KYB Group Report 2020
(April 1, 2019 - March 31, 2020)

Message from the President

During KYB’s next 100
years, we will continue tocreate new value as aleader in hydraulics basedon our spirit of creativity.

Masao Ono
Representative Director,
President Executive Officer

Our 100th Anniversary and the First Year of KYB’s Recovery
We will use the occasion of our 100th anniversary to return to the tenets of our founder andcombine the collective strengths of the KYB Group.
In November 2019, we celebrated the major milestone oftirelessly to bring its nonconforming dampers into

the 100th anniversary of Shiro Kayaba’s founding of theconformity as quickly as possible and prevent a recurrence.

Kayaba Research Center. The spirit of vitality, love andWe are also constantly working to foster awareness ofcreativity that Shiro Kayaba made his basic philosophy

compliance. We are sequentially replacing nonconforming

then as manager has been passed down in our current

dampers and conducting other measures to bring them

Corporate Spirit—“By serving technologies and products

into conformity. As of June 30, 2020, we have completed

that make people’s lives safe and comfortable, KYB

approximately 60% of the replacements and aim for fullgroup dedicates to the society”—and contributes to thecompletion by March 31, 2021. In addition, so we do not

growth of KYB today. We consider it our mission torepeat the same mistakes, we will return once again tocontinue providing an unbroken link between our past

the tenets of our founder and combine our collective

and our future.

strengths to complete implementation of our measures to

However, as we announced in FY2018, thenonconforming acts associated with seismic isolation/

prevent a recurrence.
I want to protect the heritage that has been passed

mitigation oil dampers and improper claims to thedown since our founding so that the KYB Group remains

Ministry of Defense have significantly impaired the trust

attractive to its stakeholders. To achieve this, I will also

we have earned since our founding.

focus on improving the working environment in the belief

The KYB Group made a new start in FY2019, which it
viewed as “the first year of KYB’s recovery,” and worked

that it is crucial for each employee to work with vitality,
love and creativity.

New Medium-Term Management Plan and Company Policies
We have developed a three-year management plan to regain trust and restore our pride
with the aim of being a company that is attractive to its stakeholders.
The three years covered by our previous medium-term

corporate structure capable of generating the innovative

management plan were a very difficult period for us, albeit

manufacturing and products that will support us in thewith many positives that give rise to optimism and hope for

future. Along with pursuing profitable and sustainable

future growth. I hope that KYB Group Report 2020 will servebusinesses, we will focus on creating a workplace whereas a medium to convey our various initiatives to stakeholders.

employees can take pride in work they find worthwhile,

In FY2020, we begin a new three-year medium-termwith a stance of meeting the expectations of customers

management plan that continues to place awareness andand society as the basis of our corporate activities. I intend

practice of compliance at the core of our management as

to change our previous ways of thinking and working in

we aim to transform into a highly profitable structureorder to create new value.

under the slogan “Recovering trust and pride.” In addition

The COVID-19 pandemic continues with no end in sight.

to strengthening governance by spreading awareness andNevertheless, the entire KYB Group will continue tothe practice of compliance, the plan’s basic policy entails

diligently and actively communicate with its stakeholders tomaking a clear shift in emphasis from net sales to highregain their trust as soon as possible.

profitability. In doing so, we will build a robust, sustainable

Thank you for your continued guidance and support.

KYB Group Report 2020

1

KYB’s Heritage“The intellect of humans knows no bounds,
nor does their passion.
Nothing is perfect.
However, the unique ability of humankind toprogress lies in its constant search for perfection.
A top does not fall when it is spinning,
and flowing water remains pure.
I cannot help but think that reflecting on every
aspect of management and improving ingenuity
underpins the ongoing growth of a company.”(The words of founder Shiro Kayaba)

