AISIN GROUP REPORT 2017 - Aisin Seiki

AISIN GROUP REPORT 2017 - Aisin Seiki

AISIN GROUP REPORT 2017 - Aisin Seiki
AISIN Group History and Main Product Lines

  Aiming to Be an                                                                                                                                                                                                       11



  “Irreplaceable Global Partner”
                                                                                                                                                                                                                                                                                             companies                                                    companies

                                                                                                                                                                                                                                                                 Asia &
                                                                                                                                                                                                                             Africa                                                                           AISIN Group

  The AISIN Group has promoted the spinoff of companies into a network of subsidiaries and affiliates                                                                                                                                                            38
  centered on Aisin Seiki, which was established in 1965, to effectively leverage its advanced technological
                                                                                                                                                                                                                                 1                            companies                                                                                            South
                                                                                                                                                                                                                           company                                                                                                                                America
  capabilities in the diversifying auto industry. By optimizing each company into a specialized business                                                                                                                                                                                                       companies*                                             3
  domain, we have become a corporate group able to process diverse materials such as steel, aluminum                                                                                                                                                                                 1                                                                          companies
  and resin into products that cover virtually all elements of driving that include the operating, turning and                                                                                                          *Includes Aisin Seiki
                                                                                                                                                                                                                        *Excludes other 11 equity-method affiliates

  stopping functions of automobiles.                                                                                                                                                                                     As of June 30, 2017

                                                                                                                                                                                                                                                                         2006                                                                    2016
                                                                                                                                      1985 年度
                                                                                                                                                                                              1995 年度
                                                                                                                                                                                             Consolidated                                                              2005 年度
                                                                                                                                                                                                                                                                      Consolidated                                                           Consolidated
                                                                                                                                     Consolidated                                                                                                                      連結売上高
                                                                                                                                      net sales
                                                                                                                                                                                               net sales                                                               net sales                                                               revenue
                                                                                                                                        ¥ 0.4兆円
                                                                                                                                                                                               ¥ 0.8兆円
                                                                                                                                                                                              trillion                                                                2.1
                                                                                                                                                                                                                                                                       ¥2.1 兆円
                                                                                                                                                                                                                                                                                                                                                  ¥ 3.5
  1965 - 1974                                                      1975 - 1984                                                     1985 - 1994                                            1995 - 2004                                                       2005 - 2014                                                      2015 -
  Birth of Aisin Seiki                                             Pursuit of “Quality First”                                      Full-fledged overseas production                       Expanding and upgrading overseas                                  Expansion and independence of global                             Initiatives to strengthen Group
  Aisin Seiki was created in 1965 through the merger of            During the process of strengthening corporate structure         In reaction to the Plaza Accord in 1985, the AISIN     business structure                                                business                                                         competitiveness
  Aichi Kogyo Co., Ltd. and Shinkawa Kogyo Co., Ltd. with          through total quality control (TQC), won four crowns,           Group also commenced full-fledged overseas             Along with the start of full-fledged local production,            Along with the globalization of business, strengthened           ■ Business restructuring
  the aim of strengthening its corporate structure and             including the Deming Prize, the Japan Quality Control           production.                                            strengthened production and sales structures in North             Group collaboration and progressed with the creation             Completed creation of a new framework following
  fortifying international competitiveness as an auto parts        Prize, the Plant Maintenance (PM) Prize and the PM                                                                     America, South and Central America, Europe, ASEAN                 of a business structure in each region that enables              restructuring of five businesses, namely manual
  manufacturer.                                                    Special Prize in TQC and total productive maintenance           New developments in leading-edge                       countries and China guided by the policy “Advance on              operations ranging from development and design to                transmissions, brakes, auto-body parts, seat frames and
                                                                   (TPM) categories.                                                                                                      our own into areas where there are markets.”                      production and sales to be carried out independently.            pistons, in order to develop existing business and strengthen
                                                                                                                                   technology fields
  Establishment of mass production                                                                                                 Future-oriented technology research began to bloom                                                                                                                                        our production system.
  structure                                                        Toward the age of car electronics                               with the creation of new products in energy and        Initiatives for development in energy
                                                                   Launched a new structure that combined electronics                                                                                                                                                                                                        ■ Accelerated development of next-generation
  Production capacity was increased and strengthened to                                                                            medical device fields. Established a global research   fields                                                                                                                                growth domains
  respond to a rapid expansion of automobile production.           with traditional mechanics to respond to rapid                  network.
                                                                   advances in car electronics.                                                                                           Advanced toward new development themes such as                                                                                     Identified three fields for the Group to focus on, namely
                                                                                                                                                                                          fuel cells and solar cells. Promoted efforts for                                                                                   “zero emissions,” “automated driving” and “connected
  Pursuit of self-reliance in technologies                                                                                                                                                commercialization to solve various environmental                                                                                   cars” that are viewed as key in our mission to develop
  To establish independent technologies, Aisin Seiki               Research network for future technology                                                                                 issues, beginning with global warming.                                                                                             next-generation technologies and made the decision to
  promoted measures to raise technological capabilities            development                                                                                                                                                                                                                                               invest development resources held by the Group in these
  that included opening the Technology Development &               In anticipation of 21st century society, built an                                                                      Aiming for a sustainable society                                                                                                   fields in a focused manner.
  Research Laboratory, building a proving ground and               independent research structure that included a research                                                                Commenced company-wide initiatives that position
  proactively introducing technologies from European and           laboratory with basic fields as its themes.                                                                                                                                                                                                               ■ Introduction of a Virtual Company System
                                                                                                                                                                                          global environmental protection as a crucial                                                                                       Introduced with the aims of strengthening unity within the
  U.S. auto parts manufacturers.                                                                                                                                                          management issue based on recognition that realizing                                                                               AISIN Group and boosting responsiveness to change.
                                                                                                                                                                                          a sustainable society is a social responsibility of                                                                                Directed toward raising competitiveness from four
  Building a foundation for overseas business                                                                                                                                             companies.                                                                                                                         perspectives: (1) heading in the same direction, (2) improved
  Proceeded to build a foundation for overseas business in                                                                                                                                                                                                                                                                   efficiency, (3) new value creation, and (4) sophistication.
  preparation for an expansion in exports of auto parts
  and for leaping forward as an international company.                                                                                                                                                                                                                                                                         ⇒ Please refer to “Message from Top Management”
                                                                                                                                                                                                                                                                                                                                 on Pages 06-11 and “Virtual Company Presidents’
                                                                                                                                                                                                                                                                                                                                 Roundtable Discussion” on Pages 12-17 for details.

  AISIN Group Main Product Lines

   Powertrain Domain                                                                                                                                                                       Chassis & Vehicle Safety System Domain                                                                    Information/Electronics Domain

  Manual transmissions        Multi-stage hybrid transmissions       Automatic transmissions       Electric water pumps        Exhaust manifolds                 Variable valve timing    Active rear steering                              Brake boosters and                Disc brakes                       Parking assist systems               Car navigation systems
  for passenger cars          for passenger cars                     for passenger cars            for cooling the engine      and converters                                                                                               master cylinders

   Body Product Domain                                                                                                                                                                     L&E Domain

  Sunroofs                                  Power sliding door systems                  Window regulators                    Power door latches         Spray-type damping coat           Beds, bedding and furniture                    Home-use sewing machines                    Shower-toilet seats             Gas engine driven                 Fuel cell cogeneration system
                                                                                                                                                                                                                                                                                                                     heat-pump air conditioners        for residential use

                                                                                                                                                                                                                                                                                                                                         A I S I N G R O U P R E P O R T 2 017               01
AISIN GROUP REPORT 2017 - Aisin Seiki
A Look at One Year in the AISIN Group

        A Year for Enhancing Group                                                                                                                                    In fiscal 2017, we set the AISIN Group slogan as “Do what you want to do to make tomorrow
                                                                                                                                                                      better” with the aim of becoming “A vibrant company that possesses true competitiveness and
                                                                                                                                                                      proposes new value” and promoted initiatives to bolster the competitiveness of existing
        Collaboration and Building Capabilities                                                                                                                       businesses, accelerate development in next-generation growth domains and strengthen
                                                                                                                                                                      competitiveness by enhancing Group collaboration.

        to Switch from Defense to Offense
                           April 2016                                             September 2016                                                                              August 2016 - February 2017
related topics
                                                                                                                                                                            Acquired own shares of common stock (approx. 10 million
                          Management integration of                              SeaHorses MIKAWA took part in
                                                                                                                                                                            shares at a cost of ¥49.0 billion).                                               April 2017
                          Shiroki Corporation into Aisin Seiki                   the first division of the B League
                                                                                 in the Japan Professional                                                        
                                                                                 Basketball League, which was                                                                                                                                               Introduced a Virtual Company System to bolster unity in the
                                                                                 launched in 2016.                                                                            February 2017                                                                 AISIN Group and strengthen responsiveness to changes.

