CHUO SPRING CO., LTD. Business Report FY2007

Business Highlights

Financial overview

In million JPY FY2007 FY2006 Rate of Change
Sales 95,912 92,972 3.2 Despite fewer sales of vehicles in Japan and a fall in exports to the U.S.A., sales increased year-on-year, supported by the booming economy in Asia, especially in China.  

<Sales by product>
Suspension springs:
- Although sales of leaf springs decreased year-on-year, overall sales of suspension springs increased 1.8 percent from last year's result, thanks to strong sales of coil springs and stabilizers. 

Precision springs:
- Sales rose 6.6 percent year-on-year, supported by an increase in sales of wire springs and leaf springs.

- Sales went up 5.0 percent year-on-year, thanks to a rise in demand for transmission cables.  
Operating income 1,647 1,379 19.5 - In spite of some negative factors such as greater depreciation costs and adjustments in product selling prices, operating income improved from what it was last year. The rise was the result of greater sales and the Company's streamlining initiatives.  
Ordinary income 1,772 1,881 (5.8) - Ordinary income decreased year-on-year due mainly to losses from exchange-rate translation. 
Current net income 1,511 1,275 18.6 -

Domestic business
- Nagasaki-Chuhatsu Co., Ltd., located in Nagasaki Prefecture, Japan, began operating. 
- The Company established Chuhatsu Techno Co., Ltd. in Aomori Prefecture, Japan in order to strengthen its development, designing, and evaluation activities.

>>>See Investments for more details

Overseas business
In Apr. 2007, the Company announced that it will sell its entire stake in Shanghai Chisca Suspension Components Co,. Ltd., one of its affiliated companies in China, to Shanghai Automotive Co., Ltd. China Spring Factory. The Company., in a bid to integrate its stabilizer business in the Chinese market into Tianjin Zhongxing Automotive Components, which it had established in Tianjin in July 2005, decided to dispose its interest in Shanghai Chisca Suspension Components. The Company, who currently holds a 25% stake in Tianjin Zhongxing Automotive Components Co., Ltd., is expected to dispose all of its shares in April 2007. (From a press release on Apr. 23, 2007)

In May 2007, the Company announced that it will sell all the share it has in TC Spring Ltd.(TCS) located in Maharashtra, India to Tata Autocomp Systems Ltd. (TACO), its local joint venture partner in the business. The Company decided to pull out from the joint project since TCS has been focusing on business with local car manufacturers. The withdrawal will allow the Company to target production facilities of Japanese automakers in the country, strengthening its foothold on its own. TCS was established as a 50-50 joint venture between the Company and TACO in 1999. It manufactures spring products such as coils springs, stabilizers, and torsion bars. The share transaction is valued at 289 million yen, and scheduled to be completed by the end of this month. (From an article in the Nikkan Jidosha Shimbun on May. 29, 2007)

In Feb 2008, the Company announced that it will sell its entire stake in its Turkish subsidiary Rozmas Chuo Otomotiv Yay Sanayi A.S. to Rozmas Metal, its local joint venture partner in the business, for 7 million dollars. Rozmas Chuo Otomotiv Yay Sanayi A.S., a 50-50 joint venture between the Company and Rozmas Metal, manufactures suspension coils and stabilizers for automobiles. (From a press release on Feb. 18, 2008)


R&D expenses were 345 million yen in FY2007.

Main Achievements in FY 2006
Suspension Springs Business
- The Company developed for the first time in Japan a new painting technology, which will significantly improve the reliability of suspension springs in the eyes of the market. Mass production of coil springs using the new technique has already begun.
- Production volume of the Side Action Spring by CHKK (SASC), which is now the Company's flagship product, is largely increasing on a global basis.
- For the purpose of making a thorough assessment of high performance springs and weight-saving technology before launching these springs, the Company is now in the process of preparing a designated test line to make prototypes.

Precision Spring Business  
- The Company has developed heat-resistant springs for use in automotive exhaust systems. These springs are able to withstand higher operating temperatures.  
-The Company is working on developing and launching new high-strength and high-performance valve springs in an effort to meet growing requirements for such springs for use in automotive engines. 
- In order to help protect the environment, the Company is working on expanding its lineup of disc springs manufactured through using a high-frequency, heat-treatment technology, which reduces environmental impact. In the area of heat-resistant springs, the Company is switching to using new materials, which contain lower amounts of rare metals. 
- By leveraging its analysis technology and precision-stamping technology, the Company is engineering a new design for springs so that they can be used in new applications.

Cable Business
- The Company is working on expanding its technology so as to be able to cover studies on basic theories of twisted wires, up to the point to where it is able to develop simulation technology, which will strengthen its capability to develop basic technology and reinforce ties with its customers.
- The Company established Chuhatsu Techno Co., Ltd. in Hachinohe City, Aomori Prefecture. The new facility, which serves as a satellite center for the designing and assessment of cables, allows the Company to streamline operations and shorten development lead time.

Agreements on Licensing Technology (as of March 2008)
Suppliers Country Contents of contract Contract period
Supreme Spring (A Division of Metindustrial (Property) Ltd.) South  Africa Chassis springs for automobiles and railroad cars.   Five years (with provision for automatic extension)
Metex Corporation USA Knitted wire meshes Five years (with provision for automatic extension)
Knitmesh Limited UK Knitted wire meshes Five years (with provision for automatic extension)
Dura Automotives Limited USA Control cables Five years (with provision for automatic extension)
Shanghai Chisca Auto Suspension Components Co., Ltd.  China Stabilizers Five years (with automatic extension)
Mubea Suspension, Inc.  USA Automotive chassis springs Until the project is  terminated 
Tiajin Lizhou Hardware Spring Co., Ltd.
China Valve springs, Torsion bars Five years
TC Springs Ltd.  India Automotive chassis springs  Three years
Rozmas Chuo Otomotiv
Yay Sanayi A.S.  
Turkey Automotive chassis springs Two years 

Investment Activities

Capital investment in FY2008 totaled 5,229 million JPY.

Suspension spring business:   
The focus of the investment activities: 
- building new plants at Nagasaki-Chuhatsu; 
- establishing production lines for making cold-formed coil springs; and 
- increasing production capacity and efficiency to manufacture hot-formed coil springs and cold-formed coil springs. 

Precision spring business: 
The Company invested mainly to increase both its production capacity and efficiency in making valve springs and spiral springs. 

Cable business:
The focus of the investment activities:
- constructing an additional plant at Kunshan Chuhatsu Lioho Machinery Co., Ltd.; 
- preparing production lines to make new products; and 
- improving the efficiency and product quality on its existing lines.  

New facilities in FY2007 and refurbishment plans (As of March 2008)
Company name Category Facility plan Planned budget Construction start and completion
Chuo Spring Building Manufacturing plant for chassis springs 1,150 Aug. 2007 - Mar. 2009
Machinery Manufacturing facilities for precision springs 354 Sept. 2007 - Mar. 2009
Machinery Manufacturing facilities for cables 47 Apr. 2008 - Mar. 2009
Industrial tools Dies and jigs 65 Apr. 2008 - Mar. 2009