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Toyota Industries in Focus

Passion for Cutting-Edge Technologies—Car Air-Conditioning Compressor Business—
Our Car Air-Conditioning Compressor Business is the corebusiness of the Automobile Segment as well as one of thecrucial strategic businesses of Toyota Industries. Capitalizing on
our outstanding technologies, we develop and manufacturehigh-quality, efficient products tailored to customer needs. Alongthe way, we have contributed to improvements in the comfort
and technological advances of vehicles manufactured by theworld’s leading automakers.

Outstanding Technology Development
Capabilities
Toyota Industries’ car air-conditioning compressors have won
wide acclaim for outstanding quality and reliability not only fromToyota Motor Corporation (“TMC”) but also from leading
automakers worldwide. Drawing on strong technologicalcapabilities, Toyota Industries’ Car Air-Conditioning Compressor
Business has firmly established its technological strengths.
Our Car Air-Conditioning Compressor Business has createdepoch-making new products that consistently anticipate evolving
market needs, thereby making meaningful contributions totechnological innovation among automakers. As primeexamples, in the 1980s we developed a compact, lightweight10-cylinder compressor with swash plate and fixed displacementthat provides outstanding reliability at high operating speeds. Inthe 1990s, we responded to mounting concerns about theenvironment with the development of an internally controlled
compressor with one-way swash plate and continuous variabledisplacement that increases fuel efficiency by reducing the loadon the engine. In the late 1990s, we unveiled an externallycontrolled, clutchless-type compressor with one-way swash
plate and continuous variable displacement. This compressor
enhances smooth continuous operation and improves energy
consumption by sensing changes in the external environment,such as engine acceleration. To tackle such environmental
problems as destruction of the ozone layer and global warming,in 2002 Toyota Industries, in collaboration with DENSO
Corporation (“DENSO”), developed a compressor for fuel-cellhybrid vehicles that uses CO2 as a refrigerant instead ofhydrofluorocarbon (HFC). Also in collaboration with DENSO, in2003 we developed an electrically driven car air-conditioning

Automobile Trends and Toyota Industries’ Product Development
1980s

1990s

2000s

Provide higher engine performance and comfortable interior
Slow down global warming

Reduce ozone layer destruction

Automobiletrends

Improve gas mileage
Hybrid cars, fuel-cell hybrid vehicles
Reliability at high speed, quiet operation
Compact, lightweight, power efficientCompressor
needs

Ultra-lightweight, ultra-power efficient
Replacing withnatural refrigerant

Eliminating CFCs
Lower jolt turning air conditioners ON/OFF
Fixed displacement type
1981

ToyotaIndustries’
productdevelopment

Compact, lightweight
10-cylinder swash
plate compressor

Superb drivability

Use of HFC-134a refrigerant
Power efficient, 1995
superb drivability
7-cylinder one-wayswash plate compressor

World’s first commercial products

Variabledisplacement
type

Externally controlled, variable displacement,
clutchless type1997

Ultra-lightweight,
ultra-power efficient, 2002
CO2 compressor
superb drivability
6-cylinder one-way swash plate compressor CFC-free
CO2 compressor for fuel-cell hybrid vehicles

2003

Electrically driven compressor

Compact, lightweight, highly efficientElectrically driven compressor for hybrid vehicles

24

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

Toyota Industries in Focus

Worldwide Manufacturing Bases and Local Offices
TDDK
MunichDNTS
MACI

Detroit
TACG

DWHI

ACTIS

YSD
SUBROSDNIA
DNBRConsolidated subsidiaries
Licensed manufacturers
Local offices
TACG is slated to commence production in December 2005.

Reflecting our outstanding technological capabilities, Toyota
Industries’ total global production and sales of car airconditioning compressors in fiscal 2004 amounted to 17.9
million units, giving us the top share of the world market.
Toyota Industries has globalized its production bases andbuilt a tri-polar production network with bases in all the threeprincipal automobile markets — Europe, the United States andJapan. We augment this structure by licensing production in Asia
(excluding Japan) and South America. Undertaking production

close to our markets allows us to offer products accurately
matched to local needs, while giving us such benefits as lower
shipment costs and exchange rate risks. We have also beensteadily increasing local procurement rates for our U.S. andEuropean production bases. We are committed to raising theserates even further in the future.
Toyota Industries plans to produce 20 million car airconditioning compressors in fiscal 2006 in response to expected
increases in demand. In accordance with this plan, we arereinforcing production capacities at our bases in Japan, North
America and Europe.
In Japan — our largest production base — we completed
construction of, and began operations at, the Higashiura Plant in2002, and finished renovation of the Obu Plant in April 2004. Asa result, we have established an efficient three-plant integrated
production structure covering materials to processing andassembly. These three plants are the Obu Plant, which produces
aluminum die casts for compressors, the Higashiura Plant, which
processes compressor pistons, and the Kariya Plant, which

The Obu Plant produces aluminum die casts for compressors.