                                                                                                                                                                                                                                                              ⇒ Please refer to “Message from Top Managemet” on Pages
                                                                                                                                                                            Management integration of                                                          06-11 and “Virtual Company Presidents’ Roundtable Discussion”
                                                                                                                                                                            Aisin Seiki and Art Metal                                                          on Pages 12-17 for details.

                                                                                                   August 2016                                                                                                                                                       April 2017
             April 2016
                                                                                                 Aisin Kyushu Co., Ltd. completed                                                                                                                                  Aisin Seiki and airweave Inc. entered into a sales
           The factories of Aisin Kyushu                                                         restoration and resumed production.                                                                                                                               alliance for ASLEEP and airweave brand bedding.
           Co., Ltd. and Aisin Kyushu
           Casting Co., Ltd. were damaged                                                                                                                              November 2016                                                                                 ⇒ Please refer to “Business Report for Fiscal 2017” on Pages
                                                                                                                                                                                                                                                                       24-27 for details.
           in the earthquakes with
                                                                                                                                                                      Started working groups in next-generation growth domains
           maximum seismic intensity of 7
                                                                                                                                                                      focused on three fields of “zero emissions,” “automated
           that hit Kumamoto Prefecture
                                                                                                                                                                      driving” and “connected cars.”
                                                                                                                                                                       ⇒ Please refer to “Business Report for Fiscal 2017” on Pages 24-27
                                                                                                                                                                         for details.

        2016                                                                                                                                                                                                                          2017

        April                    May                      June                      July                      August             September               October                    November                     December             January                  February                 March                       April

related topics

                                                           August 2016                                                            October 2016                         December 2016                                            February 2017

                                                         Products employed in                                                   Products employed in the              Products employed                                       ENE-FARM TYPE S fuel cell cogeneration system for
            June 2016                                    the Nissan Serena                                                      Subaru Impreza                        in the Toyota C-HR                                      residential use won the Energy Conservation Grand
           Products employed in
           Guangzhou Automobile Group                                                                                                                                                                                          ⇒ Please refer to “Business Report for Fiscal 2017” on Pages
                                                                                                                                                                                                                                 24-27 for details.
           Motor Co., Ltd.’s
                                                            Power sliding door        Variable valve timing

                                                                                                                                                                         Cooperative regenerative brake system                                                      March 2017
                                                                                                                                Electric oil pump   Interior handle
                                                                          September 2016
                                                                                                                                                                                                                                                                   Products employed in the Toyota
                                                                        Products employed in                                      October 2016                                                                                                                     LEXUS LC500
                                                                        the VOLVO 590
               Engine             Engine                                                                                        Aisin Seiki announced
            side module        front module                                                                                     ILY-Ai, a new model of
                                                                                                                                                                               Spray-type damping coat
                                                                                                                                personal mobility

                                                                                                                                                                                                                                                                      10-Speed FWD             Aluminum fixed      Pop-up door handle
                                                                             8-Speed FWD            6-Speed FWD                                                                                                                                                   Automatic Transmission      type 6-pot caliper
                                                                         Automatic Transmission Automatic Transmission

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AISIN GROUP REPORT 2017 - Aisin Seiki
|Message from the Chairman and President|                                                                                                                                           | Corporate Principles |

     The AISIN Group companies that were damaged in the Kumamoto earthquakes in April 2016 have                                                                                          Based on “Quality First”
     made a full recovery, and we would like to express our sincerest appreciation for the warm support
     we received.
                                                                                                                                                                                         1. Enhanced Value Creation
         In fiscal 2017, sales of automatic transmissions and body parts were strong worldwide, spurring                                                                                       We are committed to contributing to the advancement of society through future-oriented
                                                                                                                                                                                               research and development that provides new value for our customers.
     record high sales. Despite the negative impact of restoration costs following the Kumamoto earth-
     quakes and foreign exchange translation loss on profits, we still managed to post record highs in                                                                                   2. Continuous Global Growth
                                                                                                                                                                                               We are committed to realizing steady development and growth in the global marketplace by
     operating profit, profit before income taxes and profit attributable to owners of the parent.
                                                                                                                                                                                               establishing the foundations of our business activities in local values, cultures and customs.
         The AISIN Group will continue to advocate a basic philosophy of “Quality First” going forward
                                                                                                                                                                                         3. Harmony with Society and Nature
     and strive to build an even sturdier structure by learning the lessons of the recent earthquakes. At
                                                                                                                                                                                               We are committed to earning trust as a responsible corporate citizen by valuing harmony with
     the same time, we will contribute to the creation of an environment enabling a better society and                                                                                         society and nature.

     better lifestyles based on the unified efforts of our global Group.                                                                                                                 4. Individual Creativity and Initiative
         We ask for your continued understanding and support as we forge ahead.                                                                                                                We are committed to building a work environment that promotes continuous progress by
                                                                                                                                                                                               developing the creativity and initiative of individual employees.

     Kanshiro Toyoda                           Yasumori Ihara
     Chairman                                  President
     Aisin Seiki Co., Ltd.                     Aisin Seiki Co., Ltd.
                                                                                                                                                                      01 AISIN Group History and Main Product Lines                                             28 AISIN Group CSR
                                                                                                                                                                      02 A Look at One Year in the AISIN Group                                                       29 Organizational Governance
                                                                                                                                                                      04 Message from the Chairman and President                                                     32 Human Rights and Labor Practices
                                                                                                                                                                      06 Message from Top Management                                                                 40 Environment
                                                                                                                                                                                                                                                                     50 Fair Operating Practices
                                                                                                                                                                      12 Special Feature 1	Virtual Company Presidents’                                              54 Consumer Issues
                                                                                                                                                                                            Roundtable Discussion
                                                                                                                                                                                                                                                                     56 Community Involvement and Development
                                                                                                                                                                      18 Special Feature 2	Discussion between an Analyst
                                                                                                                                                                                            and Executive Vice President
                                                                                                                                                                                                                                                                60 AISIN Group Profile (14 main companies)

                                                                                                                                                                      22	Consolidated Financial and Non-Financial Highlights
                                                                                                                                                                      24 Business Report for Fiscal 2017

