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5. Univance Corporation Business Report FY ended Mar. 2015

Univance Corporation Business Report FY ended Mar. 2015

Contracts

-The Company has received orders for its All-Wheel Drive (AWD) transfer cases for Front-Wheel Drive (FWD) vehicles from the Renault-Nissan Alliance and has started supplying the products worldwide. The transfer cases are produced in the U.S., Thailand, and Indonesia. In the fiscal year ending in March 2016 (FY 2015), the Company plans to supply 500,000 transfer cases, which is 70% more than the supply volume in FY 2013. Some Nissan models have already been equipped with this transfer case, and supply for Renault models will start soon. The transfer case has been chosen as a global standard module under the Alliance's Common Module Family (CMF) scheme. The transfer case will be installed on the new X-Trail, the first model under the CMF. Prior to this new order, the product was installed on Nissan's compact SUV sold in Japan as well as the Murano and Pathfinder. The Company will also supply the product for Renault models that share components with the X-Trail. Transfer cases for the X-Trail and Renault models have the same basic specifications. So far, the Company has had little business relationships with Renault. Renault, which has used transfer cases for FWD vehicles made by a European supplier, will use the Company's product for C/D segment models which will be built as the first cars under the CMF. (From an article in the Nikkan Jidosha Shimbun on July 9, 2014)

Restructuring

-The Company announced that it will freeze its plan to discontinue production at its Hamamatsu Plant (Shizuoka Prefecture). The company previously said it would stop production at the Hamamatsu Plant by March 2015 as part of its initiatives to restructure its domestic operations. Given the higher-than-expected demand levels, however, the company has decided to maintain the plant’s operations. From now on, the Company will focus on improving production efficiency and saving production space, planning to reschedule its reorganization program for its three domestic facilities in Shizuoka around March 2017. (From an article in the Nikkan Jidosha Shimbun on November 19, 2014)

Management Policy

-In anticipation of the future, the Company is taking steps to strengthen its competitive advantages by developing products that lower fuel consumption to better respond to environmental needs, following the directives set under its management plan, the Univance Production Way, that calls for producing numerous products in small lots at low cost; and developing technologies. In addition, the Company is re-assigning its management resources to more effectively utilize them, while enhancing both its product competitiveness and its profit structure.

• Develop more cost-competitive products by making better use of the Company's core technologies so as to grow the business
• Strengthen and expand operations at three locations outside Japan, which are North America, Indonesia, and Thailand.
• Reorganize business operations/plants in Japan and optimize management resources.

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

R&D Structure

-R&D activities at the Company are mainly carried out by the Product Development Division. 98 employees have conducted R&D activities, which accounts for approximately 8.4% of the Group's workforce as of the end of March 2015.

R&D Activities

1) Control-unit Business
-The Control-unit Business follows the three policies outlined below, which form the common basis for all R&D activities performed at the Company. This Business develops new products that optimize the high level of technology that the Company has in the area of control, working to create cost competitive products.

• Pursuit of greater functionality based on a high level of mechatronics.
• Pursuit of products and product-creation designed to best suit each region
• Pursuit of both environmental performance and competitive pricing.

-The Company is developing new transmissions for SUV, as well as for small- and medium-duty commercial vehicles. (Transmissions are its major products.) It is doing this by focusing on improving vehicle fuel efficiency, reducing emissions so as to meet environmental standards, and easing the burden on drivers behind the wheel.

-The Company is also strengthening its activities in engineering deceleration systems that can be equipped on various types of hybrid electric and electric vehicles.

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-In order to become more competitive in the transfer unit market, the Company's major line of business, the Company is developing lighter and more compact systems, while at the same time increasing its product range. It is focusing on transfer units for use in small pick-up trucks and SUV, which is a market segment that is growing worldwide.

2) Parts Business
-The Company is developing high-accuracy components for continuously variable transmissions in order to improve fuel economy and reduce drivers' burden.

-Going forward, in order to raise the competitive advantages of its products, the Company always works under an R&D policy that requires creating materials, production methods, and elemental design technology. In this regard, the Company is working mainly on its core product lines such as gearwheels, transmission axes, and companion flanges. In addition, the Company is producing products and materials in countries outside Japan so as to increase its local production volume overseas.

Technical developments

Technology to manufacture full toroidal traction drive mechanism disks and rollers
-The Company and UK-based Torotrak plc announced that they have jointly developed production intent processing of discs and rollers for the "Full Toroidal Traction Drive Technology," which is one of the traction drive technologies used in continuously variable transmissions. The two companies are continuing to work together to progress the development activities for a product launch in cooperation with global OEMs and Tier-1 suppliers. (From a press release on May 21, 2014)

-The Company made capital investments mainly to launch new operations and to enhance its production facilities so as to increase production capacity.

Domestic Investment

-The Company will add a new line for producing pulleys used in continuously variable transmissions (CVT) at its Head Office Plant in Kosai, Shizuoka Prefecture. This is to meet increased orders from Honda Motor Co., Ltd. With this new line, the production volume of pulleys in Japan supplied for Honda is expected to increase by over 30% compared to the present volume. The company started production of the CVT pulleys at its plant in the U.S. in June 2014. Univance intends to increase sales of the pulleys by expanding its supply network for Honda in and outside Japan. (From an article in the Nikkan Jidosha Shimbun on July 25, 2014)