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5. JTEKT Corporation Business Report FY ended Mar. 2016

JTEKT Corporation Business Report FY ended Mar. 2016

Business trend

-The Company has started establishing a long-term strategy that will give direction for its technological advancement and product development 15 years into the future. As the long-term strategy is a rolling plan, the Company will take the latest trends and developments into consideration as they make updates on a yearly basis. With anticipated developments such as the change to autonomous vehicles, and further environmental performance enhancements, it is highly likely that the scope of technological expansion and innovation will accelerate for automotive manufacture. The Company will utilize its strategy, to efficiently research technology and develop new products, with a long-term perspective that aims to develop manufacturing capability exceeding that of its competitors. (From an article in the Nikkan Jidosha Shimbun on January 19, 2016)

- The Company announced that its new plant in Mexico has started its operations. The new plant produces and delivers electric power steering units to Mexico and the U.S. This is the Company's first plant in Mexico. The Company will increase the plant's annual production volume up to 900,000 units in phases by the end of 2016. The Company's new plant in Thailand has also started production of cross joints and shell bearings for intermediate steering shafts. The Thai plant can produce 4 million units of shell bearings and 1 million cross joints per month. The actual production will be raised to these levels by the end of 2016. The two plants will allow the Company to accelerate its strategy to expand its supply capacity and product portfolio outside Japan. (From an article in the Nikkan Jidosha Shimbun on September 30, 2015)

Organizational restructuring

-From April 1, 2016, Automotive parts division divided into steering and driveline, started "Steering division" and "Driveline division". It is an aim to bring up driveline business as one pillar of the business.

Contracts

-The Company's Electric Power Steering (EPS) was adopted to compact SUV "Huansu S6" which was made by BAIC Yinxiang in November 2015.

Revised Mid-term Management Plan (Mid-term Plan FY 2016)

Feed back from actual results FY ended March 2016
-Converted by the market exchange rate, both net sales and operating income renewed the past best.
-When an exchange rate is fixed (95 JPY/USD, 130 JPY/USD), operating income will hit the ceiling in FY ending March 2017.
-Operating margin target is adjusted from 7.5% of first plan to 6.4% for FY ending March 2019. The Company set operating margin target of 7.2% for FY ending March 2021.

Targets of the original mid-term management plan

-Anticipating fall in both sales and profits by the increase of R&D Expenditure for ADAS and IoE as well as influence of the exchange rate fluctuation (higher JPY) .

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D Facilities

R&D Activity

-The Japanese Ministry of Economy, Trade and Industry (METI) and the Ministry of Internal Affairs and Communications (MIC) held a plenary meeting to establish an IoT (Internet of Things) promotion consortium toward the proliferation of IoT technologies in the society. At the plenary meeting, METI and MIC formally inaugurated the promotion consortium. The IoT consortium aims to promote utilization of IoT technologies and other innovative technologies associated with big data and artificial intelligence across companies and industries. Companies and groups that will participate in the consortium include Toyota Motor Corporation, Nissan Motor Co., Ltd., Mitsubishi Motors Corporation, Fuji Heavy Industries and other Japanese automakers, and JTEKT Corporation, Bridgestone Corporation, Yazaki Corporation and other Japanese parts suppliers. By the end of this month, METI and MIC will establish new organizations to promote their respective working groups (WGs) to be launched within the ministries and start devising concrete steps. (From an article in the Nikkan Jidosha Shimbun on October 26, 2015)

Product Development

Steering Systems Division
-The Company completed development of a rack-parallel type electric power steering (RP-EPS), which offers excellent steering performances due to a structure that directly transmits steering torque through a ball bearing. It will put on the market by March 2017.

-The Company is conducting R&D activities to increase the output of dual-pinion electric power steering (DP DPS) systems so as to further expand their applications.

Driveline Division
-In November 2015, the Company announced that the Company has started the development of a new drive unit for all-wheel drive (AWD) vehicles. It is a stand-by unit that switches into AWD from 2WD when necessary. In a 2WD mode, the unit can drive the car without operating propeller shafts. Present drive unit operates propeller shafts in a 2WD mode. The Company says the new drive unit will enhance fuel efficiency. (From an article in the Nikkan Jidosha Shimbun on November 2, 2015)

-The Company promoted new type constant velocity joint and a third-generation Intelligent Torque Controlled Coupling (ITCC) in North America during FY March 2016. These were completed development and deployed in Japan in FY ended March 2014.

Bearing Division
-The Company has developed a next-generation super low-friction torque tapered roller bearing, the LFT-IV. The Company aims to start mass producing the bearings in 2018. Tapered roller bearings are used for transmission and differential gears lubricated with oil. The Company analyzed oil flows and successfully optimized the shape of the retainer of the new bearing. The bearing achieves an up to 50% reduction in friction loss compared with a conventional bearing. When it is used in a differential unit, the bearing can offer a 2.5% improvement in fuel efficiency. The Company will actively promote the new product to OEMs to receive more orders. (From an article in the Nikkan Jidosha Shimbun on October 27, 2015)

-In FY ended Mar. 2016, the Company completed the development of "Anti-creep bearing" which improved creep- resistant performance without enlarging bearing size than conventional products as a bearing for AT.

-Hub units

• Tapered Hub：Lower torque by 50%
• Ball Hub：Lower torque by 40%
• Development of products for ADAS

-Single ball bearing

• New ceramic ball bearings for motors
• Rolling bearing units for turbochargers：Reduced the power loss of more than 60%

Mechanical Components
-During FY that ended March 2016, the Company invested mainly in facilities and equipment at its global operations.

Investment in Japan

-The Company announced that it has transferred the forging processes for tapered roller bearings from the Company's Kokubu Plant in Osaka Prefecture to its Kagawa Plant in Kagawa Prefecture. The Company has also added another facility at the Kagawa Plant. The project is in line with the reorganization of the Company's bearing production operations in Japan. At the new facility, three forging machines will become operational in stages by October 2017, which is expected to increase the production capacity from current 3.6 million sets to 5.3 million sets. (From a press release on September 23, 2015)

Investment outside Japan

-The Company will increase the production capacity for automotive hub units at its U.S. subsidiary's plant by 70% to 750,000 units per month by December 2015. The Company has expanded the land and buildings at the Richland Plant of its subsidiary, Koyo Bearings North America LLC. The plant will also establish a new production line for high-capacity hub units for passenger cars. The total capital investment will be USD 133 million (JPY 16.3 billion). The Company aims to increase its order intake by expanding its supply capacity in North America, where demand for automobiles is strong. (From an article in the Nikkan Jidosha Shimbun on November 11, 2015)