DENSO CORPORATION Business report FY2007
|(in billion JPY)||FY2007||FY2006||Rate of Change||Factors|
|Sales||4,025.1||3,609.7||11.5%||Sales increased due to greater volume of exports of finished vehicles to the Middle East and Russia by Japanese automakers; as well as to greater production volume overseas in Australia, China and other Asian countries.|
|Ordinary Income||368.3||322.1||14.3%||Income and profit grew due to improved production levels, thanks to increased sales; and due to cost reductions, various initiatives to rationalize and streamline its entire management system, and increased dividend income|
|Sales||3,911.1||3,489.0||12.1%||Refer to the following list.|
Sales of Automotive Products
|FY2007||FY2006||Rate of Change||Factors|
|Heat Devices||1,287.9||1,138.0||13.2%||Business grew as a result of Japanese automakers' increasing their vehicle production volume; and additional sales of air-conditioning units to automakers outside Japan|
Business grew as a result of strong sales of diesel common rail systems in Europe
|Information and safety systems
||650.0||583.9||11.3%||Business grew as a result of Japanese automakers' increased vehicle production volume, and additional sales of car navigation systems to automakers outside Japan|
|Electronic devices||368.0||330.0||11.5%||Business grew as a result of increased sales of hybrid products and electrical components such as alternators|
|Electrical devices||349.7||310.7||12.5%||Business grew as a result of increased vehicle production of vehicles destined for export from Japan; and strong sales of ECUs and sensors in response to advances made in the use of car electronics|
|Motors||270.8||248.8||8.9%||Business grew as a result of greater sales of wiper systems, power seat motors, sliding door closure motors, and other products, thanks to increased volume of vehicle exports|
Sales by Region
|FY2007||FY2006||Rate of Change||Factors|
Increased production and sales volumes of vehicles exported to emerging countries such as those in the Middle East, and Russia resulted in an increase in sales
|197.5||215.3||(8.3%)||Increased depreciation costs due to tax revisions, and negative currency translation due to the sudden appreciation of the yen contributed to the negative results.|
|North and South America|
|Sales||832.3||769.1||8.2%||Sales grew as a result of Japanese automakers' stable vehicle production volumes and greater sales volumes|
|41.5||29.2||42.1%||Profit grew as a result of an improved level of operations, thanks to increased sales and the company's efforts to rationalize operations.|
|Sales||620.3||519.3||19.4%||Sales grew as a result of increased sales to Japanese and European automakers|
|26.5||12.2||117.2%||Profit grew as a result of an improved level of operations, thanks to increased sales and the company's efforts to rationalize operations.|
|Australia and Asia|
|Sales||616.2||480.2||28.3%||Sales grew due to the increased production and sales volume of Japanese automakers in the ASEAN region and China|
|80.4||45.9||75.2%||Profit grew due to improved production levels, thanks to increased sales, the successful launch of the Company's Chinese operations, and the Company's efforts to rationalize its business|
The Company has developed a high output power control unit (PCU) and a battery cooling system for hybrid vehicles. These products are installed on the Lexus LS600h and LS600hL made by Toyota Motor Corporation.
The Company has developed a new refrigeration cycle system that enhances cooling and refrigeration performance of automotive air conditioners and cooler boxes (vehicle refrigerator). Its new refrigeration cycle system is already being employed in the Toyota Motor Corporation's redesigned Land Cruiser launched in Japan and will also be mounted on the Land Cruiser released in other markets in October.
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New Companies Established
In Apr. 2007, the Company will establish a new company in Chitose City, Hokkaido, to manufacture automotive semiconductor products. The new company, Denso Electronics Corporation, will be capitalized at 2 billion yen.
The Company will establish Denso East Japan Corp., a new company in Tamura City, Fukushima Prefecture, Japan in Mar. 2008, to manufacture car air conditioning systems. The plant construction and production start-up are scheduled for Jan. 2009 and Jan. 2010 respectively to meet increasing vehicle production in the Kanto and Tohoku regions.
In Jun. 2007, the Company will establish its subsidiary in Changzhou, Jiangsu, China to produce common rail systems for fuel injection devices of diesel engines.
In Feb. 2008, the Company and Yangzhou Jiexin Auto Air-Conditioner Co., Ltd. (Jiangsu Province, China) have agreed to establish a joint-venture corporation to produce bus air conditioning systems in China.
In Jul. 2007, the Company and Robert Bosch GmbH in Germany have established a joint venture to develop and manufacture diesel particulate filters (DPF) in Poland, The new, fifty-fifty joint venture named "Advanced Diesel Particulate Filters Sp.zo.o." will be capitalized at around 1.3 billion yen.