Centenary of the Founding of the Kayaba Research Center
The origins of KYB date back to 1919 at the Kayaba
Research Center, which inventor Shiro Kayaba founded at
the young age of 21. Since then, we have continued to
improve our technologies and celebrated our 100th
anniversary in November 2019.
“The unique ability of humankind to progress lies in its
constant search for perfection” ― These words left by
Shiro Kayaba have become part of KYB’s heritage ofcontinuing to take on challenges without being satisfied
with the status quo.
Shiro Kayaba was fascinated by hydraulic technology, andone of his numerous inventions was hydraulic buffers (oleostruts) for aircraft in the 1920s, which he developed utilizing
the most advanced hydraulic technology at the time. Oleo
struts clearly demonstrate Shiro Kayaba’s philosophy ofdesign in which “simplicity is the best technology.”
Repeated increases in production paved the way for thesubsequent growth of KYB. The technology acquired during
the development of oleo struts was used in the creationof automobile shock absorbers after World War II. In
addition, the hydraulic components for aircraft control
systems that were developed at the same time significantly
improved control, which previously relied on physical force.
This control technology has become the basis of modern
construction machinery and industrial cylinders.
Today, backed by the hydraulic technology-centeredresearch it has accumulated since its founding, KYB has
developed into a comprehensive manufacturer of hydraulicequipment that supplies products and services tomanufacturers around the world. “A top does not fall when
it is spinning, and flowing water remains pure.” We willcontinue to devise and improve products to contribute to
the sustainable development of society.

History
1919
1927
1935
1948
1959

2

Kayaba Research Center founded by Shiro Kayaba
Kayaba Seisakusho established
Kayaba Manufacturing Co., Ltd. established
Kayaba Industry Co., Ltd. established
Listed on the Tokyo Stock Exchange

KYB Group Report 2020

1973	Overseas headquarters established with the aim offull-scale overseas expansion
1985	Company name in Japanese changed from kanji(Chinese characters) to katakana (Japanesecharacters)
2015 Company name changed to KYB Corporation

A Spirit and Technologies That Pass
On “Vitality, Love and Creativity”
Shiro Kayaba imbued the company he founded with thebasic tenets of vitality, love and creativity. This expresses
his belief that creative ideas are born in a workplace withboundless vitality, and that we can use that power tocontribute to people worldwide. Ever since then, KYB
has taken a perspective and approach unique to anindependent company in order to grow by accumulating
experience and technologies while working with a wide
variety of manufacturers to flexibly respond to customer
issues and contemporary needs.
KYB also passes on Shiro Kayaba’s belief that thedevelopment of new technologies is the basis of corporate
development through the Kayaba Award, which wasestablished in 1975. The award is given to employees whomake remarkable achievements from a creative perspectivein the area of technology development. Technicians grapple
with their chosen themes on a daily basis while addressing
the needs of customers and society with the aim of winning
the award. Our ability to achieve superior quality backed bytechnological expertise is the cumulative work of each of
our employees. Our founder’s aspirations still serve as the
bedrock of the KYB Group today and are our driving force
in untiringly taking on new challenges.

“Always look outward toward the world.
Do not fall behind progress.
Lead progress if you can.
And take a philosophical approach.”Continuing to Change as a
Leading Company

The metal plating of oleo struts on the sliding components of a Japanese
Zero fighter plane discovered on the bottom of Japan’s Seto Inland Sea
in 1977 was still shiny after more than 30 years underwater,
demonstrating the sophistication of KYB’s technologies.

The original philosophy that Shiro Kayaba espoused has
been passed down as an attitude of going beyond focusing
solely on technological innovation to take a heuristic
approach of trial and error in all aspects and continuing
to explore without giving up.
Examples include our research and development on
our test track that reproduces different road surface
conditions around the world, our production line that
continuously enhances our leading manufacturingexpertise, and our product lineup that consistently
incorporates customer feedback for repeated innovation.
The process of trial and error supports KYB’s uniqueproduct development capabilities.
In turbulent times, KYB will pursue the true essence ofthings from the elevated standpoint of its founder as it
continues to take on the challenge of creating high-valueadded products as an independent company with a focus
on creativity.
KYB Group Report 20203

Distinctively Creative Development That Meets Contemporary Needs
Automobiles

Special-purpose vehicles

Construction machinery

Construction machinery

1948

1952

1972

1984

The cylindrical shock absorberdeveloped by applying themechanism of the hydraulic buffers(oleo struts) for aircraft offeredsuperior performance in terms ofcost, durability, and drivability
compared with the mainstream
products at the time, and was
widely adopted by automobile
manufacturers in Japan, who wereexpanding production. These
products played a part in improving
the performance of Japanesepassenger vehicles.

The post-World War II boom in
construction required the production
and transportation of high-quality
ready-mixed concrete, and thisproduct’s strong reputation for
its excellent mixing performancehelped KYB grow quickly into a top
manufacturer.

