Bridgestone Business report FY2006

Business Highlights

Financial Overview
in million JPY FY2006 FY2005 Rate of change (%)
Sales 2,991,275 2,691,375 +11.1%
Operating Profit 190,876 213,850 (10.7%)
Tire segment FY2006 FY2005 Rate of change (%)
Sales 2,396,946 2,156,787 +11.1%
Operating Profit 139,069 167,911 (17.2%)

Major Factors of FY2006 Business Performance
Positive Factor - The Company revamped its product mix by releasing new products and increasing sales of high value-added products. 
- The Company revamped and strengthened is production structure worldwide. 
Negative Factor - Costs of natural rubber and other materials surged. 
Japan Positive Factor - Domestic sales increased steadily from what they'd been the previous year. 
- Sales of tires for trucks and busses for the overseas market rose even higher than last year's record. 
Negative Factor - As a result of increasing the production capacity at its facilities overseas, its tire sales in Japan decreased in the area of passenger vehicles and mini vans for exports.
Americas Positive Factor - Sales of truck and bus tires, especially OE tires, rose from the previous year's record. The increase resulted from heavy demand for replacements of these types of vehicles due to tighter emission-gas regulations that are scheduled to go into effect in 2007 and after.
Negative Factor - Sales of OE and aftermarket tires for passenger vehicles and mini vans fell due to sluggish demand. 
Europe Positive Factor - Sales of OE and aftermarket tires for trucks and buses were greater than the previous year's sales.
Negative Factor - The Company had to spend more for strengthening its sales and logistics structure.

- The Company announced that it started supplying its Potenza RE050 for the Aston Martin V8 Vintage, after gaining official approval for the OE business. Two types of Potenza RE050 models will be used in the vintage model: either a set of 235/45R18 (front) and 275/40R18 (rear), or a set of 235/40R19 (front) and 275/35R19 (rear). (From a press release by the Company on Sep. 13, 2006)

-Bridgestone Corp. announced that it started to supply 19-inch tires as original equipment for the Cayma and the Boxster of Dr. Ing. h.c. F. Porsche AG. The tire model it is supplying is the Potenza RE050 that is 235/35ZR19 87Y in size for the front and 265/35ZR19 94Y in size for the rear. Bridgestone has enhanced the line-up of tires its supplies to Porsche, since it already has been supplying 18-inch tires. (From an article in the Nikkan Jidosha Shimbun on Sep.28, 2006)

- The Company announced that Bridgestone Americas Holding, Inc., its U.S. subsidiary, and Bandag Incorporated have entered into a merger agreement. The transaction is valued at US$1.05 billion (approximately 120 billion yen). By leveraging the worldwide business network of Bandag, the Company aims to take a leading share of both the new and retread tire markets for trucks and buses. (From an article in the Nikkan Jidosha Shimbun on Dec.7, 2007)

Business Reorganization
- Bridgestone/Firestone North American Tire, LLC (BFNT), a U.S. subsidiary of Bridgestone Corp., has reached a final decision at the board meeting to close its Oklahoma City plant producing radial tires for passenger cars and light-duty trucks by December 31, 2006. The board of its U.S. holding company, Bridgestone Americas Holding, Inc., has approved the decision. The plant has suffered a loss for some time with decreasing demand for multifunctional tires and intensifying competition with tires imported from countries which enjoy low production costs. (From a story in the Nikkan Jidosha Shimbun on Jul. 15, 2006)

- Bridgestone Corporation announced that it will close its Coquimbo plant in Chile by the end of this year. A majority of products manufactured at the plant are low priced mass market tires and bias ply tires that are unique to the local market. However, demand for such products is shrinking and profitability in this sector is declining. The Coquimbo plant, which was established in 1975, was placed under management of Firestone Chile and has been producing radial tires for passenger cars and light trucks, as well as tires for trucks, buses and construction vehicles. (From an article in the Nikkan Jidosha Shimbun on Aug. 5, 2006)

Environmental Activities
- The Company announced that CO2 emissions from 15 of its domestic plants fell below the level of 1990. This was achieved as a result of the company-wide project at its all production facilities setting the target for reducing CO2 emissions to lower than the 1990 level in accordance with the Keidanren Voluntary Action Plan on the Environment. Bridgestone achieved the reduction target 5 years ahead of schedule. (From an article in the Nikkan Jidosha Shimbun on Jun. 20, 2006)

- The Company has introduced a co-generation system at its Hikone plant, located in Hikone City, Shiga Prefecture. The plant produces passenger car radial tires and supplies them to the central and western regions of Japan. It began operations in January 2007. This completes the introduction of the co-generation system into its nine domestic tire plants. This energy saving system is powered by a gas turbine with an output of 11,720kw by using liquefied natural gas (LNG) for fuel. By introducing this system, CO2 emissions at the Hikone plant will be reduced by about 22 percent per year. (From an article in the Nikkan Jidosha Shimbun on Jan.5, 2007)


R&D Structure
The Company carries out a wide range of R&D activities on new materials, products, service technology, as well as production technology on a global basis. Its technology centers in Japan, the U.S.A. and Italy conduct R&D based on the demands of each market.