                                                                                                                                                                      Editorial policy                                                                          Notations
                                                                                                                                                                      AISIN Group Report 2017 is issued to provide stakeholders with information                AISIN Group                       Aisin Seiki Co., Ltd. and consolidated subsidiaries
                                                                                                                                                                      concerning the Group’s various activities while promoting dialogue with
                                                                                                                                                                                                                                                                14 main Group companies*1 Aisin Seiki Co., Ltd.*2
                                                                                                                                                                      stakeholders. Along with this report, please refer to the AISIN Group CSR                                                   Aisin Takaoka Co., Ltd.*2
                                                                                                                                                                      page on our website for more detailed information.                                                                          Aisin Chemical Co., Ltd.*2
                                                                                                                                                                                                                                                                                                  Aisin AW Co., Ltd.*2
                                                                                                                                                                      Period covered                                                                                                              Aisin Keikinzoku Co., Ltd.
                                                                                                                                                                      Primarily fiscal 2017 (April 1, 2016 to March 31, 2017). Some information is                                                Aisin Development Co., Ltd.
                                                                                                                                                                      related to activities outside this period.                                                                                  Aisin Kiko Co., Ltd.
                                                                                                                                                                      Scope of the report                                                                                                         Aisin AI Co., Ltd.*2
                                                                                                                                                                      In principle, the AISIN Group (Aisin Seiki Co., Ltd. and its consolidated subsidiaries)                                     Aisin Sin’ei Co., Ltd.
                                                                                                                                                                      is covered in this report. In case the scope of reporting differs for each information                                      Aisin AW Industries Co., Ltd.
                                                                                                                                                                      category listed, we indicate as such using the terms six core Group companies and                                           Hosei Brake Industry Co., Ltd.
                                                                                                                                                                      13 main Group companies.                                                                                                    ADVICS Co., Ltd.*2
                                                                                                                                                                                                                                                                                                  Shiroki Corporation
                                                                                                                                                                      Reference guidelines                                                                                                        Art Metal MFG Co., Ltd.
                                                                                                                                                                      ISO 26000, Global Reporting Initiative (GRI) Sustainability Reporting Guidelines
                                                                                                                                                                      Version 4, Japan’s Ministry of the Environment Environmental Reporting Guidelines                                           *1 14 companies including Art Metal MFG Co., Ltd. from
                                                                                                                                                                      (2012 Version)                                                                                                                  fiscal 2018
                                                                                                                                                                                                                                                                                                  *2 Six core Group companies
                                                                                                                                                                      Fiscal year
                                                                                                                                                                      April 1, 2016 to March 31, 2017                                                            Cautionary statement with respect to forward-looking statements
                                                                                                                                                                      All fiscal years mentioned in this report run from April 1 to March 31 of the              The report contains statements concerning plans, prospects, strategies, convictions
                                                                                                                                                                      following year based on the accounting fiscal period in Japan. Scope of                    and business performance forecasts regarding the future of Aisin Seiki Co., Ltd.,
                                                                                                                                                                      consolidation covers consolidated subsidiaries and equity-method affiliates.               consolidated subsidiaries and equity-method affiliates. These statements are based on
                                                                                                                                                                                                                                                                 judgments made by AISIN from information that can be obtained at the present time
                                                                                                                                                                                                                                                                 and may also involve risks and uncertainties.
                                                                                                                                                                      August 2017
             Aichi Kogyo Co., Ltd., the predecessor to Aisin Seiki, manufactured the first Toyota sewing machine HA-1 in 1945. Kiichiro Toyoda, the first president
             of Aichi Kogyo, was committed to delivering top-quality sewing machines to customers to help with the swift reconstruction of Japan after the war.
             It took only six months before his aspirations bore fruit and production was underway. Approximately 80% of the sewing machines were sold
04           overseas at the time and the foreign currency earned was used to support Aichi Kogyo’s business, making this product invaluable to the company.                                                                                                                                             A I S I N G R O U P R E P O R T 2 017              05
AISIN GROUP REPORT 2017 - Aisin Seiki

                                                                       Review of Fiscal 2017
                                                                       Problem-Solving Activities through Genchi Genbutsu (Go and See for Yourself)
                                                                       Lead to Record-High Profits
                                                                       During fiscal 2017, operating profit increased                                                        I personally visited all 227 companies and 320
                                                                       ¥35.9 billion and we achieved record-high reve-                                                       main bases that are undertaking business to accu-
                                                                       nue and operating profit. The primary factors                                                         rately ascertain the current state of our business
                                                                       driving these solid results included the approximate                                                  operations through genchi genbutsu. In doing so,
                                                                       1.32 million increase in unit sales of automatic                                                      I discovered and examined problems for each
                                                                       transmissions by Aisin AW, to 8.69 million units.                                                     function, geographic region and product, and
                                                                       Also contributing to performance were especially                                                      identified approximately 350 of the most critical
                                                                       strong sales of high-added-value body parts,                                                          problems. In response, we subsequently carried
                                                                       including system products such as Aisin Seiki’s                                                       out problem-solving activities by ranking each
                                                                       power sliding doors, in Japan and China.                                                              problem based on its level of urgency and then
                                                                           I am extremely grateful that we finished the                                                      solving problems one by one starting with the
                                                                       fiscal period with outstanding business results,                                                      highest-priority issues. I believe our problem-
                                                                       especially when considering the cloudy outlook at                                                     solving activities functioned extremely well.
                                                                       the beginning of the fiscal year due to the effects                                                       For example, in door locks, one of the
                                                                       of the Kumamoto earthquakes and the impact                                                            company’s mainstay products, we video recorded
                                                                       of the strong yen. I would also like to express                                                       and then performed comparative evaluations of
                                                                       my appreciation to all our employees for their                                                        all assembly lines at our nine bases worldwide,
                                                                       hard work.                                                                                            centering on the Shinkawa Plant in Japan. This
                                                                           Looking at our business activities, our top                                                       has allowed us to deploy the most efficient
                                                                       management priority has been to strengthen the                                                        manufacturing processes globally as well as to
                                                                       competiveness of our existing businesses. In line                                                     continuously compare and review purchased
                                                                       with this objective, for approximately two years                                                      components at all bases, which has resulted in

                                                                       Outline of business restructuring

                                                                                                                                                                Chassis & vehicle
                                                                                                     Powertrain domain                                                                                                 Body product domain
                                                                                                                                                              safety system domain

                                                                                                                                        Aisin Seiki Co., Ltd.                                                   System products

                                                                          AISIN Group

                                                                                                                                                                                                                                                                 Shiroki Corporation

                                                                                               Pistons                                                      Controlled brake production

                                                                                                                                                                                                                    functional parts

     Aiming to be a Vibrant,                                                             Art Metal MFG
                                                                                            Co., Ltd.        5        Aisin AI Co., Ltd.     1                   ADVICS Co., Ltd.         2
                                                                                                                                                                                                                    Corporation      3

     Globally Competitive Company

                                                                                            Management                   MT* development                     Controlled brake
                                                                                                                                                                                     Production             Seat frames for Toyota Motor Corporation
                                                                                            Integration                  and production                       development

     That Proposes New Value
                                                                                                                           Toyota Motor
                                                                                        Art Metal MFG Co., Ltd.                                                      DENSO Corporation                           Toyota Boshoku Corporation

                                                                         1 Consolidation of development and production functions of MT business under Aisin AI Co., Ltd. from January 2016
                                                                         2 Consolidation of development and production functions of controlled brake business under ADVICS Co., Ltd. from April 2016
                                                                         3 Integration of Shiroki Corporation into a subsidiary and consolidation of external and functional parts of body product business under Shiroki from April 2016
                                              Yasumori Ihara             4 Transfer of development and sales of TMC’s seat frame business to Toyota Boshoku Corporation from November 2015
                                                          President      5 Integration of Art Metal MFG Co., Ltd. and consolidation of piston business under Art Metal MFG from February 2017                                               *MT: Manual transmission
                                               Aisin Seiki Co., Ltd.

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AISIN GROUP REPORT 2017 - Aisin Seiki

