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5. H-ONE Co., Ltd. Business Report FY ended Mar. 2015

H-ONE Co., Ltd. Business Report FY ended Mar. 2015

Restructuring in Japan

-The Company announced that it will close its Toda Plant in Saitama Prefecture by the end of March 2016. The plant is engaged in welding of automotive frames. The closure will affect 72 employees at the plant. In accordance with this closure, the Company plans to move the production operations and employees from Toda Plant to other facilities. (From a press release on May 18, 2015)

-The Company has decided to discontinue production at the Karasuyama Plant (in Nasukarasuyama City, Tochigi Prefecture) of its Koriyama Factory, at the end of March 2015. Koriyama Factory (in Koriyama City, Fukushima Prefecture) will take over production of automotive frame parts for large vehicles and parts for general-purpose machineries from the plant. The Karasuyama Plant was founded in 1992 as a plant to mainly manufacture non-automotive products. After this production transfer, the plant will be utilized as a research and development facility. (From an article in the Nikkan Jidosha Shimbun on February 4, 2015)

Increasing In-house production of Dies

-The Company will increase in-house production of stamping dies to 770 units per year by FY 2016 that ends in March 2017. The volume is 50% larger than the amount made in FY 2013. The Group will expand the capacity of its facilities in Japan, as well as those in emerging markets such as Thailand, China, India and Indonesia in order to improve its supply capability on a global basis. Currently, the Company's die business relies heavily on outside suppliers. During FY 2013, it outsourced nearly 90% of die production to other manufacturers. (From an article in the Nikkan Jidosha Shimbun on June 26, 2014)

Mid-term Business Plan (FY ended Mar. 2014 - FY ending Mar. 2017)

-Targets for fiscal year ending March 2017, under the 4th mid-term business plan, are as follows:
1) Sales: JPY 200 billion and more
2) Ordinary income rate: 4.5%

Management Policy: "Surpass the competition worldwide with H-ONE's superior competitive advantages and technology, to fully satisfying customer needs."

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

-Most of the Company's R&D expenditure was directed to automotive parts related businesses.

R&D Structure

-Centering on its development technology headquarters, the Company carried out R&D activities in cooperation with many research and development institutions including those of Honda Group.

R&D Facilities

Recent R&D Activities (Automotive Component Division)

-Developed a welding/mating process
-Developed stamping process technology for high tensile materials and light weight materials
-Developed a outer parts stamping process
-Developed functional parts by incorporating thick plate precision stamping technology and assembly technology
-Developed material hardening technology
-Developed an in-house information system based on CAD, CAM, and CAE technology; and trained engineers to use it
-Developed stamping process technology for precision metal parts

Product Development

Tube heat-induction bending technology
-The Company has developed a new tube heat-induction bending technology that enables use of pipes in curved auto body frame parts. Thanks to the high-frequency induction hardening technology, the Company achieved the pipe strength equivalent to that of hot stamped parts. The Company intends to start mass production of parts by using this technology at its Koriyama Factory in Koriyama, Fukushima, Japan, by the end of 2014. Conventional body frame parts use stamped steel sheets. The use of pipe can reduce the width of the body frame. For example, when the pipes are used for pillars, the narrower pillar can improve a driver's visibility as well as auto body design. The pipes also can save the amount of necessary steel materials, which will lead to the reduction of total vehicle weight. (From an article in the Nikkan Jidosha Shimbun on May 30, 2014)

Auto body frame parts made from ultra high-tensile steel sheets with 1180 MPa (120 kg-class) tensile strength
-The Company has received its first orders for auto body frame parts made from ultra high-tensile steel sheets with 1180 MPa (120 kg-class) tensile strength. Several automakers have placed the orders.The Company will start producing and supplying the products in Japan before April 2015. Automakers are increasing the ratio of high-tensile steel sheets used in body frames to make cars lighter. In many instances, automakers use 120 kg-class ultra high-tensile steel sheets having the highest level of strength among cold stamping parts. The Company will add such products to its lineup to accommodate the demand for ultra high-tensile steel sheets. The demand is expected to grow further in future. (From an article in the Nikkan Jidosha Shimbun on October 3, 2014)

-Further, auto body frame parts made from steel sheets with 1470 MPa is ready for series production.

-The Company's capital investment was mainly directed towards the automotive business.
-Automotive Parts Division: JPY 12,979 million to launch production of new automotive parts, and JPY 21,016 million to increase/upgrade general-purpose production facilities to raise productivity and to extend and reconstruct buildings.

Investments Outside Japan

-Major activities in FY ended Mar. 2015:

-The Company plans to double its production capacity at H-One Parts Sriracha Co., Ltd. (HPS), its production subsidiary in Chonburi, Thailand. HPS will establish an additional factory to its existing facility, planning to start operations on a new welding line by March 2015. The factory will also install a stamping machine in 2015. With this expansion, the Company hopes to meet growing demand for stamping components from a number of Japanese automakers operating in southern Thailand. The Company's major customer, Honda Motor Co., Ltd. is planning to increase its production capacity in the country by 50%, as it will open a new factory by 2015. (From an article in the Nikkan Jidosha Shimbun on January 27, 2014)