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Global bearing alliance puts industry on alert (April 01, 2001)

Why have NTN and FAG climbed into the same bed?


Why have NTN and FAG climbed into the same bed?

NTN Corporation, Osaka, Japan, and FAG Kugelfischer Georg Schfer AG, Schweinfurt, Germany, entered into a global strategic alliance at the conclusion of intensive negotiations recently in Paris.

Both companies–major players in the worldwide rolling bearing industry–have reached a Memorandum of Understanding related to the production, sales and service of wheel and rolling bearings in Europe and North America.

Rick Thomas, vice-president sales & marketing, NTN Bearing Corporation of Canada, Mississauga, Ont., commented that one of the factors that led to the alliance is that there is too much manufacturing capacity among bearing manufacturers in the world. “Unlike other industries, there has not been a lot of consolidation in the past among bearing manufacturers,” he said. “These companies have seen that the way to go is to use their resources more efficiently.”

The purpose of the partnership, the companies report, is to significantly improve efficiency in areas such as research and development, administration and processes, and common procurement. The companies plan to work as allies to jointly face the future challenges of the bearing industry, to develop innovative new generations of rolling bearing systems and to deliver more value to the customer by improving the availability and service of competitive product.

The partnership is based on the fact that NTN and FAG are ideally fit for collaboration in various fields of the business, according to a statement released jointly by the companies. Both companies product portfolio, their regional presence and strength in the market, as well as their customer base are widely complementary.

“Our different foothold in production and sales, and our respective regional strength, will enable us to leverage a maximum of manufacturing synergies, market access and customer satisfaction”, said NTN president Toyoaki Itoh.

“Our global bearings alliance will increase our common product range, create a well-balanced regional presence and improve profitability for both companies,” added FAG chairman and CEO Prof. Uwe Loos.

The partnership intends to set up a common supplier base for raw materials, components, tools and services and to create a joint marketplace for e-commerce applications.

Both companies also plan to establish a series of joint-ventures in Europe and North America. In manufacturing, a joint production company of wheel hub bearings in the U.S.A. and joint production companies of ball and tapered roller bearings in Portugal and Hungary are also targeted.

Also, a common new sales and marketing organization is planned in Canada to target the market for industrial bearings. It may be extended to other countries and markets later. Nevertheless, these schemes are subject to the approval of appropriate regulatory agencies, a spokesman said.

According to Bob Marshall, vice-president and general manager of FAG Canada’s national sales division, the alliance “definitely will have an impact on our production facilities, on who is going to manufacturer what, and where. But it’s too soon to understand how it will work.” He is assured that the result will be beneficial to both companies, though.

NTN’s Thomas commented that NTN and FAG have approximately the same market share in Canada. “It’s like a merger of equals. We’re very complementary in Canada. I’m looking forward to working with FAG. They have an excellent reputation and make excellent products.”

Both partners will maintain their companies as economic and legal entities. The corporate identity and respective brands will remain separate and independent. No mutual equity contribution nor a share swap have been planned. Where common sales activities are earmarked the customer body will be served with a wider range of products from both brands.

A North American meeting of the partners is scheduled for early April. Check back the NewsBreak section for further developments as we learn of them.

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