Financial Overview

(in billion JPY)

	FY2008	FY2007	Rate of Change (%)	Factors
Overall
Sales	3142.7	4,025.1	(21.9)	-Sales decreased as a result of the global decrease in automobile production and foreign exchange loss.
Ordinary Income	(35.3)	368.3	-	-Ordinary income decreased due to capacity utilization loss caused by sales decrease and foreign exchange loss.
Net Income	(84.1)	244.4	-	-
Automotive business
Sales	3042.7	3,911.1	(22.2)	Refer to the following list.

Sales of Automotive Products

(in billion JPY)

	FY2008	FY2007	Rate of Change (%)	Factors
Heat Devices	1,006.9	1,287.9	(21.8)	-Vehicle production by Japanese automakers decreased. -While sales of automotive air-conditioners for European automakers were strong in the first half, they declined in the second half onward as a result of decreased production of vehicles utilizing these products.
Powertrain devices	741.9	940.2	(21.1)	-Vehicle production by Japanese automakers decreased. -While sales of diesel common rail system were strong in Europe in the first half, they declined in the second half and onward as a result of decreased production of vehicles that installed the products.
Information and safety systems	471.4	650.0	(27.5)	-Sales of car navigation systems and other products decreased as a result of decreased vehicle production by Japanese and US automakers.
Electronic devices	293.6	368.0	(20.2)	-Sales of starters and alternators decreased as a result of decreased vehicle production by Japanese automakers.
Electrical devices	272.9	349.7	(22.0)	-Sales of engine ECUs and other products decreased as a result of decreased vehicle production by Japanese automakers.
Motors	218.3	270.8	(19.4)	-Sales of wiper systems, power window motors, etc. decreased  as a result of decreased vehicle production by Japanese and US automakers.
Others	37.6	44.4		-
Total	3,042.7	3,911.1	(22.2)	-

Sales by Region

(in billion JPY)

	FY2008	FY2007	Rate of Change (%)	Factors
Japan
Sales	2,145.6	2,725.9	(21.3)	-Sales decreased as a result of a decrease in domestic vehicle production, decrease in export of components to be used for overseas production and foreign exchange loss.
Operating Profit	(114.7)	197.5	-	-Operating profit decreased due to capacity utilization loss caused by sales decrease and foreign exchange loss.
North and South America
Sales	559.8	832.3	(32.7)	-Sales decreased due to decreased vehicle production in the USA.
Operating Profit	5.1	41.5	(87.8)	-Operating profit decreased due to capacity utilization loss caused by sales decrease.
Europe
Sales	462.5	620.3	(25.4)	-Sales decreased due to decreased vehicle production in European countries.
Operating Profit	3.6	26.5	(86.4)	-Operating profit decreased due to capacity utilization loss caused by sales decrease.
Australia and Asia
Sales	507.7	616.2	(17.6)	-Sales decreased due to decreased production of Japanese cars in ASEAN countries.
Operating Profit	60.5	80.4	(24.8)	-Operating profit decreased due to foreign exchange loss and capacity utilization loss caused by sales decrease.

Contracts
-The Company has developed a small air conditioning unit for small-sized cars. Toyota Motor Corporation has decided to install this unit on the iQ, Toyota's new ultra-compact car to be released in Japan and Europe.

-The Company has developed a remote touch control device that allows a driver to operate at hand such in-vehicle systems as the car navigation, audio and air-conditioning, and it is installed on the Toyota Lexus RX.

-The Company 's compact organic light-emitting diode (OLED) displays will be used in the meters for installation in the Lexus RX.

>>> See R&Dfor more details


New Company
-In Nov. 2008, the Company announced that it will establish a new company Denso Powertrain Technologies Corporation on the premises of its Daian Plant in Inabe-shi, Mie Prefecture. The new company responsible for tuning of vehicle powertrain control systems will start operations in October 2010, expecting to generate approximately 1.5 billion yen in fiscal 2011. The news company's activities for developing adequate control systems for different vehicles and engines are growing due to advancing technologies for controlling various kinds of powertrain units such as gasoline engines, diesel engines and hybrid systems. With the establishment of the new company dedicated to this particular function, the Company can respond to the growing demand. (From an article in the Nikkan Jidosha Shimbun on Nov. 19, 2008)

-The Company announced that it will form a new company by integrating Denso Airs Corporation (Anjo City, Aichi Prefecture), its subsidiary manufacturing car air conditioner pipes, and the air conditioner hose business of GAC Corporation (Azumino City, Nagano Prefecture), which produces automotive air conditioning systems. The Group aims to strengthen its air conditioner business by establishing a seamless production structure which covers manufacture of hoses up to piping. The new company, Denso Airs Systems Corporation, will be set up in Toyokawa City, Aichi Prefecture in July 2009. Sales are targeted at 28 billion yen in FY2012. (From an article in the Nikkan Jidosha Shimbun on Feb. 26, 2009)

Business Reorganization
-The Company starts the process of liquidating its subsidiary Denso Manufacturing Midlands Ltd. in the United Kingdom. Denso Manufacturing Midlands engages in the manufacturing and sales of starters and alternators. The Company has decided to integrate its electric systems manufacturing operations in Europe into Denso Manufacturing Italia S.p.A. and to dissolve its UK-based manufacturing arm. (From a press release on Nov 7, 2008)

-The Company announced that Denso (China) Investment Co. Ltd. (DICH), the Group's regional headquarters in China, will acquire from Denso Create Inc. (Aichi, Japan) all shares of Denso Create Shanghai Inc. effective April 2009. With this reorganization, Denso Create Shanghai will be renamed Denso Software Shanghai Co., Ltd. and continue its current software development business for mass-produced products, particularly vehicle navigation systems.


