AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki

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AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
2019   Integrated Report
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Corporate principles                                                                       CONTENTS
                                                                                                                                        Based on “Quality First”                                                                   Progress in value creation
                                                                                                                                        1. Enhanced Value Creation                                                                 02      AISIN Group history
                                                                                                                                        We are committed to contributing to the advancement
                                                                                                                                        of society through future-oriented research and                                            04      Strengths of AISIN Group
                                                                                                                                        development that provides new value for our                                                08      Financial and other highlights
                                                                                                                                                                                                                                   Creating value with a view to the next 50 years
                                                                                                                                        2. Continuous Global Growth
                                                                                                                                        We are committed to steady development and                                                 10      Message from Top Management
                                                                                                                                        growth in the global marketplace by establishing the                                       18      Financial strategies of AISIN Group
                                                                                                                                        foundations of our business activities in local values,
                                                                                                                                        cultures and customs.                                                                      22      AISIN Group’s value creation process

                                                                                                                                        3. Harmony with Society and Nature
                                                                                                                                                                                                                                   24      AISIN Group’s sustainability initiatives
                                                                                                                                                                                                                                           —Identifying materialities—
                                                                                                                                        We are committed to earning trust as a responsible
                                                                                                                                        corporate citizen by valuing harmony with society and                                      Results of our value creation initiatives
                                                                                                                                                                                                                                   26      Our Virtual Company (VC)
                                                                                                                                        4. Individual Creativity and Initiative
                                                                                                                                        We are committed to building a work environment                                            27      Group Head Office
                                                                                                                                        that promotes continuous progress by developing the                                        28      Powertrain VC
                                                                                                                                        creativity and initiative of individual employees.
                                                                                                                                                                                                                                   30      Chassis & Vehicle Safety System VC
                                                                                                                                                                                                                                   32      Body VC
                                                                                                                                                                                                                                   34      ICT & Electronics VC
                                                                                                                                                                                                                                   36      Aftermarket VC

                                                                                                                                                                                                                                   Value creation management
                                                                                                                                                                                                                                   38      Executive officers
                                                                                                                                                                                                                                   42      Governance

                                                                                                                                                                                                                                   Social and environmental initiatives
                                                                                                                                                                                                                                   50      Environment
                                                                                                                                                                                                                                   60      Society

                                                                                                                                                                                                                                   Financial and company information
                                                                                                                                                                                                                                   72      Consolidated summary of financial and non-
                                                                                                                                                                                                                                           financial information over the last 11 years
                                                                                                                                                                                                                                   74      Financial review
 Kanshiro Toyoda                                                     Kiyotaka Ise
                                                                                                                                                                                                                                   77      Consolidated financial statements
 Chairman                                                            President
 Aisin Seiki Co., Ltd.                                               Aisin Seiki Co., Ltd.                                                                                                                                         81      Major shareholders

                                                                                                                                                                                                                                   82      Outline of 13 Main AISIN Group Companies

                                                                                                                             Editorial policy                                                                                      Framework for Disclosure of Information
                                                                                                                             AISIN Group Report (Integrated Report) is issued by AISIN Group to provide shareholders, investors
                                                                                                                             and other stakeholders with an understanding of our initiatives to increase our corporate value in
                                                                                                                             the medium to long term. The report is edited according to the International Integrated Reporting          Financial Information             Other Information
                         In fiscal 2019, we achieved record sales through initiatives to make our existing businesses more
Message from
                                                                                                                             Framework by the International Integrated Reporting Council (IIRC)
                                                                                                                             and the Guidance for Collaborative Value Creation by the Ministry of                                                    AISIN Group Report 2019
                         competitive, accelerate growth strategies with a view to the next generation and reinforce our
                                                                                                                             Economy, Trade and Industry to provide more important information on
the Chairman             management foundations for sustainable growth. It is thanks to our stakeholders that we have
                         been able to achieve this, and we would like to express our warmest gratitude to you all.
                                                                                                                             how we are increasing our corporate value. This information includes
                                                                                                                             the history and strengths of AISIN Group, our strategies and business
                                                                                                                                                                                                                                        Includes:                     Includes:

and President
                                                                                                                                                                                                                                        • Financial Report            • Social and Environmental
                                                                                                                             activities in the face of the biggest period of change in 100 years, and
                            The world’s automotive industry is currently facing the biggest period of change in 100                                                                                       Guidance for                  • Securities Report             Initiatives
                                                                                                                             our ESG initiatives. Information on our ESG initiatives covers work that
                         years. “Quality First” has been AISIN Group’s basic philosophy since we were first established.     has a particularly significant impact on our corporate value from the        Collaborative                 • Shareholders’ Report        • Environmental Data
                                                                                                                             perspective of priority. Other details can be found on our website.          Value Creation                                              • Corporate Governance
                         We continually approach our work with a customer-first mindset, striving to create safe and                                                                                                                                                    Report
                         important, high quality products for our customers. This basic philosophy will continue to guide                                                                                                                                             .
                         our work in the future as we aim to become a vibrant company that is truly competitive and          Period                                               Reference guidelines                                                 AISIN Group website
                                                                                                                             Primarily fiscal 2019 (April 1, 2018 to March        ISO 26000, Global Reporting Initiative
                         provides new value.                                                                                 31, 2019). Some information is related to             (GRI) Standard, Environmental Reporting                 
                            We hope that you will continue to support us and work with us in the future.                     activities outside this period.                       Guidelines (2012 Version) by Japan’s Ministry
                                                                                                                                                                                   of the Environment
                                                                                                                             In principle, this report covers AISIN Group         Fiscal year
                                                                                                                             (Aisin Seiki Co., Ltd. and its consolidated          April 1, 2018 to March 31, 2019
                                                                                                                             subsidiaries). In cases where the scope of           The scope of consolidation covers
                                                                                                                             reporting differs, we indicate this using            consolidated subsidiaries and equity-method
                                                                                                                             descriptors such as “13 main group                   affiliates.
                                                                                                                                                                                  September 2019
                                                                                                                                                                                                                                                                          AISIN GROUP REPORT 2019   01
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Progress in value creation

     AISIN Group history
     AISIN Group is composed of a vast collection of automotive companies led by Aisin Seiki, our core company which was                                                                                                                                                                                                                                             Strengths of AISIN Group:
     founded in 1965. Throughout our history, we have strategically expanded and adapted our business operations to meet the                                                                                                                                                                                        ystem
     ever-diversifying needs of the automotive industry. Each of our companies has a specialist-level team of professionals working                                                                                                                                                                         e  ty S
                                                                                                                                                                                                                                                                                                        Saf                 ics                       le
                                                                                                                                                                                                                                                                                                    cle                  ron t                    sty
     with highly advanced technology. The changes taking place in the industry are the kind that come along once a century, but at                                                                                                                                                      i n    Vehi                  c t        e           L ife
                                                                                                                                                                                                                                                                                    rtra ssis & y                 le          rk         y&
                                                                                                                                                                                                                                                                                                               & E terma
     AISIN Group, we are ready. In April 2017, we adopted a new Virtual Company System to maximize the vast potential among
     our global companies in a unified way. The success of the Virtual Company System inspires us to continually improve the way
                                                                                                                                                                                                                                                                                                           ICT       Af           En
                                                                                                                                                                                                                                                                                                                                     erg                                           Outstanding technology
     we do business to sharpen our competitive edge.                                                                                                                                                                                                                                                                                                                               development
                                                                                                                                                AW Industries                                 Aisin AW Industries                                                                                                                                                    • Creative development of technology that is environmentally friendly,
                                                                                                                                                                                                                                      Aisin AW Industries                                                                                                              fuel efficient, safe and user-friendly
                                                                                                                          Toyoyasu Seiki    Aisin Toyoyasu
                                                                                                                                                                                                                                                                                                                                                                     • Comprehensive evaluation of the functions and performance required
                                                                                                                                                                                        Aisin Kiko                                                                                                                                                                     for every vehicle
                                                                                                                                                                                                                                            AISIN Kiko
                                                                                                                                                AW Kiko                                                                                                                                                                                                              • Wide-ranging collaborations with partners for maximum potential
     Tokai Aviation Industries                                                                                                                                                                                                                                                                                                                                       • Accurately assessing consumer needs with our extensive knowledge of
     established                                                                                  Aisin Warner                                  Aisin AW
                                                                                                                                                                                                                                                                                                                                                                       BtoC business
                                                                                                                                                                                                                                             Aisin AW
                                                                                                                                                                                Aisin AW Seimitsu
                   Tokai Aircraft
                                                                                                                                                                                                              Aisin AI
                                    Aichi Kogyo
                                                  1965                                                                                                                                                              ADVICS
                                                                                                                                                                                                                                                                                                                                                                                   Excellent manufacturing
                                                  Aisin Seiki formed
                                                                                                                                                                                                                                            Aisin Seiki                                                                                                              • Technology for the entire production process from raw materials
              Shinkawa Kogyo                                                                           Aisin Keikinzoku                                                                                                                                                                                                                                                to assembly, using a wide range of methods including die casting,
                                                                                                                                                                                                                                       Aisin Keikinzoku                                                                                                                pressing and cutting
                                                                                                                                                Sin’ei Kogyo                   Aisin Sin’ei                                                                                                                                                                          • Supplying high-quality products worldwide
                                                                                                                                                                                                                                            Aisin Sin’ei
                   Shinkawa                                                                                                                                                                                                                                                                                                                                          • Passing on our knowledge and techniques through training initiatives
                                                  Takaoka Kogyo                                                                             Aisin Takaoka
                                                                                                                                                                                                                                           Aisin Takaoka                                                                                                               to assist with technology development around the world
                                           Ohama Sewing   Hekinan
                                           Machines       Industries                               Aisin Chemical
     Toshin Aircraft                                                                                                                                                                                                                    Aisin Chemical
                                         Chugai Finance         Chugai Real Estate                                Aisin Development
                                                                                                                                                                                                                                                                                                                                                                                   Cohesive strength as a
                                             Fuji Engineering                                                                                                              Aisin Development
                                                                                                                                                                                                                                     Aisin Development
                                                                                                         Aisin Greening
                                                                                                                                                                                                                                                                                                                                                                     • Wide-ranging business fields and highly specialized operations
                                                                                                                                                                                                                                                                                                                                                                     • Flexibly adapting our core businesses to meet the needs of each
                                                                                Hosei Brake Industry                                                                                                                                                                                                                                                                   new era
                                                                                                                                                                                                                                     Hosei Brake Industry
      Shiroki Metal Industries                                                                                                                  Shiroki Corporation
                                                                                                                                                                                                                                     Shiroki Corporation
      Art Commerce      Art Metal Mfg.
                                                                                                                                                                                                                                        Art Metal Mfg.