We succeeded in downsizing
the controller at the heart of ahydraulic system to create amore sophisticated, componentbased system. The existing large
and complicated piping wasredesigned. It was hailed as arevolutionary hydraulic valve, andprovided a foothold for KYB toenter the field of industrial-use
hydraulic equipment.

This high-pressure cylinder forconstruction machinery with a new
structure was developed to achieve
the world’s highest quality. The
seal, which was developed inhouse, maintains the high level of
airtightness and durability required
for the high-pressure, high-speed
operation characteristic ofconstruction machinery. Ongoing
improvements have been made tothis mainstay product, and thelatest model is KCH-7.

System products

Railroad equipment

Motorcycles

Automobiles

1989

1996

2002

2004

The differential settlement
modification system utilizes theelectronics technology we havebeen involved with since the 1970s.
The system automatically measuressettlement at approximately 800
locations in a building to correct
its inclination by jacking up thepillars. It is used to support KansaiInternational Airport, where theground is soft.

KYB developed the world’s firstelectronically controlled railway
suspension system for massproduced vehicles, consisting ofa control unit, acceleration sensor
and semi-active damper. Evenat high speeds, it controls swaycaused when trains cross paths
and wind pressure when enteringtunnels, earning a positive evaluation
for its riding comfort and stability.

KYB developed the world’s lightest
high-performance front fork,
introducing many new technologies,
materials and structures that
dramatically improve operability,with optimal damping force toachieve a riding experience thatoffers both performance andcomfort. The product has been
adopted by several motorcycle
manufacturers to meet theneeds of extreme-performancesports motorcycles.

We developed this vane pump foruse in CVTs in response to thesuccess of our vane pump for power
steering. It meets demands for spacesaving, high efficiency, low noiseand low cost, and we thoroughly
eliminated contamination
throughout the production line.

Standard (twin-tube)
shock absorbers

Differential settlement
modification system

4

KYB Group Report 2020

Hi-Lo* concrete
mixer truck* Brand name derived from “High Quality,
Low Cost,” which was used as a slogan.

Semi-active suspension system

Multilayer valve/
MS valve

Lightweight, high-performance
front fork for extreme-performancesports motorcycles

KCH high-pressure cylinder forconstruction machinery

Vane pump for continuously
variable transmissions (CVTs)

Contents
Message from the PresidentCorporate Spirit (What KYB Aims to Be)
By serving technologies and productsthat make people’s lives safe andcomfortable, KYB group dedicates tothe society.
1. We shall follow all rules and face all issues with honesty.
2. W e shall build a corporate culture full of vitality,and hold high goals.
3. W e shall value sincerity, cherish nature and care forthe environment.
4. W
 e shall constantly pursue creativity to contribute to
the prosperity of customers, shareholders, suppliers
and society.

Inside front cover

KYB’s Heritage

2

KYB Group Business Overview

6

KYB’s Manufacturing

10

Previous Management Plans

14

Overview by Segment

16

Contributing to Social Issues through Our Business

19

Progress of Measures to Prevent Reoccurrence ofSeismic Isolation/Mitigation Oil Damper Problems

20

Stakeholder Communications

21

Quality Management24

Supply Chain Management

25

Human Resources Management

26

Environmental Management

30

Corporate Governance

35

Internal Control and Compliance

39

Management Team

41

Risk Information

42

Financial and Non-Financial Highlights

44

Global Network

46

Corporate Information/Shareholder Information

47

Editorial Policy

Corporate Statement

Our Precision,Your Advantage
In moving ahead with its business, KYB willcontinue to offer reliable quality to its end users
and clients. We believe this not only results in an“advantage” to our stakeholders, but also lets our
employees feel that they are changing the world
for the better through the quality they help create.
The wish to give our employees the “advantage”
of the joy of monozukuri is incorporated in our
corporate statement.

