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5. Yorozu Corp. Business Report FY ended Mar. 2016

Yorozu Corp. Business Report FY ended Mar. 2016

Mid-term management plan: Yorozu Spiral-up Plan 2017

-During the fiscal year ending March 2015, the Company announced its new, mid-term management plan called "Yorozu Spiral-up Plan 2017", which will cover FY2015-FY2017. The Company plans to develop an ideal structure in terms of what it should be like in a period of 10 years, to 2024. The Company aims at becoming a "suspension system maker" creating single-unit, integrated suspension systems, from conducting performance development activities up to launching commercial production. It aims at doubling its consolidated sales, to JPY 300 billion, and achieving a profit margin of 7% or higher. The roadmap for achieving this requires meeting the following targets in FY2017.

-The three pillars to achieving the targets under the "Yorozu Spiral-up Plan 2017"
1) Further strengthening product appeal and R&D capabilities

• Creating technology for developing suspension systems: strengthen R&D capabilities to develop suspension modules, rear-suspension modules, etc.
• Responding to needs in terms of ultra-lightweight, high rigidity, and low-cost: Develop new materials, designs/architectures, and production methods
• Improving technology on development-simulation: advance virtual development activities
• Revising the YPW （Yorozu Production Way）: achieve extraordinary quality and innovative cost-reductions

2) Expand sales to major global OEMs

• Further increasing orders from Japanese OEMs
• Expanding sales channels targeted at European and American OEMs and advancing sales to OEMs in emerging countries: establish European office (Established in Aug. 2015)
  
• Strengthening global supply structure: study idea of establishing supply hubs that cover the Alliance, building third plant in China, and building second plant (YAA) in the U.S. (Established in Oct. 2015)
  

3) Strengthen global management that emphasizes diversity

• Hiring and regularizing employees, and emphasizing diversity: Ensure and regularize enough employees in anticipation of future business operations
• Developing and exchanging human resources on a global level: develop human resources based on career plans
• Further strengthening matrix organization by function: strengthen global communication based on a 3D matrix organization

Recent Development Outside Japan

-The Company and its partner Mitsui & Co. (U.S.A.), Inc. have held an opening ceremony for Yorozu Automotiva do Brasil Ltda. (YAB), in Resende, Rio de Janeiro, Brazil. YAB is engaged in manufacturing and selling suspension components for passenger vehicles. YAB's new plant was built adjacent to Nissan Motor's Resende Plant. (From a press release on August 11, 2015)

Major Contracts

-Major contracts concluded in FY ended March 2016

Awards

-Major awards received in FY ended Mar. 2016

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

R&D Facilities

-Under the Company’s mid-term management plan, the Company is working on developing new products at the Yorozu Global Technical Center (YGTC) in Oyama City, Tochigi Prefecture, as a means to further strengthen its product appeal and development capabilities.

YPW （Yorozu Production Way）Innovation：achieve extraordinary quality and innovative cost-reductions

• Install innovative, automated assembly lines
• Automate press-fitting and paint lines
• Reduce costs by installing a heavy-duty servo-press
• Initiate unmanned internal logistics based the use of automated guided vehicles (AGVs)
• Raise quality through installing a machine to inspect inline welding and servo-torch

Automated and Unmanned Assistance Based on IoT System

• Make it possible for the home office’s YGTC to immediately manage maintenance instructions, changes in stamping-machine RPMs, changes in welding conditions, etc.
• Make it possible to check production status at all plants worldwide
• Make it possible to contact all plant managers and maintenance people in case of emergencies/irregularities at plant locations

Product Development

Development of highly rigid pipe-beam
-A rear-beam is being developed based on a new design and production method, which will improve body performance of next-generation cars. Based on stamp-forming and heat-processing, the tensile strength of the metal pipe will be enhanced three-times of the material strength. Series production is already started, introducing it a common platform worldwide.

Development of lightweight suspension member
-The Company developed a lightweight suspension member that is 20% lighter than conventional products, by including high-tensile steel in the member's material. It plans to use it on the next-mass-market models.

Improving development-simulation technology
-By developing the latest analysis system, the Company is aiming to improve the precision of development activities and further reduce development time.

-For FY ending Mar. 2017, the capital investment is planned to be JPY 25,740 million.

Capital investment in the FY ended March 2016

• Japan: JPY 1,769 million to respond to new vehicle models and to install servo stamping at the Yorozu Engineering Center (YE).
  
• U.S.: JPY 8,220 million to respond to new vehicle models and to enhance investment on facilities in Mexico (YAGM).
• Asia: JPY 5,511 million to respond to new vehicle models and to enhance investment on facilities in China at G-YBM and W-YBM.

Investments in Japan

-The Company will boost production capacity at its plant in Kyushu. The Company will install two large machine presses at a cost of JPY 2 billion in order to enhance capacity by 30% in fiscal year 2017 (ending in March 2018). Welding capacity will also be expanded in stages. Nissan Motor Co., Ltd. and Nissan Shatai Co., Ltd., the Company's main customers, are boosting vehicle production for export in Kyushu against the backdrop of the weak yen. The Company will make capital investments in consideration of those plans, and because it has judged that there will continue to be a heavy burden on its factory going forward. The Company has also decided to make a large scale capital investment in its dies and equipment subsidiary in Tohoku. (From an article in the Nikkan Jidosha Shimbun on January 13, 2016)

Investments Outside Japan

-The Company announced that it will establish a new manufacturing subsidiary in Alabama, USA. The new company, which will be called Yorozu Automotive Alabama, Inc., will manufacture and sell automotive suspension parts and agricultural machinery parts. Capitalized at USD 70 million (approximately JPY 8.4 billion), the new company is scheduled to be established by the end of October 2015. A total of approximately USD 117 million (JPY 14 billion) will be invested in the new company. By March 2021, there are expected to be 300 employees, and sales are expected to reach approximately USD 112 million (JPY 13.5 billion). (From a press release on October 13, 2015)