     1965 - 1974
     Birth of Aisin Seiki
     Aisin Seiki was created in 1965 through the merger of
                                                                                 1975 - 1984
                                                                                 Pursuit of “Quality First”
                                                                                 Aisin strengthened its corporate structure through total
                                                                                                                                                            1985 - 1994
                                                                                                                                                            Full-fledged overseas production
                                                                                                                                                            In reaction to the Plaza Accord in 1985, AISIN Group also
                                                                                                                                                                                                                                     1995 - 2004
                                                                                                                                                                                                                                     Expanding and upgrading overseas
                                                                                                                                                                                                                                     business structure
                                                                                                                                                                                                                                                                                                                     2005 - 2014
                                                                                                                                                                                                                                                                                                                     Expansion and independence of global
                                                                                                                                                                                                                                                                                                                                                                                              2015 - present
                                                                                                                                                                                                                                                                                                                                                                                              Initiatives to strengthen AISIN Group’s
     Aichi Kogyo Co., Ltd. and Shinkawa Kogyo Co., Ltd. to                       quality control (TQC), and won the Deming Prize, the                       commenced full-fledged overseas production.                              Driven by our mission to expand into new and emerging                           Along with the globalization of business, we strengthened                • Business restructuring
     strengthen corporate structure and fortify international                    Japan Quality Control Prize, the Plant Maintenance (PM)                                                                                             markets, we leveraged our full-fledged local production                         group collaboration and progressed with the creation of a                We created a new framework by restructuring our manual
     competitiveness as an auto parts manufacturer.                              Prize and the PM Special Prize in the TQC and total                                                                                                 capabilities and strengthened our production and sales                          business structure in each region that enables operations                transmission, brake, body, seat frame and piston businesses
                                                                                                                                                            New developments in leading-edge                                                                                                                                                                                                  to strengthen our production systems and build our other
                                                                                 productive maintenance (TPM) categories.                                                                                                            structures globally with a particular focus on North, South                     ranging from development and design to production and
                                                                                                                                                            technology fields                                                                                                                                                                                                                 core businesses.
     Established mass production framework                                                                                                                  Future-oriented technology research began to bloom                       and Central America, Europe, ASEAN countries and China.                         sales to be carried out independently.
     to handle changes in the market                                             Toward the age of vehicle electronics                                      with the creation of new products in the fields of energy                                                                                                                                                                         • Accelerated development of future business fields
                                                                                                                                                                                                                                                                                                                                                                                              AISIN Group strategically chose to invest global development
     We expanded our production capacity to meet market                          We launched a new structure that incorporated electronics                  and medical devices through the expansion of our global                  Initiatives for development in energy                                                                                                                    resources into three areas for future business expansion: zero
     needs as the automobile manufacturing industry rapidly                      with traditional mechanics to respond to rapid advances in                 research network.                                                        fields                                                                                                                                                   emissions, automated driving and connected cars. These
     expanded.                                                                   this industry segment.                                                                                                                              Aisin’s corporate philosophy is deeply rooted in                                                                                                         focus areas will drive our next-generation technologies.
                                                                                                                                                                                                                                     environmental protection, and we began to promote
                                                                                                                                                                                                                                                                                                                                                                                              • Introduction of a Virtual Company System
     Pursuit of self-reliance in technologies                                    Research network for future technology                                                                                                              efforts for commercialization to solve various                                                                                                           The introduction of our Virtual Company System in 2017
     As technology began to emerge as a trend in the                             development                                                                                                                                         environmental issues such as global warming. This led to                                                                                                 created a more unified AISIN Group and accelerated our
     automotive industry, Aisin Seiki implemented measures                       As society began to look toward the 21st century, we                                                                                                new areas of product development including fuel cells                                                                                                    potential for growth in this rapidly changing industry. The
     to raise its capabilities, including opening the Technology                 developed a proprietary research network, establishing                                                                                              and solar cells.                                                                                                                                         unified direction, improved efficiency, new value creation and
     Development & Research Laboratory, building a new                           and then expanding laboratories for each of our core                                                                                                                                                                                                                                                         sophistication of this system gives us a distinct competitive
     proving ground and proactively introducing technologies                     fields.                                                                                                                                             Aiming for a sustainable society
     from European and U.S. markets.                                                                                                                                                                                                 We launched company-wide initiatives that position global                                                                                                                                                  (Billion yen)
                                                                                                                                                                                                                                     environmental protection as a crucial management issue                                                                                                                                                     4,500
                                                                                                                                                                                                                                     because we believe that creating a sustainable society is
                                                                                                                                                                                                                                     the social responsibility of all companies.

      ■ Sales throughout Aisin’s lifetime                                                                                                                                                                                                                                                                                         Electric water pump for
      *Sales up to 1992 are non-consolidated.                                                                                                                                                                                                                                                                                     engine cooling
      *Overseas sales: The figure used for this ratio overseas sales minus sales for items exported from Japan.                                                                                                                                                                                                                                                                                                                                3,000
                                                                                                                                                                                                                                                                                                                                                                RWD 10-speed automatic transmission

                                                                                                                                                                                                                                                                                                                                                                                                                               Overseas sales

                                                                                                                                                                                                                                                           Power sliding door system
                                                                                                                                                                                                                                                                                                                                                    Overseas sales

                                                                                                                                                                                                                                                                                                                                                    33.7%                                                   FY2019
                                                                                                                                                                                                                                                                                                                                FY2006                                                                Consolidated revenue                      1,500
                                                                                                                                                                                                                                                                                                                         Consolidated revenue

                                             Commissioned for production of                                                                                            Gas engine driven heat-
                                                                                                                                                                                                         Voice navigation system
                                                                                                                                                                                                                                                                                                                         ¥  2,120.5                                                                   ¥4,043.1
                                                                                                                                                                       pump air conditioner                                                                                                                                                                                                                 billion
                                             Toyoglide 2-speed semi-automatic                 Shower toilet                   Sun-roof (first in Japan)                                                                                                                                                                        billion
                                             transmission (first in Japan)                                                                                             (outdoor unit)
     Development of home-use
     sewing machines                                                                                                                                                                                                                                                                                                                                                                                                                             0
      1965                                        1970                                      1975                                      1980                                       1985                                        1990   1995                                   2000                                                 2005                                      2010                                  2015

02   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                                                                                                                                                                           AISIN GROUP REPORT 2019                  03
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Progress in value creation
     Strengths of AISIN Group

                                           Outstanding technology development
                                           AISIN Group draws on a vast base of highly specialized technology in order to respond to the
                                           increasingly sophisticated and diverse needs of the automotive industry and the demands of society.
                                           From artificial intelligence to automated vehicles and cutting edge research to CASE* product
                                           development, AISIN Group has the agility and ability needed to remain on the leading edge for the
                                           future while producing the products of today.
                                           *CASE is an acronym for “connected”, “autonomous”, “shared/service” and “electric”, indicating the core trends of the automotive industry.

