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5. Toyota Boshoku Corporation Business Report FY ended Mar. 2018

Toyota Boshoku Corporation Business Report FY ended Mar. 2018

Contracts

-The Company announced on March 21 that its seat and door trim have been adopted for Toyota Motor Corporation's new Lexus LC. The seat features a layered structure of stacked Y-shaped seat back components that extend beyond the shoulder area on the main component. The seat itself weighs only 20 kg or less even if it is equipped with six power-controlled functions. The door trim achieves the world's first drape form with Alcantara fabric. The product is produced on a dedicated production line that includes manual work processes at the company's Sanage plant in Toyota City, Aichi Prefecture. Both products incorporate unprecedented structures to fit the image that the Lexus LC developers had for the vehicle. (From an article in the Nikkan Jidosha Shimbun on March 22, 2017)

Business Alliance

-Toyota Boshoku Corporation (the Company), Autoneum Switzerland AG (Autoneum), and Nihon Tokushu Toryo Co., Ltd. (Nihon Tokushu) announced on October 5 that they have agreed on the establishment of a joint venture to undertake noise and vibration (NV) evaluation and analysis of automobile systems. The joint venture will be established at the Company's Oguchi Plant by the end of fiscal year 2017 (ending in March 2018). It will be engaged in NV evaluation, analysis, and development of advanced interior and exterior systems for Toyota Motor Corporation and other automotive companies. The three companies will combine their technological strengths to enhance development capability for next-generation vehicles. The joint venture will be called ATN Auto Acoustics Inc., which comes from the initials of the three companies. The new company will be capitalized at JPY 100 million, of which 49% will be financed by the Company, 26% by Nihon Tokushu, and 25% by Autoneum. Executives will be composed of two people from the Company and one each from Nihon Tokushu and Autoneum. The new company will start with a staff of about 10 people, which will increase in response to the growth of business. (From an article in the Nikkan Jidosha Shimbun on October 6, 2017)

-The Company announced that it acquired 1,521,000 shares (4.17% of all outstanding shares) in Tachi-S Co., Ltd. for about JPY 3 billion on June 29. The Company says it is aiming to maximize the benefits of the two companies' business partnership by strengthening ties. In March 2017 the Company and Tachi-S formed a business partnership to reinforce their respective competitiveness in the global automotive seat market. Going forward, the two firms will share know-how and business resources and consider collaboration for seat frames and structural components at the development stage. (From an article in the Nikkan Jidosha Shimbun on July 4, 2017)

New Company

-The Company announced that its sub-subsidiary Kawashima Textile Manufactures (Shanghai) will set up a wholly owned subsidiary in Yancheng City, Jiangsu Province, China, in April 2018. The new company, Kawashima Automotive Parts (Jiangsu) , will manufacture and sale transportation interior materials. It will have CNY 50 million in capital. The Company will establish a production system that allows everything from thread, fabric to seat cover sewing to flexibly respond to customer needs. (From a press release on March 29, 2018)

R&D Structure

R&D Activities

-The Company will start building a next-generation production system with an eye toward 2030. It will put a model production line utilizing virtual reality and other information technology into test operation in fiscal year 2018 (ending in March 2019). The Company anticipates that needs for automotive seats will diversify along with a full-fledged spread of autonomous vehicles in the future. The Company's President Yoshimasa Ishii commented, "Toyota Boshoku will meet demand for small quantities of a variety of products," indicating the supplier's aim to innovate its production system. The Company plans to install the model production line at the Sanage plant, its seat production base in Toyota City, Aichi Prefecture. This project was revealed at a press conference that was held on July 11 to outline the progress of the Company's mid-term management plan. The development of autonomous driving is accelerated globally, and proliferation of this technology will change the value of vehicles. The Company is developing new products and new technologies while seeking answers to the question, "What values and technologies will be necessary for future interior parts (President Ishii)?" (From an article in the Nikkan Jidosha Shimbun on July 12, 2017)

