Financial Overview

(in millions of JPY)

	FY2008	FY2007	Rate of change (%)	Factors
Overall
Sales	328,371	357,233	(8.1)	-
Operating income	(2,964)	13,168	-	-
Ordinary income	(6,179)	9,893	-	-
Net income	(10,722)	6,137	-	-
Tire
Sales	242,054	252,495	(4.1)	-In Japan, both the volume of sales and the monetary amount of sales of tires for new vehicles decreased substantially year-on-year as a result of the global economic downturn, especially being affected negatively by a dramatic decline in automobile production in the fourth quarter in Japan.
Operating income	(1,395)	12,472	-	-
DiverTech and others
Sales	86,555	105,014	(17.6)	-Though the Company received steady orders for vibration reduction rubber for automotive use in the first half of the year, sales decreased substantially year-on-year due to a sharp decline in orders received especially in the fourth quarter. -Sales of automotive seat cushions also decreased substantially year-on-year due to a decline in orders received in the fourth quarter.
Operating income	(1,559)	690	-	-

Contracts
-The Company started to supply its PROXES R30A tires to Toyota's third generation Prius for installation on new vehicles.


Business Partnership
-The Company and Bridgestone Corporation announced that they have agreed to enter into a comprehensive business and financial alliance. By collaborating in the areas of production technology, materials procurement, and producing products for each other on an outsource basis, the two companies will try to retain their competitive advantages  against emerging companies offering lower priced products. The Company will issue 20 million shares of new ordinary stock, allocating the total to Bridgestone. (This equates to 8.72% of all outstanding shares.) This will allow Bridgestone to become the Company's third largest shareholder, following two investment funds and beating out Toyota Motor Corporation, which now owns 4.56% of the Company's outstanding shares. On the other hand, Bridgestone will sell 3.9 million of its treasury stocks (equivalent to 0.48% of outstanding shares) to the Company. (From an article in the Nikkan Jidosha Shimbun on May 17, 2008)

-The Company and Bridgestone Corporation held a press conference to outline the specific plans for their business alliance, in accordance with the basic agreement reached between the two companies last May. Their plans include jointly developing new production technology for producing tires, which, mainly involves implementing innovative production systems and jointly purchasing raw materials. They will also start utilizing each other's production capabilities in terms of producing radial tires for passenger cars   in the Americas; and support each other by consolidating manufacturing operations of certain products such as bias tires and supplementary products. The two companies agreed to produce a total of 1 million tires in the Americas in 2012. Being able to utilize each other's strengths and managements resources will allow them to further enhance the value of their respective companies. (From an article in the Nikkan Jidosha Shimbun on Oct. 28, 2008)


Recent Developments Outside Japan
<U.S.A.>
-The Company will review the product mix of tires produced in the U.S. While its major products, both for OEM supply and the aftermarket, have been Ultra-High-Performance tires used in SUVs and large-size sedans, it plans to make its product mix more focused on mid-size tires, targeting medium-sedans in response to sluggish sales of large-size vehicles, mainly caused by high oil prices. Since its U.S. tire plant is fully equipped with a new high-mix/variable-volume production system, no additional investment will be required to modify the product mix. The production capacity increase in the U.S., projected in its mid-term business plan through FY 2010, will not be changed either. (From an article in the Nikkan Jidosha Shimbun on Jun.2, 2008)


Restructuring
-The Company announced plans for a structural reform that will restore earnings against a downturn in business triggered by a global economic slowdown and the sharp appreciation of the yen. In an aim to restore its business to profitability by the fiscal year ending March 2010, it will reduce a maximum of 2,000 employees in production, administration, and sales subsidiaries and cut approximately six billion yen in expenditures by canceling exhibits in trade shows such as the Tokyo Motor show, for example, and reducing HR costs.   It will also reduce its tire inventory worth four billion yen at plants and sales companies at home and abroad. It will also curtail planned investments outlined in its mid-term management plan '08 through FY2010. This means canceling investments to expand its North American tire manufacturing plant; and postponing construction of an Asian manufacturing plant. The Company expects an operating loss of two billion yen for the fiscal year ending March 2009, instead of the originally expected one billion yen. Therefore, its accumulated net loss will grow to 12.7 billion yen from the 2.6 billion yen originally expected. The Company will review its production operations in and outside Japan and work to reduce operating hours at both the tire business and Diver Tech business, which engage in anti-vibration rubber. (From an article in the Nikkan Jidosha Shimbun on Feb. 10, 2009)

