Briefing on the present situation in Minebea and its key subsidiaries
Back to Shareholders' Meetings (Year 2006)
The 60th Ordinary General Meeting of Shareholders
1. Medium-Term Management Policies
We set the following three basic policies, as the three pillars of management.
The first pillar is to further reinforce and expand the business of our mainstay bearings and bearing-related products.
The second pillar is to build our operations in the area of precision small motors into a second pillar of our operations after bearings and bearing-related products.
The third pillar is to increase the ratio of high-value-added products in all product categories and diversify offerings to serve a broader market.
Minebea's principal competitive advantages are: ultra-precision machining technologies; mass production technologies; and a unique vertically integrated manufacturing system. We will strive to accomplish the three pillars of management by making the best possible use of these strengths.
Furthermore, to further accelerate the three basic policies, we have resolutely carried out decisive structural reforms, reinforced R&D and implemented management with a clear vision. With regard to structural reforms in particular, we made a significant change of organization, effective July 1, 2005.
With regard to reinforcement of R&D, we will integrate R&D activities at our Plants and other departments under the new Engineering Headquarters to avoid overlapping. We will also reorganize our engineering team and make the operation more efficient so that we can maximize synergy effects by linking R&D activities in various parts of our operations.
Management with a clear vision will be to analyze future market trends, prepare ourselves for technological development and other tasks to meet future needs and make intensive investments in product development.
Through these three measures, we will accelerate our basic management policies.
2. Manufacturing Activities in Thailand
It is 24 years since Minebea began manufacturing activities in 1982 in Ayutthaya, which lies 75 km to the north of Bangkok.
We presently operate a group of factories in four areas in Thailand and employ approximately 30,000 people. These factories account for about 50% of the Minebea Group's total output and comprise the Group's largest mass production base.
Production of HDD spindle motors, miniature and small-size ball bearings, pivot assemblies, lighting devices for LCDs and other mainstay products has continued to expand in Thailand as Minebea's primary production base.
3. Manufacturing Activities in Shanghai
In 1994, Minebea established its first Chinese subsidiary Minebea Electronics & Hi-Tech Components (Shanghai) Ltd. in the suburbs of Shanghai and started production of miniature and small-size ball bearings and of fan motors.
Since then, production of these products has increased smoothly, and miniature and small-size ball bearings, fan motors, measuring instruments, and PC keyboards are now produced. This positions the subsidiary as our main factory of fan motors and PC keyboards.
Operations in China account for approximately 20% of total group output and form the second largest production base of the Minebea Group following Thailand.
We intend to decide on our product lineup and production scale, while keeping a careful eye on market trends in China and the other parts of the world; situations in China; foreign exchange fluctuations; and other business factors.
4. Minebea-Matsushita Motor Corporation
On April 1, 2004, Minebea-Matsushita Motor Corporation was jointly established by Minebea and Matsushita Electric Industrial Co., Ltd. (Matsushita), integrating all functions of the information equipment motor business of both companies. Share holding ratio is 60% by Minebea and 40% by Matsushita.
While competition in the information equipment motor business is becoming increasingly severe worldwide, especially due to industry consolidation led by Japanese manufacturers and the rise in the number of market newcomers from China, further growth in demand can be expected in new product applications such as digital home applications including plasma TVs and LCD TVs, information terminals including personal computers and mobile phones, and game machines.
The joint venture company, with the aim of capturing the leading position in markets worldwide in the above-mentioned business, taps Minebea's advanced ultra-precision machining, mass-production technologies, cost competitiveness and Matsushita's cutting-edge product development technologies to strengthen its high added-value product development/manufacturing capabilities and accelerate development speed, as well as establishing strong customer support structure.
In the previous fiscal year, we revamped the structure of the joint venture business. This fiscal year, we will strive to turn around the business by implementing organizational reforms, cost reductions and other key measures.
5. Structural Reforms in the PC Keyboard Business
We had striven to improve profitability in our PC keyboard business. In fiscal 2006, we completed the production shift to Shanghai from Thailand, and strove to enhance production efficiency at Shanghai Shunding Technologies Ltd. (SST). However, due mainly to severe price competition and the recent rise in plastic prices, we were unable to obtain satisfactory results. Under these circumstances, we have considered drastic results improvement measures from various angles, and decided the implementation of the following structural reform.
The reform is to focus on making and marketing mainly high-quality, high-priced models for which we can utilize our technologies and competitiveness. To that end, we reported a consolidated business structural reform loss of 3.4 billion yen in fiscal 2006. This comprised a loss from incurring reorganization charges: a loss on disposal of fixed assets, such as excessive production facilities and dies; and a loss on liquidation of inventories.
In addition, main PC keyboard production company SST reported an extraordinary loss from the reform. This resulted in a remarkable fall in the real value of the shares of Singapore subsidiary Sheng Ding Pte. Ltd.-the holding company of SST-below our book value, which needed a long time to recover. In our unconsolidated settlement of accounts, we reported a loss on valuation of the shares and a business structural reform loss, totaling 8.8 billion yen.
