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5. Yutaka Giken Co., Ltd. Business Report FY ended Mar. 2015

Yutaka Giken Co., Ltd. Business Report FY ended Mar. 2015

*Figures for FY ended March 2014 has been restated according to IFRS.

Business Planning

-Since April 2014, the 12th medium-term plan started. Slogan is "Breakthrough to the next stage".

-FY2020 vision: Continuously develop innovative products and technologies that impress customers

• To offer the world's most competitive products in the area of its core technologies
  
• To develop and produce next-generation products that support a new era of mobility
  
• To demonstrate global leadership in creating the future, with each employee taking the initiative

-The Company will restructure its production system at its plants in Japan between 2015 and 2017, aiming to reduce labor costs and achieve a substantial improvement in production efficiency. The Company will introduce seamless production lines, from material input to assembly, for exhaust system parts and torque converters. The new lines will be significantly automated and will eliminate intermediate stock of parts between lines. The Company will also mechanize inspections with cameras and reduce the manpower required for the overall production lines. Honda, the Company's key customer, has chosen the Company as the sole supplier of mufflers and torque converters for its next-generation mini vehicle series. Competitors are supplying these parts for Honda's current mini vehicle series. The Company has successfully won the parts order because of the Company's efforts to restructure its production system and to cut costs by reducing the number of components. (From an article in the Nikkan Jidosha Shimbun on February 18, 2015)

• During the FY ended March 2016, the Company constructed the most advanced torque converter production line at its Yutaka Plant in Hamamatsu, Shizuoka Prefecture, Japan. The new integrated and synchronized production line almost quadrupled (up 280 %) the production efficiency in terms of the number of units produced by a single worker. The Company plans to introduce this advanced and efficient production system to its each and every plant.

Dissolution of subsidiary

-The Company announced that it will complete the dissolution of its U.S.-based subsidiary, South Carolina Yutaka Technologies Inc. (SCYT), effective June 10, 2014. SCYT had been engaged in manufacturing and selling components for automobiles and motorcycles. The dissolution was announced in April 2012. (From a press release on June 9, 2014)

Contracts

-Honda, the Company's key customer, has chosen the Company as the sole supplier of mufflers and torque converters for its next-generation mini vehicle series. Competitors are supplying these parts for Honda's current mini vehicle series. The Company has successfully won the parts order because of the Company's efforts to restructure its production system and to cut costs by reducing the number of components. (From an article in the Nikkan Jidosha Shimbun on February 18, 2015)

*Figures are IFRS base.

R&D Structure

-Tochigi Development Center and the Production Technology Office mainly promote R&D activities.


Exhaust system
-The Company focuses 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.

Drive system
-The Company focuses 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.


Exhaust system
-The R&D division of Cardington Yutaka Technologies Inc., a consolidated subsidiary of the Company, developed technologies to improve productivity in making high performance exhaust system by engineering advanced gas purification technology, fuel saving technology, and noise absorbing technology.

R&D Activities

Exhaust heat recovery system
-The Company plans to develop and commercialize exhaust heat recovery equipment by FY 2016. Exhaust heat from engines is decreasing as hybrid vehicles and downsized engines are increasing. The Company expects demand growth for the thermal management equipment which is capable of efficient recovery of exhaust heat. It aims to commercialize the product as early as possible and develop it into its primary product of exhaust system products. (From an article in the Nikkan Jidosha Shimbun on April 3, 2014)

-Investment to install production facilities to respond to new models, and streamline operations to reduce costs.


-Investment at Cardington Yutaka Technologies Inc. and Yutaka Technologies de Mexico S.A. de C.V. to manufacture new types of automobile parts and streamline operations.


-In response to the growing Asian market, investment mainly at YS Tech (Thailand) Co., Ltd. and P.T. Yutaka Manufacturing Indonesia to increase production capacity and respond to new models.


-Investment in Foshan Yutaka Auto Parts Co., Ltd. to manufacture automotive parts for new models and increase production capacity.

Investment Outside Japan

-YS Tech (Thailand) Co., Ltd. (Prachin Buri, Thailand) completed a new plant, and partly began its operations in January 2014. The new plant is mass-producing spool valves for Vietnam Denso.


-The Company will reinforce its torque converter production capacity in China. A new production line will be added at its production subsidiary in Foshan, Guangdong Province in order to boost its annual production capacity by 50% from the 2013 level to 760,000 units in 2015. The supplier's customer, Honda Motor Co., Ltd., is currently expanding production in China and other countries. The Company is trying to catching up with the move by reinforcing its local supply volume in China, North America, and Southeast Asia. Besides China, the Company began producing torque converters in Mexico and plans to increase its production capacity in Thailand. (From an article in the Nikkan Jidosha Shimbun on February 25, 2014)