     improved profits. Besides this example, we are        restructuring implemented in the powertrain               The first guideline, “accelerate growth strate-        The third guideline is to “reinforce the man-
     achieving significant results at various bases and    domain, Chassis & Vehicle Safety System Domain         gies that anticipate the next generation,” is the      agement foundation that supports sustainable
     for products, and our problem-solving activities      and Body Product Domain as we proceed                  Group’s top priority. Based on the watchwords          growth” and this also encompasses compliance.
     are now being firmly positioned throughout our        smoothly with initiatives for strengthening com-       “zero emissions,” “automated driving” and “con-        We will once again reevaluate the underlying
     operations worldwide.                                 petitiveness in all domains.                           nected cars,” we will accelerate development           foundation that supports our corporate activities,
         We also began undertaking business restruc-          As these examples demonstrate, I am confident       activities targeting next-generation growth            thoroughly adhere to our basic philosophy of
     turing in fiscal 2016. As part of this reorganiza-    that we are making steady progress toward              domains as well as introduce a Virtual Company         “Quality First” and assure quality that meets the
     tion, in February of fiscal 2017 we integrated the    “strengthening our underlying foundation.” Based       System and tackle new challenges in Group man-         expectations of our customers.
     management of Art Metal MFG Co., Ltd. in the          on this assessment, I would like to make fiscal        agement for strengthening Group competitiveness.          We are also advocating the following three
     piston business. With this business integration, we   2018 a year in which we transition from                   The second guideline is to “strengthen com-         measures as behavioral guidelines for individuals.
     have now completed the framework for business         “defense” to “offense.”                                petitiveness in existing businesses.” As we earn       The first is to “have a dream” for attaining or
                                                                                                                  the benefits of our business restructuring, we will    realizing some desire. The second is to speedily
                                                                                                                  steadily progress with the building of an efficient    take on new challenges for realizing this dream.
     Toward Future Growth                                                                                         Group production structure that responds to            The third is to “break down any walls in the
     Issues to Be Addressed by the AISIN Group                                                                    increasing demand for automatic transmissions.         company, business and functions” that stand in
     The AISIN Group has promoted the establishment        connected to the internet.                             Along with this, the Group will work in unison to      your way.
     of separate, independent companies and achieved           In the automobile industry, a wave of unprece-     accelerate initiatives for raising competitiveness.       Under these management policies and three
     growth as a professional corporate group under        dented dramatic structural change is rapidly           These efforts will focus on standardizing compo-       behavioral guidelines, I would like the AISIN Group
     the respective management policies of each of         approaching. This includes the advance of auto-        nents and evaluation items previously determined       to be a vibrant company that possesses true com-
     these companies that specialize in specific product   mated driving technologies, the spread of con-         separately for each company as we strive to            petitiveness worldwide and proposes new value.
     lines. When looking at the state of the world in      nected cars and evolving lifestyles characterized by   improve development efficiency.
     recent years, however, I am concerned about           cars changing from something you own to some-
     growing business risks and regional risks, such as    thing you share.
     an increase in global protectionism policies, and         The AISIN Group’s transmission business is         Accelerate Technology Development in Next-Generation Growth Domains with the
     have a heightened sense of uncertainty about the      currently performing well. That said, I am unsure      Group Working in Unison
     future. The impact of recent developments on the      whether we can maintain our future competitive-        The AISIN Group has specialized in a domain            hybrid cars, electric vehicles (EVs) and fuel cell
     AISIN Group’s business activities is totally unpre-   ness as these changes unfold merely by maintain-       involving the actual movement of cars based on         vehicles (FCVs). Specifically, we are developing a
     dictable. At the same time, IT is advancing with      ing the status quo. As a response, we will promote     the “operating, turning and stopping” functions        one-motor automatic transmission for hybrid cars
     unprecedented speed, and society is undergoing        initiatives for strengthening our sense of unity as    of automobiles. Going forward, an urgent task in       that is being demanded by European automakers.
     dramatic changes as everything around us is now       a Group and our ability to respond to change.          this domain will be to respond to systemization        We are also focusing on developing motors and
                                                                                                                  and integration accompanying the advance of            inverters, which are basic components of power-
                                                                                                                  automated driving and connected cars in the            trains for EVs and FCVs, by leveraging our knowl-
     Formulating Group Management Policies for Strengthening Our Sense of Unity as a                              future. As I look ahead to our development that        edge cultivated in hybrid transmissions.
     Group and Our Ability to Respond to Change                                                                   combines artificial intelligence with the AISIN            In the EV/FCV System WG, we are undertaking
     We formulated the Group Management                                                                           Group’s existing core technologies, I believe that     development in cooperation with Toyota Motor
                                                            1. Accelerate growth strategies that
     Policies from fiscal 2018 with the aim of aligning                                                           the three areas of “zero emissions,” “automated        Corporation in anticipation of the age of EVs and
                                                                anticipate the next generation (take on
     our direction as a Group. These policies help us                                                             driving” and “connected cars” will likely become       FCVs. We would like to provide a variety of prod-
                                                                challenges toward the future).
     recognize challenges and strengthen our sense of                                                             extremely important areas. Therefore, I decided to     ucts suitable for electrification across a wide field
                                                            2. Strengthen competitiveness in existing
     unity as a Group and our ability to respond                                                                  undertake Group-wide new technology develop-           that includes not only our powertrain business but
     to change.                                                                                                   ment activities in these three areas with the Group    also our chassis & vehicle safety business and body
                                                            3. Reinforce the management foundation
        Our fiscal 2018 Group Management Policies                                                                 working in unison.                                     product business.
                                                                that supports sustainable growth.
     consist of the following three guidelines:                                                                       In the first area, zero emissions, we are pursu-       In the second area, automated driving, we are
                                                                                                                  ing various initiatives through the Electrification    making various efforts in the Vehicle Dynamics
                                                                                                                  Working Group (WG) and the EV/FCV System WG.           Control WG and the Automated Valet Parking WG.
                                                                                                                      The Electrification WG is moving forward with          The Vehicle Dynamics Control WG is developing
                                                                                                                  the development of powertrain products for             systems that optimize vehicle dynamic

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AISIN GROUP REPORT 2017 - Aisin Seiki

     performance and realize integrated control of                                                      We possess a wide variety of products and                    The VC System is composed of four business
     operating, turning and stopping functions that                                                 technologies that include such body parts as                 VCs and the Head Office. The business VCs con-
     encompasses powertrains, steering, suspensions                                                 power sliding doors, power back doors and sun-               sist of the Powertrain VC, which handles engines
     and brakes. I had the opportunity to test drive a                                              roofs as well as such body sensors as driver moni-           and transmissions; the Chassis & Vehicle Safety
     prototype vehicle that integrated this technology.                                             toring systems. The Hospitality Services WG aims             System VC, which is responsible for brakes, chassis
     The body responded favorably when making sharp                                                 to use these technologies to realize a variety of            and automated driving; the Body VC, which han-          consolidate its transmission development
     turns and we are already realizing bodies that                                                 functions that provide comfort. These include seat           dles body components such as power sliding              resources cultivated to date, build a unified devel-
     enable extremely comfortable rides.                                                            positioning that activates in conformance with the           doors and sunroofs; and the ICT & Electronics VC,       opment structure and promote the development
         In the Automated Valet Parking WG, we carried                                              driver the instant the driver is seated as well as           which handles navigation, electronic control units      of new powertrains.
     out development aimed at fully automated park-                                                 doors that detect the presence and distance of               and sensors. Through the VC System, we will                 In the Chassis & Vehicle Safety System VC,
     ing whereby with just one touch of a button an                                                 adjacent vehicles and then changes the way the               promote product development by consolidating            ADVICS, Aisin Seiki and Hosei Brake Industry will
     automobile performs automated parking and then                                                 doors are opened to avoid making contact with                the technologies of each company and enhance            collaborate in the development of brakes, chassis
     automatically returns to a drop-off location. We                                               other vehicles.                                              business efficiency by eliminating overlapping          and automated driving to raise the performance of
     have already advanced to the stage of test drives                                                  The Location Based Services WG creates                   domains. Further, the Head Office will possess          “operating, turning and stopping.”
     using actual vehicles, and we hope to introduce                                                services that support the movement of customers              functional divisions such as development, produc-           In the Body VC, we will adjust overlapping
     this technology at this year’s Tokyo Motor Show.                                               leveraging the navigation technologies of                    tion, procurement and sales as well as business         product domains of Aisin Seiki, Aisin Sin’ei and
         In the third area, connected cars, we are                                                  Aisin AW and utilizing position information                  administration divisions that include accounting        Shiroki Corporation and integrate each company’s
     undertaking various initiatives in the Hospitality                                             and Big Data.                                                and human resources functions. We will proceed          field of strength. By doing so, we will strive to
     Services WG and the Location Based Services WG.                                                                                                             with the sophistication of our business operations      enhance efficiency through the pursuit of econo-
                                                                                                                                                                 through functional divisions and enhance the            mies of scale while developing efficient production
                                                                                                                                                                 efficiency of business operations through the           lines that leverage the excellent qualities of the
     Introducing a Virtual Company System toward Strengthening Group Competiveness                                                                               unified platform of business administration             three companies.
     In April 2017, we introduced a Virtual Company                                                 lines to undertake product development, produc-              divisions.                                                  In the ICT & Electronics VC, we will strengthen
     System (VC System) as a foundation for strength-                                               tion and sales as if each product line is one com-               In detailed terms, the Powertrain VC will center    competitiveness by integrating all electronic com-
     ening the competitiveness of the Group as a whole.                                             pany. On the other hand, we will speedily execute            on Aisin AW, which handles automatic transmis-          ponent and navigations system units, consolidat-
        The VC System was introduced for the purpose                                                our business operations while maintaining respect            sions and transmissions for hybrid cars; Aisin Seiki,   ing resources and raising development efficiency.
     of strengthening competitiveness by bolstering a                                               for each real company to take advantage of the               which handles transmissions for commercial              ⇒ For details, please refer to “Virtual Company Presidents’ Roundtable
     sense of unity as a Group and our ability to respond                                           excellent DNA cultivated at each separate com-               vehicles; and Aisin AI, which handles manual               Discussion” on Pages 12-17.

     to change. To attain this objective, we are consoli-                                           pany to date, such as their diversity, respect for           transmissions. Each company in this VC will
     dating various companies according to business                                                 people, spirit of challenge and a sense of speed.