The KYB Group has issued this integrated report since FY2019 tocommunicate its management policies, business strategies andCSR activities to shareholders, investors and all other stakeholders.
We hope to create new opportunities for dialogue by coveringbusiness performance, management strategies and other financial
information, as well as the environment, society, governance (ESG)
and other non-financial information in order to inform readers
about our efforts to increase corporate value over the medium tolong term. For a better reading experience, we will continue toimprove the report based on stakeholder feedback. We welcome
your suggestions.
Reporting Period
FY2019 (April 1, 2019 to March 31, 2020)(Includes efforts that are outside the above reporting period)

Scope
The report covers KYB Corporation and subsidiaries and affiliates
in Japan and around the world. Environmental data is for KYB
Corporation (Sagami Plant, Kumagaya Plant, Gifu North Plant,
Gifu South Plant and Gifu East Plant) unless otherwise annotated.
Date of Issue
November 2020
Forward-Looking Statements
This report includes plans and forecasts as of the issue date, andestimates based on our business plans and management policies.
Forward-looking statements are based on information available
at the time of report preparation, and actual results may differ
depending on changes in relevant conditions.
KYB Group Report 2020

5

KYB Group Business Overview

KYB provides products to customers in various fields by combining electronic control and systems
technologies that apply its two core technologies for vibration control and power control. KYB’s
business and product segments are divided into Automotive Components Operations, HydraulicComponents Operations, the Special-Purpose Vehicles Division, the Aircraft Components Division, andthe System Products and Electronic Components Business.

KYB’s Core Technologies and Businesses
Automobiles
Motorcycles

Vibration
ControlTechnology

Railroad equipment

Electronic
ControlTechnology

HydraulicTechnology

Power
ControlTechnology

Aircraft components
Construction machinery

SystemTechnology

Special-purpose vehicles
System productsElectronics components

Main Businesses
Automotive Components Operations

Ultra-low velocity valves forshock absorbers

6

Air-oil-separate system (AOS) for thefront forks of motocross motorcycles

Hydraulic Components Operations

Control valves

Active suspension systems forrailroad cars

This business primarily develops and supplies a wide variety
of products for automobiles and motorcycles. Leveraging
vibration control technology, it serves market requirements
for comfort, safety and maneuverability in day-to-day driving
and motorsports.

This business develops and supplies a variety of hydraulicequipment for construction machinery, industrial vehicles andrailroad cars. It also leverages vibration control technology tomeet the needs of onsite monozukuri and railroad infrastructure
for precision miniaturization, digitalization and systemization.

Major Products

Major Products

Shock absorbers for automobiles: Shock absorbers (original
equipment (OE), aftermarket)
Shock absorbers for motorcycles: Front forks, rear cushion units
Hydraulic equipment for automobiles: Vane pumps, vane
pumps for continuously variable transmissions (CVT), hydraulicpower steering systems, electric power steering (EPS)
Others: Stay dampers, shock absorbers for all-terrain vehicles,
free locks

Hydraulic equipment for industrial use: Cylinders, valves,
pumps, motors, mini-motion packages (MMP), hydrostatictransmissions (HST)
Others: Dampers for railroad cars, brakes for railroad cars, active
suspension systems for railroad cars, seals

KYB Group Report 2020

Sales Composition by Product for Fiscal 2019 (Consolidated)
Net Sales by Business Segment

Segment Profit by Business Segment*
Other businesses

Other businesses¥24.2 billion¥0.4 billion

Net Sales

Segment Proﬁt by
Business Segment¥381.6 billion
HydraulicComponents
Operations¥125.3 billion¥17.6 billion
Automotive
Components
Operations¥232.1 billion

HydraulicComponents
Operations¥5.5 billion

Automotive
Components
Operations¥11.7 billion* Segment profit corresponds to operating profit under JGAAPMarket Share of Major Products Source: KYB data (As of March 31, 2020)
Shock Absorbers

Motorcycle Front Forks

No. 1 42% No. 3 16%

No. 1 45%

in Japanin the worldin Japan

Hydraulic Cylinders

Concrete Mixer Trucks

No. 1 28%

No. 1 86%

in the worldin Japan

Other businesses (system products, aircraft components, special-purpose vehicles, electronic components, etc.)

Concrete mixer trucks

Actuators for aircraft

Chair ski shock absorbers fordisabled skiing

Floor equipment• Special-Purpose Vehicles DivisionThis business develops and manufactures special-purpose
vehicles, focusing on a lineup of small to large concrete mixer
trucks that have the largest market share in Japan. The
excellent mixing, discharging, environmental performanceand other features of our products boost work efﬁciency.

theater performances. In addition to hydraulic technology,
we are also focusing on electronic control technology todevelop products such as electronic control units (ECU) for
automobiles and other uses.

• Aircraft Components DivisionThis business supplies ﬂight control systems, landing systems,
hydraulic and pneumatic systems and other hydraulic equipment
for aircraft. In the aerospace technology market, which requires
outstanding reliability, we leverage cutting-edge hydraulictechnology to support ﬂight safety and comfort.

