NTN Acquires IFA Stake

NTN Corp. (Japan; TSE: 6472) announced it has acquired 25% ownership of IFA-Antriebstechnik GmbH (IFA-AT, Germany), a manufacturer of constant velocity (CV) joint bearings. IFA-AT had been a wholly-owned subsidiary of IFA Group (IFA Maschinenbau Verwaltungsgsellschaft GmbH), a privately held auto parts manufacturer serving the German auto industry. IFA-AT was established in 2001, taking over the newly outsourced portion of Volkswagen AG's CV joint manufacturing program. The dual-sourcing strategy allowed VW, Audi and other captive CV joint customers to reduce their reliance on relatively expensive in-house manufactured joints. NTN said its purpose in buying into IFA-AT is to, "establish a tight business relationship with VW, which will, in conjunction with another CVJ joint venture with Renault in France, enable NTN to accelerate the growth of its CVJ business in the European market." The reference to Renault reflects NTN's importance as a Nissan/Renault vendor. In addition to its Nissan ties, NTN has been producing CV joints for Renault via a joint venture dating back to 1988. Beyond building the European CV joint business, NTN hopes the new relationship will allow it to expand CV business with VW on a global basis. VW is one of the most globally diverse auto manufacturers, with plants and local sourcing opportunities in more countries than any other auto maker. As the business relationship becomes more established, NTN will be taking a larger position in IFA-AT, with plans to eventually become the majority owner. NTN's aggressive targeting of the CV joint business parallels similar moves by other bearing manufacturers. Nachi very recently announced plans to expand its CV joint production at its three plants. However, NTN appears willing to settle for nothing short of CV joint market domination worldwide. The company has already gone on record with its goal of becoming the world's market-leading CV joint manufacturer by 2010. Its recent moves have been in fast-growing markets. In January, NTN announced plans to establish a new company in Haryana, India to manufacture constant velocity (CV) joints for the fast-growing auto manufacturing market there. The new 10,000 square meter (108,000 square foot) manufacturing facility, NTN Manufacturing India Pvt. Ltd., is its tenth CV production location. Currently, NTN manufactures joints at plants in Asia, Europe, China, Asia, and the United States, A month later, NTN and India's NEI announced plans to build a joint venture greenfield manufacturing facility in India, also dedicated to CV joint production. Beyond building market share by acquisition, NTN also said it intends to dominate the CV joint market by rolling out high value-added bearings and integrated front axle units. NTN has been manufacturing CV joints and components since 1963, when it established a relationship with Hardy Spicer Ltd.