     Overview of VC System                                                                                                                                       A Company That Provides Excitement and Joy to Its Customers
                                                         Board of Directors                                                                                      At first glance, there appears to be no particular      president we unveiled the slogan “Do what you
                                                                                                                                                                 problems under the business structure that main-        want to do to make tomorrow better.” I ask you
                                                        Business VC System                                                       Group Head Office
                                          Chassis & Vehicle                                                                                   Group Managerial
                                                                                                                                                                 tains our DNA, whereby each separate company            to ensure that the AISIN Group remains a group
                Powertrain VC                                              Body VC                   ICT & Electronics VC   Group Functions
                                          Safety System VC                                                                                     Administration    determines its own direction just as we’ve always       of companies that can provide excitement and joy
                    Aisin Seiki                 Aisin Seiki                Aisin Seiki                     Aisin Seiki         Functions               Admin     done. However, I have the sense that without            to customers throughout the world in any era.
                                                                                                                                                                 realizing it, the entire AISIN Group has become         The automobile industry is approaching a major
                     Aisin AW                                                                              Aisin AW            Functions               Admin
                                                                                                                                                                 very large, the AISIN spirit has faded and each         turning point. I believe that various initiatives,
                Aisin AW Industries        Hosei Brake Industry            Aisin Sin’ei
                    Aisin Kiko                                         Shiroki Corporation                                                                       company is heading in slightly different directions.    beginning with our VC System as well as our
                     Aisin AI                                                                                                          Aisin Takaoka
                  Art Metal MFG                                                                                                       Aisin Chemical
                                                                                                                                                                 I view the recent introduction of the VC System as      development activities in next-generation growth
                Electrification WG          Automated Valet               Hospitality Services WG          Location Based            Aisin Keikinzoku            an excellent opportunity to continually promote         fields, will in a sense determine the future of our
                EV/FCV System WG              Parking WG                                                    Services WG             Aisin Development
                                                                                                                                                                 change in the four lines of business and develop        company. I have a strong desire to continue taking
                     ADVICS                      ADVICS                                                     ADVICS             Functions               Admin     this system into an optimal shape through               on new challenges while having dreams so that
                                            Vehicle Dynamics                                                                                                     repeated trial-and-error efforts with the Group         we can move toward the future together with
                                               Control WG
                                                                                                                                                                 working in unison. When I assumed the duties of         our customers.

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AISIN GROUP REPORT 2017 - Aisin Seiki
Special Feature 1                     Virtual Company Presidents’ Roundtable Discussion                                                  Perception of the Environment Surrounding
                                                                                                                                              the VC System and Issues of Each VC 
                                                                                                                                              Ihara: Please share your views on the environment                                              highly competitive sunroofs, power sliding doors and

     Further Reinforcing Our Future
                                                                                                                                              surrounding each Business VC and the Group Head                                                other system products, which we have only been able
                                                                                                                                              Office and describe existing issues.                                                           to supply to a limited group of customers, we need to
                                                                                                                                                                                                                                             enhance our product lineup to provide more choices
     Competitiveness through the Virtual                                                                                                      Powertrain VC
                                                                                                                                              Ozaki: The demand for automatic transmissions is
                                                                                                                                                                                                                                             to customers and push ahead with the development
                                                                                                                                                                                                                                             of forward-looking, next-generation products.

     Company System                                                                                                                           on the rise, and one issue is how we increase our
                                                                                                                                              production capacity while adapting to regulatory                                               ICT & Electronics VC
                                                                                                                                              changes. Increasingly stringent environmental regula-                                          Uenaka: The ICT and electronics field is seeing the
                                                                                                                                              tions have been enforced across the world, such as                                             increased use of IoT and artificial intelligence (AI).
                                                                                                                                              the CAFE*1 standards in the United States and the                                              ICT and electronics will be at the core of the auto-
                                                                                                                                              NEV*2 regulations in China. If these regulations push                                          mobile industry in the future, and we need to
                                                                                                                                              the trend toward electrification and accelerate the                                            collaborate with the rest of the Business VCs in
                                                                                                                                              shift to hybrid vehicles (HV), electric vehicles (EV) and                                      taking necessary actions.
                                                                                                                                              fuel cell vehicles (FCV), the demand for the existing
                                                                                                                                              automatic transmissions may decline. We have to                                                Group Head Office
                                                                                                                                              prepare for that risk as well.                                                                 Mitsuya: Business models in the automobile indus-
                                                                                                                                              *1 Short for Corporate Average Fuel Efficiency, the CAFE standards are regulations in the
                                                                                                                                                  United States, which calculate the average fuel efficiency of each automaker and require
                                                                                                                                                                                                                                             try have changed dramatically, encouraging many
                                                                                                                                                  the automaker to ensure that its fuel efficiency does not go below this standard value.
                                                                                                                                              *2 Short for New Energy Vehicle, the NEV regulations in China require automakers to sell
                                                                                                                                                                                                                                             companies operating in different business sectors to
                                                                                                                                                  a certain number of “new energy vehicles,” including EVs and plug-in hybrid electric
                                                                                                                                                  vehicles (PHEVs).
                                                                                                                                                                                                                                             enter into the industry. We have to adopt a new way
                                                                                                                                                                                                                                             of competing with these companies. Under these
                                                                                                                                              Chassis & Vehicle Safety System VC                                                             circumstances, we need to make moves geared
                                                                                                                                              Ogiso: In the field of chassis and vehicle safety, we                                          toward the next generation and the generation after
                                                                                                                                              are undergoing considerable changes involving                                                  that, while securely attaining growth in our existing
                                                                                                                                              electrification, automated driving and connected cars                                          business fields. To do so, the Group Head Office has
                                                                                                                                              and facing severe competition. As seen in the grow-                                            to carry out three tasks. One is to look ahead, dis-
                                                                                                                                              ing demand for preventive safety technologies to                                               cuss with the Business VCs what technologies and
                                                                                                                                              eliminate traffic accidents, needs of the times are                                            businesses to invest in from a broader business
                                                                                                                                              changing, requiring us to make a swift response and                                            perspective and set up a structure to provide access
                                                                                                                                              take up new challenges. On the other hand,                                                     to the information necessary for such discussions.
                                                                                                                                              mechanical components, such as brakes that safely                                              The second is to consolidate common resources and
                                                                                                                                              stop heavy vehicles weighing one or two tons, still                                            operations for better efficiency and use the resulting
                                                                                                                                              remain very important. The entire Group has to                                                 “surplus” to further refine the existing operations.
                                                                                                                                              make concerted efforts to increase the competitive-                                            The third is to reinforce our safety, environmental
                                                                                                                                              ness of these products, including adoption measures                                            and quality postures that form the foundation of our
                                                                                                                                              targeting emerging countries.                                                                  management. These are the three tasks the Group
                                                                                                                                                                                                                                             Head Office intends to tackle.
                                                                                                                                              Body VC                                                                                        Ihara: Is the Group Head Office planning to draw in
                                                                                                                                              Nishikawa: Aisin Seiki and Shiroki Corporation had                                             staff from our 14 Group companies?
                                                                                                                                              been “good” rivals, learning from each other for                                               Mitsuya: As a first step, about 40 members and 10
     Kazuhisa Ozaki             Satoshi Ogiso       Yasumori Ihara          Masahiro Nishikawa Hiroshi Uenaka         Makoto Mitsuya
     President                  President           President               President          President              Executive Vice          almost 50 years. Recently, however, the competition                                            members from 14 Group companies of the
     Powertrain VC              Chassis & Vehicle   Aisin Seiki Co., Ltd.   Body VC            ICT & Electronics VC   President               with manufacturers in emerging countries has been                                              Managerial Administration Sector were dispatched
                                Safety System VC                                                                      Aisin Seiki Co., Ltd.
                                                                                                                                              intensifying, and the two companies are having a hard                                          to Aisin Seiki and Aisin AW, respectively, on April 1,
                                                                                                                                              time to prevail over the competition, particularly in the                                      2017. They are making an “inventory” of businesses
     Recently, the automobile industry has faced extreme changes, driven by technological innovation, such                                    field of exterior and functional parts, such as door                                           at these companies.
     as vehicle electrification, automated driving and the Internet of Things (IoT), and by the entry of IT and                               frames and moldings. Increasing the competitiveness
     other different business sectors into the industry. To increase our capability to respond to such changes                                of these existing products is an urgent task. In addi-
     and strengthen the unity of the AISIN Group, we launched the Virtual Company (VC) System in April                                        tion, as the two companies together operate 46
     2017. With President Ihara leading the discussion, the president of each VC and Executive Vice President                                 vehicle body bases in and outside Japan with some
     Mitsuya representing the Group Head Office talked about what specific initiatives are being                                              overlaps in business fields, we also need to increase
     implemented under the VC System to increase overall competitiveness.                                                                     the efficiency of our supply structure. As for our

