Okuma Holdings Inc.

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Okuma Holdings Inc.

5-25-1 Shima-Oguchi, Ohguchi-cho
Niwa-gun 480-0193
Telephone: (+81) 587 95 7820
Fax: (+81) 587 95 4807
Web site: http://www.okuma.co.jp

Public Company
1898 as Okuma Noodle Machine Co.
Employees: 1,895
Sales: $822 million (2004)
Stock Exchanges: Tokyo
NAIC: 332721 Precision Turned Product Manufacturing; 333319 Other Commercial and Service Industry Machinery Manufacturing; 333515 Cutting Tool and Machine Tool Accessory Manufacturing; 333518 Other Metalworking Machinery Manufacturing

Okuma Holdings Inc. is the name adopted in 2005 for the merged operations of Okuma Corporation and two affiliated companies, Okuma & Howa Machinery Ltd. and Okuma Engineering Co. The new company is one of Japan's and the world's largest manufacturers of computer-numerical-control (CNC) machinery and systems. The company, which stemmed from a maker of noodle machinery at the turn of the 20th century, produces a wide range of machinery for every industry. The company's largest production is in machining centers, which combine a range of production processes into a single, comprehensive system. Machining centers represent 50 percent of the group's sales, which are expected to top ¥136 billion ($1.3 billion) by the end of the enlarged company's 2006 fiscal year. Lathes represent Okuma's second-largest product category at over 30 percent. The company also produces multitasking machines, enabling a variety of production processes from a single centralized system. This category represents 14 percent of sales. Japan remains Okuma's core market, accounting for more than 46 percent of revenues. Elsewhere in the Asia Pacific region, the company generates more than 14 percent of sales, a number which was expected to grow with the company's launch of a lathe-making joint-venture, Hangzhou Feeler Takamatsu Machinery Co., in January 2005. Okuma has also maintained a sales and manufacturing presence in North and South America, especially in the United States, since the early 1980s. That market accounted for 26 percent of group sales in its 2005 fiscal year. In addition, Okuma exports to Europe, which represents approximately 14 percent of sales. Junro Kashiwa, who serves as president and CEO of Okuma Corp. will become chairman of Okuma Holdings. Upon completion of the merger, the listing for Okuma Holdings will replace those of Okuma Corp., Okuma & Howa, and Okuma Engineering.

Beginnings at the Turn of the 20th Century

Okuma was founded in 1898 by 28-year-old Eiichi Okuma in Nagoya, Japan. The company was initially founded to produce machinery for the manufacture of noodles. Okuma then adapted his operations to the make cigarette machines, as well as machinery for woodworking and printing. The extension of his business led Okuma to become interested in building the machines needed to produce the machines, and in 1904 his company began producing its first machine tools.

Machine tools became the company's specialty by the end of World War I. In 1918, Okuma changed its name to reflect its new focus, becoming Okuma Machinery Works Ltd. At this time, the company began manufacturing lathes, a line that remained one of the company's largest product groups into the 21st century. Okuma grew strongly in the run-up to World War I, and by the end of the 1930s the company had captured the leading position in the Japanese machine tools market.

Okuma remained a market leading in the postwar years as well. In particular, the company played an important role in developing technologies that enabled Japan to achieve its impressive industrial growth in the second half of the century. This process began in 1953, when the company expanded its line to include radial drilling machines. By the end of the decade, the company had introduced its first high-speed lathes. This latter category represented an important development in the production of machinery and in the manufacture of machine tools themselves.

The introduction of the first numerical-controlled (NC) machinery represented an opportunity for Okuma in the 1960s. In 1963, the company introduced its own NC-controller featuring absolute position encoding capability. Okuma's early extension into the NC technology enabled it to capture a major share of the market, and the company remained one of the only Japanese companies to include capacity in both machine tools and the NC systems to drive them. By 1966, the company had combined the two, producing its first NC lathe.

By then, the company had launched production of double machining centers, debuting its first in 1964. This product category enabled Okuma to play a major role in the support of the Japan's hosting of the Olympic Games, as well as in the construction of the country's high-speed train system and the development of Japan's industry in general. By 2004, the company had sold more than 6,000 double machining centers.