-The Company and Kanazawa University announced that they have signed a comprehensive partnership agreement to research and develop comfort for next-generation automobile interior spaces. The Company and Kanazawa University have collaborated in the development of automotive engine air filters since 2010. Both organizations will widen the scope of joint research with their eyes focused on vehicles in the near future. Over the next three years, they will pursue joint research primarily in interior spaces and explore three themes: air quality, numerical expression of comfort, and ride comfort. In the field of air quality, the Company and the university will primarily research on air management including fragrance and filters for removing particulate matter 2.5 (PM 2.5). The Company is considering the acceptance of students as interns from Kanazawa University and dispatching its personnel to the university, with the aim of developing human resources. (From an article in the Nikkan Jidosha Shimbun on March 3, 2018)

Product development

-The Company is aiming to develop four new seats for enhanced passenger comfort including a standard type power seat for compact cars, and commercialize them between 2018 and 2019. Power seats are currently available only for luxury cars. The Company will develop the new standard type power seat to achieve low cost products that are widely available for compact cars and other vehicles. A multifunction adjustable seat will support passengers of different builds and hold positions during cornering and other driving situations. A seat that supports passengers boarding or exiting the vehicle will offer a mechanism for readily adjusting the seat's fore-and-aft position. The Company will also develop a new seat arranging system with vehicles like minivans in mind. The system will enable variable seating configurations that can be adjusted by remote control. The Company will develop a system by combining these technological elements and promote it to automakers from 2020 onward. The Company regards comfort as a key factor in the automotive interior parts market with an eye toward practical utilization of autonomous driving. (From an article in the Nikkan Jidosha Shimbun on May 26, 2017)

Patents

-The Company and Mitsui Chemicals, Inc. (Mitsui Chemicals) announced on April 11 that they have concluded a license agreement on the use and commercialization by Mitsui Chemicals of patents that the Company holds for highly impact-resistant plastic. The Company will make use of Mitsui Chemicals' high technical expertise and equipment in the area of modifiers for improved plastic performance and seek to achieve practical utilization of the plastic for automotive seats and door trims around 2018. The two companies have been considering a business alliance for the commercialization of the highly impact-resistant plastic since November 2016. Based on this agreement, Mitsui Chemicals will aim to commercialize the material as one of its modifiers in the automotive market by taking advantage of its manufacturing technologies, equipment, and sales channels. (From an article in the Nikkan Jidosha Shimbun on April 12, 2017)

-The Company invested mainly in the new products and streamlining and updating the existing production facilities.

• Japan: 　JPY 28,947 million
• Americas: 　JPY 10,286 million
• Europe and Africa: JPY 9,613 million
• Asia and Oceania: JPY 3,247 million

Expansion Scheduled for Toyota Boshoku Indiana’s Production Plant

-The Company announced that it will invest USD 31 million to expand its operations in Jackson, Tennessee. The Company will add 143,000 square-feet to its current facility in Jackson, while consolidating its welding operations and adding new equipment. The workforce will be increased from 242 to 381 employees. Toyota Boshoku America, Inc. and its affiliates employ more than 11,000 people in 18 locations throughout the United States, Canada, Mexico, Brazil and Argentina. (From Tennessee Department of Economic Development release on December 4, 2017)

>>>Forecast for next year
-For the fiscal year that ends in March 2019, the Company expects a decline both in sales and profits in consideration of foreign exchange fluctuations. (Based on the forecast of 1USD=105JPY）

Factors
1) Sales
-Japan: Sales decreased due to a fall in production.
-Americas: Sales decreased due to foreign exchange fluctuations and a fall in the production of SUV models.
-Europe and Africa: Sales decreased due to a fall in the production of some models.

2) Ordinary profit
-Japan: Ordinary profit decreased to to a rise in the prepared costs.
-Americas, Europe and Africa: Ordinary profit decreased due to a rise in the preparation costs for new products.