Yutaka Giken Co., Ltd. Business Report FY2006

Business Highlights

Financial overview ( in millions of JPY )
  FY2006 FY2005 R. C. (%)
Overall
Sales 199,177 180,713 10.2
Operating income 8,237 7,403 11.3
Ordinary income 9,110 8,116 12.2
Net income 5,504 5,731 (4.0)
Automotive components division
Sales 174,530 153,145 14.0
Operating income 6,982 5,979 16.8
( R.C. : Rate of Change) Highlights by Geographical Region

Japan
- In May 2006, the Company transferred brake system production lines from the Yutaka Plant in Shizuoka Prefecture to the Arashiyama Plant in Saitama Prefecture. After the transfer, the Yutaka Plant now specializes in the production of driveline products. The purpose of this move is to enhance logistics and overall operational efficiency.

- The Company is preparing to start commercial production at the Mie factory, which was finished being constructed in February 2007. The Company has positioned the new facility as its hub to supply exhaust systems for Honda's Suzuka Factory. After the new plant becomes fully operational, the Suzuka Plant of Yutaka Giken will be shut down.

>>>See Capital Investment for more details

North America
- In December 2006, the Company announced that it will establish a new production facility in Alabama, U.S.A. This new facility, which will become the Group's third plant in the U.S., is scheduled to become operational in April, 2008.

>>>See Capital Investment for more details

Brazil
- Yutaka do Brazil Ltda. launched preparations for starting production in August 2008.

>>>See Capital Investment for more details

China
- Wuhan Jin Feng Auto Parts Co., Ltd., the Company's production subsidiary for automotive exhaust systems, opened its new plant in March 2007.

- Foshan Yutaka Auto Parts Co., Ltd., the Company's production subsidiary for automotive driveline system products, opened its new plant in March 2007.

Thailand
- In August 2008, YS Tech (Thailand) Co., Ltd. launched commercial operations of a new press machine, which completed the Company's project to establish a seamless production structure for automotive torque converters. The Thai facility also began manufacturing automotive exhaust system products.

India
- In August 2006, the Company made Yutaka Autoparts Pune Ltd. its wholly owned subsidiary in order to increase business efficiency.

- In March 2007, the Company established a new plant in Delhi, which became its second manufacturing subsidiary in India.

>>>See Capital Investment for more details

R&D

R&D Expenditure ( in millions of JPY )
FY2006 FY2005 FY2005
Group 2,295 1,853 1,558
Automotive Parts 2,250 1,800 1,501

R&D structure
- In October 2006, the Company transferred its operations formerly conducted at the Hamamatsu Technology Research Center to Sakurai City, Tochigi Prefecture, and consolidated the functions with the existing Tochigi Technology Research Center. The facility was renamed Tochigi Development Center, and handles the Company's core R&D activities together with the Production Technology Office.

The additional investment in testing equipment, originally scheduled for the next fiscal year at its Tochigi engineering laboratories, will be moved up to the current fiscal year. The Company will establish operations capable of developing growth-expected automotive parts for new models in series, ahead of the original schedule, and will shorten the development period. Its Tochigi R&D Center has been established to strengthen its development functions by combining development of exhaust systems at the Tochigi engineering laboratories and drive-train systems at the Hamamatsu engineering laboratories. It plans to raise efficiency in development operations such as the testing process for automotive parts for new models to be launched next year. Facilities including endurance test systems for both drive-train and exhaust system parts will be enhanced and the beneficial effects will be expanded to the Company's overseas operations, in an aim to shorten the development-to-production period. (From an article in the Nikkan Jidosha Shimbun on Nov. 17, 2006)

<Automotive Parts Division>

Details of its main R&D Activities
Exhaust-related parts The Development Section No. 1 and the Production Technology Office focused on further advancement of eco-friendly technologies, like improving the cleaning of exhaust gases, fuel-efficiency and reducing noise, etc. Developed production technology and carried out R&D on exhaust systems, which improved both its product competitiveness and productivity.
Power train-related parts The Development Section No. 2 and the Production Technology Office focused on R & D and production technology development in further efforts to reduce the size and weight of parts and improve fuel-efficiency, etc, which improved both its product competitiveness and productivity.