     Creative development of technology that is environmentally friendly, fuel-efficient,
     safe and user-friendly
     We never lose sight of our vision to expand our existing products globally, and to develop products that will change the future of
     society. The 13 main companies in AISIN Group have 19 development sites and 13 advanced research facilities worldwide along
     with three test courses. At any moment around the world, there is an Aisin team working hard to                    IMRA Japan
     discover the next technological                                                                                        Sites   Sapporo
     breakthroughs in the automotive           Aisin Europe S.A.                                                          Fields of Electromagnetic materials, superconductive
                                                                                                                          Research materials, biological sciences
     industry.                                                                           Aisin (Nantong) Technical Center                                                                                                                                                                                                          Aisin Technical Center of America, Inc.
                                                                      AW Technical Center Europe S.A.
                                                                      (Belgium Head Office)                              of China Co., Ltd.                                       Toyokoro Proving Ground       Daiba Development Center
                                                                                                                                                                                  Nakagawa District, Hokkaido                                                                        IMRAAmerica,Inc.
                                                                      AW Technical Center Europe S.A.                                                                                                                                                                                   Sites     Fremont, Boulder, Ann Arbor
                                                                      (Wolfsburg Branch)                                                                                                                                                                                              Fields of   Lasers
                                                                                                                                                                     Tangshan Aisin Gear Co., Ltd.                                                                                    Research

                                                                               ADVICS Europe GmbH                                                                         ADVICS Changzhou
                                                                               Aisin AI Europe GmbH                                                                       Administration Co., Ltd.
                                                                                                                                                                                      Fujioka Proving
                                                                                                                                                                                      Toyota City, Aichi                                                                                                                          AW Technical Center U.S.A., Inc.
                                                                                                                                                                                                                Technova                                                                                                          ADVICS North America, Inc.
                                                                                                                              Aisin Wuxi Body Parts Co., Ltd.
                                                                                                                                                                                                                   Sites     Tokyo
                                                                                                                                                                                                                 Fields of   Think tank (energy, the environment, transport, etc.)
                                                                                                                    AW Suzhou Technical Center Co., Ltd.                                                         Research
                                                                                                                                                                                                                                                                                                                                  Shiroki North America, Inc.
                                                                                                                                  AW Hangzhou Software Development Co., Ltd.
                                                                                                                                                                                                                Equos Research
                                                                                          Aisin Automotive Haryana Pvt. Ltd.
                                                                                                                                                                                                                   Sites     Tokyo, Anjo
                                                                                                ADVICS North India Pvt. Ltd.                       Guangzhou Shiroki Corp.
                                                                                                                                                                                                                 Fields of   Fields related to information and energy                                                  Fowlerville Proving Ground
                                                                                                                                                                                                                                                                                                                       Michigan, USA
                                                                                                                                                                                                                Aisin Cosmos R&D
                               IMRA Europe S.A.S.                                                                                                                                                                  Sites     Kariya, Kisarazu
                                   Sites     Brighton (UK), Sophia Antipolis (France)                                  Aisin Cosmos R&D Co., Ltd.                                                                Fields of   Human subject research (Kariya), biotechnology
                                                                                                                          Sites      Hyderabad                                                                   Research
                                Fields of    Electrochemistry (solar cells), perception
                                Research     and intelligence (image processing),                                       Fields of    Chemical synthesis
                                             electromagnetism (motors)                                                  Research                                                                                IMRA Material R&D
                                                                                                                                                                                                                   Sites     Kariya
                                                                                                                                                                   Shiroki Asia Corporation Limited
                                                                                                                                                                                                                 Fields of   Advanced materials
               ● Overseas development sites: 19                                                                                                                    Aisin Asia Pacific Co., Ltd.                  Research
                                                                                                                                                                                                                                                                                                                                                                Aisin Automotive Ltda.
               ● Advanced research facilities: 13
               ● Test courses: 3
               ● Daiba Development Center

     Comprehensive evaluation of the functions and performance                                                                                                                                                       Welcoming outside perspectives through wide-ranging
     required for every vehicle                                                                                                                                                                                      collaborations with partners
     When it comes to proving grounds, AISIN Group was a trailblazer, beating our competitors to the                                                      Recreating unique environments                             AISIN Group has a long history of alliance with research institutes, universities and other
     punch by building a general proving ground including a circuit in 1970. Our proving grounds are                                                      around the world in our evaluations                        partners for technical collaborations such as the historic Technova* project. We continue
     an important part of our constant work to verify and improve the performance and durability of                                                                                                                  to look outside our own practices to gather information from a variety of industries to best
     our products, with highly advanced facilities and test courses recreating road conditions around                                                                                                                anticipate and respond to the rapidly changing demands of the industry. In January 2018,
     the world. Tests are conducted from a variety of angles, always with our users’ experience in mind.                                                                                                             AISIN Group formed a consolidated subsidiary fund, the Fenox Venture Company in Silicon
     The results of our evaluations are instantly applied to our product development work in an ongoing                                                                                                              Valley, California, to maximize the resources of outstanding technical startups. We also
     initiative to provide the reliability that the industry increasingly demands. We are always working to
                                                                                                                                                                                                                     signed a capital and business partnership with Idein
     improve evaluations to accelerate development of next generation of products and make efficient
                                                                                                                                                          Evaluation of electromagnetic waves                        Inc. in February 2018. This partnership will work to
     use of our findings throughout the group.                                                                                                            transmitted to electronic devices                          develop cutting-edge technology, making use of Idein’s
         Aisin builds automobile evaluation framework focused on manufacturers and users,                                                                                                                            AI model designs and outstanding technology for
         with three domestic and overseas test courses                                                                                                                                                               mass-produced microcomputers to develop AI-based

                                                                                                                                                                                                                     *	Technova is a technical think tank that was established in AISIN Group
                                                                                                                                                                                                                        in 1978.
                                                                                                                                                          Evaluation of automatic brake systems

     Fujioka Proving Ground                               Toyokoro Proving Ground                        Fowlerville Proving Ground
                                                                                                                                                          Evaluation of vehicle stability on course
     Toyota City, Aichi Prefecture                        Nakagawa District, Hokkaido                    Michigan, USA
                                                                                                                                                          with artificial ice
     Area: Around 670,000m2                               Area: Around 7,480,000m2                       Area: Around 3,840,000m2

04   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                                                                                                                                   AISIN GROUP REPORT 2019   05
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Progress in value creation
     Strengths of AISIN Group

                               Excellent manufacturing (production technology)                                                                                                     Cohesive strength as a group
                               At AISIN Group, we give 110% to our manufacturing work, creating top-notch production                                                               With specialized expertise in a wide range of business fields, we are able to meet the wide-ranging
                               technology to produce products with quality our customers can rely on.                                                                              needs of consumers—our end customers—in areas that range from our core automotive parts
                               And we have no plans to rest on our laurels—we will continue to innovate in the creative methods                                                    business to fields such as electronics and energy.
                               and build production processes we have developed for the next generation of products, and we will
                               build on our framework for our development of production technology so that every product in
                               every region of the world has the best possible quality.
                                                                                                                                                     Body product business                                          Chassis & Vehicle Safety                                               Powertrain Business
                                                                                                                                                                                                                    System business
     Supplying high-quality products worldwide
                                                                                                                                                                    Aisin Seiki                                                     Aisin Seiki                                                             Aisin Seiki
     We have built a global supply framework with 150 production sites around the world.
     We work closely with the world’s major automotive manufacturers to develop and supply products that meet their                                                 Aisin Sin’ei                                                    Hosei Brake Industry                                                    Aisin AW
     diverse range of needs and provide a high degree of added value.                                                                                               Shiroki Corporation                                             ADVICS                                                                  Aisin Kiko
                                                                                                                                                                                                                                                                                                            Aisin AW Industries

                                                                                                                                                                    19.5%                                                             17.9%
                                                                                                                                                     Ratio of                                                       Ratio of                                                                                Art Metal Mfg.

                                                                                                                                                     total sales:                                                   total sales:
                       production sites around the world                                                                                             Sales:         ¥789.0billion                                   Sales:            ¥724.1billion

                                                                                                                                                                                                                                                                                           Ratio of
                                                                                                                                                                                                                                                                                           total sales:

                                                                                                                                                                                                                                                                                           Sales:             ¥2,253.9billion
                                            China                                                                    North
          Europe                                                                                                    America
         6 companies                     31 companies               Japan                                       23 companies
                                                               52 companies
                                                                                                                                                                                                                             Disc brake

                                                                                                                                                                                                    ESC modulator
                                                                                                                                                                                                                                      Total sales of
                                                                                                                                                      Sun roof                                                                        AISIN Group
                                                                                                                                                                                                                                                                                                                                Raw Materials
                                                                                                                                                                                                                                                                                  Automatic transmission

                                                                                                                                                                                                                                                                billion                                                         Business
             Africa                            Asia &                                                                               America
            1company                                                                                                               3 companies
                                             34 companies                                                                                             Power sliding door

                                                                                                                                                                                                                                                         Around                                                                 coating-type damping
                                                                                                                                                                                   Power back door system               Parts supplied
                                                                                                                                                                                                                        by AISIN Group           15,000                                                                         material

                                                                                                                                                                                                                                                         Around                                                                        Aisin Takaoka
                                                                                                                                                                                                                                                                                    Electric 4-wheel drive unit
                                                                                                                                                                                                                        Total parts
                                                                                                                                                                                                                        in an automobile         30,000                                                                                Aisin Chemical
                          Wide range of production                                Sharing knowledge and techniques                                                                                                                    (From a study by AISIN)                                                                          Aisin Keikinzoku
                          methods and technology                                  to contribute to global growth
                          With a wide range of production methods and             We know that high-quality products come from
                          technology, from die casting and pressing to cutting,   highly skilled workers, and one of our most important
                          raw material handling and assembly, AISIN Group is      initiatives is a global training program for our                                                                                                              Electric water pump
                                                                                                                                                                                                                                                for engine cooling
                          involved in the entire production process, and our      manufacturing team members. This enables us to
                          products account for an enormous number of the          pass on the knowledge and techniques that AISIN                                                                                                                                                                          Aftermarket Business
                          parts in a vehicle.                                     Group has developed over the years, and contributes
                                                                                  to the development of the countries where AISIN’s
                                                                                  companies are located.
                                                                                                                                                     ECU                   Car navigation system

