Buying Timken’s needle bearing business during two loss years (2009)

Buying at the bottom, and making what you bought work

Committing ¥29bn in the middle of two consecutive years of net loss is hard to explain from the results alone. That the acquisition went ahead can be read as reflecting the position of needle bearings — the missing item, unavoidable if the company was to aim for the top of the world in automotive bearings. Chasing a field growing with fuel-efficient vehicles through its own investment would have meant building plants and engineers from scratch. Taking on twelve operating plants and 3,400 people in a single package fitted the price conditions of a demand trough.

What you get by buying, however, is assets and people, not the ability to run them. JTEKT had merged two companies only three years earlier and already carried a doubled network of sites in North America and Europe. Adding twelve plants in seven countries meant that the objects requiring integration in fact increased. That instability in North American production was still being discussed at earnings briefings more than ten years later shows that, quite apart from whether the acquisition was well or badly executed, a decision to add sites leaves a long-lasting load on operating capability on the shop floor. Rather than whether it was bought cheaply, the question this decision left behind may be how many years it takes to put what was bought onto the company’s own production system.