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Recent developments in Japan
-Revamping Its Production Framework
The Company will consolidate its Hiroshima Plant located in Hiroshima-shi, Hiroshima prefecture, and Denso Manufacturing Kitakyushu Co., Ltd., its subsidiary in Kitakyushu-shi, Fukuoka prefecture, on April 1, 2008. The Company intends to respond to increasing vehicle manufacturing in western Japan and promote its local community-based management. (From an article in the Nikkan Jidosha Shimbun on Oct. 2, 2007)
The Company will start supplying the total volume of the injector, a major part of its common rail system for a diesel engine to be marketed in China from 2009, from its subsidiary in Kyushu, Japan. It plans to manufacture injector parts collectively in Japan in the immediate future and to respond to the globally-increasing demand by utilizing production capacities in its major plants in Aichi and Kyushu prefectures. In 2010, it plans to output injectors for 600,000 vehicles, 300,000 of which will be sent to China. (From an article in the Nikkan Jidosha Shimbun on Feb. 1, 2008)
The Company will shift production of ceramic, or monolith, catalysts entirely from its headquarters plant in Kariya-shi, Aichi prefecture to Daian Plant in Inabe-shi, Mie prefecture. The transfer will be processed gradually starting in April and completing in July for a full-fledged production launch in the new facilities. This will allow the company to respond to future demands for an increase in production by switching from the current plant, which is becoming outdated and too small to meet the growing needs. Over 90% of monolith products made by Denso are supplied for Toyota models. (From an article in the Nikkan Jidosha Shimbun on Mar. 7, 2008)
-Company conducts TOB
The Company will acquire common stock of Aisan Industry Co., Ltd. through a takeover bid (TOB). The TOB will cost Denso a total of 7.4 billion yen. After the purchase, it will hold 9.95% of the company's shares. Aisan Industry is a major supplier of automotive engine components based on its fluid control technologies, such as fuel injectors, exhaust gas control devices and engine valves. While it is a competitor for the Company in some areas, the two companies have been enhancing their partnership since the joint development and production of throttle bodies in 2000 and have expanded joint products to fuel injectors and fuel pumps. (From an article in the Nikkan Jidosha Shimbun on May. 12, 2007)
Recent developments outside Japan
-Production of Airbag ECUs (India)
The Company revealed its policy to locally produce airbag ECUs (Electronic Control Unit) at its Haryana plant in India. The Company intends to enhance the product supply capability in India, because an installation of an airbag is expected to increase as automobiles becomes popular in the local market. It will also try to substantially reduce ECU costs by using the common specifications. (From an article in the Nikkan Jidosha Shimbun on Oct. 24, 2007)
-Dissolution of Capital Alliance (Korea)
The Company will dissolve its capital alliance with Doowon Climate Control Co., Ltd., Republic of Korea. Although it has held a 33.4% stake in the Korean partner, it has decided to sell off all its shares to the partner "due to significant changes in the business environment for the two companies, " according to the Company. The sale price is approx. two billion yen. By ending this alliance, the Company will lose its car air-conditioning manufacturing base in South Korea. "We would like to consider specific measures (for the future) as part of our global supply network, " according to the Company. (From an article in the Nikkan Jidosha Shimbun on Feb. 22, 2008)
The Company has developed "the 2010 mid-term action plan" for five years to 2010 in order to achieve its 10 year management policy, "DENSO Vision 2015." It aims to achieve over 4,000 billion yen for consolidated net sales and 10% for return on equity (ROE) by 2010. (From an article in the Nikkan Jidosha Shimbun on Jul 29, 2007)
The Company, which has a 30 percent share of the worldwide automotive air conditioning industry (based on FY 2005 sales), plans to boost the portion in the same market to 35 percent by fiscal 2010. This target is based on the projection that sales of its car air conditioners will increase to 22 million units by fiscal 2010 (compared to the current level of 16.28 million units as of FY 2005) to support growing sales of vehicles built by Japanese automakers especially in emerging nations and the U.S. (From an article in the Nikkan Jidosha Shimbun on Feb.19, 2007)
In 1991, the Company established Denso Research Laboratory in Aichi Prefecture. The Laboratory is involved with semiconductor electronics, information technology, human-machine-interface technology and other areas. As of March 31, 2008, the laboratory has a workforce of 382.