                                                                                                                                                     ICT & Electronics Business                                     Energy & Homes Business
                                                                                                                                                                    Aisin Seiki                                                     Aisin Seiki
                                                                                                                                                                    Aisin AW                                                        Aisin Takaoka
                                                                                                                                                                    ADVICS                                                          Aisin Development
                                                                                  Workers learn how to operate an    Our staff learn how to draw
                                                                                                                                                                     3.1%                                                             3.8%
                                                                                                                                                     Ratio of                                                       Ratio of
                                                                                  industrial robot                   diagrams with CAD and by hand
                                                                                                                                                     total sales:                                                   total sales:

                                                                                                                                                                     ¥124.0billion                                                    ¥152.1billion
                                                                                                                                                                                                                                                                          Household                      Gas engine driven        Shower toilet
                                                                                                                                                     Sales:                                                         Sales:                                                co‑generation systems          heat‑pump air
                                                                                                                                                                                                                                                                                                         conditioner (outdoor

06   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                                                                         AISIN GROUP REPORT 2019           07
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Progress in value creation

                                                                                                                                                                                                                                                                                                                             *The index used for emissions per sales is calculated as a percentage of the figure for
     Financial Highlights                                                                *Figures are indicated by Japanese standards for fiscal 2015 and according to IFRS for fiscal 2016 onward                       Other Highlights                                                                                      the baseline year (FY2010) of targets set out in the Sixth Environmental Action Plan

     Net sales, operating income and operating margin                                                             Profit before tax and profit attributable to the owner                                                 Total CO2 emissions and CO2 emissions per sales                                                          Total CO2 emissions in transportation and emissions per sales
                                                                                                                  of the parent company for the current period
                                                                                                                                                                                                                         ■ Total CO2 emissions                CO2 emissions per sales                                             ■ Total CO2 emissions in transportation             Emissions per sales
       ■ Net sales         ■ Operating income              Operating margin                                       ■ Profit before tax         ■ Profit attributable to the owner of the parent                           (1,000t-CO2)                                                                           (Index)            (1,000t-CO2)                                                                      (index)
                                                                                                                                                company for the current period                                            6,000                                                                                    100                120                                                                            100
     (Billion yen)                                                         4,043.1          (%)                   (Billion yen)                                                                                                                                                                                                                    89
                                                              3,908.9                                                                                                                                                                                   87                                                                                                                  84            84
        4,000                                                                                   8.0                      300                                                                                                                                           82                                                                                      93                                      83
                                                                                                                                                                                                                                         92                                           79
                                                 3,562.6                                                                                                                        268.1                                                                                                               76
                                    3,245.9                         6.5                                                  250                                     237.3                                                    4,500                                                                                    75                   90                                                                           75
                       2,964.6                                                                                                                                                                 217.4
        3,000                                         6.4                                       6.0                                                                                                                                                                                                                                                                                                    71
                                         5.9                                                                                                      194.0                                                                                                                                                                                                                                   69
                            5.6                                                    5.1                                   200       184.0                                                                                                                                            2,959         3,027                                            59          62           62
                                                                                                                                                                                                                          3,000                                       2,719                                        50                   60                                                                           50
                                                                                                                                                                                                                                        2,521          2,579
        2,000                                                                                   4.0                      150                                                        134.5
                                                                                                                         100                                                                                              1,500                                                                                    25                   30                                                                           25
        1,000                                                                                   2.0
                                         192.7        228.6        253.8           205.5                                                                                                                                        0                                                                                  0                     0                                                                           0
                            166.1                                                                                                                                                                                                       2015           2016           2017           2018          2019   (FY)                                    2015        2016         2017          2018         2019    (FY)
               0                                                                                0                              0
                         2015         2016         2017         2018          2019       (FY)                                       2015           2016           2017           2018           2019    (FY)             * Past figures have been revised due to changes in the scope of calculation.                             * Past figures have been revised due to changes in the scope of calculation.

     Equipment investment and depreciation                                                                        R&D expenditure and ratio of these costs to net sales                                                  Waste and waste per sales                                                                                VOC emissions per sales
     ■ Equipment investment             ■ Depreciation                                                              ■ R&D expenditure                    Ratio of these costs to net sales                               ■ Total emissions             Emissions per sales                                                        ■ Total emissions            Emissions per sales
      (Billion yen)                                                                                               (Billion yen)                                                                  202.1          (%)       (1,000t)                                                                                 (index)             (t)                                                                       (index)
                                                                           389.9                                                                                                                                                                                                                                                    2,000                                                                            100
             400                                                                                                         200                                                                                        20      280                                                                                    100
                                                                                                                                                                  167.7                                                                                 84
                                                                                                                                                   162.6                                                                                 80                            77
                                     294.1                                                                                          149.1                                                                                                                                             72            72
             300                                                                                                         150                                                                                        15      210                                                                                    75               1,500                                                                            75
                                                              260.3                                                                                                                                                                                                                                                                                74
                       247.8                     237.4                                                                                                                                                                                                                                             173                                                         71
                                                                                 226.4                                                                                                                                                                 163                           169                                                                                    57            55
                                                                                                                                                                                                                                                                       161                                                                                                                             53
                                                                   213.4                                                                                                                                                                149
                                         186.1        197.1
             200                                                                                                         100                                                                                        10      140                                                                                    50               1,000         867.0                                                              50
                            161.0                                                                                                                                                                                                                                                                                                                            839.3                      826.8         807.5

             100                                                                                                                                                                                        5.0                   70                                                                                   25                 500                                                                            25
                                                                                                                           50                                                                                       5
                                                                                                                                            5.0           5.0             4.7            4.7

                   0                                                                                                           0                                                                                    0           0                                                                                  0                     0                                                                           0
                        2015          2016         2017         2018          2019   (FY)                                            2015          2016            2017           2018           2019     (FY)                          2015           2016           2017           2018          2019     (FY)                                  2015        2016         2017          2018         2019    (FY)

                                                                                                                                                                                                                         * Past figures have been revised due to changes in the scope of calculation.                             * Past figures have been revised due to changes in the scope of calculation.

     EPS (basic earnings for the current period per share)                                                        Dividends per share, payout ratio and total return ratio                                               Total employees, overseas employees and ratio                                                            Rate of disabling injuries occurring in the workplace
     ■ EPS (basic earnings for the current period per share)                                                      ■ Dividends per share                   Payout ratio           Total return ratio                      ■ Total employees               Overseas employees and ratio                                                    National average            13 main Group companies in Japan
           (Yen)                                                                                                       (Yen)                                                                                   (%)        (Persons)                                                                                (%)                (%)
          600                                                                                                          160                                                                                      100      200,000                                                                                    100                0.6
                                                                                                                                                                                 150            150                                                                                                                                                                                                   0.54
                                                                                                                                                                  125                                                                                                                                                                  0.5
                                                 444.46                                                                                                                                                                                                                                                                                                                                 0.43
                                                                           408.64                                      120                                                                                      75       150,000                                                                                    75
          400                       354.53                                                                                                         100                                                                                                                                            119,732                              0.4
                                                                                                                                    95                                   66.5                                                                                                       114,478                                                                   0.41
                                                                                                                                                                                                                                                                      110,357                                                                                              0.39
                                                                                                                                                                                                                                        94,748         99,389
                                                                                                                         80                                                                                     50       100,000                                                                                    50                 0.3
                                                                                                                                           34.7                                                        36.7                                     44.5           44.7          45.1          43.9          43.5
          200                                                                                                                                             28.2                                         36.7                                                                                                                            0.2
                                                                                                                                         34.7                                           30.6
                                                                                                                         40                               28.2           28.1                                   25        50,000                                                                                    25                                        0.17
                                                                                                                                                                                                                                                                                                                                       0.1                                 0.13
                                                                                                                                                                                                                                                                                                                                                                                         0.11          0.1

              0                                                                                                            0                                                                                    0                0                                                                                  0                    0
                        2015         2016         2017         2018           2019   (FY)                                          2015           2016           2017            2018           2019     (FY)                            2015          2016            2017          2018          2019     (FY)                                  2015        2016         2017          2018         2019    (FY)

                                                                                                                  *¥49 billion in shares in AISIN were purchased in fiscal 2017, and ¥59.4 billion
                                                                                                                                                                                                                                                                                                                                                           fatalities and disabling
                                                                                                                   in shares were purchased in fiscal 2018.
                                                                                                                                                                                                                                                                                                                                  Disabling injury        injuries in the workplace
                                                                                                                                                                                                                                                                                                                                                   =                                   x 1,000,000
                                                                                                                                                                                                                                                                                                                                  frequency rate
                                                                                                                                                                                                                                                                                                                                                            Total working hours

08   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                                                                                                                                           AISIN GROUP REPORT 2019                 09
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Creating value with a view to the next 50 years
     Message from Top Management

                                                                                                               Kiyotaka Ise

                         Laying the foundation for the next
                         50 years and beyond…
                         AISIN Group has contributed to the development of the automotive industry with
                         advanced technology, superb manufacturing and cohesive strength as a group.
                         Now, the industry is facing the biggest period of change in over a century with new
                         advances including electrification and automated driving.
                         We have the opportunity once again to contribute to the future of the industry by
                         changing as a company, and here we will tell you about our plans and initiatives
                         for sustainable growth.