Okuma's growth led it to begin development of a new manufacturing facility and headquarters, in Oguchi, which saw its first phase of construction completed in 1970. By 1979, the company had completed the second phase of the Oguchi plant, at which time it began relocating its headquarters to the new facility. The process was largely completed in 1980, marking the company's departure from Nagoya after more than 80 years.

In the meantime, Okuma had adopted the newly emerging computer technology that revolutionized the world of manufacturing in the 1970s and 1980s. The company released its first computer-numerical-control (CNC) system in 1973. The success of that venture led Okuma to convert all of its NC machinery to use CNC technology.

International Expansion in the 1980s

Okuma added a number of new products in the early 1980s. In 1981, for example, the company produced its first vertical machining centers. The following year, it created a new generation of lathes, the LC15 NC. At the same time, Okuma began to expand externally for the first time. In 1980, for example, the company acquired a stake in another major Japanese machine tool company, Howa Industry, which became known as Okuma & Howa Machinery. Howa stemmed from the spin off of Howa Corporation's machine tools division in 1943. Under the name Howa Industry, the company launched its first six-foot lathe in 1945 and later went public, listing first on the Nagoya Stock Exchange in 1949, before joining the Tokyo Stock Exchange in 1961. Three years later, Howa Industry built a new production facility in Konan, Aichi, which became its headquarters. Okuma & Howa, which remained a separate, independently listed company, developed a particular expertise in producing machine tools for Japan's, and later the world's, car makers.

Okuma turned toward the international market in the 1980s. It first entered the United States with a sales subsidiary in New York in 1984. The creation of a new trade agreement between the United States and Japan during the 1980s, which placed restrictions on Japanese imports, led Okuma to launch a manufacturing subsidiary in the United States as well. The company invested some $30 million to establish a plant in North Carolina in 1987. In the same year, affiliate Okuma & Howa also set up a plant in the United States.

Back at home, Okuma set up its second production plant in 1988, in Kani, completing the first phase of its construction in that year. The second phase of the Kani plant's construction was completed just three years later. The expansion of the company's production capacity played an important part in the company's international expansion strategy, supporting the extension of its sales operations into new markets. In 1988, Okuma added a sales and service subsidiary in Germany, giving the company its first foothold in the European market. As with its U.S. extension, the company's Okuma & Howa affiliate also set up a sales and marketing subsidiary in Germany that year. In addition, Okuma began expanding into the Asian market as well, establishing a branch in Singapore in 1990.

Merging for Leadership in the 2000s

Okuma continued developing new machine tools and systems through the 1990s. In 1994, the company debuted a new generation of lathes. This advance was followed by the launch of its MX-V and MX-H horizontal machine centers the following year, and the Space Turn series of NC lathes in 1997.

On the international front, the company consolidated its U.S. operations, transferring its sales and marketing business to its North Carolina manufacturing plant in 1995. In 1997, Okuma moved into Taiwan, establishing the Tatung Okuma Co. joint venture for that market. The two companies by then had built up a relationship over more than 20 years, beginning with the transfer of Okuma high-speed precision lather technology in 1976.

Okuma next turned to the Australia and New Zealand markets, acquiring Atlas CNC Machines Ltd. in 2000. That company stemmed from Gilbert Lodge and Company, founded in 1908, which became a leader in the Australian and New Zealand machine tools market over the next decades. Gilbert Lodge was acquired by Atlas Steels in 1985, changed its name to Atlas CNC in 1992, then was acquired by Email Ltd. in 1995. Atlas CNC's purchase by Okuma came after the joint takeover of Email by Smorgon and Onesteel in 2000. In 2002, Atlas CNC was renamed as Okuma Australia Pty Ltd.

Company Perspectives:

Development, manufacture and sales of NC machine tools and systems based on an overall integrated approach. One of the world's foremost companies in the field of machine tools, Okuma is the only Japanese machine tool manufacturer with sophisticated mechatronics know-how to build machines and controls precisely for each other. The corporate logo symbolizes this approach asYour Single Source For Machine & Control.