12      A I S I N G R O U P R E P O R T 2 017
AISIN GROUP REPORT 2017 - Aisin Seiki
Special Feature 1 Virtual Company Presidents’ Roundtable Discussion

                                                    Yasumori Ihara                                                                                                                Kazuhisa Ozaki                                                                                                              Satoshi Ogiso
                                                    President                                                                                                                     President                                                                                                                   President
                                                    Aisin Seiki Co., Ltd.                                                                                                         Powertrain VC                                                                                                               Chassis & Vehicle Safety System VC

     Specific Initiatives under the VC System 
     Ihara: Now, could you describe the specific initiatives                                                 hybrid transmissions. Aisin Seiki and Aisin AW had                                                                                                               Chassis & Vehicle Safety System VC                                            ties. While conducting these three activities, we will
     of each Business VC and the Group Head Office?                                                          separately developed motors and inverters in the                                                                                                                 Ihara: The Chassis & Vehicle Safety System VC                                 continue to take on challenges in new fields during
                                                                                                             past, but we consolidated development resources                                                                                                                  handles brakes and everything that relates to                                 the following year.
     Powertrain VC                                                                                           into Aisin AW two years ago and have thus strength-                                                                                                              operating, turning and stopping. What are your
     Ozaki: We need to effectively utilize the overseas                                                      ened our development structure.                                                                                                                                  specific initiatives?                                                         Body VC
     bases of Aisin Seiki, Aisin AW and Aisin AI to set up                                                   Ihara: Does it mean that the development process,                                                                                                                Ogiso: Currently, we are promoting the sharing of                             Nishikawa: First, for increasing the competitiveness
     an efficient production structure across the entire                                                     which had been undertaken solely by Aisin AW, has                                                                                                                information on each VC, its tasks and the business                            of existing products, we rolled out “best mix” activi-
     Powertrain VC. For example, we are considering                                                          become a task of the entire Powertrain VC?                                                                                                                       environment and working to determine the direction                            ties last year to extract the strengths of each of the
     shifting the roles of personnel and equipment at                                                        Ozaki: Yes, and it also means we have more options                                                                                                               our full-scale efforts should pursue. While doing so,                         three companies. These activities have begun to
     some of Aisin AI’s overseas production plants from                                                      now. Over the medium to long term, electrification                                                                                                               we have decided to deliver products that are truly                            show some good results. We will reinforce plant
     manufacture of manual transmissions to manufac-                                                         and other changes in vehicles will also entail changes                                                                                                           valuable and globally competitive. We are now in                              operations by unifying quality management stan-
     ture of automatic transmissions.                                                                        in powertrains; therefore, one of our important                                                                                                                  the stage of discussing specific initiatives based on                         dards and operational management methods of the
         In the field of electrification, as a response to the                                               action themes is how we envision our future in                                                                                                                   this policy.                                                                  three companies, and facilitating personnel
     switching demand from automatic transmissions to                                                        response to such changes.                                                                                                                                        Ihara: Could you provide examples of products that                            exchange. Next, in terms of reorganizing our supply
     hybrid transmissions, we are developing a one-motor                                                     Ihara: Besides development and production, are                                                                                                                   are new and globally competitive?                                             structure, transfer of production operations among
     hybrid transmission, for which demand is currently                                                      there any other collaborative efforts, for example, in                                                                                                           Ogiso: We have rolled out activities in three fields.                         plants in Japan has been proceeding at a good pace,
     growing in Europe. This product combines a motor                                                        sales activities?                                                                                                                                                One is the field of automated driving and preventive                          but we have not started this process for our plants
     with our existing automatic transmissions and can be                                                    Ozaki: We just started collaborative sales activities                                                                                                            safety, which is extremely important and requires                             outside Japan. We will discuss the matter thoroughly
     manufactured by using the equipment already in                                                          and have asked sales personnel of each company to                                                                                                                deliberate strategies. Specifically, we are discussing                        and strive to ultimately build an optimum supply
     place. We will also devise ways to use the same                                                         think about what approach we should take in order                                                                                                                to encourage the collaboration between the auto-                              structure across the world. In the area of develop-
     equipment even when there is a change in compo-                                                         to encourage customers to use the products of the                                                                                                                mated valet parking technology and vehicle dynam-                             ment of next-generation products, we will take on
     nent by refining our production processes.                                                              AISIN Group. The entire Powertrain VC is exploring                                                                                                               ics control technology, which are mainly promoted                             challenges of conducting development activities
         For EVs and FCVs, we are forging ahead with                                                         ways to deliver excellent products, not just power-                                                                                                              by Aisin Seiki and ADVICS, respectively, in our                               under the Hospitality Services Working Group (WG)
     development of motors and inverters based on the                                                        trains alone but as a system encompassing every-                                                                                                                 Business VC and exploring how we should translate                             in collaboration with the ICT & Electronics VC and
     knowledge we have accumulated in the field of                                                           thing from engines to transmissions.                                                                                                                             the two into products that will be useful for the                             adopting new materials, including aluminum and
                                                                                                                                                                                                                                                                              public. The second is the field of chassis control                            carbon fiber reinforced plastic. For these purposes,
                                                                                                                                                                                                                                                                              currently undertaken by Aisin Seiki. Combining                                we will establish a Development Committee within
                                                                                                                                                                                                                                                                              chassis control with a brake offers many possibilities.                       the Body VC to narrow down a list of items that will
      Overview of the VC System (Group Companies and Products)                                                                                                                                                                                                                For example, suspension control and brake control                             be developed jointly by the three companies to 14
                                                                                                                                                                                                                                                                              had been designed separately, and an automaker                                and promote development in an efficient manner.
                                                                                   Scope of business                                                                Members (14 Group companies)
                                                      Existing fields (main products)                           Next-generation fields                                                                                                                                        had combined the two into its vehicles. This is ineffi-                           Also, we intend to nurture skilled leaders who
                                                                                                                                                                                                                                                                              cient and precludes new ideas. Thus, we are engag-                            can take initiative in these cross-company activities.
                                                                                                                                                                                                                                                     Art Metal MFG
                                                                                                                                                                                             Aisin AW Industries

                                       Engines                    Pumps, pistons
                                                                                                                                                    Powertrain VC

                                                                                                                                                                    Aisin Seiki

                                                                                                                                                                                                                    Aisin Kiko
                                                                                                                                                                                  Aisin AW

                                                                                                                                                                                                                                          Aisin AI

           Powertrain VC                                          Manual transmissions,                                                                                                                                                                                       ing in an activity to consider a suspension system                            Ihara: For hospitality services, I hope you will
                                       Drivetrain                 automatic transmissions,                            EV/FCV System
                                                                  transmissions for HVs                                                                                                                                                                                       and a brake system simultaneously, and to offer a                             strengthen collaboration within the Group and
                                                                                                                                                                                                                                                                              better packaged solution. The third is the field of                           increase our capabilities to offer solutions in concrete
                                       Main brakes                Drum brakes, disc brakes
                                                                                                                                                                                             Hosei Brake Industry
                                                                                                                                                Safety System VC
                                                                                                                                                Chassis & Vehicle

