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5. SHIROKI Corporation Business Report FY ended Mar. 2015

SHIROKI Corporation Business Report FY ended Mar. 2015

-In prior years, royalties received from consolidated subsidiaries and other companies were included in the "royalty income". From the FY ended March 2015, these royalties are included in net sales. To reflect this change, the consolidated financial statements of the previous fiscal year have been revised.

Transfer the Seat Structure Business to Toyota Boshoku

-On May 13, 2015, the Company, Toyota Boshoku Corporation and Aisin Seiki Co., Ltd. announced that they have signed a contract under which Aisin Seiki and Shiroki will transfer their seat structure business to Toyota Boshoku. In accordance with this agreement, Toyota Boshoku will integrate seat recliner and seat rail development and production operations at Aisin Seiki and Shiroki into its own operations, effective November 2015. (From an article in the Nikkan Jidosha Shimbun on May 14, 2015)

Business merger with Aisin Seiki Co., Ltd.

-Aisin Seiki Co., Ltd., Toyota Boshoku Corporation and Shiroki announced a plan to reorganize their auto body parts and seat parts businesses to eliminate redundancies. In April 2016, Shiroki will be the wholly owned subsidiary of Aisin Seiki. Aisin Seiki will concentrate on system and modular products, transferring the auto body component business to Shiroki. Meanwhile, seat frame component businesses of Aisin Seiki and Shiroki will be consolidated into Toyota Boshoku. A new development division will be set up at Toyota Boshoku's Sanage plant in Toyota City, Aichi Prefecture, Japan, in 2015. The method to consolidate production and the costs for business acquisition will be determined by the end of 2015. Note that both companies will continue to strengthen their seat parts operations, which are outside of the operations transferred from both companies to Toyota Boshoku. (From an article in the Nikkan Jidosha Shimbun on December 20, 2014)

-The Company has won first orders for its seat components from Mazda Motor Corporation and Honda Motor Co., Ltd., establishing business with all passenger car makers in Japan. The Company started parts supply to Mazda in October 2014. This time, it received an order from Honda for the seat components to be used in a new Honda model that will be launched in 2016 or later. By winning the new orders, the Company proved its ability to supply its parts to the automakers other than Toyota. The Company intends to maximize the economies of scale through business integration with Aisin Seiki which is scheduled in April 2016, and to maintain and expand its seat components business. (From an article in the Nikkan Jidosha Shimbun on March 11, 2015)

Joint Ventures

-In May 2014, the Company announced that it will establish an Indian joint venture with Technico Industries Ltd., an affiliate of the Company, in July 2014. The new company, which will be called Shiroki Technico India Pvt. Ltd., will manufacture and sell automotive parts such as window regulators and seat components with a floor space of approximately 6,000 square meters. Production is scheduled to start in January 2015. The new company will be capitalized at INR 300 million (approximately JPY 521.5 million), in which Shiroki will hold 50% plus one share, while Technico Industries will own the remaining 50% minus one share. Sales at the new company are expected to reach INR 1.9 billion (approximately JPY 3.3 billion) in the fiscal year ending March 2016. In accordance with the establishment of the joint venture, the Company plans to sell its entire 27.37% stake in Technico Industries to shareholders of the affiliated company. (From a press release on May 12, 2014)

Contracts

-Major contracts made in FY ended March 2015,

Awards

-In April 2015, the Company was awarded the Technical Development award from TS TECH Co., Ltd. which is a new customer for the Company.

-Shiroki North America, Inc. was given high ratings for the quality of its parts, being one of the 2014 Regional Supplier Quality Award Winners chosen by Nissan North America.

Mid-term Management Plant/Long-term Plan for the Future

New Mid-term "Rolling Plan"
-The Company continues its new mid-term management plan that will cover the period ending with the 2016 fiscal year (March 2017).

In order to achieve these objectives, the Company focuses on the following activities;

• Building a management structure capable of posting profits based on sales of JPY 70.0 billion generated in Japan.
• Successfully launching smooth operations at Shiroki Technico India Pvt. Ltd.
• Manufacturing high quality but low priced dies and facilities by improving the standards of mold diagrams and the net ratio of facilities use.

Long-term Plan for the Future: Shiroki Vision 2021
-Along with the Rolling Plan, the Company announced its Shiroki Vision 2021 that plans the business road map for the 2021 fiscal year ending in March 2022.

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D Facilities

-At the Technology Center located in Toyokawa city, Aichi prefecture, the Company leverages its accumulated technical know-how to quickly provide attractive products distinguished by high-quality, low-cost, safety, comfort, and environmental friendliness. It's also striving to make is products more compact and lighter in weight, improve product architecture and materials based on advanced ergonomics, and achieve modularization and electrification.

Recent R&D Achievements

Automotive components business
-Power seat adjuster
-Manual seat adjuster
-New wire-type regulators
-New arm-type regulators
-Next generation luggage back door lock
-New construction, light weight aluminum door frame
-Molding with high-design performance
-New manpower saving method of door frame

Product Development

Lock integrated Seat rail (Seat track)
-The Company has developed a spring lock seat rail, the world's first seat rail that integrates the locking mechanism into the rail. While the locking mechanism of existing products comprises a spring and clasps, the new seat rail's spring receives the load from the lever and has the locking function itself. By simplifying the structure, the new seat rail reduces the number of components to 19 from 29, offering a 15% weight reduction and a 10% cost savings compared to existing products. In addition, some components of the new seat rail can be shared between front and rear seats. The Company has already been supplying the new seat rail to Suzuki Motor Corporation and Toyota Motor Corporation since last year. A special award was given by Toyota for promoting use of common parts. Positioning the new seat rail as its main product, the Company intends to win more orders from automakers. (From an article in the Nikkan Jidosha Shimbun on March 25, 2014)

-Most of the Company's capital investment was devoted to the automotive component business. The Company improved facilities in order to improve productivity and reduce cost and prepared the facilities to produce products for new vehicle models.

Production Innovation

Seat adjuster
-The Company will introduce a new line for producing automotive seat adjusters at the Nagoya plant located in Toyoda, Aichi. The new line saves space to one-quarter of a conventional line and can adjust production volume flexibly. In addition, initial investment amount for installing a new line was reduced by 30%. The new line uses largely improved automatic assembly machines for round recliners and seat tracks, which are components of a seat adjuster. The line will be installed within the fiscal year ending March 2015. The Company plans to introduce the line to plants outside Japan in the future. (From an article in the Nikkan Jidosha Shimbun on January 31, 2014)

Window regulator
-The Company is able to produce both power and manual window regulators through mixed-production operations. Furthermore, it reduced the amount of space used and investment costs by integrating processes.

Door frame
-The Company created a revolutionary production line that reduces man-hour, line length, and process changeover time by half.