While Japan remained Okuma's primary market, continuing to account for more than 46 percent of the group's sales in 2005, the company had successfully balanced its domestic sales with a strong international presence. The Asian market remained a target of the company's expansion efforts, and in 2003 Okuma entered the fastest-growing country in the region. In that year, the company established a presence in mainland China with the launch of the joint-venture BYJC-Okuma (Beijing) Machine Tool Co.

In 2004, Okuma stepped up its mainland presence, teaming up with Taiwan's Fair Friend in order to create Hangzhou Feeler Takamatsu Machinery Company in Hangzhou City. That company launched operations at the beginning of 2005.

By then, Okuma ranked among the world leaders in the machine tools market. In 2005, the company moved to consolidate its position, reaching an agreement with Okuma & Howa and another publicly listed associate, Okuma Engineering Co., to form a three-way merger. The result of the merger was the creation of a new holding company, Okuma Holdings Inc., which took over the stock market listings of all three companies. In this way, Okuma boosted its total revenues to more than ¥136 billion ($1.33 billion). Junro Kashiwa, who had served as president and CEO, was then named as chairman of the new, larger company. Okuma Holdings expected to uphold the long tradition of the Okuma name as a machine tool leader into the 21st century.

Principal Subsidiaries

Okuma America Corporation; Okuma Australia Pty Ltd; Okuma Europe GmbH; Okuma Latino Americana Comercio Ltda; Okuma Machinery (Shanghai) Co., Ltd; Okuma Singapore; Okuma Techno (Thailand) Ltd; Tatung-Okuma Co., Ltd.

Key Dates:

Eiichi Okuma founds a company in Nagoya, Japan, to produce machinery for noodle making, later adding the production of cigarette machines and other equipment.
The company launches production of machine tools.
The company becomes Okuma Machinery Works Ltd.
Howa Machinery (later Howa Industries) is created as a spinoff of the machine tools division of Howa Heavy Industries.
Okuma launches the production of high-speed lathes.
Okuma launches its first self-developed NC controller.
The company begins a technology transfer relationship with Tatung of Taiwan.
A stake in Howa Industries, which becomes Okuma & Howa, is acquired; construction of the new Oguchi plant and headquarters is completed.
Okuma enters the United States with a sales and marketing subsidiary in New York.
A U.S. manufacturing subsidiary is established in North Carolina.
A sales and marketing subsidiary is established in Germany.
The company opens a branch in Singapore.
The company changes its name to Okuma Corporation.
Tatung-Okuma joint venture in Taiwan is created.
Atlas CNC, which becomes basis of Okuma Australia Pty Ltd, is acquired.
Okuma enters China through its BYJC-Okuma joint venture in Beijing.
The company launches a new mainland China joint venture with Taiwan's Fair Friend and creates Okuma Holdings Inc. through a merger of Okuma Corporation, Okuma & Howa, and Okuma Engineering.

Principal Competitors

Sulinskiy Metallurgical Works Joint Stock Co.; Gurevsk Metal-lurgical Plant Joint Stock Co.; Halma plc; Koninklijke Nedschroef Holding N.V.; MacLean-Fogg Co.; Société Legris S.A.; Alumasc Group PLC; San Shing Fastech Corporation; Ideal Standard France S.A.; B Elliott Ltd.; Helvar Merca Oy Ab.

Further Reading

"How the Okuma/Okuma & Howa Merger Will Shake Out," Metal-working Insiders' Report, May 15, 2005, p. 2.

"How Two Japanese Builders Are Betting on the Market in China," Metalworking Insiders' Report, November 15, 2004, p. 4.

Kelley, Katherine A., "Ten Thousand Machines Made," Modern Machine Shop, March 2000, p. 114.

"Okuma Companies Merging Management," American Machinist, March 2005, p. 22.

"Okuma Copes by Shifting Production, Moving Upmarket," Metal-working Insiders' Report, November 28, 2001, p. 1.

"Okuma in Cooperative Research in China," Metalworking Insiders' Report, June 15, 2005, p. 5.

"Okuma Plans Merger with Two Affiliates," Metalworking Insiders' Report, January 15, 2005, p. 1.

Ushio, Shota, "Okuma Milestone," Metalworking Insiders' Report, July 31, 2004, p. 6.

M.L. Cohen