10   AISIN GROUP REPORT 2019                                                                                                  AISIN GROUP REPORT 2019   11
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Creating value with a view to the next 50 years
     Message from Top Management

                         Based on “Quality First”                                  from this wave of technical innovation have extended        The third is to break down barriers. Until now,            We need to increase our development of
                                                                                   deep into society. Technological innovation now          AISIN Group has used branch management to                  technology and investment in the future.
                         With ”Quality First” as our corporate principle,          influences the values of the general public, with cars   achieve specialization and speed, but as the                  What we do have are Aisin’s three unique
                         AISIN Group continually strives to create appealing       now beginning to be regarded as things to be “used”      company has grown, redundancy has occurred in our          strengths: our advanced technology, superb
                         products for our customers. “Quality First” is at         rather than “owned”. In order to survive in the age      business and management, while collaboration has           manufacturing (production technology) and cohesive
                         the heart of everything we do, and it is the guiding      of CASE, as these new technical fields are known in      sometimes been insufficient. To resolve these issues,      strength as a group (wide-ranging areas of business).
                         principle of our manufacturing processes. But with        the automotive industry, we need to change the way       we launched a Virtual Company (VC) System in April         We will strengthen these and address the issues we
                         values becoming more and more diverse, the types          we operate, and fast.                                    2017. Areas of business that are duplicated between        are experiencing through two reforms.
                         of products and levels of quality that our customers                                                               group companies all operate together as if they are
                         are seeking are many and varied. We need to give                                                                   one “company”. In future, we will think outside the
                         each of our customers our full attention and provide      Three policies for action with a shared                  VC system to further accelerate collaboration within
                         the quality they are looking for. I want to look at our   sense of urgency                                         the group.
                         corporate principles through that lens as we build our                                                                Since I was appointed as President in June 2018,
                         business on those principles.                             In order to make the drastic changes needed,             I have regularly explained the situation to all of our
                                                                                   each and every person at AISIN, from executives          employees so that they can understand our policies
                                                                                   to employees, needs to properly understand the           for action and the sense of urgency they need to
                         To survive the biggest                                    major changes that are taking place in the industry      have about these major changes. We will need to
                                                                                   and approach this situation with the sense of            carry out structural reforms quickly in order to adapt,
                         period of change in                                       urgency that it merits. We established three Action      and nothing is more essential than a change in our
                         100 years, we must change                                 Guidelines that will serve as common philosophies        employees’ awareness in order to make those reforms
                                                                                   for the group as a whole.                                happen. I want this to become entrenched in AISIN’s
                         ourselves                                                    Our first Action Guideline is initiative and speed.   culture and make AISIN a strong company that can
                                                                                   We expect each person at AISIN to think for              grow sustainably and bring new value to society.
                         Rapid changes to the environment                          themselves and act quickly and proactively, rather
                         around us                                                 than waiting passively.
                                                                                      The second guideline is to scrap and build with       Aiming for growth through
                         It has been said that the automotive industry is          nothing considered untouchable. With resources, it
                         experiencing the biggest period of change in              is essential to choose carefully and focus on what       steady work on two
                         100 years. Fuel consumption and exhaust gas               we have chosen. Even in businesses that have             reforms
                         regulations are becoming more and more stringent          contributed to AISIN Group’s growth in the past, we
                         around the world, prompting a shift to electric           may lose our competitive edge and find no prospects      In recent years, AISIN Group has continually
                         vehicles. Meanwhile, automated driving technology         for growth. If this happens, we need to assess the       performed well due to growth in demand for core
                         is advancing rapidly due to dramatic progress in          situation quickly, scrap these businesses and shift to   products such as automatic transmission (AT), but the
                         components such as computers, image processing            areas where our resources are needed. The same is        changes taking place mean that these increases in
                         and AI. Companies from a wide range of industries         true in each of our individual operations: we need to    our figures will not last long-term—in fact, our profits
                         such as electrical goods and IT have jumped at this       prioritize our work, scrap the tasks with the lowest     decreased in FY2019 due to a decline in the Chinese
                         demand, creating more intense competition in the          priority and shift to the work that truly needs to be    market. We are still feeling the pinch in FY2020, and
                         automotive industry than ever before. The ripples         done now.                                                our profits are expected to decrease for the second
                                                                                                                                            year in a row. If the electrification of powertrains
                                                                                                                                            continues, demand for AT may never again be what
                                                                                                                                            it used to be—making it difficult to predict the future
                                                                                                                                            of this core business.
                         AISIN Group’s three Action Guidelines

                                  1                              2                       3
                                                                                     Break down
                          Initiative and speed           Scrap and build

12   AISIN GROUP REPORT 2019                                                                                                                                                                                                                              AISIN GROUP REPORT 2019   13
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Creating value with a view to the next 50 years
     Message from Top Management

                         Reform of corporate structure to                                  The area of automated driving provides many            Reforming our corporate framework to
                         handle CASE                                                    opportunities for us to show our strength, and by         become highly profitable
                                                                                        focusing our development resources on technology
                         AISIN Group’s key strength is our wide-ranging                 like our vehicle dynamics control, electronically         Changing our business structure to handle CASE will
                         areas of business - we make up to 15,000 of the                controlled brake system, driver monitoring system,        take some time and capital. We will need to reform
                         approximately 30,000 parts a car is said to contain.           intelligent parking assist system and automated valet     the structure of our existing businesses to streamline
                         This technology combined with our commitment to                parking, we can significantly impact the autonomous       and enhance profitability. This will mean scrapping
                         quality will enhance our development capabilities for          future.                                                   and building existing businesses and cutting fixed
                         the wide range of products required in the age of                 Other fields expected to bring major changes to        costs to create a lean framework.
                         CASE.                                                          the market are connected cars and sharing services.          We are scrapping business areas and products that
                            By applying the technical base we’ve established            We are using the latest technology to develop             are not competitive and for which there are limited
                         with other products, we are tackling electrification           products to meet the needs of shared users such           prospects for growth such as the recent closure of                      Our first sewing machine, the HA-1
                         through the development of 1-motor hybrid                      as power sliding doors, smart door safety function,       our sewing machine business, one of our original
                         transmission, 2-motor hybrid transmission, and                 smart seating arrangement and cabin monitoring            businesses. We also discontinued our bed business,
                         electric drive modules such as the eAxle series, along         system.                                                   a company that began over 50 years ago as Toyota
                         with other products involved in electrification of                Through these expansions of our product range,         Beds. These difficult decisions are evidence our
                         cars, such as electric pumps and our electronically            we intend to grow our stake in CASE-related               commitment to the future, and we are now turning
                         controlled brake system.                                       products from 27% market share to approximately           our attention to any underperforming automotive
                            We are also actively strengthening our frameworks           50% market share by fiscal 2024.                          parts businesses. Future resource creation will focus
                         for development, sales and production. In April 2019,             We will also welcome outside perspectives in a         on the development of our CASE business.
                         we entered a joint venture with Denso Corporation              variety of fields through technical collaborations with      We will approach the cutting of fixed costs from
                         to establish BluE Nexus Corporation to produce                 partners to rapidly expand into new areas of business.    two angles. The first is a reform of our working
                         and sell electric drive modules such as eAxle. We                                                                        practices. In addition to making thorough use of IoT
                         also combined Aisin AW and Aisin AI to optimize                                                                          and RPA*, we will revise the operations performed by
                         our powertrain business as a whole and handle                                                                            every employee to ensure that no time is wasted on
                                                                                                                                                                                                                          The first Toyota Bed, the Split Type Sofa Bed
                         electrification more efficiently.                                                                                        superfluous work. Combined with bold changes to
                                                                                                                                                  the way we work, we can increase productivity by at
                                                                                                                                                  least 20%.
                                                                                                                                                     The second is a revision of the branch management
                               TOPICS                Announcement on October 31, 2019
                                                                                                                                                  system that has been behind AISIN Group’s
                                                                                                                                                  growth thus far, thereby redefining the group’s
                               Management Integration of Aisin Seiki and Aisin AW                                                                 management for the needs of the future. Subsidiaries
                               October 31, 2019, Aisin Seiki Co., Ltd. (AI) and Aisin AW Co., Ltd. (AW)                                           and management functions will be merged to
                               signed a basic agreement for the management integration of AI and AW.                                              eliminate redundant costs and use our resources
                                  In order for the Aisin Group to survive the once-in-a-century                                                   more efficiently. We will also centralize head office
                               transformation of the automotive industry, which is ushering in the                                                functions such as management and procurement for
                               rapidly developing CASE-related fields and the entrance into the                                                   the group, making these functions stronger and more
                               market by companies from other industries, it has become necessary                                                 efficient.
                               to further strengthen our competitiveness, and to this end, in an
                               effort to strengthen collaboration within the Group and improve
                               management efficiency, the Aisin Group pushed forward with the                                                     * Robotic Process Automation, a system using a software robot in
                                                                                                                                                    which high-performance recognition technology such as rule engines,
                               introduction of the virtual company system in April of 2017.
                                                                                                                                                    AI and machine learning is used to automate operations or make
                                  Although there has been some progress over the past two and half                                                  them more efficient.
                               years in collaboration and consolidation of management functions
                               across company boundaries, changes in external business conditions
                               are also accelerating and in order to proceed to a new level of
                               structural reform, a decision was made to carry out an integration of
                               AI and AW in the spirit of a merger on equal footing.
                                  The new company resulting from the AI and AW merger will
                               further accelerate a shift of resources to critical areas, with the
                               objective of creating synergies in both operations and management
                               and strengthen our competitiveness in CASE-related fields.

