U-SHIN LTD Business report FY2008

Business Highlights

Financial Overview (in millions of JPY)
FY2008 FY2007 Rate of Change (%) Factors
Sales 78,842 74,773 5.4 -Sales increased at all business divisions.
4,766 2,388 99.5 -Sales increased year-on-year, because prices of zinc and other materials fell after the company adjusted its product prices to cope with previously elevated materials prices.
Ordinary profit 3,909 2,336 67.3 -
Net profit 1,331 (137) - -
Automotive Components Division
Sales 55,863 53,083 5.2 -Sales were favorable in the first half of the year, as the Company won a number of contract awards to supply its products to new vehicle models.

-Sales were also strong overseas especially at U-Shin Manufacturing (Zhongshan) Co., Ltd., which achieved a 21.8 percent increase; U-Shin (Thailand) Co.,Ltd., which marked a 13.4 percent increase; and U-Shin Europe Ltd. in Hungary, which recorded a 12.3 percent rise, in revenues.
2,457 512 379.8 -

Major supply awards the Company won in FY2008:

-Key sets:
In line with the expansion of Mazda-Ford global car project to use common parts in their vehicles, the Company won increased business in Japan, China, and Europe.

-Mechanical heater control units:
The Company launched the Honda Life project. The Company supplies the majority of heater control units used in Honda models.

-Heater control panels, Key sets:
The company won from Suzuki Motor contracts to supply heater control panels and key sets for the A-star 1-liter model to be marketed in India. Mass production is scheduled to begin at its Manesar Plant in early 2009.

-Door latches:
The Company won additional contracts to supply its new door latches designed for Mazda models to several new vehicles models, which resulted in increased production volume. Sales increased thanks also to favorable sales of Suzuki's global vehicles, in which the Company's products are used. The Company, whicn now produces door latches in Japan, China, and Hungary, plans to set up a new production facility in Thailand. It has already acquired the land to do so. (Ref. Investment)

The Company won a supply award from MAN of Germany.

-Steering lock bodies:
The Group, which had been producing magnesium alloy components solely in Japan, also began manufacturing these products at U-Shin Europe in Hungary. Shipment of steering lock bodies for Ford models developed jointly by Mazda and Ford already began.

-Smart lock systems with electric steering locks:
The Company won a number of supply awards from Japanese automakers. Models which use these lock systems include Honda's luxury sedans sold in North America and Mazda's new Axela released in 2008.

Future Challenges
(1) To achieve its medium term business plan:
-Based on its amended medium term business plan, the Company projects its rates of sales increases will temporarily decline due to a revitalization project carried out at Yushin U.S.A. Ltd. (Ortech). Thanks to favorable demand from its customers, however, it expects to maintain growth in the medium run.

-The Company expects to achieve profitability at each of its new facilities overseas, as they have begun full-scale operations to recoup their initial investments.

-Over the medium term, the Company targets an operating profit of more than 5 percent based on its projection that its sales will continue to grow steadily.

Medium-term business plan (revised) - Consolidated basis (in millions of JPY)
FY2006 FY2007 FY2008 FY2009 FY2010
Sales 700 680 766 850 901
Ordinary profit 14 18 37 42 45
Ordinary Income to Net Sales(%) 2.0 2.6 4.8 4.9 5.09

(2) To strengthen its production structure as a global supplier and expand its business overseas:
-The Company has increased its market share through supplying its three core products, namely, keysets, latches, and mechanical heater control panels, to vehicles marketed on a global basis. The Company projects that business might start to slow down because carmakers are likely to have completed the first stage of the development of these strategic vehicles. In order to win new business and further improve its profitability, it will focus its development activities on electric steering locks, smart lock systems, and automatic heater control panels, positioning these next-generation products as its new core technologies.

Overseas Business Strategies
(1) Based on a contract it won from a new customer in India, the Company will start supplying its products produced in China and Thailand to this new customer, further expanding its operations overseas.
(2) The Company, which operates a magnesium casting facility in Europe, will strengthen its marketing activities targeting European companies.
(3) The Company aims to attract new customers by leveraging the value of its products with high cost efficiencies.
(4) The Company will reinforce its technical capability in the area of electronics products, into which it will incorporate mechanical technology, its field of expertise, in order to increase the value of its products.
(5) The Company aims to win direct businesses with European and U.S. carmakers.

