Business Report for Fiscal 2016

During fiscal 2016, when we marked the major milestone of our 50th anniversary,
the AISIN Group worked in unison and steadily achieved important results.

1 Course of Business and Results

Business environment

During fiscal 2016, although the global economy continued to recover steadily thanks to increased personal consumption in North America and Europe, the pace of growth slowed in emerging countries beginning with China. In Japan, the economy recovered owing to such factors as an improvement in corporate earnings and an increase in personal consumption.

Despite a decline in unit sales of new cars in some emerging countries, the global auto industry was favorable overall due to growth in the volume of new car sales in the major markets of North America, Europe and China as well as a rise in unit sales of passenger cars in Japan.

Under these conditions, in keeping with our aim of “developing further into a vital company capable of growing continuously,” the AISIN Group promoted a variety of initiatives focused on strengthening competi-

Review of business results

In fiscal 2016, net sales amounted to ¥3,243.1 billion (compared with ¥2,964.6 billion in the previous fiscal year) due to an increase in production volume by customer automakers in Japan and overseas. Despite an increase in R&D expenses for future growth and a rise in depreciation and amortization expenses, operating income reached ¥176.4 billion (compared with ¥166.1 billion in the previous fiscal year) as a result of activities for strengthening our profit structure that included promoting cost improvements. Ordinary income amounted to ¥186.8 billion (compared with ¥188.3 billion in the previous fiscal year) and profit attributable to owners of parent was ¥96.9 billion (compared with ¥77.5 billion in the previous fiscal year).

Sales breakdown by product category
Sales breakdown by product category
Sales breakdown by geographical location
Sales breakdown by geographical location

Auto Parts Business

Background and purpose of business restructuring

The AISIN Group has aimed for steady growth in global markets and has expanded its business with locations in various regions of the world. As a result, we have grown to become a Group that generates consolidated net sales of ¥3.2 trillion.

Nonetheless, in recent years the automobile industry has witnessed a dramatic advance in next-generation technologies, including innovations in powertrains and the progression of self-driving technologies. These trends have been accompanied by a further escalation of competition that includes the creation of new mega-suppliers through M&A and the entry of IT companies. Meanwhile, fierce price competition that also includes local suppliers is unfolding, primarily in emerging countries, where market growth is expected.

Amid these adverse changes in the environment, it is becoming increasingly difficult to survive in future global competition by relying on traditional frameworks for business focused on expanding scale. To achieve continuous growth, the AISIN Group must therefore secure true competitiveness for competing globally and shift toward high-quality growth that consistently generates profits. Acting on this recognition, we held repeated discussions on the best ways of attaining these goals. Ultimately, we decided to undertake business restructuring in the Powertrain, Chassis & Vehicle Safety System and the Body Product domains and from November through December 2014 we exchanged basic agreements with each involved company.

Framework and state of progress of business restructuring
Technology development

Needs in auto parts are evolving significantly in tandem with a diversification of lifestyles and values and a variety of technology innovations. As these changes unfold, we have deployed the AISIN Group’s wideranging resources to promote the development of new technologies based on our key themes of the environment and enhanced fuel efficiency, security and safety, and comfort and convenience.

Sales activities

Strengthening activities for expanding sales tooverseas automakers

We promoted an expansion in sales to automakers in Europe and emerging countries by taking advantage of our strengths, namely our extensive product lineup and our high quality. In Europe, as in the previous year BMW once again used our FWD 8-speed automatictransmission in its new model vehicles. We also commenced business with Daimler for brake calipers. In emerging countries, Mahindra & Mahindra Limited of India adopted our FWD 6-speed automatic transmission and sunroof.

Strengthening our global produdion 5tructure

Reinforcing our production structure for automatic transmissions

We made group-wide efforts to establish an efficient production structure for automatic transmissions, for which future demand is expected to grow. By fully utilizing the resources of the entire Group, we have established a fast and efficient supply structure for increasing future sales.

Measures in this area include commencing production of automatic transmission parts at Aisin AI utilizing the technologies cultivated in the production of manual transmissions in addition to increasing and strengthening production capacity at Aisin AW, which serves as our main entity for development and production.