14   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                              AISIN GROUP REPORT 2019   15
AISIN GROUP REPORT 2019 Integrated Report - Aisin Seiki
Creating value with a view to the next 50 years
     Message from Top Management

                         Medium-term management                                   we will tackle this by identifying new demand in           Becoming the corporate                                      To all of
                                                                                  emerging countries and expanding our range for HV
                         plan for fiscal 2024                                     transmission and electric products such as eAxle. We       group that society needs                                    our stakeholders
                                                                                  plan to increase the role of electric products in our
                         Our medium-term management plan for fiscal               sales of driving modules, raising the ratio from 5% in     The global society is holding companies increasingly        Since I was appointed President, I have been
                         2024 was created based on the initiatives we have        fiscal 2019 to at least 20% in fiscal 2024.                responsible for their impact – both good and bad            changing the way we think by looking outside our
                         described so far. Here we will explain the key points,      We are also working to further reduce R&D costs         - on various social issues. A particularly prominent        existing rules and operations and providing new ideas
                         including our predictions of future market trends.       and fixed costs (other than depreciation) by reforming     example is the Sustainable Development Goals (SDGs)         to make AISIN Group more innovative. My mission
                            Growth in the automotive market is tailing off,       our practices in the ways we mentioned earlier and         set by the United Nations in 2015.                          is to successfully steer this ship through the biggest
                         and where global car sales used to grow every year,      making a strong shift from our previous branch                We are responding to this call and working               sea of change in the automotive industry in the past
                         they have fallen in 2018 and 2019. As a result, it is    management to our new group-wide management                hard to achieve a sustainable society. In May               century of the automotive industry. I am sharing my
                         expected to take three years longer than planned         system. Our aim is for these costs to be lower in fiscal   2019, we established AISIN Group Principles of              sense of urgency with all who work in AISIN Group
                         to reach the target of 13 million units that was set     2024 than they are in fiscal 2020.                         Corporate Behavior as a guide to fulfilling our             and encouraging them to turn that urgency into
                         for fiscal 2021 in 2018 for core businesses such as         Though profits decreased in both fiscal 2019 and        social responsibilities, with extensive standards           energy applied to innovation that lays the foundation
                         our AT, HV transmission and driving modules such         fiscal 2020, AISIN Group is no stranger to surviving       for contributing to sustainable economic growth,            for growth over the next 50 to 100 years. In addition
                         as eAxle. We have revised our sales plan to sell 13      challenging times. By steadily carrying out our two        identifying solutions to social issues and upholding        to a strong drive for structural reforms in AISIN
                         million units by FY2024. This is still a challenging     reforms, we aim to achieve an operating profit margin      the rights of all people.                                   Group, I will also improve our ESG management so
                         target that will require an increase of around 30%       of at least 7% and ROE of at least 12% in fiscal 2024.        Aisin has always been a company dedicated to             that we can continue to be a company that society
                         on our sales of 9.99 million units in FY2019, but                                                                   meeting social needs, with international cooperation        needs. You can expect a lot from AISIN Group in the
                                                                                                                                             and existing harmoniously with society and nature           future.
                                                                                                                                             as core tenets of our management principles. We
                                                                                                                                             selected seven priority issues to focus on as a group
                                                                                                                                             and have set long-term targets and KPIs for each
                         Management plan for fiscal 2024                                                                                     issue to strengthen our initiatives to solve these social
                           Make fiscal 2020 a turning point and aim to increase operating profit margin by at least 7% by fiscal 2024           Because we have a special responsibility as an
                          ■ Revenue         Operating profit margin                                                                          automotive company to address the significant
                                                                                                                                             strain that vehicles place on the environment, we
                         (billion yen)                                                                                              (%)
                           5,000                                                                                                     10.0    are working to achieve zero CO2 emissions in the
                                                                                                                                             entire life cycle of automobiles by 2050, developing
                                                                                                                                             emission-reducing products and introducing
                                                                                                                                     9.0     innovative new facilities to achieve zero CO2
                                                                                                                                             emissions in our plants.
                                                                                                                                                We also believe that stringent corporate
                                                                                                                                             governance is the key to sound economic growth,
                           3,000                                                                                                             and we are consistently working to strengthen our
                                                                                                                                     7.0     governance practices. On April 1, 2019, we reduced
                                                                                                                                             the levels and number of operating officers in the
                           2,000                                                                                                             group to best expedite operations. We also reduced
                                                                                                                                     6.0     our board of directors from 14 to 9 in June 2019,
                                                                                                                                             with external directors now representing over a third
                           1,000                                                                                                             of our board. These initiatives will clarify the roles of
                                                                                                                                     5.0     our management and operating officers and enable
                                                                                                                                             more stable, more transparent management.

                                 0                                                                                                   4.0
                                         2017      2018           2019    2020    2021        2022        2023        2024   (FY)

16   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                AISIN GROUP REPORT 2019   17
Creating value with a view to the next 50 years
     Financial strategies of AISIN Group

                                                            Introduction: My role as a financial                                       Our ability to achieve increases in profit in the wake                  eliminate waste wherever we can and sharpen
                                                            officer                                                                 of the 2008 global financial crisis was driven by the                      our investments. With these principles in mind,
                                                                                                                                    expansion of our AT sales. As I mentioned before, this                     we will make a drastic shift in our development
                                                       I began working for Aisin Seiki in 1981, in HR. I                            market is changing rapidly and cannot be solely relied                     investments and management resources to be
                                                       became involved in the “meat” of Aisin’s work                                upon during our current fiscal challenges. We also                         ready for the dawning age of CASE. We plan to
                                                       in 1987, when I was transferred to accounting.                               must address our stagnated productivity, an increase                       increase our spending on CASE-related development
                                                       In 1993, I transferred to an American production                             in our fixed costs and our undeniable dependency                           from 27% of our spending to around 50% by
                                                       company of ours, where I gained a wide range of                              on sales to reverse the consecutive decrease in profit                     fiscal 2024 and increase our CASE-related facilities
                                                       experience from business planning to accounting,                             over the last two years. We are fully grasping the                         from 10% to around 40%. We will approach
                                                       HR and general affairs. I was made the deputy head                           seriousness of this situation and we are taking the                        electrification by expanding our range of driving
                                                       of our Accounting Division in January 2002, and                              opportunity to make dramatic improvements to our                           products such as eAxle and HV transmission and
                                                       have worked my way up the ladder in accounting                               framework in order to survive these once-in-a-century                      by accelerating our development to provide entire
                                                       and finance since. In my current role in finance,                            changes.                                                                   systems and packages. This approach capitalizes on
                                                       I take a medium- to long-term view, working to                                                                                                          the strengths presented through the wide range of
                                                       achieve sustainable growth and improve our value by                                                                                                     suitable products produced by AISIN Group, such as
                                                       ensuring that our return on invested capital (ROIC)*1                            Basic policies for our medium-term                                     cooperative regenerative brake systems and other
                                                       is greater than our weighted average cost of capital                             management strategies                                                  electronically controlled brakes and electric pumps.
                                                       (WACC)*2. This sustainable growth will be achieved                                                                                                      Sharing is a core facet of today’s MaaS*2 society
                                                       through three key practices. First, we will continue to                      Our strategy through fiscal 2024 is to streamline the                      and this is changing the way cars are being used.
                                                       plant plenty of seeds for the future while building a                        structure of our company to create a lean company                          Cars are being driven for longer periods of time and
                                                       corporate framework that can cope with change and                            framework, adapt to the age of CASE, and achieve                           many different users are riding in them, resulting in
                                                       maintain profitability. The second practice is thorough                      an operating profit margin of at least 7% and return                       completely different needs from what was expected
                                                       risk management to prevent crises and minimize                               on equity (ROE) of at least 12%.                                           of us in the past. We will accelerate development
                                                       damage if a crisis does occur. Finally, our third                               The indicators of profitability that we will focus                      of our car body parts such as power sliding doors
                                                       practice is to carry out strong initiatives for ESG and                      on are operating profit on sales, break-even point,                        and seats to increase durability, and will create
                                                       achieve the SDGs based on AISIN Group’s activities.                          ROE of the parent company and return on invested                           products and services that meet new needs for
                                                                                                                                    capital (ROIC). Another key focus will be further                          more comfortable and convenient driving. To make
                                                       *1 An indicator of how efficiently a company is generating profit
                                                          from the capital invested in its business activities. (Operating profit
                                                                                                                                    strengthening our earning power*1 from the current                         this development happen as quickly as possible, we
                                                          after income tax ÷ (inventories + property, plants and equipment +        value of 15-16% to 19-20%.                                                 will seek outside input, actively collaborating with
                                                          intangible assets))
                                                                                                                                                                                                               companies, venture businesses and other outside
                                                       *2 Weighted Average Cost of Capital (WACC): A weighted average
                                                          of the costs generated by loans (debt costs) and procurement              Growth strategies                                                          parties.
                                                          costs generated by shares (capital stock costs). This is the minimum      In order to stay ahead of the rapid changes
                                                          profitability that the company needs to achieve.
                                                                                                                                    in the industry, we need to actively invest in
                                                                                                                                    the development of next-generation fields,
                                                            Review of FY2019 and outlook for
                                                            FY2020                                                                  Strengthening our corporate framework