                                                                                                                 Automated Valet Parking
                                                                                                                                                                                                                                                                              brakes. ADVICS had been in charge of this field, but                          terms by working with the ICT & Electronics VC.
                                                                                                                                                                    Aisin Seiki

         Chassis & Vehicle

                                       Chassis                    Controlled suspension
         Safety System VC                                                                                        Vehicle Dynamics Control                                                                                                                                     electrification of parking brakes has necessitated
                                                                  Electronic stability control (ESC),
                                       Braking systems
                                                                  cooperative regenerative braking systems
                                                                                                                                                                                                                                                                              system development for both disc and drum brakes.                             ICT & Electronics VC
                                                                                                                                                                                                                                                                              Controlled brakes are also required to offer higher                           Uenaka: We assume two roles in our operations,
                                                                                                                                                                                                                    Shiroki Corporation

                                       System products            Power sliding doors, sunroofs
                                                                                                                                                                                             Aisin Sin’ei
                                                                                                                                                                    Aisin Seiki
                                                                                                                                                    Body VC

               Body VC                 Functional parts           Door latches, seat frames                                                                                                                                                                                   performance at a lower cost. Since the AISIN Group’s                          with the Tier 1 role as a primary supplier for auto-
                                       External parts             Door frames, door handles, moldings          Hospitality                                                                                                                                                    strengths lie in electromechanical products that                              makers, mainly handling car navigation systems, and
                                                                                                                                                                                                                                                                              combine an actuator and an electronic control                                 the Tier 2 role as a secondary supplier handling
                                                                                                                                                Electronics VC

                                                                                                                                                                                                                                                                              device, we need to find ways to better integrate a                            components, such as ECUs for automatic transmis-
                                                                                                                                                                    Aisin Seiki

                                                                                                                                                                                  Aisin AW

          ICT & Electronics             Information               Navigation systems

                                                                                                                               Location Based
                                                                                                                                                    ICT &

                 VC                    Electronic components      Electronic control units (ECU), sensors                         Services
                                                                                                                                                                                                                                                                              motor, driver and an ECU. Occasionally, we will also                          sions. In the Tier 1 role, there is an issue of how we
                                                                                                                                                                                                                                                                              need to collaborate with the ICT & Electronics VC                             should respond to the evolution of car navigation
      * For the overview of the VC System, please refer to the “Message from Top Management” section on Pages 06-11.
                                                                                                                                                                                                                                                                              and Powertrain VC to reinforce our overall capabili-                          systems. Our strength lies in that we have vehicle

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AISIN GROUP REPORT 2017 - Aisin Seiki
Special Feature 1 Virtual Company Presidents’ Roundtable Discussion

                                                 Masahiro Nishikawa                                Hiroshi Uenaka                                             Makoto Mitsuya
                                                 President                                         President                                                  Executive Vice President
                                                 Body VC                                           ICT & Electronics VC                                       Aisin Seiki Co., Ltd.

                                                                                                                             State of the VC System and Message for the Future 
     information. In addition, Aisin AW had originally                that have become available through higher efficiency    Powertrain VC                                                       Group Head Office
     been handling high-precision map information. We                 will be allotted to overseas bases, to which we wish    Ozaki: I felt certain that the VC System will be                    Mitsuya: The Group Head Office started discussing
     intend to effectively combine these pieces of infor-             to add better management capabilities or assign         successful when I first addressed employees at the                  about the VC System with each company around
     mation with information equipment and jointly                    more advanced, strategic operations. The Group          launch ceremony in April. As time passes, we will be                February of this year. Because there was only a lim-
     create new value with automakers. We are also                    Functions Sector will identify operations that are      able to build a heightened sense of unity within the                ited time, we received varying opinions about the
     looking into the creation of new Business to Business            better conducted together in the areas of procure-      Business VC. We are very thankful for receiving                     system at first. But as we explained our aspiration in
     (B to B) services. In the Tier 2 role, we are required to        ment, logistics, basic research and development, and    many inquiries from customers in the powertrain                     detail, they gradually showed deeper understanding.
     offer even higher functionality and quality at lower             leverage the scale advantage of the AISIN Group as      field. We will work to capture every chance and                     We would like to set up a positive activity cycle by
     costs, and this makes combining our products with                an effort to achieve improvement.                       contribute to the growth of the entire Group.                       accumulating example cases, which make us feel we
     IT systems more important. Along with technology                 Ihara: The Group Managerial Administration Sector                                                                           did a good thing and naturally create a sentiment to
     development, we will make efforts to change our                  provides good examples of integrated operations         Chassis & Vehicle Safety System VC                                  do more. About five years ago, we had conducted
     way of working. This means that within the VC                    and unified systems of personnel affairs, accounting    Ogiso: We at the Chassis & Vehicle Safety System                    Group collaboration activities. Executive officers who
     System, we will assume a “Tier 1.5” role and foster              and public relations. On the other hand, the Business   VC are also feeling confident. Being able to talk to                gathered at that occasion were wearing different
     collaboration in undertaking our tasks.                          VCs and the Group Head Office have their own            each other beyond the Group’s corporate borders is                  company badges, and I asked them to take those
     Ihara: Japanese manufacturers are forced into a                  development, production, products, procurement          extremely valuable and is expected to generate a                    badges off and talk as members of the AISIN Group.
     difficult battle in this area, as is the case for semicon-       and sales functions, just like before. The VC System    great outcome. We have many competitors in the                      We have only one badge today, and I no longer have
     ductors. Does the AISIN Group have a chance to take              will not work if we fail to define the clear roles of   chassis and vehicle safety field. To prevail over the               to ask them to take it off. The entire Group will work
     a competitive lead in this area?                                 the Group Head Office and each Business VC. How         competition, we absolutely need to transcend corpo-                 as one team for the future of the AISIN Group.
     Uenaka: We can differentiate ourselves by combin-                will the Group Functions Sector handle the matter?      rate borders and have frank discussions. We will
     ing mechanical and actuator-related products,                    Mitsuya: We are indeed discussing with each             facilitate exchange of honest opinions among the                    Ihara: The VC System is, in fact, an extreme measure
     a source of the AISIN Group’s strengths, with ICT                Business VC about the roles of the Functions Sector.    members of the VC System, draw on their individu-                   designed to secure the future competitiveness of the
     and electronics devices. We aim to channel more                  We will sort out our operations by first clarifying     alities and work with a passion toward our goal.                    AISIN Group. In the age of great uncertainty, it is
     resources into this area and win out over the                    which operations are better conducted jointly.                                                                              difficult to attain greater competitiveness through
     competition.                                                     Ihara: Taking procurement activities as an example,     Body VC                                                             a work style that exists within the context of conven-
     Ihara: We opened the Daiba Development Center in                 the system of purchasing main components at each        Nishikawa: The VC System has been a driver of                       tional ideas. Thus, the most important objective of
     April 2017. What is your plan regarding personnel                Business VC and buying items that are suitable for      inter-company personal exchange. We will continue                   the VC System is to reform our way of working and
     recruitment?                                                     bulk purchase, such as materials and electronic         to expand this circle of exchange because we believe                increase our competitive edge. The entire AISIN
     Uenaka: It takes time to nurture human resources.                components, at the Group Head Office is a good,         that natural interaction among people creates a                     Group will strive together to continue to evolve
     But we cannot wait that long. We need to cultivate               simple example. I hope you can achieve a similar        strong system. Currently, the three companies are                   through trial and error, meet the expectations of
     the capabilities of our workforce through mid-career             separation of work in the areas of production           tackling issues for improving efficiency and utilizing              our stakeholders and move ahead to enhance our
     recruitment and other means.                                     engineering and development.                            “extra” resources generated through higher effi-                    competitiveness.
                                                                                                                              ciency to expand our business. We will use the VC
     Group Head Office                                                                                                        System effectively and work steadily toward enhanc-
     Mitsuya: For several decades, each company in the                                                                        ing the appeal of our products and increasing sales.
     AISIN Group had conducted business separately.
     Taking the opportunity of the launch of the VC                                                                           ICT & Electronics VC
     System, we need to reform this mindset by thinking                                                                       Uenaka: The VC System has changed the atmo-
     what is best for a consolidated group, not for an                                                                        sphere positively. We had collaborated within the
     individual company, and by questioning ourselves if                                                                      Group in the past, but what differs most from our
     our conventional way of working really generates                                                                         past initiatives is that members are very eager to
     value. As a first step, the Group Managerial                                                                             provide ideas on what they would like to do. We
     Administration Sector will create a common platform                                                                      already have 92 such action ideas. Achieving an
     by, for example, standardizing our accounting                                                                            outcome for each as early as possible will lead to
     systems. We will then utilize AI and robotics technol-                                                                   the generation of new ideas on what to do next.
     ogies to automate routine operations and simple                                                                          We would like to establish such a positive cycle.
     analysis and decision-making processes. Resources

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Special Feature 2
                                                                                                                         After undertaking business restructuring in five
                                                               Discussion between an Analyst and                         areas from fiscal 2016 and implementing
                                                               Executive Vice President                                  “problem-solving activities” in fiscal 2017, the
                                                                                                                         AISIN Group introduced a Virtual Company (VC)

                                                               What are the                                              System aimed at further raising competitiveness
                                                                                                                         as it approaches an age of dramatic change.