The Company announced that it will add 3,590 research and development staff globally, which is broken down to 2,700 in Japan and 890 in other countries, by 2010. This number is an increase over the staff number in 2004. While strengthening basic R&D activities in Japan, it will step up localizing application development to cope with the needs of Japanese automakers expanding their businesses overseas. (From an article in the Nikkan Jidosha Shimbun on Dec. 8, 2006)
In Feb. 2007, the Company decided to establish a technical center in Bangkok, Thailand. In order to support China, India, and other emerging market economies, the new facility will help the Company develop superior products that best meet the needs of each market.
|(in billion JPY)||FY2007||FY2006||FY2005|
New Product Development (FY2007)
-High Output Power Control Unit (PCU) and Battery Cooling System
The Company has developed a high output power control unit (PCU) and a battery cooling system for hybrid vehicles. It said that these products are installed on the Lexus LS600h and LS600hL made by Toyota Motor Corporation. The Company developed a unique cooling structure that significantly improves cooling performance of power semiconductor devices in the PCU. While power semiconductor devices are mounted horizontally on a cooling unit in conventional cooling systems, power devices in the new PCU are sandwiched between two heat sinks and inserted in layers between stacked cooling tubes. This structure allows both sides of the power devices to be cooled, resulting in greater improvement in cooling performance. The new PCU offers high output of approximately 60 percent greater than its conventional technology per unit volume. Furthermore, when the new PCU is designed to produce the same output as the existing technology, it can be made 30 percent smaller in size and 20 percent lighter in weight. (From an article in the Nikkan Jidosha Shimbun on May 24, 2007)
-Refrigeration Cycle System with Ejector
The Company has developed a new refrigeration cycle system that enhances cooling and refrigeration performance of automotive air conditioners and cooler boxes (vehicle refrigerator). This new cycle system uses an ejector, which enables high cooling performance in the cabin even when the cooler box is used. Its new refrigeration cycle system, which is the world's first of the kind that can be installed in passenger vehicles, is already being employed in the Toyota Motor Corporation's redesigned Land Cruiser launched in Japan, and will also be mounted on the Land Cruiser released in other markets in October. In a conventional refrigeration cycle, flow of refrigerant to the air conditioner system or the cooler box system is switched by a solenoid valve, which negatively effects cooling performance of the air conditioning system when the cooler box is used. The Company was successful in achieving high air conditioning performance and refrigeration performance simultaneously by replacing the solenoid valve with an ejector, which rapidly injects and expands high-pressure refrigerant. Compared with existing systems, the new refrigeration cycle system offers a 15 percent improvement in cooling performance, and a 20 percent increase in refrigeration efficiency. (From an article in the Nikkan Jidosha Shimbun on Oct. 4, 2007)
Major Technical Contracts (As of Mar. 31, 2008)
|Robert Bosch GmbH
-Traction control system
-Vehicle stability control
-Power assist brake
|Acquiring licenses to use patented technology||May 2005 -
|-Gasoline EMSs||Licensing of patents||Jan. 2006 -
|-Gasoline EMSs||Licensing of patents||May 2006 -
|Nippon Seiki Co., Ltd.
|-Instrument clusters||Licensing of patents||Mar. 2007 -
|Advanced Diesel Particulate Filters Sp.z o.o.
|-Diesel particulate filters||Licensing of patents and expertise||Sep. 2007 -
Termination of joint venture agreement
|Doowon Heavy Industrial Co., Ltd.