                                                       While we achieved record sales in fiscal 2019, our                                              ROE                       Profit on sales               Total asset turnover         Financial coverage
     Financial support for                             operating profit decreased.                                                              Profit for the period
                                                                                                                                                                                 Profit for the period
                                                                                                                                                                                                                                                Invested capital

     structural reform with for                           Despite actively expanding our business for
                                                       CASE and powertrains such as AT and increasing
                                                                                                                                                   Stock capital                        Sales                        Invested capital            Stock capital

     medium- to long‑term value                        investment in development, AT sales were lower
                                                       than expected in the second half of the year due to
                                                                                                                                                                                Strengthening our corporate framework                          Capital policy

                                                                                                                                                                            Reform and elimination of businesses
                                                       factors such as a slowing of the Chinese market and                                                                  • Scrap and build                                               capitalization ratio of
                                                       temporary costs required to ensure quality.                                                                                                                                          around 25%
                                                          As we continue to invest in development costs                                                                     Reform and elimination of organizations
                                                                                                                                                                            • Virtual company system/physical merging and elimination
                                                       for CASE and the strengthening of our production
     Makoto Mitsuya Executive Vice President
                                                       framework in fiscal 2020, challenges remain in AT                                                                    Reform and elimination of operations
                                                       Sales, particularly in the Chinese market, and both                                                                  • Use of AI and robotics
                                                                                                                                                                            • Unification of platforms
                                                       revenue and profits are expected to be down.
                                                          The Chinese market still offers a lot of potential
                                                       and the needs of this market are set to grow in the
                                                       future, but the impact of issues such as the trade                                                               Improve ROIC (return on invested capital)                           Procure capital
                                                       conflict between the USA and China are still of                                                                                                                                      under favorable
                                                       immediate concern.                                                                                                                                                                     conditions

18   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                          AISIN GROUP REPORT 2019   19
Creating value with a view to the next 50 years
     Financial strategies of AISIN Group

                                                                                                                                                               *1 An indicator of the balance between interest-bearing debt and
                         Refining our corporate framework                            limiting of crises during calm periods and taking initial                    capital (net assets). (Interest-bearing debt/(interest-bearing debt +                           Closing: To all of our stakeholders
                         As we accelerate our development of the next                measures in the event of a crisis to minimize damage,                        stock capital))
                                                                                                                                                               *2 A method in which the parent company or central company
                         generation of products, we need to refine our               prevent secondary disasters and resume normal                                establishes dedicated accounts in the same bank for the group’s
                         corporate framework. I want to thoroughly reduce            activities as quickly as possible. We assess risks by                        capital and manages the capital centrally for efficient consolidated                        In order to come out on top and survive the biggest
                                                                                                                                                                  operations and use of capital. This term can refer to both the
                         fixed costs and decrease our break-even point to            examining situations around the world and assessing                          method and the system itself.
                                                                                                                                                                                                                                                              period of change in 100 years, we must carry out
                         below 80% so that we can survive the major changes          the severity of a risk and the frequency with which                                                                                                                      structural reforms to handle the shift to CASE and make
                         that are taking place in the market. To achieve this,       the issue is likely to occur. We then determine the                                                                                                                      our corporate framework leaner. At the same time, it is
                         we will carry out reforms in each of our businesses,        order in which risks should be dealt with and classify                    Changes in Capitalization Ratio                                                                essential to coexist harmoniously with the environment
                         organizations and practices, with “scrap and build”         our responses into four categories: risk avoidance,                       Capitalization ratio = (interest-bearing debt/(interest-bearing                                and society and share our prosperity with the world. The
                                                                                                                                                               debt + stock capital))
                         and “shifting from branch management to group-              risk control, risk shifting and risk retention.                                                                                                                          values in our corporate principles—“Enhanced Value
                         wide management” as our key phrases.                                                                                                  ■ Stock capital ■ Interest-bearing debt                        Capitalization ratio            Creation”, “Continuous Global Growth”, “Harmony
                            Scrap and build—with nothing considered                  *1 Earning power is an index calculated by adding together a                                                                                                             with Society and Nature” and “Individual Creativity
                                                                                        company’s operating profit margin, depreciation cost ratio and         (Billion yen)                                                           24.9          (%)
                         untouchable—will be our basic policy as we reform              development cost ratio. Operating profit margin indicates the           2,500                                                                                    25   and Initiative”—fit very neatly with the Sustainable
                                                                                                                                                                               21.9                                     22.7
                         and eliminate businesses. If it generates a loss or only       company’s current performance, depreciation cost ratio indicates
                                                                                                                                                                                                           21.7                                               Development Goals (SDGs) that are currently in the
                                                                                        the expansion of its businesses and development cost ratio indicates
                         a marginal profit, it has to go. A standout example            its investment in the future.                                           2,000                                                             1,873.6                20   spotlight. AISIN Group has always been aware that
                         of this is the elimination of our sewing machine and                                                                                                                            1,694.8                                              each and every one of us is responsible for building
                                                                                     *2 Mobility as a service, a new concept in which the mobility provided                              1,558.4
                         bed businesses, which have been a part of Aisin since          by various forms of transportation is consumed as a service.            1,500                                                                                    15   a relationship of trust with society at large through
                         we were first established. As we have said, nothing is                                                                                                                                                                               our corporate activities. “Be with” is our slogan as
                         untouchable, and the same will apply to our automotive                                                                                 1,000                                                                                    10   we work to protect the natural environment, nurture
                         parts business.                                                  Capital policy                                                                                                      468.7        528.5
                                                                                                                                                                                                                                         622.5                young people and contribute to the development of
                                                                                                                                                                                  429.0        394.3
                                                                                                                                                                   500                                                                                   5
                            Next, there is the reform and elimination of                                                                                                                                                                                      communities around the world. With globalization and
                         organizations. Until now, the growth of AISIN Group                                                                                                                                                                             0
                                                                                                                                                                                                                                                              increasing diversity exposing us to more new values,
                         has been ensured by branch management. However, as          Our core capital policy is to improve the value of our                                    2015         2016           2017         2018          2019      (FY)          cultures, customs and situations than ever before, we
                         the group has expanded substantially, this management       company with a balance between safe finances and                          Figures are indicated by Japanese standards until fiscal 2015 and                              need to pay even more attention to society and the
                                                                                                                                                               according to IFRS for fiscal 2016 onward
                         method has resulted in a lot of redundancy, waste           efficient use of capital. We approach this balance                                                                                                                       people we interact with. In the mid-Edo period (the Edo
                         and inefficiency in our businesses, products and core       using capitalization ratio*1 as an index. We believe                      Changes in dividends                                                                           period as a whole lasted from 1603 to 1868), people
                         divisions. To turn this around, we established a Virtual    that this ratio should be around 25% to achieve the                                                                                                                      had a custom called kasa‑kashige (offering an umbrella).
                                                                                                                                                                ■ End of period ■ Interim                        Dividend payout ratio*1
                         Company (VC) System in 2017 to switch from branch           ideal capital composition.                                                                                                                                               Any time two people passed each other on a rainy day,
                         management to group-wide management. We opened                 We work to ensure the safety of our finances by                          (yen)                                                                               (%)      they would move their umbrellas out of each other’s
                                                                                                                                                                250                                                                   36.7               40
                         group headquarters to facilitate our VC system. This        using evaluations as one of our benchmarks and                                            34.7                                                                           way. People were conscious of giving way to each other
                         new format enables us to centralize and standardize our     maintaining a trust rating of AA to A+ for debt on                                                                                 30.6                                  a little so that they did not bump into others. They knew
                                                                                                                                                                                              28.2         28.1                                          30
                         managerial administration divisions and our divisions for   long-term loans to ensure that we are always able to                                                                                                                     how to coexist, and this is the mindset that we need to
                         each function within the group, and to make effective       procure outside capital at a low cost.                                                                                             150           150                     adopt now. While we are of course seeking to grow our
                         use of the assets in each VC. We also merged Aisin AW          To use our capital efficiently, we make it a priority                                                              125                                                company through our business activities, we also keep
                         and Aisin AI in April 2019 to promote these activities.     to only procure debt capital within the scope that                         100             95                                       90            90                     our corporate principles at the forefront of our mind
                         We plan to spend fiscal 2020 merging, eliminating and       allows us to maintain a high rating, and limit the                                         50           50                                                               and carry out ongoing activities to ensure that we are
                         streamlining organizations at our numerous sites around     scale of our capital to reduce our overall capital costs.                    50                                                                                          growing together with our shareholders, investors and
                                                                                                                                                                                                                         60            60
                         the world.                                                  We have also implemented a cash management                                                 45           50             50                                                all of our other stakeholders.
                            Our reforms and elimination of operations will           system (CMS)*2 to make effective use of our                                    0
                                                                                                                                                                               2015         2016           2017         2018          2019    (FY)