System products: Theater equipment, equipment for military
vessels, seismic isolation and vibration suppression devices,simulators, hydraulic systems, tunnel boring machines, andenvironmental devices
Aircraft components business: Devices for take-off andlanding of aircrafts and steering components, control devices,and emergency equipment
Special-purpose vehicles: Concrete mixer trucks, granule
carriers, special-function vehicles
Electronic components, etc.: Electronic devices• System Products and Electronics Components BusinessWe are opening up new possibilities for hydraulic technology,
such as auditorium and stage control systems that support

Major Products

KYB Group Report 20207

Product Lineup
We support daily life by providing safety and comfort. The products presented here are used in a
broad range of fields.

8

Automotive

Motorcycles

Construction Machinery

KYB makes automotive components thatgive users the drivability they want inany situation, from a family outing to achallenging motorsports event.

KYB makes motorcycle components forthe highest level of riding stability andsuperior maneuverability by using raceproven technology designed for extreme
speed and safety.

KYB construction machinery components
are widely incorporated in equipment used
at construction sites under severe conditions.

Industrial Vehicles

Agricultural Machinery

Industrial Machinery

KYB puts its components to work in
forklifts and other industrial vehicles toprovide powerful support for improved
operational efficiency.

KYB agricultural machinery components
save space and energy for easier farming.

KYB supplies components for industrial
machinery from elevators to factoryequipment to help accelerate production.

KYB Group Report 2020

KYB Group Business Overview

Railroad Equipment

Special-Purpose Vehicles

Theater Equipment andEquipment for Theater
Construction

KYB railroad equipment helps achieve
comfortable high-speed travel bybuffering rolls from air pressure when
cornering, passing oncoming trains orentering tunnels.

KYB special-purpose vehicles support
comfort in all environments. KYB concrete
mixer trucks have the highest market sharein Japan.

KYB technology supports theatrical
productions by providing rigging, acoustic
reflectors and other essential equipment
for performance venues.

Marine ProductsSports and Welfare

Aircraft Components

KYB hydraulic and tension control
technologies make work at sea easier,including for ships operating remotedevices for deep sea exploration, as well
as for transport ships, supply ships andrescue ships.

KYB uses its core technologies to develop
products for sports and welfare.

KYB provides a wide range of aircraftcomponents that meet the strict reliability
requirements of the aerospace technology
market, including components for flightcontrol and landing, and for hydraulic andpneumatic systems.

KYB Group Report 2020

9

KYB’s Manufacturing

KYB’s Technology Development
We incorporate cutting-edge technologies centered on hydraulic vibration control and power
control to continue taking on the challenges facing the next generation.
The origin of KYB is the Kayaba Research Center, which wasestablished by the inventor Shiro Kayaba in 1919. Since thefounding of the center, we have spent a century refining
hydraulic and other technologies. Our shock absorbers haveearned a strong reputation among customers worldwide for
their advanced technology and high quality, achieving market
shares of about 40% in Japan and about 15% globally.
A major feature of hydraulic pressure is the ease with which
it produces a larger output than electric, pneumatic or otherdriving methods. The ease of control due to its superior
responsiveness is another reason for its wide use. For example,
an automobile shock absorber that absorbs impact from theroad surface is a good example of the use of the viscosity of oil
to exert an appropriate damping force, and hydraulic pressure
is considered the best system for construction machinery
because of the large output required.

KYB has created a variety of hydraulic products in combination
with other technologies such as electronic control, centeringon the two core technologies of hydraulic vibration control
and power control. Even with today’s rapidly advancing
technologies, we have confidence in the meaningful
contribution that hydraulic technology can make to thedevelopment of society. In response to changing times, wetherefore utilize cutting-edge technologies such as AI, IoT andadvanced simulations to further evolve our core technologies,
while promoting the electronic control and systemization ofequipment to address changing social conditions and customer
needs for environmental protection, safety and comfort. In
doing so, we are taking on the challenge of developing thenext generation of hydraulic equipment.