Major Achievements in FY2006

Exhaust-related parts - The Company developed a seamless production structure to supply complete exhaust systems, from exhaust manifolds to silencers, for the Honda CR-V. The complete exhaust systems are designed to improve engine performance, and also have weight and cost saving features. The Company conducts mass production of these products at its five plants worldwide: the Arashiyama Plant; Cardington Yutaka Technologies Inc. in the U.S.; UYS Limited in the U.K.; YS Tech (Thailand) Co., Ltd. in Thailand; and Wuhan Jin Feng Auto Parts Co., Ltd. in China. Noise absorbing chambers used in the exhaust system are manufactured in-house at the Company's plant in Japan, the U.S., and China using an efficient production method.
- The Company's U.S. subsidiary developed and started mass production of catalyst converters for the MD-X marketed exclusively in North America.
- The Company's U.K. subsidiary developed and started mass production of silencers for the Civic R-series.
Power train-related parts - The Company developed and started mass production of ultra flat torque converters with compact and high-performance lockup clutches for the new Honda Stream. Designed as part of of the Company's project to revamp its production structure, these converters can be mass produced on automated lines, enhancing productivity. Incorporating the same concept, the Company also developed torque converters for the new Honda Civic built in Thailand. Commercial production of these converters are handled at YS Tech (Thailand) Co., Ltd.
- For high-power V6 engines for the new Honda Acura and MD-X marketed in the U.S., the Company developed and began mass production of ultra flat torque converters with lockup technology.
- For the new Honda CR-V, the Company developed compact and high-quality ultra flat torque converters with lockup clutches. Mass production of these torque converters was launched simultaneously in Japan, the U.S. at Cardington Yutaka Technologies Inc.; Thailand at YS Tech (Thailand) Co., Ltd.; and China at Foshan Yutaka Auto Parts Co., Ltd.
- For the new Honda Acura RD-X turbo engines assembled in the U.S., the Company developed ultra flat torque converters with lockup technology. Mass production of these torque converters is handled at the Company's plant in the U.S.

Investment Activities

Investment Expenditure ( in millions of JPY )
FY2006 FY2005 FY2004
Group 12,941 8,834 7,611
Automotive Parts 12,613 8,096 6,906
Automotive Parts Division
The Group's automotive parts division will focus its investment activities on Yutaka Giken Co., Ltd. and Cardington Yutaka Technologies Inc. for the purpose of revamping equipment to increase production capacity; preparing production lines for new models; and streamlining operations to reduce costs.

Domestic Investments
The Company will build a new plant in Tsu, Mie Prefecture while closing its Suzuka plant. The new plant, which is scheduled to begin operating in April 2007, will produce exhaust-related parts for Honda Motor Co., Ltd. The total investment in the new plant amounts to approximately 3 billion yen and it will initially employ about 240 people. (From a press release by the company on Apr. 27, 2006)

Overseas Investments
- Brazil
YUTAKA DO BRAZIL LTDA, a subsidiary of the Company, will build a new plant in the suburbs of Sao Paulo, Brazil. The new plant, which is due to begin its operations in August 2008, will produce and sell exhaust-related parts in Brazil where the automotive market is rapidly growing in recent years. (From a press release by the company on Oct. 25, 2006)

- India
The Company will set up a wholly-owned subsidiary in the suburbs of Delhi, as its second production base in India, where it will produce and sell exhaust-related automobile parts as well as motorcycle brake discs in order to cater to a growing Indian auto market and to further boost its market competitiveness. It is capitalized at 250 million INR with approximately 100 employees. (From a press release by the company on Oct. 25, 2006)

- USA
The Company announced it will establish a new company in Cullman, Alabama, the 3rd facility in North America, as a production company wholly owned by its subsidiary, Cardington Yutaka Technologies Inc. The new company, Alabama Cullman Yutaka Technologies, Limited Liability Company (ACYT), will be capitalized at 15 million USD (approximately 1.7 billion yen). The total investment amounts to 47 million USD (approximately 5.7 billion yen) . The new company is scheduled to start its operations in April 2008, which will manufacture and sell torque converters and exhaust-related parts for customers in Alabama. (From a press release by the company on Dec. 25, 2006)

New Facilities
Name
Name of the business
(Location)
Type
of
facility
Planned amount of investment
(million JPY)
Start Planned
completion
Planned amount of increase in capacity
Yutaka Giken Co., Ltd.,
-Head Office
-YutakaPlant
(Shizuoka Pref., Japan)
Manufacturing facilities for automobile parts etc., R&D facilities and other facilities 1,714 May.
2006
Mar.
2008
A slight increase

-Takaoka Plant
(Shizuoka Pref., Japan)
Manufacturing facilities for automobile parts etc. 206 Dec.
2006
Mar.
2008
A slight increase
-Mie Plant
(Mie Pref., Japan)
Manufacturing facilities for automobile parts etc. 1,984 Nov.
2006
Mar.
2008
A slight increase

-Ranzan Plant
(Saitama Pref., Japan)
Manufacturing facilities for automobile parts etc. 1,083 Sep.
2006
Mar.
2008
A slight increase

-Tochigi R&D Center
(Tochigi Pref., Japan)
R&D facilities 327 Jan.
2007
Mar.
2008
A slight increase
Sumirex
(Shizuoka Pref., Japan)
Manufacturing facilities for automobile parts etc. 100 Apr.
2007
Mar.
2008
-
Cardington Yutaka Technologies Inc.
(Ohio, USA)
Manufacturing facilities for automobile parts etc. 2,189 Dec.
2006
Mar.
2008
A slight increase
South Carolina Yutaka Technologies Inc.
(South Carolina, USA)
Manufacturing facilities for automobile parts etc. 722 Aug.
2006
Mar.
2008
A slight increase
UYS Limited
(Oxford, UK)
Manufacturing facilities for automobile parts etc. 500 Apr.
2007
Mar.
2008
A slight increase