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5. TACHI-S Co., Ltd. Business Report FY ended Mar. 2015

TACHI-S Co., Ltd. Business Report FY ended Mar. 2015

Joint Ventures

-The Company and Lear Corporation of the U.S. agreed to change the shareholding ratio in their four TACLE Seating joint ventures (JV). Tachi-S will acquire 100% ownership of Thai and American JVs, while Lear will acquire 100% of the JVs in the U.K. and India, in an aim to improve and accelerate responses to customers in each market. The partnership between the two companies started in 2005 in order to supply seats to Nissan's overseas plants. As each JV's management and production operations have become stable, they have decided to change the partnership to make each business stronger. (From an article in the Nikkan Jidosha Shimbun on April 18, 2014)

Recent Development Outside Japan

• Seat production started in: Xiangyang, China (Oct. 2014) and Dalian, China (Oct. 2014)
• Parts production (Sawing and Seat frame) started in: China, Thailand (June 2014) and Mexico (Oct. 2014)

Contracts

-Major contracts made in FY ended Mar. 2015: ( ) shows production launch of the Company, * shows "frame only"

Awards

-Major awards received in FY ended Mar. 2015:

Long-term Vision 「Global Challenge 177 [GC177]」

-Global Seat System Creator (Manufacture from Seat frame to Complete Seat, Globally)

-3 targets

• Number 1 Quality
• Operating margin: 7%
• Global manufacturing share: 7%

-Global activities

• Setting up R&D function in major regions
• Reorganize and expand production facilities
• Expand parts operations at production plants

-Enhance competitive strengths

• Strengthen product proposals
• Strengthen product manufacturing
• Strengthen ability to respond to change

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

-The Company's planned expects R&D expenditure for FY ending Mar. 31, 2016 is JPY 3,845 million.

R&D Facilities

R&D Structure

-The Company, in order to conduct effective and efficient R&D activities, has positioned its technical center in Japan as the main function accountable for product development and fundamental technology. In addition, however, the Company works with its operations in the U.S.A. and Europe, and with technical-licensing and partner companies, in order to gather information on the latest technologies and peripheral technologies. Also, the Company makes sales presentations to global OEMs and parts suppliers about its wealth of technology on new products and new production methods. Currently, some of these technologies are being used by customers.

-The Company formed two commercial alliances, the first one with Fuji Kiko (in August 1999) and the second with Kasai Kogyo (in November 2006). These alliances are designed to improve its R&D capabilities in the areas of structural products and plastic molded parts, with the idea of jointly using each other's R&D functions outside Japan.

-Based on its decision to consolidate all the functions directly involved with product creation, namely development, production, and purchasing, the Company opened its R&D/Product Creation Center in August 2012 in Ome City, Tokyo.

-In China, after establishing Tachi-S Engineering China Co., Ltd. in Fuzhou in Aug. 2008, the Company opened 3 more technical centers, namely in Guangzhou, Zhejiang, and Zhengzhou.

R&D Activities

Developing Seats and Proprietary Structural Parts
-The Company develops the following products as seat-systems: seats for cars and other types of vehicles, recliner devices, slide rails, large-size movable lifters, underfloor storage devices, long slide-rails for RVs (and related peripheral parts), rotary units, and other items. It is working to win customers.

Developing Enhanced Safety Technology
-As a means to enhancing occupant safety, the Company develops the following items as seat systems, which are already being installed: seats with three seatbelts, seats with side airbags, occupant sensing seats with smart airbags, and seats that mitigate neck injuries. In addition, the Company conducts R&D activities on the structural nature of safety seats in terms of their responding to front, rear, or lateral collisions.

Developing Environmentally Compliant Technology
-In the area of developing technology that complies with environmental concerns, the Company develops new materials that improve fuel efficiency and comply with the total phase-out of environmentally harmful substances; and develops ultra-lightweight seats that incorporate the latest structural technology. It is making sales presentations to customers, who are using these products.

Developing Products for Adapted Vehicles
-The Company develops special seats designed for vehicles adapted for use by the physically challenged. These seats offer excellent assistance in terms of their easy operation and their ease of letting occupants get in and out of vehicles. It is making sales presentations to customers, who are using these products.

Developing Lower-cost Products
-The Company develops low-cost, next-generation seats made possible through standardization, which are already being equipped by customers in and outside Japan.

Developing Production Technology
-The Company develops technology that improves the adhesion and molding of seats, technology that can foam mold single-unit headrests and armrests, and technology that reduces work and increases automation in the seat-assembly processes. It works on mold-making and die-making based on CAD and CAM. In addition, the Company has constructed a mixed production-line that can handle small lots of numerous product items, enabling it to respond to the increasing number of both vehicle models and product items.

Seat R&D
-Under the aim of creating more comfortable seats, the Company is continuing its efforts at evaluating the level of "seating comfort", doing its own research into seat structures and designs in terms of how seats should be. In addition, in order to find the perfect design in a short period of time, i.e., a design that balances performance, quality/quantity, and costs, the Company conducts CAE analysis in reducing development time and costs.

Seat-design R&D
-The Company is developing designs on its own that are connected to all the sectors that the Company is engaged in such as seats. This includes working on future seat concepts and developing new product designs and corporate designs. The Company had made presentations to customers, who are currently using these products.

Standard frame
The Company developed an original standard frame that can be shared among various vehicle models. The standard frame is already used on vehicles produced by the Company' major customers.

-Contents of the investment by region for FY ended Mar. 2015 are as follows:

-The Company expects capital expenditure for FY ending Mar. 31, 2016 to be JPY 7,688 million.