縲勲id-term Plan 08縲勾/strong>

(in millions of JPY)

	FY2008 (actual)	FY2010 (forecast)
Sales	328,371	300,000
Operating income	(2,964)	11,000
Ordinary income	(6,179)	9,000
Investment Expenditure	29,221	54,000

Forecast for the Fiscal Year Ending March 2011 by Business Division

(in millions of JPY)

	Tire business	DiverTech and Other Businesses
Sales	240,000	60,000
Operating income	9,500	1,500
Investment Expenditure	45,000	9,000

-The Company plans to sell 29 million tires in the fiscal year ending March 2011. 

R&D Expenses

(in millions of JPY)

Business segment	FY2008	FY2007	FY2006
Overall	8,762	9,618	9,607
Tire	5,567	5,829	5,783
DiverTech and Other Businesses	2,326	2,951	-
Automotive parts	-	-	1,383
Chemical and industrial products	-	-	1,663
In common	869	837	778

*Starting fiscal year 2007, which ended March 31, 2008, the Company consolidated its non-tire segment, namely Chemical & Industrial Products and Automotive Parts, into one segment under a new name called DiverTech and Other Businesses. Since then, the Company has two business divisions.


R&D Structure
-The Company carries out its R&D activities on tires mainly at Toyo Technical Center located in Itami-shi, Hyogo Prefecture.


R&D Activities

Business division	Development Topics
Tire	The tire technical center focuses on developing new tires by: -developing fundamental technology on tire design that incorporates analyzing the behavior of both the tires and the vehicles; and -developing simulation technology that can analyze noise and abrasion performance of tires. -The Company built a production technology workshop on the premises of its tire technical center in order to develop elemental technology involved in production processes as a means toward improving its production technology.
DiverTech and Other Businesses -Transportation equipment	-Advanced Technology: As part of its efforts to create suspension systems that feature the most suitable grounding performance, the Company completed development of a product called LF-BUSH that largely improves both passenger comfort and driving performance. The Company is preparing to launch the new product. -To respond to changes in engine vibration, the Company is developing an engine mount that can offset vibrations with a high degree of accuracy. The Company will apply this offsetting technology and develop such a mount, with plans to eventually commercialize it in the future.  -Environment: The Company had been focusing on developing hexahydric-chrome-free products. But its recent focus is on reducing VOC (volatile organic compound) emissions in its production lines as well as in its products by increasing the use of alternative materials. -Fuel Economy: The Company is trying to develop parts that are not only lighter but also have higher performance, by making use of aluminum and resin materials; and by also developing new methods and new materials.

Capital Expenditure

(in millions of JPY)

Business segment	FY2008	FY2007	FY2006
Overall	29,221	20,153	18,610
Tire	23,955	14,763	13,116
DiverTech and others	5,266	5,389	-
Automotive parts	-	-	4,254
Chemical and industrial products	-	-	659

*Starting fiscal year 2007, which ended March 31, 2008, the Company consolidated its non-tire segment, namely Chemical & Industrial Products and Automotive Parts, into one segment under a new name called DiverTech and Other Businesses. Since then, the Company has two business divisions.


Capital Investment Plans (As of Mar. 2009)

Business division	Planned amount of investment (in million JPY)	Objective of the investment
Tire	12,047	Streamlining operations, improving quality, and establishing a global supply structure.
DiverTech and Other Businesses	2,606	Streamlining operations, improving quality, and reorganizing production facilities in Japan
In common	204	Strengthening research on fundamental technology
Total	14,857	-