Calsonic Kansei Corporation Business Report FY2010

Business Highlights

Financial Overview

(in millions of JPY)
  FY2010 FY2009 Rate of Change (%) Factors
Sales 748,249 619,449 20.8 1)
Operating income 19,479 (5,699) - 2)
Ordinary income 18,693 (6,167) - -
Net income 15,598 (13,281) - -

-The Company was able to improve its cost-competitiveness by implementing various initiatives worldwide aimed at eliminating waste. These included reducing the number of product items for sale, revising product-creation processes, and improving purchasing and logistics operations.
-With the closure of its Atsugi Plant, the Company consolidated its production operations into its plants in Gunma, Yoshimi, and Oppama.
-Sales increased year-on-year, reaching 748.2 billion yen. This was an increase of 128.8 billion yen, a 20.8% rise.

-The Company’s business operating profit rose year-on-year, reaching 19 billion, 470 million yen, which was a year-on-year increase of 25 billion, 170 million yen. This was the result of the Company’s selling greater product volume and also undertaking initiatives such as reducing the cost of goods and fixed costs.

-Sales (which includes internal sales among the regions) were 417.9 billion yen, a year-on-year increase of 54.8 billion yen (or 15.1%). Business operating profit was 8.36 billion yen, a year-on-year increase of 16.78 billion yen.

<North America>
-Sales in North America  (which includes internal sales among the regions) were 160.1 billion yen, a year-on-year increase of 50.5 billion yen (or 46.1%). Business operating profit was 3.89 billion yen, a year-on-year increase of 6.95 billion yen.

- Sales in Europe (which includes internal sales among the regions) were 7.6 billion yen, a year-on-year increase of 900 million yen (or 1.3%). Business operating profit was 1.18 billion yen, a year-on-year increase of 360 million billion yen (or 45.0%). 

- Sales in Asia (which includes internal sales among the regions) were 145.0 billion yen, a year-on-year increase of 35.8 billion yen (or 32.8%). Business operating profit was 6.13 billion yen, a year-on-year increase of 1.24 billion yen (or 25.4.0%).

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

Outlook for FY2011

(in 100 millions of JPY)
  FY2010 FY2009 Year-on-year Fluctuation
Sales 7,900 7,482 418
Operating income 210 195 15
Ordinary income 200 187 13
Net income 210 156 54
R&D Expenditure 186 151 35
Investment Expenditure 233 210 23

Sales by Region

(in 100 million of JPY)
  FY2010 FY2009 Year-on-year Fluctuation
Japan 4,484 4,179 305
North America 1,681 1,601 80
Europe 763 761 2
Asia 1,501 1,451 50



Mid-term Business Plans

-The Company has mapped out a mid-term business plan called the CK GX4 T10, which covers a 6-year period from April 2011 through March 2017. Under the new plan, the company aims at becoming one of the top ten (T10) auto parts suppliers in the global market in terms of sales and operating profit, based on the prediction that global vehicle production will be reaching 95 million units in the near future. In order to achieve this target, the manufacturer is going to develop 10 new Green (G) products that are friendly to the environment. It will also aim to meet increasing demand from rapidly growing emerging countries by outsourcing production to its local plants. The GX4 stands for Green, Growth, Global and Great Company, four key words of the company’s progress policy. (From an article in the Nikkan Jidosha Shimbun on July 21, 2011)

-In July 2011, Nissan (the Company’s parent company) announced its roadmap for a new, five-year, mid-term business plan covering 2011 through 2015. Under the plan, Nissan will make an additional investment, specifically 50.0 billion yuan (610.0 billion yen) in Dongfeng Motor Company (DFL), its joint-venture company in China. Nissan revealed that DFL will increase its unit-sales volume to the 230-million level and also launch 30 various new vehicle models, including some electric vehicles that will be sold under its own brand name. Also, Dongfeng Nissan Passenger Company(DFL-PV), which is one of DFL’s business units and in-charge of handling auto development, production, and sales activities, is aiming to not only increase the production capacity at its auto plant but also raise the level of local-Chinese content to nearly 100% by 2015. It is also constructing new facilities that will deal in powertrain products such as engines and transmissions. (From a press release dated July 26, 2011)


R&D Expenditure

(in millions of JPY)
  FY2010 FY2009 FY2008
Overall 21,016 21,197 27,579

R&D Structure

-The Company organized its R&D structure, creating a global R&D center concept based on consolidating R&D activities into three, core functions as follows: development technology (Saitama, Saitama Prefecture); testing (Sano, Tochigi Prefecture); and production technology (Yoshimi, Saitama Prefecture).

-The Company will take aggressive measures starting in fiscal 2011 to improve productivity at its manufacturing sites through boosting investments directly aimed at increasing productivity like introduction of automated equipment. While the company has been pursuing fundamental structural reforms focused on cost reduction for the past few years, it has been rather hesitant to introduce new equipment for increasing productivity, given a drastic decline in production volume since the Lehman shocks. Nevertheless, in view of a recent recovery in capacity utilization at its plants, Calsonic Kansei has decided that it would be able to reap cost reduction benefits even by making new capital investments to raise productivity. The amount of the investment earmarked for boosting productivity would be in the range of 10 percent or more among the total investment budget for fiscal 2011. (From an article in the Nikkan Jidosha Shimbun on January 31, 2011)

-As the center conducting R&D activities capable of responding to product requirements worldwide, it is in-charge of advanced, basic, and application development. The Company is adding more resources toward advanced and basic development activities, which create future development technology and are designed to enhance its competitive edge. 
-In order to strengthen its predominance in terms of product pricing, one element of product competitiveness, the Company has been working on ways to reduce the costs of goods. Making use of R&D capabilities in LLCs is one of these. Specific examples include transferring R&D responsibilities to its China Technical Center and CK Engineering Shanghai.