Outlook for FY2009

Sales Forecast by Region

(in billion JPY)

		FY2009	FY2008
Japan		1,850	2145.6
North and South America		500	559.8
Europe		372	462.5
Oceania		463	507.7

Capital Expenditures/R&D Expenditures Forecast

(in billion JPY)

		FY2009	FY2008
Capital Expenditures	Japan	102.0	221.6
	North and South America	14.0	31.0
	Europe	16.0	26.4
	Oceania	24.0	35.4
	Total	156.0	314.4
R&D Expenditures		260.0	297.1

R&D Expenditure

(in billion JPY)

	FY2008	FY2007	FY2006
Overall	297.1	311.5	279.9
Automotive business	288.3	302.5	270.7

R&D Structure
-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, 2009, the laboratory has a workforce of 396.

-The Company has started the "DP (Denso Project)," that is, the companywide lateral organizations to challenge development of new technologies. Three new departments, including "DP fuel-saving technology development office," have been formed for the next-generation technologies to improve fuel efficiency and CO2 emission reduction. The Company's organization is made up of Groups in different business areas and each Group was mostly responsible for technology development of its area. For the DP, however, engineers from different Groups have been put together to establish agile operations to meet current development challenges. The Company plans to organize more DP offices as required and to accelerate development of technologies in highly-needed areas based on elemental technologies of each Group. (From an article in the Nikkan Jidosha Shimbun on Jan. 9, 2009)

-In Oct. 2008, the Company announced that it will invest approximately 8 billion yen to build a new test facility to evaluate performance and conduct endurance tests of common rail systems, which are fuel injection systems for diesel vehicles, at its Zenmyo Plant located in Nishio, Aichi Prefecture. The Company aims at speeding up product development by conducting performance evaluations and durability tests, currently implemented at the headquarters, at the Zenmyo Plant producing common rail systems. Construction is scheduled to start in May 2009, with operations set to begin in April 2010. The new facility will have an area of about 9,000 square meters. (From an article in the Nikkan Jidosha Shimbun on Oct.3, 2008)

-In April 2008, the Company established the Asia Technical Center at Denso International Asia Co., Ltd. in Thailand to conduct product development.


R&D Activities
-The Company worked to improve fuel economy of vehicles and  developed various products for three power sources of vehicles, namely hybrid, diesel and gasoline.

(1) Hybrid
-The Company had supplied battery ECUs, DC-DC converters, high voltage relays and other products to Toyota Prius since 1997. After that, it commercialized high-output power control units. The Company now works to reduce the cost, size and weight and improve performance of its hybrid products in response to the expanding hybrid vehicle market. 

(2) Diesel
-The Company works to clean exhaust emissions through improving fuel injection pressure and injection control performance of the common rail system, a fuel injection device for diesel vehicles.

-In April 2008, the Company started a vehicle-to-vehicle communications test on public roads in Abashiri city, which was assigned as one of the Special Ubiquitous Zones by the Ministry of Internal Affairs and Communications.


New Product Development
Small Air Conditioning Unit for Small-Sized Cars
-The Company has developed a small air conditioning unit for small-sized cars. The new unit is 320 millimeters wide, which is half the width of conventional air conditioning units for small cars like the Toyota Vitz. The system is approximately 20% smaller in terms of volume and creates more interior room. Toyota has decided to install this unit on the iQ, Toyota's new ultra-compact car to be released in Japan and Europe. The Company reduced the size of the blower fan and integrated the blower unit into the main unit to make the new system smaller. Energy consumption was cut by 14 percent by using the motor at the efficient revolving range. The newly-developed air conditioning unit is designed to stand upright. So, it can be used for both the right- and left-hand drive of the same model. The Company, therefore, can expect larger economies -of-scale in cost reduction than conventional units. The supplier already started production of the units for the iQ at its Nishio Plant in Nishio-shi, Aichi Prefecture. The application of some newly-developed components, such as the fan, will be expanded to the Company's air conditioning units for other models. The Company has already made 10 patent applications for the components including the fan. (From an article in the Nikkan Jidosha Shimbun on Oct. 23, 2008)

