput plants producing small Higher throughput plants producing small varieties.varieties.

Effect of high competition due to overcapacity, plunging margins and inducing cost reduction.

Industry TrendsIndustry Trends7 a. Decline in 7 a. Decline in Operating CostsOperating Costs


Reduced WIP inventory (avg 45 days in 90s – 20 days in 2000s)

Reduced FG inventory (16% in 90s to 11% today)

Increased raw material inventory( 10- 12 days to over 50 – 100 days to advantage of bulk buying of steel.)

Industry TrendsIndustry Trends7 b. Decline in Operating Costs - 7 b. Decline in Operating Costs - InventoryInventory


Trend for Global Buying of bearings by Auto manufacturers …. increased price/quality pressure on local bearing companies

Reduced import tariffs in most countries

Porous borders of countries like India leading to rise in smuggled bearings for after market

Industry TrendsIndustry Trends8. Global Competition8. Global Competition


Japan remains closed to competition due to Japan remains closed to competition due to

exclusive arrangements with fellow Japanese exclusive arrangements with fellow Japanese

companies (Keiretsu) like case of Toyota and companies (Keiretsu) like case of Toyota and

KoyoKoyo

Industry TrendsIndustry Trends

However, Japan remains closed to However, Japan remains closed to competitioncompetition


Specially of miniature bearings (9mm – 30 Specially of miniature bearings (9mm – 30 mm used in computers, FHP motors, mm used in computers, FHP motors, automation and white goods) and small ball automation and white goods) and small ball bearings (30 mm to 52 mm) used in automobiles bearings (30 mm to 52 mm) used in automobiles (~ 60% fall in prices 1992-2004).(~ 60% fall in prices 1992-2004).

China and EU countries – major suppliers of China and EU countries – major suppliers of small bearings; now control up to 37% of world small bearings; now control up to 37% of world marketmarket

Industry TrendsIndustry Trends9. Steep Fall in Prices of Bearings…9. Steep Fall in Prices of Bearings…


Global firms spend average 2% of sales on Global firms spend average 2% of sales on researchresearchBenefit of global firms from collaborative R&DBenefit of global firms from collaborative R&D

Faster product innovations and faster development Faster product innovations and faster development of new generation bearings. of new generation bearings.

Industry TrendsIndustry Trends10. Collaborative Research & Development10. Collaborative Research & Development


What does it mean to Tata BearingsWhat does it mean to Tata BearingsAgenda for Discussion :Agenda for Discussion :

1.What are our core strengths ? How do we capitalize on them?

2.What are our principal weaknesses ? How do we overcome them ?

3.Discussion on Opportunities : A) Small Car explosion :

1. Hub bearings (new)2. Clutch assemblies (new)3. Engine & transmission bearings (expansion)

B) Other Opportunities : 1. M&L Ball Bearings & TRBs for pump & motors, farm

equipment, industrial equipment 2. Assemblying of sourced components ? pros/cons?

4. Discussion on Threats : 1. Rising low cost imports, 2. Expansion thru sourcing by organized players,

3. Entry of KBC, NTN & Koyo ?


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Global trends in the bearings industry