                         consist of measures such as joint procurement,              capital policies and the capital in AISIN Group on a
                         distribution and IoT development between the                consolidated basis.                                                                                          FY2015     FY2016     FY2017     FY2018     FY2019
                         divisions for each of our functions and unification of         At present, the ROIC for all of our businesses is
                                                                                                                                                                Profit for the period              77.5      100.3      126.6      134.5      110.1
                         platforms for operations such as HR and accounting          around 8%, while the weighted average capital cost                         (billion yen)
                         in our managerial administration divisions to               (WACC) is 5-6%. Our returns are higher than our                            Total dividends                    26.8       28.3       35.2        40.7      40.4
                         streamline and centralize our operations throughout         procurement costs, which indicates that we have                            (billion yen)
                         the group. We are also taking stock of all of our           made AISIN valuable as a company, but it is also clear                     Repurchase of treasury               0           0       49.0        59.4            0
                         operations, focusing on what really needs to be done        that we need to carry out initiatives to future increase                   stock (billion yen)
                         and making use of AI and RPA to dramatically reduce         our returns. To accomplish this, we need to actively                       Total return ratio*2(%)            34.7       28.2       66.5        74.5      36.7
                         the time that our work takes. Together with our             work on strengthening our corporate framework in                          *1 Dividends per share ÷ basic profit for the period per share
                         reforms of our working practices, these measures will       the ways that I mentioned earlier.                                        *2	(Total dividends + Repurchase of treasury stock) ÷ profit for the period
                                                                                                                                                               Figures are indicated by Japanese standards until fiscal 2015 and
                         increase the overall productivity of our staff divisions       In terms of our return to shareholders, we                             according to IFRS for fiscal 2016 onward
                         by over 20%.                                                have been able to achieve steady dividends with
                                                                                     a dividend payout ratio of around 30%. We will
                         Thorough risk management                                    continue to keep our capitalization ratio and future                      Rating                                                           (as of August 2019)

                         Thorough risk management is essential to achieve            investment trends at the forefront of our minds,                                                                                      Long-term Short-term
                         sustainable growth. This means prevention and               and are considering share buy-back.                                                             S&P Global Rating                          A+            A-1

                                                                                                                                                                Rating and Investment Information Center (R&I)                  AA-             -
20   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                                                                        AISIN GROUP REPORT 2019   21
Creating value with a view to the next 50 years

       AISIN Group’s value creation process
       AISIN Group identifies priority issues to tackle social issues through our business practices.
       “Quality First” is our basic philosophy as we apply the strengths we have developed
       in everything we do. We supply a wide range of products and services in areas such as                             Corporate principles
       automotive parts, energy and homes. AISIN Group works to provide value to society,
       increase our value as a company and maintain the trust of our stakeholders, but we’re also                             Based on                                     1. Enhanced Value Creation
       thinking bigger than that: we are contributing to the accomplishment of many of the UN’s
                                                                                                                                                                           2. Continuous Global Growth
       Sustainable Development Goals.                                                                                    “Quality First”                                   3. Harmony with Society and Nature
                                                                                                                                                                           4. Individual Creativity and Initiative

                                  Work Force                              Business capital                                                                                                                                                                   Products and services                                 Providing value to society
Social issues                     Priority issues                                   Input                                                                                                                                                                                      Output                                              Outcomes

                                                                   Financial capital                                                                                                                                                                   Automotive parts                                            Shareholders and investors
     Climate                   •	Prevention of global warming
                               • Reduction of traffic accidents    • Net assets: ¥1,873.6 billion                                                                                   Busin           Bu                                                                                                             ● Revenue: ¥4,043.1 billion
     change                                                                                                                                                                              esse
                               •	Providing safe means of          • Interest-bearing debt: ¥623.8 billion                                                                                       s an sine                                                                                                         ● Dividends: ¥150
                                 transportation for people and                                                                                                                      Plan             ds      s
                                                                                                                                                                                                       erv s A
                                 cargo                             • Cash on hand: ¥520.7 billion
                                                                                                                                              mers                                      ning              ice ct
                                                                                                                                                                                                             s t iv
                                                                                                                                                                                                                                                                                                                   ● Aggregate market value: ¥1,065.8 billion
                                                                   • Business cash flow: ¥354.9 billion
                                                                                                                                           sto                                                         an       o     i
                                                                                                                                                                                                                  pr ti
                                                                                                                                         Cu                                                              dc         o                                                                                              Customers

                                                                                                                                                                                                                          es e ne
                               •	Promoting a shift to clean                                                                                                                                               o

  Depletion of                   energy                            Production capital                                                                                                                                                                  Powertrain                  Chassis & Vehicle Safety
                                                                                                                                                                                                                                                                                                                   ● We supply products to reduce traffic

   resources                   •	Working to improve health

                                                                                                                                                                                                                                                       • Hybrid transmission       Systems
                                                                   Through our well-oiled supply

                                 and welfare                                                                                                                                                                                                           • Electric 4-wheel drive   • E lectronically controlled   ● Our products are user-friendly and ensure
                                                                   framework, we provide high-quality

                                                                                                                                                                                                                                                         unit                        brake system

                                                                                                                                                                                                                                                                                                                     our customers’ comfort
                                                                   products worldwide                                                                                                                                                                                              • Intelligent parking assist
                                                                                                                                                                                                                                                                                     system                        ● Each vehicle is evaluated for quality you
                                                                   • 150 production sites                                                                                                                                                                                                                            can count on
                                                                   • ¥389.9 billion invested in facilities

     Rapid                     •	Technological innovation for
  urbanization                   sustainable industries
                               •	Prevention of pollution,         Intellectual capital                                                                                         Outstanding technology
                                                                                                                                                                                                                                                                                                                   ● We strive to coexist harmoniously with

                                                                                                                  u c tio n

                                                                                                                                                                                                                                      Product design
                                 reduction of environmentally                                                                                                                                                                                                                                                        our suppliers and share our prosperity
                                                                   We develop a wide range of technology,                                                                            development
                                 unfriendly materials, recycling                                                                                                                                                                                       Body                        ICT & Electronics
                                                                   always thinking of our customers around
                                 of resources and more efficient
                                                                   the world
                                                                                                                                                                                                                                                       • Power sliding door       •C  ar navigation system       Employees
                                 resource usage                                                                                                                                                                                                        • Sun roof                 • ECU
                                                                                                                                                                                                                                                                                   • Sensors                      ● We make AISIN a fulfilling place for our
  Environmental                                                    • R&D expenditure: ¥202.1 billion                                Excellent                                                                                                                                                                        employees to work
    pollution                                                      • Technical partners                                           manufacturing                                                                                                                                                                    ● We promote diversity and inclusivity
                               •	Industrial health and safety,    • 19,792 patents                                                                                                                                                                                                                                ● We enable our employees to have a
                                 protecting human rights,
                                 promoting diversity, reforming    • 32 overseas research and                                                                                                                                                                                                                       better work-life balance
                                                                      development sites                                        The AISIN Group's                                                                                                                                                                   ● We promote physical and mental health
                                 working practices, work-life
                               • Sustainable procurement
                                                                   Human capital                                                                                                                                                                                                                                   Local communities
                                                                                                                                                                                                                                                                                                                   ● We work on advances in mobility societies

     inequality                                                    Behind our global success in
                                                                   manufacturing are diverse personnel                                                                          Cohesive                                                                Energy and homes                                             to improve safety

                                                                                                                                                                              strength as a                                                                                                                        ● We contribute to local economies
                                                                   with extensive manufacturing expertise

                                                                                                                                                                                                                t ho

                                                                   • 119,732 employees                                                  nt                                                                  e
                                                                                                                                                                                                                                                                                                                   ● We contribute to the development of

                                                                   • 52,065 overseas employees                                              of                                                        rk m
                                                                                                                                                                                                                                                                                                                     local communities and the training of
                                                                                                                                                  f ac
                                                                                                                                                                                                f wo
  Accidents and                                                                                                                                                                                                                                                                                                      young people in those communities
    disasters                                                       (43.5% of total)                                                                     i li t ie                       nt o
                                                                                                                                                                     s   D e ve l op m e                                                                                                                           Environment
                                                                                                                                                                                                                                                        • Household co-           • Shower toilet                ● We work on popularizing electric
                                                                                                                                                                                                                                                          generation systems                                         products to reduce CO2 emissions
                                                                                                                                                                                                                                                                                                                   ● Thorough resource recycling procedures
                                                                                                                                                                                                                                                                                                                     are in place to reduce waste
                                                                                                                                                                                                                                                                                                                   ● We are contributing to the conservation
                                                                                                                                                                                                                                                                                                                     of biodiversity

                                                                                                                              Corporate governance                         Compliance             Risk management

                                                                                                                                                                                   AISIN Group Principles of
                                                                                                                                     AISIN WAY                                        Corporate Behavior

22   AISIN GROUP REPORT 2019                                                                                                                                                                                                                                                                                                     AISIN GROUP REPORT 2019         23
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