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5. Bosch [Bosch Corporation] Business Report up until FY ended Dec. 2014

Bosch [Bosch Corporation] Business Report up until FY ended Dec. 2014

Recent Development in Japan

-In 2011, the Company is going to enhance its operations to produce the latest electronic stability control systems (ESCs). The Company will retool its equipment at its Tochigi Plant for switching to production of lighter and more compact, ninth-generation hydraulic units, while boosting ESC production. In Japan, installation of the ESC technology will be made mandatory on all new non-mini, passenger vehicles effective October 2012. Further, from October 2014, the ESC system will become compulsory on all non-mini passenger vehicles on Japanese roads, including used vehicles, which should expand demand for ESCs significantly. (From an article in the Nikkan Jidosha Shimbun on October 28, 2011)

Business Policies

-In Jun. 2015, the Company announced that its sales reached JPY 343 billion in 2014, an increase of 7.0% from the previous year's result. The improvement was attributable to strong sales of its common rail systems for farm machines, ABSs and ESCs for vehicles and motorcycles, and CVT belts. As of April 2015, approximately 6,700 people work for Bosch in Japan, including employees of ZF Lenksysteme GmbH (currently called Robert Bosch Automotive Steering GmbH), which was converted into Bosch's wholly owned subsidiary in January 2015. (From a press release on June 18, 2015)

-In Jun. 2014, the Company announced that its sales reached JPY 320 billion in 2013. Sales rose 2.5% from the previous year's result due to increased sales of motorcycle products for the North American market and strong sales of CVT belts and other automotive products. The Company said its global business with Japanese OEMs is expected to grow 10% year-on-year in 2014. It announced its intention to expand production in Southeast Asia, where vehicle production is growing at the highest rate and Japanese OEMs are dominating the market. The Company's new plant in Indonesia started operating on June 10, 2014 by producing gasoline injectors. The plant will also manufacture other products including O2 sensors. In addition, the Company began production at its new plant in Thailand at the end of 2013. The plant produces gasoline engine products, planning to add chassis system parts to its product lineup at the end of 2014. (From a press release on June 19, 2014)

-In Sep. 2010, the Company announced that sales for this term ending in December 2010 will increase 32% from the previous term to around JPY 320 billion exceeding the original plan. The Company is confident sales are certain to surpass the initial forecast because of factors such as increased sales of variable speed belts manufactured by the Bosch Group spurred by an increase in models installed with CVTs (Continuously Variable Transmission) and a rebound in sales of diesel fuel injection systems. The sales of the Bosch Group as a whole during the term ending in December 2010 are expected to top EUR 10 billion supported in part by a 30% boost in sales in Asia-Pacific countries, especially in a rapidly growing China. (From an article in the Nikkan Jidosha Shimbun on September. 9, 2010)

-In 2010, the Company aims to increase sales of the diesel injection system, its major product. It will therefore, restrengthen its activities of making technology proposals in Japan toward the widespread use of diesel-engine passenger vehicles. In Europe, where diesel cars are leading the market, a new emission regulation as tough as the Japanese post new long-term regulation will start in 2014. The Company will target Japanese automakers, emphasizing that this will make modification of its technology to Japanese specifications possible at lower cost. It will also launch a fuel system capable of providing the low-cost, high-pressure injection, which is advantageous for fuel efficiency and emission features. The Company will thus support Japanese automakers' development operations in order to introduce diesel passenger cars in their regular lineups. (From an article in the Nikkan Jidosha Shimbun on Jan. 15, 2010)

-In May 2010, The Company disclosed the mid-term business strategy at a press meeting held in Tokyo. By increasing expertise shared in designing components for low-priced vehicles among the group companies, including a subsidiary in India, which has experienced development of low cost products, Bosch will endeavor to increase cost competitiveness by optimizing its global production structure as a group. While electrification technology, including for hybrid vehicles, will be crucial to automobiles in the long-term perspective, the Company foresees conventional engine vehicles will still be accounting for 80% in the global market in 2020. In the meantime, the Company will also focus on products based on environmentally responsive technologies, such as gasoline direct injection systems and clean diesel engine units that have not been widely adopted by Japanese automakers. Despite a projected 24.6% increase in sales to 298 billion yen for the year ending December 2010, they will remain at a level a little short of 80 percent scored in the peak year of 2007. Profit margin before taxes of at least 5 percent appears to be assured, but it is below the target of 7 to 8 percent. Hereafter, the Company will take further steps to streamline operations like consolidation of production and engineering functions related to machine tools to the Higashimatsuyama Plant in Saitama Prefecture.(From an article in the Nikkan Jidosha Shimbun on May. 28, 2010)

Plant Closure

-The Company said it is going to shut down its Tomioka Plant in Gunma Prefecture, which is producing automotive electronic control units (ECUs). The closure is expected to be completed by the third quarter of 2013, while ECU production will be transferred to China and other low cost countries after the Company gains the consent of its customers. Based on the discontinuance, approximately 100 people now working at the Tomioka facility will be transferred to other plants, and the factory site will be sold off. This move reflects the Germany-based Bosch Group's initiatives to use its global resources more effectively in efforts to improve its cost competitiveness. Until the end of last year, the Tomioka Plant had been manufacturing airbag control units as well. Nevertheless, the operation was already shifted to Bosch's Chinese operations, from which the Japanese unit is procuring the airbag components. (From an article in the Nikkan Jidosha Shimbun on Jan. 23, 2013)

Awards

-In February 2011, Bosch Group received the Global Contribution Award from Toyota Motor Corporation. Toyota has recognized Bosch's performance with the Global Contribution Awards in 2002 and 2006. (From a press release issued in February 2011)

R&D Expenditure

-In 2012, the Company plans to spend the equivalent of 8% of its annual sales revenue on R&D activities.