Current status and issues at each production facilities
Facility Status and Issues
US factory
Yuhshin U.S.A. Ltd. (Ortech)
-As a result of a rehabilitation project, this subsidiary restored profitability on a full-year basis. The facility, however, will downsize the level of its production volume by closing down its production lines making unprofitable products. The U.S. subsidiary will thereby shift to supplying also products made at U-shin (Thailand) and U-Shin Manufacturing (Zhongshan) in China, plants that achieve higher cost efficiency.
Hungary factory
U-Shin Europe Kft.
-This subsidiary has won increased business through global strategic vehicle projects carried out by Mazda and Ford; and also by Suzuki, GM, Fiat, as they are all using common parts in their cars. With production lines at these customers already running at full capacity, the Group expects the growth rate in sales will start to decline in the future.
-The Group, which currently makes magnesium casting products solely in Japan, decided to install new lines at this Hungarian facility to manufacture these products. In addition, the the subsidiary will supply steering lock bodies to vehicles sold under the Ford name, based on a global vehicle project being conducted by Mazda and Ford.
Chinese (First) factory
U-Shin Manufacturing (Zhongshan) Co., Ltd.
-This subsidiary mainly manufactures products destined for export to Japan and other countries.
-Thanks to the expanding automotive market in China, the subsidiary has won increased contracts from local automakers too.
-The percentage of sales in China is expected to increase to 31 percent from the current 18 percent.
-This facility has reached full-scale production, thanks to growing business from its customers. It is expected to start operating in the black soon, after having operated in the red.
Thai factory
U-Shin (Thailand) Co., Ltd.
-As a supply hub for heater control panels, this subsidiary is winning increased business.
-The subsidiary expects its monthly production volume to reach 210,000 units in the next fiscal year, which will be enough volume to cover exports both to Japan and ASEAN countries.
-Having positioned this facility as the supply hub for ASEAN countries, the Group will consider expanding the plant.
-The subsidiary is expected to become profitable in fiscal 2008, thanks to greater sales of high-profit products sold directly to its customers
-This facility has reached full-scale production, thanks to increased orders from its customers.


R&D Expenditure (in millions of JPY)
FY2008 FY2007 FY2006
R&D expenses (million yen) 1,591 1,481 1,880
Ratio to sales (%) 2.0% 2.0 2.7

R&D Structure

-Leveraging its proprietary technology it originally intended for automotive components, the Company is also conducting studies to apply such technology in the area of industrial machinery and housing equipment.

-The Company will integrate production and R&D divisions in Europe. U-Shin Deutschland GmbH in Dusseldorf, an R&D center in Germany, will be closed during the fiscal year that will end in November 2007 and sales personnel and engineers there will be consolidated to Hungary. After the closure of U-Shin Deutschland, application engineering will be handled in Hungary, to strengthen cooperation between design and production divisions while reducing management cost. (From an article in the Nikkan Jidosha Shimbunon Sep. 7, 2007)

New Product Development (Automotive Components Division)
Electric steering lock systems
-The Company released a new steering lock system in fiscal year 2008 and has already started supplying the product to three companies. New development projects are under way, including those based on supply awards and those offered for new applications.

Heater control units
-The Company is winning increased business as demand for mechanical heater control units rises in accordance with the auto industry's shifting to smaller vehicles. The Company is also making further efforts to develop and introduce more advanced technologies.

Door latches
-The Company is promoting its door latch system, which includes a door handle, as a comprehensive door opening and shutting system including a door handle. It is designed to offer quiet opening and shutting and to be a lightweight and low-cost unit.

Technologies Provided (As of Nov. 2008)
To Country Contents Period of Contract
ELITECH Technology Co., Ltd. Taiwan Consent to execute industrial property rights and know-how related to automotive key sets. June 13, 2003 to
end of production and sales
Magna Donnelly Corporation USA Manufacturing technology and information related to exterior handles for automobiles. Feb. 1, 2002 to
end of production and sales
San Long Industrial Co., Ltd. Taiwan Manufacturing technology and information related to outer handles for automobiles. Oct. 31, 2003 to
end of production and sales
San Long Industrial Co., Ltd. Taiwan Manufacturing technology and information related to outer handles and inner handles for automobiles. Feb.1, 2005 to
end of production and sales
Xinchang Machinery Co., Ltd. Taiwan Manufacturing technology and information related to latch for automobiles. Jun. 30, 2006 to
end of production and sales

Investment Activities

Capital Expenditure (in millions of JPY)
FY2008 FY2007 FY2006
Automotive Components Div. 2,861 4,925 5,145
Total 3,065 5,402 5,381

-The Automotive Components Division focused its investment activities on installing new production equipment including dies and machinery.

Overseas Investments
-In 2008, the Company announced a second plant project in Thailand to to manufacture products including heater control panels and door latches. The planned new facility was planned to be completed by 2010 to support Suzuki Motor's local facility building the Swift, as well as AutoAlliance (Thailand) Co., Ltd. , which is a Mazda-Ford joint-venture unit, and Honda Motor's local plant. However, the Company postponed this project in December 2008, saying it would allocate the 1.8 billion yen project budget from fiscal year 2010 onward.

New investment plan (Automotive Components Division)
Name of Company/Plant Location Equipment Estimated amount of Investment
(in million yen)
Project Period
From To
Technical Center Aki-gun, Hiroshima Pref. Testing equipment for R&D divisions 107 Nov. 2008 Jun. 2009
Hiroshima Production Aki-gun, Hiroshima Pref. Dies and assembly lines to handle model changes; Machining equipment 1,065 Nov. 2008 Jan. 2010
Hamamatsu Production Hamamatsu City,
Shizuoka Pref.
Dies and assembly lines to handle model changes; Machining equipment 127 Nov. 2008 Jan. 2010
Yamato Seiko Co., Ltd. Kure City, Hiroshima Pref. Dies and assembly lines to handle model changes; machining equipment 330 Nov. 2008 Nov. 2009
U-Shin Manufacturing (Zhongshan) CO., LTD. Guangdong, China Dies and assembly lines to handle model changes; machining equipment 315 Nov. 2008 Nov. 2008
U-Shin Europe LTD. Kisber, Hungary Dies and assembly lines to handle model changes; machining equipment 87 Nov. 2008 Nov. 2009
Total - - 2,767 - -