Number of R&D facilities
  North America Central
& South America
Europe Middle East/
China Japan Total
Technical Center 1 0 1 0 0 1 2 5
2 2 2 0 2 0 2 10

>>>The Group's overseas facilities for production and development

Domestic R&D facilities
R&D Facility Location
Technical Center Chuo-ku, Tokyo
Technical Center for Diversified Products Totsuka, Yokohama
Bridgestone Proving Grounds Nasushiobara, Tochigi
Hokkaido Proving Grounds Shibetsu, Hokkaido

R&D Expenditure
in million JPY FY2006 FY2005 FY2004
Overall 86,600 79,400 72,800
Tire segment 71,400 65,100 59,600

New Production Technology
-The Company announced that it developed a "multi air chamber tire" which has three separate chambers within the tire. The inside of the tire consists of a main chamber in the center and sub-chambers on both sides. The air pressure in each of the chambers can be controlled independently, making it possible to adjust and balance the level of firmness between the tread area and the left and right sidewalls. This ensures that ideal contact is made between the tire and the road under any condition, and thus, achieves a steadier drive. The Company will continue developing the multi air chamber tire for more practical use. (From a story in the Nikkan Jidosha Shimbun on Mar. 3, 2006)

-The Company announced on July 7 that it successfully developed a new synthetic technology to form a chemical bond between silica and high-cis butadiene rubber (BR) at the end of each molecule. The new technology NanoPro-Tech will be applied for the first time to the Company's new winter tire Blizzak Revo 2, which is going on sale on September 1. This technology will be gradually applied to other tires. The high-cis BR features superior flexibility and has excellent wear resistance characteristics, but it does not work well together with silica, which is an indispensable substance to improving performance on wet surfaces and reducing rolling friction. Accordingly, it was difficult to bring out the best performance of both materials. The Company, however, established a new technology to synthesize high-cis BR (RC polymer) that features high reactivity to silica at the end of its molecule. This was achieved by combining (1) a newly developed technology to make a catalyst that polymerizes monomers into polymers and produces high-cis BR with an active polymer end, and (2) a technology to apply the most appropriate denaturant to the active end of the high-cis BR to convert it into the end that actively reacts to silica. (From a story in the Nikkan Jidosha Shimbun on Jul. 8)

- The Company developed a more compact and advanced version of its in-wheel motor drive system for electric vehicles, which are drawing attention as next-generation cars. The system can be installed in a wider rage of models. 

Investment Activities

Capital Expenditure
in million JPY FY2006 FY2005 FY2004
Overall 261,300 203,600 190,900
Tire business (Unconsolidated) N.A 57,100 53,100
Tire business
230,800 178,400 168,800
Domestic Investment
- The Company announced that it will establish a new plant to produce radial tires for construction equipment in Kita-Kyushu City, Fukuoka Prefecture. Construction of the plant will begin in the second half of 2007, with operations expected to start in late 2009. Daily production will be 30 tons worth of large and ultra-large off-the-road tires. The Company will also increase its production capacity of steel cord for construction vehicle tires at its Saga Plant. A total of approximately 32 billion yen has been invested in these new projects. (From an article in the Nikkan Jidosha Shimbun on Dec.22, 2006)

Recent Developments by Country
- The Company announced that it will construct a wholly owned carbon black plant in Mexico by making a total investment of approximately 8.9 billion yen. The opening is scheduled for June 2008. This Mexican plant will be the Bridgestone Group's third carbon black plants, joining facilities in Japan and Thailand. Annual production capacity is expected to be 35,000 tons, with an estimated 110 employees expected to work at the plant. (From an article in the Nikkan Jidosha Shimbun on May. 24, 2006)

- The Company announced that it is constructing its third tire plant in Eastern Europe, in Poland. The new plant will produce radial tires for trucks and busses, and will start operating in the first half of 2009. Production capacity is 5,000 tires a day. The company will invest approximately 200 million euros or approximately 2.8 billion yen. The new plant in Poland will be operated by a wholly owned subsidiary of Bridgestone Europe NV/SA (BSEU), the Company's European subsidiary. The new plant will be the third plant in Eastern Europe, following the Poznan plant in Poland a facility in Hungary, which is currently under construction. (From a story in the Nikkan Jidosha Shimbun on Jun. 8, 2006)

The Company announced on February 7 that Bridgestone Firestone do Brasil Industria e Comercio Ltda. (BFBR), a subsidiary of Bridgestone Americas Holding, Inc., held an opening ceremony to cerebrate the completion of its new plant in Bahia, Brazil on February 2. Built in Camacari, Bahia at an investment of 160 million dollars, the new facility has a floor area of approximately 1 million square meters. It will hire some 500 employees to manufacture radial tires for passenger cars and light trucks. The plant will increase its daily production to 8,000 units in order to make tires to supply to the domestic Brazil market and the overseas markets in the Americas. (From an article in the Nikkan Jidosha Shimbun on Feb.08, 2007)

The Company announced that it will construct a new proving ground near its Nong Khae plant, located in Ayutthaya, Thailand, at the end of 2008. The 1.1 billion baht (3.4 billion yen) project, which will include transferring and expanding the Company's existing test course, has been approved by the Thailand Board of Investment. The new proving ground will be laid on 540,000 square-meters of land (more than 10 times as large as the existing one at the Nong Khae plant); and will have a 3.3-kilometer high-speed circuit, a 48,000-square-meter ground for general test runs, as well as special proving courses for testing noise and driving comfort. (From an article in the Nikkan Jidosha Shimbun on Mar. 19, 2007)