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5. Yorozu Corp. Business Report FY ended Mar. 2017

Yorozu Corp. Business Report FY ended Mar. 2017

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

Major Contracts

-Major contracts concluded in FY ended March 2017

Awards

-Major awards received in FY ended Mar. 2017

>>>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 light-weight suspension links
-The Company is currently developing a lighter weight suspension link based on a design using one part instead of three parts, without the need for welding.

Development of systems for automatically creating analytic models based on simulation technology
-The Company is developing system that can create analytic models based on using automated processing. This is designed to reduce the time it takes to process development activities and prepare for production.

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

Capital investment in the FY ended March 2017

• Japan: JPY 5,236 million to respond to new vehicle models and expand YE
• Americas: JPY 14,301 million to respond to new vehicle models, invest in YAA’s new production plant, YMEX and YAGM
• Asia: JPY 5,106 million to respond to new vehicle models and expand and strengthen W-YBM

Investments Outside Japan

-The Company will launch operations at its U.S. manufacturing subsidiary Yorozu Automotive Alabama (YAA) one year ahead of schedule. Production of components including suspension parts will start from around March-April of 2017. The company decided to adjust the launch schedule in consideration of the rising operating rate of another production site in Tennessee. The cost competitiveness of the plant will be increased through the implementation of unmanned systems including a highly automated production line. YAA was established in Jasper, Alabama, in October 2015 to meet strong vehicle demand in the U.S. It has a site area of approximately 200,000 square meters with a building area of about 25,000 square meters. The plant buildings currently under construction will be completed by the end of 2016. YAA aims to achieve sales of approximately USD 112 million in fiscal year 2020. (From an article in the Nikkan Jidosha Shimbun on August 29, 2016)