|-A/C systems||Licensing of patents and expertise||Feb. 2008 -
|-Variable bulb timing||Licensing of patents||Feb. 2008 -
|(in billion JPY)||FY2007||FY2006||FY2005|
Domestic Investments (FY2007)
The Company will establish a new company in Chitose City, Hokkaido, to manufacture automotive semiconductor products. The new company, Denso Electronics Corporation, will be capitalized at 2 billion yen. The Company intends to start the production at the new facility in Apr. 2009. By fiscal-year 2015, it expects the accrued investments in the new company to reach approximately 24 billion yen, with projected sales of around 100 billion yen. (From a press release on Apr. 26, 2007)
The Company will expand its production subsidiary in Kyushu, Denso Manufacturing Kitakyushu Co., Ltd. located in Kitakyushu city, Fukuoka prefecture, by building about a 22,000-square-meter plant within the premises of Denso Manufacturing Kitakyushu. To cope with increased production of Toyota Motor and Daihatsu Motor in Kyushu, production of car air conditioners, injector parts for diesel fuel injection systems and engine cooling modules will be expanded. The plant will also start producing fuel pump modules and wiper rings. Construction work will begin in August and is scheduled to be completed in March 2008. The initial stage of operations will start in May. Total investment is planned at about 20 billion up to fiscal 2010. (From an article in the Nikkan Jidosha Shimbun on Jul. 20, 2007)
The Company has agreed with Anjo city and the land development bureau of Anjo city to purchase land for the expansion of its Anjo Plant located in Anjo city, Aichi Prefecture. The land is expected to be used for environmentally responsive products. Details of production items and timing of starting the operation are still to be decided. (From an article in the Nikkan Jidosha Shimbun on Dec. 25, 2007)
The Company will establish Denso East Japan Corp., a new company in Tamura City, Fukushima Prefecture, Japan, to manufacture car air conditioning systems. The plant construction and production start-up are scheduled for Jan. 2009 and Jan. 2010 respectively to meet increasing vehicle production in the Kanto and Tohoku regions. Denso projects sales of approx. 30 billion yen in FY 2015. Customers will include two Toyota Group auto body suppliers; Iwate Plant of Kanto Auto Works, Ltd. and Central Motor Co., Ltd., which is scheduled to move to Miyagi Prefecture in 2010; Honda's Saitama Factory, Sayama City, Saitama Prefecture, and new Yorii Factory to be operational in 2010 at Yorii-machi, Saitama Prefecture; and Fuji Heavy Industries' Gunma plants. This 100% owned subsidiary of the Company will be established in Apr. 2008 with a capital of 2.6 billion yen. A total of 16 billion yen will be invested by FY 2015 in site acquisition, plant construction and facilities. (From an article in the Nikkan Jidosha Shimbun on Mar. 21, 2008)
Overseas Investments (FY2007)
The Company will establish a wholly owned subsidiary, "Denso (Changzhou) Fuel Injection System Co." in Changzhou, Jiangsu, China to produce common rail systems for fuel injection devices of diesel engines. With a total investment of approximately four billion yen, the new company will start production in Jul. 2009, and is expected to generate sales of 18 billion yen in fiscal 2012. The new plant in China will be its third overseas production facility of common rail systems, following Hungary and Thailand. Capitalized at about 2.8 billion yean, it will produce common rail systems for large size diesel engines in view of China's trend of tightening emission regulations. (From an article in the Nikkan Jidosha Shimbun on Jun. 19, 2007)
The Company and Yangzhou Jiexin Auto Air-Conditioner Co., Ltd. (Jiangsu Province, China) have agreed to establish a joint-venture corporation to produce bus air conditioning systems in China. The two companies plan to start supplying these products to local bus manufacturers in Apr. 2008, targeting sales of 5 billion yen in 2010. The joint-venture company will be called Yangzhou Jiexin Denso Air-Conditioner Co., Ltd. (tentative name) and be located within the site of Yangzhou Jiexin Auto Air-Conditioner in the Jiangdu Industrial Zone, Jiangsu Province. It will be capitalized at 1.8 million dollars (approximately 200 million yen) with 50 percent of the shares owned by Yangzhou Jiexin Auto Air-Conditioner; 30 percent by Denso (China) Investment Co., Ltd., the Company's regional headquarters in China; and 20 percent by GAC Corporation, the Company's automotive and industrial air conditioner production company in Azumino City, Nagano Prefecture, Japan. (From an article in the Nikkan Jidosha Shimbun on Feb. 26, 2008)
Denso Manufacturing Canada, Inc.(DMCN), the Company's subsidiary in Guelph, Ontario, Canada, will expand its facility by approximately 20,000 square meters. With this expansion, DMCN will produce heat exchangers and electric fans for radiators and integrate these products into engine cooling modules. Construction of the expansion is scheduled to begin in Jul. 2007 and production is scheduled to start in Jan. 2009. The new investment will total about 7.8 billion yen. DMCN's sales are expected to increase to approximately 29.3 billion yen by fiscal year 2010, nearly twice the level of fiscal 2006. DMCN will produce radiators, condensers, electric fans for radiators and engine cooling modules while continuing production of air conditioning units. (From an article in the Nikkan Jidosha Shimbun on Jun. 22, 2007)
The Company and Robert Bosch GmbH in Germany have established a joint venture to develop and manufacture diesel particulate filters (DPF) in Wroclaw, Poland, based on the agreement announced in Oct. 2006. The new, fifty-fifty joint venture named "Advanced Diesel Particulate Filters Sp.zo.o." will be capitalized at around 1.3 billion yen. (From a press release on Jul. 23, 2007)
Capital Investment Plan (FY2008)
-The Company plans to invest a total of 322 billion yen in capital investments during fiscal 2008, which ends on March 31, 2009.
-Among the total, 318 billion yen will be spent on its automotive business mainly to increase production capacity in order to respond to automakers' production launches of next-generation and new vehicle models.