Strengthening our global production structure

We strengthened the production structure of each Group company to respond to growing demand globally.

New companies established by ADVICS in Mexico, Brazil, the Czech Republic and South Africa began production of brake parts. Aisin Chemical increased and strengthened production capacity in the United States and China and commenced construction of a new plant in Thailand in preparation for an expansion of sales of wet friction materials. Meanwhile, Aisin Takaoka established a new company in Mexico for producing chassis parts such as disc rotors while Aisin Seiki established a new company in Mexico for manufacturing such body parts as door handles.

Technology Development Topics (Security and Safety) Technology Development Topics (Security and Safety)
Technology Development Topics (Comfort and Convenience) Technology Development Topics (Comfort and Convenience)

Life and Energy Related Business

Initiatives for raising recognition levels for the ASLEEP brand

Please refer to the Column.

Details are provided here.

ENE-FARM TYPE S fuel cell cogeneration system for residential use undergoes model change

We thoroughly reviewed the materials and equipment specifications to realize the industry’s highest generating efficiency and smallest equipment body while significantly reducing cost. The smaller size of the equipment body has reduced limitations on installation space, which enables installation in condominiums and other types of multi-dwelling housing complexes.

fuel cell cogeneration system (ENE-FARM TYPE S)

2 Issues to Be Addressed

The AISIN Group will address the following four issues aimed at achieving continuous growth and increasing corporate value.

1.Strengthen Group competiveness

Our recent business restructuring is just at the starting point. In the future, Group companies will share their orientations and leverage each company’s strengths and distinctive features while striving to establish true competitiveness for competing globally. Specifically, using the recent business restructuring as a basis, we aim to firmly reap such positive results as strengthened cost competitiveness through increased business efficiency and an expansion in business through improved product appeal. In conjunction, we will build an efficient structure for increased production that maximizes the resources of Group companies as we expand the automatic transmission business that supports AISIN’s company framework.

Moreover, from the perspective of optimizing the entire Group, we will promote both business and management reforms that include building business strategies, emphasizing the priority allocation of resources and streamlining administrative sections.

2.Strengthen the competitiveness of existing products

We aim to realize a strong profit structure that can alsoendure harsh operating environments, and to do so, we are working to strengthen the competitiveness of our existing products, which constitute the bedrock of our business operations. As we strive for efficient business development with established priorities for geographic regions, customers and products, we are promoting reforms to our manufacturing that integrate design, production technologies, plants and procurement. These efforts include pursuing the creation of original technologies, raising productivity and improving output levels, and carrying out bundled procurement. Additionally, we will work to realize appropriate fixed costs such as development expenses, capital investment and personnel expenses from a companywide perspective.

3.Create new value in anticipation of the next generation

We will solidify our underlying foundation by strengthening the competiveness of our existing products as well as focus on generating new business and creating new products to secure future growth potential. In the auto parts business, we will marshal the Group’s technologies and resources and carry out advanced development of next-generation products that anticipate future needs such as powertrain electrification and self-driving. Also, we are striving to cultivate business that will become the second pillar of our operations and will therefore strengthen and expand our energyrelated businesses and after-market businesses. Concurrently, we will take on the challenge of creating new products and businesses that uncover the latent needs of end users.

4.Reinforcing our management foundation

As our business extends across the globe, solidifying the foundation of our corporate management is a major prerequisite for achieving continuous growth through business activities deeply rooted in each region. Therefore, we will make unprecedented efforts to create safer workplaces, beginning with the prevention of disasters and accidents, as well as to carry out environmental protection activities, such as reducing CO2 emissions and waste materials, and thoroughly implement compliance. With “Quality First” as our basis, we will provide reliable quality in accordance with the ways customers use our products in countries worldwide. Leveraging all our corporate activities as a base, we will foster a corporate culture in which each and every employee can work energetically and demonstrate his or her creativity and self-initiative regardless of nationality, gender or age.

These tasks are not something that can be attained overnight. In keeping with the slogan “Do what you want to do to make tomorrow better,” all employees will share goals and energetically take on new challenges as we aim to be a “vibrant company that possesses true competitiveness and proposes new value.”