Financial overview

(in millions of JPY)

	FY2006	FY2005	R.C.(%)	Factors
Overall
Sales	145,702	57,994	151.2	- Sales increased year-on-year, as a result of the addition of Techno-Metal Co., Ltd. and Metaldyne Corporation to the Company's consolidate financial statements. (The Company acquired these two companies in fiscal year 2006.)
Operating income	3,276	2,013	62.7	-Profit and loss results at Techno Metal and Metaldyne were added to the Company's consolidated financial statements.     - The Company posted an ordinary loss due to having posted goodwill amortization costs for  acquiring Metaldyne Corporation.
Ordinary income	(162)	1,447	-
Net income	(665)	(282)	-	- The Company posted a larger net loss compared to what it was last year due to an extraordinary loss to cover an environmental allowance reserve, and drawbacks of corporate tax based on the calculation of deferred tax assets.
Parts Business Segment
Sales	136,941	50,081	173.4	- Sales at the parts business segment significantly increased year-on-year, partly because Techno Metal Co., Ltd. and Metaldyne Corporation were added to the consolidated financial statements. Sales were supported also by strong sales in Thailand, where demand for auto parts continued to be high.
Operating income	3,651	2,593	40.8	- Operating income went up year-on-year, supported by greater sales, improved profitability, and reduced procurement costs.

( R.C. : Rate of Change )

Acquisitions
- The Company acquired Metaldyne Corporation on January 11, 2007, making it its wholly owned subsidiary. Following are some of the benefits expected from the acquisition:
The ability:

1.	To strengthen its presence in the North American market, and expand its customer base in Europe, China, Korea, India, and Brazil by leveraging the sales network of Metaldyne.
2.	To introduce Metaldyne's management know-how.
3.	To reinforce ties with major automakers in North America, Europe, and Asia; and to enhance its product lineup.
4.	To share cutting-edge technology on powertrain and chassis products including power metallurgy products, hyper ductile products, high vacuum HDPC, and magnesium diecasting.   To make full use of each company's engineering capabilities in order to launch high value-added products such as high-performance suspension systems.
5.	To improve its research and development capability.
6.	To improve production capacity especially in the areas of aluminum casting, ductile casting, sintered metal, and precision machinery.
7.	To reduce costs through jointly procuring materials, parts, dies and services, enjoying the benefit of volume purchasing.
8.	To maximize the use of each company's production equipment by sharing them.
9.	To expand business opportunities for Metaldynes's light-duty vehicle business and heavy-duty vehicle segment.

Business plan 
The Company announced initiatives to expedite the integration of its Metaldyne subsidiary, consolidate the corporate management structure and reduce operating costs. The Company expects these actions, along with the recent announcement of plant closings and executive retirements, to result in a net savings of more than $10 million in fiscal 2007. The Company will continue to focus on balancing assets with the changing global market opportunities and the Company's expanding Asian businesses. This consolidation of corporate functions comes just 10 weeks after the merger was completed in early January 2007. The Company also completed a successful equity issuance in early March 2007 whereby new investors from Southeast Asia and Europe contributed more than $70 million of new equity. This equity round was the second part of a planned three-phase restructuring of the Company/Metaldyne capital structure which included the initial merger transaction, the equity issuance and a contemplated debt refinancing of the combined companies. (From a press release on Mar. 27, 2007)

R&D Expenditure

(in millions of JPY)

	FY2006	FY2005	FY2004
Group	998	537	701
% of Sales	0.7%	0.9%	1.2%
Parts Business	876	400	512

R&D Structure
The Company has 158 R&D engineers as of March 2007.


