NKK CORPORATION: Annual Report 2001
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Q: Why consolidate? And why align with Kawasaki Steel?

A: Our operating environment is characterized by realignment among steelmakers and within demand sectors--principally the automotive industry--on a global scale, and by the subsequent expansion of global procurement activities. Realignment of raw material suppliers is also prevalent in today's market. Against this backdrop, we firmly believe business consolidation is the most effective way to develop our operations and ensure appropriate product and service responses to customers' increasingly sophisticated requirements. Kawasaki Steel is the perfect partner for NKK. The new company formed post-consolidation will possess strong earning power, reinforced by top-tier competitiveness in world markets, and a full range of products and services geared to the needs of clients.

Q: What cost benefits will be achieved?

A: The cost benefits of this consolidation are expected to reach approximately ¥60 billion. This figure represents ¥20 billion in reduced administrative expenses, largely through personnel downsizing at headquarters' divisions; a further ¥20 billion through increased production efficiency; ¥10 billion from lower spending for activities related to logistics, maintenance and procurement; and another ¥10 billion in decreased costs derived through joint efforts underway at four steelworks since April 2000.
      Ahead of the consolidation, NKK will endeavor to improve its financial position and exceed the targets stated in its medium-term Group business plan. A stronger financial footing before the consolidation will enhance the new company's expected benefits.

Q: What about the global support structure?

A: Both NKK and Kawasaki Steel have excellent steelworks. We have the Fukuyama and Keihin facilities in Japan, National Steel in the United States and steel sheet joint ventures in Thailand; Kawasaki Steel's most notable facilities are at Mizushima and Chiba, plus ties with AK Steel Corporation in the United States, Dongkok Steel Mill Co., Ltd., and Hyundai HYSCO in South Korea. NKK and Kawasaki Steel are also involved in talks with Thyssen Krupp Steel AG to establish a global alliance.
      Maximizing our connections, we will establish an efficient supply structure covering Asia, the United States and Europe that enables us to satisfy our clients' requirements on a global scale better than ever before. By being more accessible to demand sectors, the new company will earn a place as one of the most influential suppliers of steel in the world.

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