Global trends in the bearings industry


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Global trends in the bearings industry

  1. 1. Global Trends In The Bearings Industry Prabhash Gokarn Bearings M&S, Tata Steel
  2. 2. Global Bearings Market Global Bearings Market Size : US$27 billion CAGR estimated 5-7% (2004-07) Ball Bearings expected to remain at 45%, Roller Bearings (TRB, SRB, CRB) 40%Wednesday 19-May-2004 2 Prabhash Gokarn Bearings M&S
  3. 3. Geographical Shift Industry shifting from developed economies (Germany, Italy, UK, France) to the Asia/Pacific (Asian Tigers, China & India), Latin America (Brazil) and East Europe (Poland & Czech republics).Wednesday 19-May-2004 3 Prabhash Gokarn Bearings M&S
  4. 4. Industry Highly Consolidated Others, $4.8, SKF, $4.5, 18% 18% Industry highly SNR, $0.5, 2%consolidated already, Minebea, NSK, $2.9,still merging by $0.9, 4% 12%buyouts & JVs. Torrington, $1.7, 7% INA, $2.1,Top 20 firms => 82% Timken, $1.8, 8% 7% FAG, $2.0,of the market Koyo, $2.0, 8% 8% NTN, $2.0, 8%Wednesday 19-May-2004 4 Prabhash Gokarn Bearings M&S
  5. 5. Globalization best characterized by SKF Over 50 factories in 20 countries o 50% in Europe o 30% in America o 20 % in Asia New plants being set-up o East Europe o Expansion in ChinaWednesday 19-May-2004 5 Prabhash Gokarn Bearings M&S
  6. 6. Industry Trends1. Increased output per employee Increase in output per employee as plants become more automated : ….2.4 fold increase in last 30 yearsWednesday 19-May-2004 6 Prabhash Gokarn Bearings M&S
  7. 7. Industry Trends2. Increased Globalization &Geographical Shift Increased globalization & shift to low cost production facilities - Bearing majors setting up plants in newly industrialized countries Wednesday 19-May-2004 7 Prabhash Gokarn Bearings M&S
  8. 8. Industry Trends3. Structural Shift to Smaller Bearings Structural shifts leading to sharp increase in use of smaller bearings (upto 30 mm & upto 52 mm) due to increase in : light weight high performance automobiles, transaxle planetary gear transmissions, FHP motors in automation (eg automatic windows), computer peripherals (eg disc drives), white goods. Wednesday 19-May-2004 8 Prabhash Gokarn Bearings M&S
  9. 9. Industry Trends4. Factory Size In 1960 -70s – merging of small plants or growth of these small plants to large ones producing large number of bearings in 1980 – 1990s. …..Nowadays Emerging trend of specialized small plants- produce fewer varieties of bearings located near major consumers. Wednesday 19-May-2004 9 Prabhash Gokarn Bearings M&S
  10. 10. Industry Trends5. Increased Competition & Excess Capacity Throughout 1980s – 2000s - over capacity and increased competition characterize bearings industry. Competition has matched on time/ just in time delivery and quality aspects. Breakup of former communist countries reduced domestic demand for factories in East Europe & effect of dumping by China lowering price further. Wednesday 19-May-2004 10 Prabhash Gokarn Bearings M&S
  11. 11. Industry Trends6. Increasing Capital Expenditure Automation , high speed turning and CBN grinding High productivity with reduced operating costs. Wednesday 19-May-2004 11 Prabhash Gokarn Bearings M&S
  12. 12. Industry Trends7 a. Decline in Operating Costs Higher productivity Move to developing countries like ChinaHigher throughput plants producing smallvarieties.Effect of high competition due to overcapacity,plunging margins and inducing cost reduction. Wednesday 19-May-2004 12 Prabhash Gokarn Bearings M&S
  13. 13. Industry Trends7 b. Decline in Operating Costs -InventoryReduced WIP inventory (avg 45 days in 90s – 20days in 2000s)Reduced FG inventory (16% in 90s to 11% today)Increased raw material inventory( 10- 12 days toover 50 – 100 days to advantage of bulk buying ofsteel.) Wednesday 19-May-2004 13 Prabhash Gokarn Bearings M&S
  14. 14. Industry Trends8. Global CompetitionTrend for Global Buying of bearings by Automanufacturers …. increased price/quality pressureon local bearing companiesReduced import tariffs in most countries Porous borders of countries like India leading to risein smuggled bearings for after market Wednesday 19-May-2004 14 Prabhash Gokarn Bearings M&S
  15. 15. Industry TrendsHowever, Japan remains closed tocompetition Japan remains closed to competition due to exclusive arrangements with fellow Japanese companies (Keiretsu) like case of Toyota and KoyoWednesday 19-May-2004 15 Prabhash Gokarn Bearings M&S
  16. 16. Industry Trends9. Steep Fall in Prices of Bearings… Specially of miniature bearings (9mm – 30 mm used in computers, FHP motors, automation and white goods) and small ball bearings (30 mm to 52 mm) used in automobiles (~ 60% fall in prices 1992-2004). China and EU countries – major suppliers of small bearings; now control up to 37% of world market Wednesday 19-May-2004 16 Prabhash Gokarn Bearings M&S
  17. 17. Industry Trends10. Collaborative Research & Development Global firms spend average 2% of sales on research Benefit of global firms from collaborative R&D Faster product innovations and faster development of new generation bearings. Wednesday 19-May-2004 17 Prabhash Gokarn Bearings M&S
  18. 18. What Discussionit mean to Tata BearingsAgenda for does :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 ? Wednesday 19-May-2004 18 Prabhash Gokarn Bearings M&S
  19. 19. Wednesday 19-May-2004 19 Prabhash Gokarn Bearings M&S