The Higashiura Plant processes compressor pistonscompressor for hybrid cars and a two-way compressor with abuilt-in motor for hybrid cars. This two-way compressor is driven
alternately by the engine during driving and by a built-in motor
during engine stop, achieving a balance between fuel efficiency
and comfort when the car air-conditioner is turned on. These
revolutionary compressors were developed and commercialized
ahead of competitors, and present clear evidence of Toyota
Industries’ technological and competitive strengths.

Strong Global Presence

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

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Toyota Industries in Focus
MACI, our U.S. production base in Parma, Michigan

TDDK, our European production base in Straßgräbchen, Germany

develops and assembles compressors. Having built thisproduction structure, we are now firmly positioned to respond togrowing future demand for car air-conditioning compressors.
In fiscal 2004, Michigan Automotive Compressor, Inc.
(“MACI”)*, our U.S. production base, produced and sold over 6.5
million swash plate compressors with fixed displacement.
Our European production base, TD Deutsche
Klimakompressor GmbH (“TDDK”)*, produced approximately 1.5
million swash plate compressors with variable displacement.

Japan. To respond to this anticipated rise in demand, wedecided to establish TACG as a plant specializing in variabledisplacement compressors in the southern United States, whereautomakers have been actively setting up operations. TACG isslated to produce 2 million compressors annually by 2010.
Toyota Industries and DENSO will press forward with thelocalization of production — manufacturing variable displacement
compressors at the new company and fixed displacementcompressors at MACI — and will work to build a supply structurethat responds quickly to customer needs, with the aim of further
expanding business in the North American market.

* MACI and TDDK are joint ventures with DENSO. As of March 31, 2004,
Toyota Industries held 60% and 65%, respectively, of the shares of thesecompanies.

In fiscal 2004, Toyota Industries was the market leader inJapan, with sales of approximately 5.3 million car air-conditioning
compressors to TMC and other major car manufacturers. InNorth America, Toyota Industries supplied U.S. automakers andJapanese auto manufacturers producing in North America with
6.9 million units (including exports from Japan and localproduction), of mainly fixed displacement compressors. InEurope, Toyota Industries supplied over 5.6 million units(including exports from Japan and local production), such as
variable displacement compressors for luxury cars and compact
variable displacement compressors for small cars.

Toward the Future
Our medium-term strategy emphasizes aggressively expanding
sales, particularly in North America and Europe, where weforesee huge potential. In North America, we will redouble efforts
to secure new orders. As part of these efforts, in July 2004
Toyota Industries and DENSO jointly established TD AutomotiveCompressor Georgia, LLC (“TACG”)* near Atlanta, Georgia. Our
second compressor production base in North America, TACG
was established to meet the local procurement needs ofautomakers in the growing North American market.
Up to the present, fixed displacement compressors havebeen the compressor of choice in North America. However, amid
rising environmental awareness, Toyota Industries projects thatvariable displacement compressors, with their excellent energy
efficiency, will experience growth in demand as in Europe and26

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION* TACG is capitalized at US$100 million. Toyota Industries North
America, Inc. (a holding company controlling Toyota Industries’
North American operations) invested 65% of this capital and DENSOInternational America (a company controlling DENSO’s NorthAmerican operations) invested 35%. Production is scheduled to commencein December 2005.

In Europe, the proportion of cars fitted with car airconditioners has risen to around 70%, and we anticipate this will
climb further. Toyota Industries plans to aggressively cultivate
new customers by developing and supplying products closely
customized to the needs of the European market, such as highly
efficient compact variable displacement compressors.
At the end of April 2004, cumulative production of car airconditioning compressors by Toyota Industries in Japan, Europe
and North America reached 200 million units. Although it tookapproximately 36 years for cumulative production to reach 100
million units in July 1996, the figure then soared to 200 million
units in a mere eight years. Mere volume, however, is not ourgoal. We will further augment our technology development
capabilities. We will develop and market new products
responsive to customer needs ahead of competitors. Thesemeasures, we believe, will in turn enable us to solidify ourposition in the car air-conditioning compressor market.
All our car air-conditioning compressors are supplied to DENSO,
which in turn sells them to leading automakers worldwide.
DENSO not only sells our compressors as separate units but
also incorporates them in its car air-conditioning systems.