Recent developments (parts business)

Product	Development Topics
Magnesium die casting	The Company already launched mass-production of large magnesium die casting products mainly for passenger vehicles. Preparations are being made to start commercial production of products for new models. The Companyis making further advances, from prototype production up to trial production, on each item it is developing .
Aluminum casting and forging	The Company focuses on developing new casting technology to manufacture dies for aluminum die casting.
High-vacuum die casting	The Company, which manufactures integrated frames for motorcycle by using high-vacuum die casting technology, won new business to supply these frames for passenger vehicles. After finalizing the design of the frames, the Company intends to start preparation work for mass-production.
Internal smoothing technology	The Company already introduced technology that smoothens the interiors of intake manifolds for passenger vehicles, and cylinder heads for motorcycles. Having won additional new large contracts, the Company is working on applying this technology to new areas.
Iron casting	In the area of iron casting, the Company launched mass-production of high-strength hyper ductile components for trucks. It is working on developing parts made of hyper ductile materials for passenger vehicles, too.
Powertrain chassis	Metaldylne Corporation is developing frame desig techniques and technology to make light-weight powertrain chassis, aiming to achieve more advanced casting technology.

Information of new products exhibited at JSAE 2006

<Exhibition Highlights> The exhibit was focused on technologies for reducing weight of components. Advanced Cast Technology for Vacuum Die-Cast (ACTIV-VD) Technology to cast metal into a die under the vacuum condition. >>>Technical Information <Applications for mass production> Components of rear fender brackets for motorcycles have been converted from aluminum welded parts to a unitized structure component. While the number of parts has been  reduced by 60 to 70%, required rigidity is maintained, and functionality has been improved by the unitary construction, as well. The new process was adopted by the U.S. model of Yamaha FJR1300, which has been recording zero gas defect since March 2006. The Company is going to approach automakers for touting this technology in the future. >>> YAMAHA FJR1300

Investment Expenditure

(in millions of JPY)

-	FY2006	FY2005	FY2004
Group	184,174	4,555	3,622
Parts Business	184,099	3,547	3,414

Investment focus of the parts business was on renewing and maintaining equipment to enhance production efficiency for general auto parts. Following the acquisition of Metaldyne Corporation during fiscal 2006, Metaldyne's tangible and intangible fixed assets of 173,501 million yuan (as of January 11) are included as expenditures in the parts business.

The Company began examining a plan to expand its production facilities in Thailand to increase manufacturing capacity. It will also consider adding products currently made by its subsidiary, Techno-Metal Co., Ltd., to the product lineup for the Thai plant. In view of active production by Japanese automakers that are operating in Thailand as well as the fact that the capacity at the Thai plant has reached its limit, the Company will reinforce manufacturing capacity while expanding the product lineup of the plant. (From an article in the Nikkan Jidosha Shimbun on Oct. 20, 2006)

New facilities

( in millions of JPY )

Name (location)	Type of facility	Planned total investment (million JPY)	Start	End	Planned amount of increase in capacity
Toyokawa Plant (Aichi, Japan)	Renewing a cupola heat exchanger	278	Nov. 2006	Dec. 2007	-
Hoei Industrial Co., Ltd. (Mie, Japan)	Renewing a stamping machine on the casting line.	497	Oct. 2006	Feb. 2008	-
Techno-Metal Co., Ltd. Nihonmatsu Plant (Fukushima, Japan)	Facilities to manufacture turbine housing	889	Apr. 2007	May. 2008	-
Asahi Tec Metals (Thailand) Co., Ltd. (Chonburi, Thailand	Facilities to manufacture turbine housing	3,229	Apr. 2007	May. 2008	300 ton/month
Metaldyne (Suzhou) Automotive Components Co., Ltd. (Jiangsu, China)	Facilities to manufacture chassis components and powertrain products	938	Apr. 2007	Dec. 2007	-
Metaldyne Sintered Components Mexico, S. de R.L.de C.V. (Coahuila, Mexico)	Facilities to manufacture powertrain products	783	Jan. 2007	Dec. 2007	-
Metaldyne International Spain, S.L. (Catalonia, Spain)	Facilities to manufacture chassis components	646	Apr. 2007	Apr. 2008	-