KYB’s Technologies
KYB’s CoreTechnologies
Vibration control

Elemental Technologies

Power control

Leading-Edge Technologies

HydraulicElectronic control

Motorization

AI and IoT

SystemMaterials

Testing andevaluation

Sophisticated simulation

Monozukuri (Japanese manufacturing expertise)

Digital technology

Products That Utilize Our Original Technologies

Vane pump for CVT in light andcompact automobiles
This vane pump for the hydraulic power source in thecontinuously variable transmission (CVT) that is used
exclusively in light and compact vehicles achieves
low cost and a smaller footprint while maintaining
performance equal to existing products. Despite theconflict between cost reduction and miniaturization,
we succeeded in achieving both by integratingproduction, technology and sales from the initialstages of development. As a result, KYB received a
Global Special Award from JATCO Ltd. in July 2019.
10

KYB Group Report 2020

Prosmooth™ (sliding parts for shock absorbers)

Double hydraulic stop (DHS) suspension

Prosmooth™ is a newly developed series of sliding
parts for shock absorbers that deliver the next level ofboth luxurious “magic carpet ride” comfort with finevibration control and line trace performance forcornering with a slight steering stroke. It has received ahigh evaluation from experts and has been adopted bya number of automobile manufacturers. In June 2018,
Prosmooth™ received a Toyota Project Award in theEngineering Division from Toyota Motor Corporation.

DHS suspension shock absorbers generate highdamping force throughout the full suspension travel.
It features improved riding comfort during normal
driving and high running performance on roughroads, and has been adopted in many models by
numerous manufacturers. In June 2018, it received a
Supplier Award from Groupe PSA.

KYB’s Technology Development System
We aim to generate new value, with the Basic Technology R&D Center and the Production
Technology R&D Center at the core.
KYB conducts research and development of its highly original
and advanced technologies with the Basic Technology R&D
Center and the Production Technology R&D Center at the core.
These R&D centers handle basic research and development ofelemental technologies, while the technical departments ofeach business develop new products and make improvements toexisting products in areas such as performance or cost reductions.
In addition, the R&D centers and technical departments of eachbusiness and Group company work together to conduct projects
across divisions. Moreover, for smooth, timely and efficient
continuity from R&D to manufacturing, we consider futuretechnologies based on long-term environmental changes andresearch, analysis and forecasting of the associated social andcustomer needs. We have established and implemented thisapproach as the roadmap for a sustainable growth strategy.

At the same time, we are reviewing our existing system for R&D
and commercialization, and have started initiatives to respond to
the new era. Engineers at our representative offices in Europe(Europe Technical Center) collect the most up-to-date informationfrom around the world so we can identify technological trends
and incorporate them in our R&D. In addition, we established a
new Digital Transformation (DX) Improvement Department in2019 to promote and cultivate digital technologies such as AI andIoT throughout the Company. By building an IoT platform,
improving productivity and quality, conducting manufacturing
using AI, developing products and rolling out new services, theKYB Group aims to provide products that customers can use withan even greater sense of reliability.

Technology Development Structure
Control, vibration, information and communications, electrical/electronics, mechanical elements,
sensors, surface treatment, heat treatment, processing, assembly, inspection, automation, etc.
Basic Technology R&D Center/Production Technology R&D Center
Basic research

Future technology
research

Intellectual Property
Department

Elemental technology
research

Intellectual property
strategy

CAE1 Promotion Department/DX Improvement Department
AI and IoT

Digital technology

Simulation technology

Product development

Mass production
Businesses/Group companies

The original R&D conducted at the Basic Technology R&D Center and the Production Technology R&D Center is carried out efficiently using the latest digital and simulation
technologies under a multi-faceted intellectual property strategy. The businesses and Group companies conduct product development and mass production, fully utilizing
the R&D done at the laboratories to deliver products to customers with appeal in every aspect of QCD2 that other companies cannot match.
The process from R&D to product development and mass production does not proceed in only one direction. Through regular feedback, all employees share informationand continue to update our products.
1. CAE: Computer Aided Engineering. The use of computer simulations to resolve issues faced by technical departments.
2. QCD: Quality, cost and delivery

Developmental Experiment Center
The Developmental Experiment Center is an extensive in-house facility on a scale rarely
seen among independent manufacturers. The site is approximately 595,000 m2 andincludes a large-scale test track consisting of three types of road—straight,
mountainous and circular—that reproduces different road surface conditions aroundthe world. In addition to anticipating needs and taking the lead in conducting
independent road tests of items including suspensions, steering devices and electronic
devices for automobiles and motorcycles, we can also collect data on differences due tospecification changes for evaluation jointly with customers. These and other capabilities
have earned the Developmental Experiment Center a positive review as it enables us tofine-tune actual vehicles on-site. By expediting developmental experiments, we canshorten the development period and conduct development more efficiently.