-R&D expenses for Japan were 18.82 billion yen.

<North America>
The Company makes use of its North American R&D capabilities to finalize product development based on discussions with local customers, after basic developments and application specs of vehicle product developments are decided in Japan. The R&D activities for products designed for the Mexican market are managed and operated in the North American Technical Center.
-R&D expenses in North America totaled 1.23 billion yen.

-The Europe Technology Center serves the same function as that of the North American one. The Center is in charge of one critical part of R&D activities for Renault, based on its partnership with the company.

- R&D expenses in Europe totaled 600 million yen.

-The importance of R&D in Asia is tied to the growth of the Chinese market. The Company is significantly expanding the R&D structure at its Asian Technical Center, which shares the role with the Japan Technical Center in developing products for the Chinese market, aiming to create a very efficient and cooperative R&D structure.
- R&D expenses in Asia totaled 350 million yen.

R&D Facilities

R&D Center Saitama Pref., Japan
Test Center Tochigi Pref., Japan
Production Engineering Center Yoshimi, Saitama Pref., Japan

R&D Activities

Improving product competitiveness
(1) To develop components and systems that respond to environmental concerns. And example of these types of components include a heat exchanger that complies with the need for technology that is environmentally focused.
(2) To develop an exhaust system, and the components for it, which can improve fuel economy and exhaust purification performance.
(3) To develop highly advanced modular products as well as to develop components that are higher in performance and lighter in weight.
(4) To develop meters and information delivery systems that enhance safety.
(5) To develop air-conditioning systems that provide a comfortable driving environment.

Developing strategic products
(1) Developing systems and products for next-generation electric vehicles
(2) Developing technologies and products that reduce product weight so as to decrease CO2 emissions
(3) Developing low-cost vehicle systems and products for emerging markets

Product Development

EV drivetrain parts
-The Company has entered the business of EV drivetrain parts. It has started producing inverters to supply to Nissan Motor Co., Ltd. for its new LEAF EV to be launched on Dec. 20. An inverter is a device that converts direct current stored in the battery to alternating current in order to provide power to the drivetrain motor. Since Nissan plans to manufacture the LEAF in the U.S., U.K. and other countries, Calsonic Kansei will consider its production overseas. (From an article in the Nikkan Jidosha Shimbun on December. 6, 2010)

Air-conditioning System for EV
-Developed a new car air-conditioning system, which drastically cuts energy consumption when it is used for heating in an electric vehicle. The new system employs heat pump technology adopted in a household air-conditioner. The company is confident that consumption of electricity can be cut by half when the system is operating for heating, compared with the conventional system. Saving energy consumption for heating is expected to contribute to extending the cruising range of an electric vehicle. While Calsonic Kansei is considering application of the new system to vehicles, starting with the next generations of models now on the market, it is also studying the possibility of its introduction to current gasoline engine vehicles as well. (From an article in the Nikkan Jidosha Shimbun on May. 7, 2010)

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY2010 FY2009 FY2008
Overall 15,100 16,000 27,000
Automotive component business 14,900 14,900 23,800

-The Company is spending 15.1 billion yen, investing mainly in its auto-parts business to augment and upgrade its testing facilities, in addition to investing in facilities and equipment (including intangible assets) to respond to vehicle model changes being made by its major customers.

-Investments by region are as follows: Japan (6.7 billion yen), North America (2.6 billion yen), Europe (700 million yen), Asia (5.1 billion yen).

-The Company invested 14.9 billion yen mainly in its auto-parts business, preparing facilities and equipment to handle the production of brand-new products, in addition to spending on facilities and equipment to produce products designed for electric vehicles.

-By September 2010, the company had ceased operations at its facilities producing heat exchangers and at its Atsugi Plant (in Aikawa, Kanagawa Prefecture), consolidating production operations mainly into its Gunma Plant. The Company posted an extraordinary loss of 621 million yen for the loss it incurred on buildings and structures at its Atsugi Plant.

Investment Outside Japan

-The Company will set up a new company in Haimen City, Jiangsu Province, China in April 2011 to manufacture compressors for air conditioners. China is the fourth country for Calsonic Kansei to establish a compressor company, following Japan, Malaysia, and Thailand. The name of the new company is Calsonic Kansei (Haimen) Car Air-Conditioning Compressor Corporation and is 100% owned by Calsonic Kansei China Holding Company, the holding company of the Calsonic Kansei group companies in the China Region. The company is scheduled to commence its manufacturing activities from April 2012. The purpose of the establishment of the new company is to respond to the needs for the production increase of compressors in line with the increasing automotive demand in China. As the first phase, the company plans to manufacture 600,000 units of Aluminum Vane Rotary Compressor a year. (From a press release on March 11, 2011)