Radiator Tank Using Plant-Derived New Resin
-In Jan. 2009, the Company that it has developed a radiator tank using plant-derived new resin. Mass-production of the new product will begin in the spring of this year for vehicles sold at home and abroad. The new radiator tank uses organic compound extracted from castor-oil trees, which comprises about 40 percent of the new resin. Compared with conventional products molded from nylon-based materials, the new radiator tank reduces by more than 30 percent CO2 emissions during its product lifecycle, which covers from production process up to waste. Radiator tanks made of plant-derived resin were already developed and sold by other manufacturers. The Company's new radiator tank, which uses new resin jointly developed with DuPont Kabushiki Kaisha, however, is the first of its kind to contain as high as 40 percent of the eco-friendly material. In addition, as the newly developed resin is seven times more resistant to calcium chloride products, it allows the company to manufacture automotive products for cold regions at lower cost. The Company looks to incorporate the new resin into a wide range of products targeting nylon based components used around water systems, while working on increasing installation of the new radiator tank in automobiles. (From an article in the Nikkan Jidosha Shimbun on Jan. 15, 2009)

Remote Touch Control Device
-The Company has developed a remote touch control device that allows a driver to operate at hand such in-vehicle systems as the car navigation, audio and air-conditioning, and it is installed on the Toyota Lexus RX. The controller is mounted in the vehicle's center console. Shifting the control knob back and forth, right or left, will move the cursor on the display screen with a clicking feeling like a computer mouse. While a dial-type controller has been installed on vehicles by European automakers, the new controller that is capable of operating vertically and horizontally is the first in the world. When the cursor is intended to move to a target point on the screen, the controller with two embedded electric motors provides an added feeling as if the cursor is drawn closer to the target. This sophisticated feature has made it possible to control the remote display accurately. (From an article in the Nikkan Jidosha Shimbun on Jan. 29, 2009)

Compact Organic Light-Emitting Diode (OLED) Displays
-The Company's compact organic light-emitting diode (OLED) displays will be used in the meters for installation in the Lexus RX, becoming the first OLED device to be featured on Toyota vehicles. Compared with conventional liquid crystal displays, the OLED displays offer a significantly great degree of visibility, which will reduce drivers' eye burden. Despite various issues including high costs, the Company looks to expand use of the OLED to cover wider ranges of vehicles by working on developing more advanced technology to offer larger displays, full-color system, and low cost products. (From an article in the Nikkan Jidosha Shimbun on Feb. 16, 2009)


Technological Alliance
-The Company and Aisan Industry Co., Ltd. have started studies on their fuel pump modules of fuel systems so as to share designs and specifications. The both companies currently develop the products separately based on their own designs. In the course of promoting their partnership, they intend to use common designs for more efficient development operations. At the earliest, the next fuel pump module will be developed based on this "common design policy." The two companies are strengthening their ties in the three products: fuel injectors, throttle bodies and fuel pump modules. They have basically agreed that the Company will take the lead in designing fuel injectors, whose development work is mainly on the electronic control unit (ECU), and that Aisan will take the lead in developing throttle bodies of air intake systems. As for fuel pump modules, they have commenced studies so that they will first standardize designs and specifications between their respective products and supply the same quality products through their respective sales and plant networks. (From an article in the Nikkan Jidosha Shimbun on Apr. 25, 2008)


Major Technical Contracts (As of Mar. 31, 2009)

Company (Country)	Product	Coverage	Contract Term
Robert Bosch GmbH (Germany)	-Anti-lock brake -Traction control system -Vehicle stability control -Power assist brake	Acquiring licenses to use patented technology	May 2005 - Mar. 2020
Hitachi, Ltd. (Japan)	-Gasoline EMSs	Licensing of patents	Jan. 2006 - Dec. 2012
Delphi Corporation (USA)	-Gasoline EMSs	Licensing of patents	May 2006 - May 2026
Nippon Seiki Co., Ltd. (Japan)	-Instrument clusters	Licensing of patents	Mar. 2007 - Dec. 2022
Advanced Diesel Particulate Filters Sp.z o.o. (Poland)	-Diesel particulate filters	Licensing of patents and expertise	Sep. 2007 - Termination of joint venture agreement
Doowon Heavy Industrial Co., Ltd. (Korea)	-A/C systems	Licensing of patents and expertise	Feb. 2008 - Feb. 2013
Delphi Corporation (USA)	-Variable bulb timing	Licensing of patents	Feb. 2008 - Apr. 2018

Capital Expenditure

(in billion JPY)

	FY2008	FY2007	FY2006
Overall	314.4	343.8	312.5
Automotive business	309.9	338.5	310.1

Investments outside Japan
<USA>
-The Company celebrated the grand opening of a fourth manufacturing plant at DENSO Manufacturing Tennessee (DMTN) facility in Maryville, Tenn. Production has already begun at the new facility. DMTN currently employs nearly 3,000 people, and hiring for positions in the new plant will continue through 2010 as production lines are added. DMTN anticipates 500 additional employees by 2010. The new plant includes production lines transferred from DMTN's existing electronic products plant and will focus entirely on body electronics: remote keyless entry, auto air conditioning control units, tire pressure monitoring systems and body control modules. (From a press release on Apr. 4, 2008)


Capital Investment Plan (FY2009)
-The Company plans to invest a total of 156 billion yen in capital investments during fiscal 2009, which ends on March  31, 2010.

-Among the total, 155 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.