                                                               financial strategies
                                                                                                                             To explain to shareholders and investors
                                                                                                                         about the financial measures that will support
                                                                                                                         the AISIN Group’s growth and evolution, we

                                                               that support the                                          welcomed global automobile industry expert
                                                                                                                         Takaki Nakanishi for a dialogue with Executive

                                                               AISIN Group’s                                             Vice President Makoto Mitsuya, who is in charge
                                                                                                                         of finance. Here we introduce our basic stance,

                                                                                                                         policies and strategies concerning finance as
                                                                                                                         well as the valued insights of Mr. Nakanishi.
                                                                                                                         Please read this section in conjunction with the “Message from Top
                                                                                                                         Management” on Pages 06-11 and with “Virtual Company Presidents’
                                                                                                                         Roundtable Discussion” on Pages 12-17.

                                                               Makoto Mitsuya                                                                        Takaki Nakanishi
                                                               Executive Vice President, Aisin Seiki Co., Ltd.                                                                 Analyst
                                                                                                                                                                                               Takaki Nakanishi
                                                                                                                                                                                               Analyst and CEO, Nakanishi Research Institute, Co., Ltd.

                                                               improvement activities?                                   the same products were being produced by multiple                     Takaki Nakanishi has extensive experience that includes management,
     Improving Profitability by Enhancing                                                                                                                                                      quality controller and a publishing analyst from both the sell-side
                                                               Mitsuya: Maintaining sustainable growth even in an        Group companies.                                                      (securities companies) and buy-side (fund management companies). Mr.
     the Efficiency of Business                                                                                                                                                                Nakanishi has been in charge of research in the auto industry continuous-
                                                               age of dramatic change is important. We are work-         Nakanishi: One benefit derived from the separate-                     ly since 1994 and has maintained his solid position. He ranked 1st in the
     Nakanishi: I have observed the AISIN Group’s              ing to improve our profit structure by trimming fixed     company system is mobility that is also one of the                    U.S. Institutional Investor All-Japan Research Team Rankings for the auto
                                                                                                                                                                                               sector for six years running from 2003 to 2008 and was also first in the
     growth pattern for 20-plus years and believe the          costs and developing high-added-value products            Group’s strengths. Nonetheless, I also began to sense                 Nikkei Veritas Analyst Rankings in the auto and auto parts industry over
                                                                                                                                                                                               the same period. After returning to the sell-side in 2011, he was ranked
     Group has steadily achieved solid growth. What will       to maintain a corporate structure capable of with-        that in many ways you faced issues concerning poor                    first in 2013 in both the Institutional Investor All-Japan Research Team
     be the key points for enabling the AISIN Group to         standing events such as the so-called Lehman shock.       efficiencies because of this approach. How would                      Rankings and the Nikkei Veritas Analyst Rankings in the auto industry.
                                                                                                                                                                                               Mr. Nakanishi has authored numerous books including Toyota versus
     maintain this growth?                                     Specifically, we aim to realize a break-even point        you generally assess this point?                                      Volkswagen—Strongest Company Aims to Be Champion in 2020 (Nikkei
                                                                                                                                                                                               Publishing Inc.) and 2020 “Group of Winners” Automakers (Nikkei
     Mitsuya: I believe that improving the profitability of    ratio of 80% or lower even with an exchange rate          Mitsuya: Regarding the poor efficiencies you men-                     Publishing Inc.).
     our businesses will be the most important point for       of $1/¥100. Although we will reduce fixed costs, I        tion, we have agency costs (conflicting opinions
     allowing the Company to continuously realize sus-         should point out that we also need to actively invest     among Group companies) and duplications in func-
     tainable growth. As indicators of our profitability, we   for development in next-generation fields. For this       tions sectors and in managerial administration sec-                   Management indicators and future initiatives
     emphasize the operating profit margin, the break-         reason, we must decisively eliminate wasteful areas       tors. Let me give you an example. Our Group com-                                                      Operating                        Total asset
     even point ratio and return on equity (ROE).              to realize a balance in the way we allocate funds.        panies possess and independently operate the entire                            ROE                   profit margin                   turnover ratio          Financial leverage
                                                                                                                                                                                                 Profit for the period       Profit for the period               Revenue                 Invested capital
         In recent years, we have promoted two important       Nakanishi: The collaboration of the entire AISIN          range of functions such as human resources, legal                       Shareholders’ equity              Revenue                    Invested capital          Shareholders’ equity
     activities for improving the operating profit margin.     Group is crucial for promoting profit structure           affairs and accounting functions. This has enabled
     One of these is problem-solving activities for quickly    improvements. Carrying out business globally through      each company to build systems and frameworks for                                                                                                               3. Capital strategy
                                                                                                                                                                                                                         1. Improve profitability         2. Enhance efficiency
     improving profit margins on any current products          numerous consolidated companies and sub-consoli-          optimal operations. On the downside, these individ-
                                                                                                                                                                                                                           Problem-solving                Effective use of assets     Capitalization ratio:
     having poor profit margins, with efforts focused          dated companies is certainly a strength of the AISIN      ual systems and frameworks are not always optimal                                                 activities                     Reduce duplicate            Maintain at 20%-25%
                                                                                                                                                                                                                           Business restructuring         investments
     on improving manufacturing. For example, in fiscal        Group. Alternatively, I believe that operations through   from the broader perspective of consolidated opera-                                               Improvement of                 (Virtual Company System)
                                                                                                                                                                                                                           break-even point ratio
     2016 one of our products had a negative profit mar-       207 companies lead to a variety of issues in terms of     tions and collectively often hindered overall efficiency.                                         • Develop high-added-
                                                                                                                                                                                                                             value products
     gin of 30%, but through problem-solving activities        optimization. What are your thoughts on this?                 We are moving decisively to solve this prob-                                                  • Reduce fixed costs
                                                                                                                                                                                                                             (Group Head Office)

     we turned this into a positive margin. The second         Mitsuya: Until now, the AISIN Group promoted sus-         lem of poor efficiencies. In April 2017, we newly
     activity is business restructuring. This restructuring    tainable growth by spinning off into separate com-        launched the Group Head Office and are consolidat-
                                                                                                                                                                                                                                    Improvement of ROIC                                 Financing with
     aims at raising the Group’s competiveness by trans-       panies any businesses that attained growth and then       ing and standardizing the functions and managerial                                                      (return on invested capital)                        favorable conditions
     forming our business structure with the involvement       raised its expertise in these particular fields while     administration sectors. Moreover, to accelerate the                                                              Profit for the period
                                                                                                                                                                                                                             Invested capital (= fixed assets + inventories)
     of other companies in five areas consisting of man-       achieving agile operations. However, this approach        reduction of fixed costs, we intend to proactively
     ual transmissions (MTs), brakes, seat frames, body        also had inefficient aspects. Because each company        utilize robotics and artificial intelligence (AI). In the
     parts and pistons.                                        pursued its own growth, this led to a duplication of      functions sector, we will undertake joint procure-                   administration sector, we will unify human resources
     Nakanishi: Could you discuss any numerical tar-           human resources, technologies and other resources         ment, joint logistics and joint development in the                   and accounting platforms and promote simplification
     gets you hope to attain in the future through these       among different companies. A prime example is that        field of the Internet of Things (IoT). In the managerial             and consolidation to further enhance efficiency.

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