-In 2011, the Company plans to increase its R&D investment by 0.7 percentage point from the previous year to 7.6% of total sales. It will focus on expanding its development centers and engineering low emission technologies, while further expanding business with customers in Asia. The subsidiary will consider expansion of its R&D facilities in Yokohama, Kanagawa Prefecture and Higashimatsuyama, Saitama Prefecture, which are rather running out of space. (From an article in the Nikkan Jidosha Shimbun on July 15, 2011)

R&D Structures

Increase the number of personnel involved in the development of driver assistance systems by 50% its current level in 2014
-The Company will increase the number of personnel involved in the development of driver assistance systems by 50% its current level in 2014. This is in reaction to brisk demand from Japanese automakers for automated braking systems and lane departure warning systems. Demand for engineers specializing in control technologies has been increasing especially in foreign suppliers. Another reason for this move relates to road conditions specific to Japan, where there are more tunnels and narrower roads than in Europe and the U.S. Also, there are many signs with characters and roads with no pedestrians and bicycle lanes. For these reasons, it is necessary to change driver assistance systems developed in Europe significantly for road conditions in Japan. Bosch will increase personnel through internal transfers to reduce the reliance on recruitment from outside the company. The number of personnel working on driver assist systems will have increased threefold from 2001, when the Company first put a collision detection system into practical application. Development of lane departure systems, pedestrian detection systems and sign detection systems will require additional processes to be suitable for the Japanese market. (From an article in the Nikkan Jidosha Shimbun on October 30, 2013)

-In 2011, the Company had 1,300 persons engaged in R&D activities. It has seven R&D facilities; and two proving grounds, one in Memanbetsu and the other in Shiobara. All of these locations work in close collaboration with the other R&D Centers within the Bosch Group.

R&D Facilities

-In November 2010, the Company has announced the completion of the vehicle proving ground enlargement at the Bosch Technical Center Memanbetsu (TCM) in Hokkaido, Japan. With an investment of 3.1 billion yen, the proving ground was extended to 63 hectares – thereby doubling its size. Since its opening in 1992 the total investment in the TCM amounts to 8.3 billion yen. The enlarged test course is now equipped with a dynamic driving area which is counting a diameter of 300m, an 800 m long 4-lane straight track, and a new emergency escape area. The Company will additionally invest one billion yen in order to build up a handling course and an oval circuit until 2013. The Company has also completed the expansion of the Yokohama development center in June 2010 with an investment of 4.3 billion yen, strengthening Japan as Bosch's largest R&D base for vehicle safety outside of Germany. (From a press release on November 16, 2010)

-In June 2010, the Company announced the official opening of its expanded research and development center in Yokohama, Kanagawa Prefecture. The facility functions as a development hub for safety devices such as brake systems as well as powertrain systems including electric drive units. With the aim of offering enhanced safety devices and more advanced environmentally friendly technology required of Japanese automakers, the Company invested 4.3 billion yen to expand the facility including doubling of the total floor space to 21,000 square meters. The number of associates working at the development base has also been increased to 1,000, about twice that in 2007. As a result of the expansion, the Yokohama facility has now become the Bosch Group's largest R&D center for active safety systems outside Germany.(From an article in the Nikkan Jidosha Shimbun on June. 16, 2010)

Capital Investment

-In 2010, the Company announced to plan to invest approximately 12 billion yen in FY ending Dec., 2010, which is triple the amount it spent in 2009. In 2009, the Company largely reduced the investment amount in order to decrease the loss due to the financial crisis. The Company will bring the level back to normal and use it for the purchase of a plant site in Thailand and R&D reinforcement. This year's sales are expected to recover only to 70% of its peak year, 2007. The Company, however, aims to ensure its competitive edge by boosting investment in production and development while anticipating the mid-term growth of the Asian new car market as well as low-priced cars for emerging nations. (From an article in the Nikkan Jidosha Shimbun on Jan. 7, 2010)

Investment Activities in Japan

-In 2010, the Company will reorganize its operations for producing electronic stability control (ESC) systems with the aim of increasing its supply capacity and enhancing cost efficiency, as installation of the safety system will soon be made mandatory in Japan. The Group will transfer from its plant in Germany automated production equipment used for assembling ESC units to its Tochigi Plant in Tochigi Prefecture, Japan. At the same time, it will integrate production of automotive electronic components for the Asian market into its China plant, positioning the Chinese facility as the supply hub for Asia. Following these changes, the Company is going to close down its Tomioka Plant in Gunma Prefecture around 2014. Enhancing its ESC supply capabilities in Japan, the Company intends to absorb new needs of the growing market. (From an article in the Nikkan Jidosha Shimbun on December 16, 2010)

Data

Number of Employees