Developmental Experiment Center(Kamo-gun, Gifu Prefecture)

KYB Group Report 2020

11

KYB’s Production Technologies
We will leverage the manufacturing expertise we have honed over many years and integrate
it with digital technologies to further raise its level.
KYB develops and mass produces items in a wide range offields including automobiles, motorcycles, construction
machinery, railroad equipment, special-purpose vehicles andaircraft components. Factors such as size, quantity, cost andquality control are different for each product field, requiring
separate handling, and manufacturing must also be responsive
to social changes in the global situation, the economy andother conditions. Under these circumstances, KYB has been
responding to customer requests by developing production
line, processing and assembly technologies tailored to eachproduct field.
More specifically, we started manufacturing shock absorbers,
which are a mainstay product, in an era of low variety, highvolume production (to 1998), then transitioned to simplification

Gifu North Plantof the production line through product standardization (20002005), the creation of a line optimized for production volume
and product characteristics (2006-2011) and a compact linethat handles changes in number of units produced and producttypes (2012 to present).
Going forward, we will promote innovative manufacturing
utilizing digital technologies such as AI and IoT and integrate
it into our existing manufacturing (processing/assembly)
technologies to further raise the level of our technologies.
As one aspect of our innovative manufacturing, we aim tocreate the world’s most advanced factory for producing shock
absorbers. Based on the roadmap shown in the figure below,
we will proceed steadily toward a fully automated production
system in the future.

Gifu East Plant

Sagami Plant

Innovative Manufacturing Roadmap
Phase 1

Phase 2Phase 3

Final Phase

Fully automated line

AI/IoT technologies shown in red

Autonomous driving/Optimizing control ★

30% decrease inprocessing cost

AI control ★

Value★ IoT Cloud/Communication control

Tech. Items★ IoT remote control★ Defect detection (AI)★ IoT equipment predictive control (AI)★ IoT monitoring control
Overseas expansion
Domestic expansion
Development of innovative line

★ Robot control
Development line (BM)BM personnel rate -35%

BM personnel rate -70%

Development line (BM)12KYB Group Report 2020

Full automation

KYB’s Manufacturing

Outlook
We aim to help resolve social issues through greater competitiveness and innovative manufacturing.
As an independent company, KYB has been conducting its own
R&D and improving its technical and product development
capabilities through interactions with customers around theworld. We have applied and developed core technologies toenter diverse fields including automobiles, construction
machinery, industrial machinery, special-purpose vehicles,
railroad equipment and aircraft components. In addition to
the technologies we have accumulated and our many years ofexperience and expertise, we have continued to respond todifficult requests from our customers with a can-do attitude anda sense of pride. These factors have made KYB what it is today.
We have raised four issues to be addressed in the future:promotion of electrification/electronic control and system
support; utilization of digital technology (AI/IoT) and big dataprocessing; realization of innovative manufacturing; andfurther improvement of competitiveness.

We will also more explicitly address social issues. Amid calls forenvironmental protection and clamor over the labor shortage inJapan, we are aware of the major role KYB has to play. For
example, we believe we can make a contribution in areas suchas dealing with the environmental aspects of the REACH
regulations,* pursuing higher efficiency through electronic
control for energy conservation and safety, and working towardautomatic operation of construction machinery.
The KYB Group’s global development network currently spansthe five regions of Japan, the United States, Europe, China
and ASEAN. However, to succeed in these volatile times, weare searching for more efficient development methods andreconsidering the appropriateness of our organizational structure.
In addition, we will place a greater emphasis on cultivating
engineers who can respond flexibly to changes as we continue
working to create the hydraulic technologies of the future.

* Regulations that came into effect in the EU in June 2007 with regard to registration, evaluation, authorization and restrictions on chemicals

Main Presentations and Lectures at Academic Conferences in FY2019
The Future of Smart Road Monitoring

Second SmartCity Technology Forum

Case Study of Use of CAE for Prediction of ElectricPower Steering Characteristics

NewtonWorks Corporation
Nonlinear Analysis Forum 2019

Anisotropy Analysis of Pierced Hole Shapes on Thin
Steel Pipes

The 2019 Japanese Spring Conference for theTechnology of Plasticity

Development of a Single-Joint Detachable Modular
Hydraulic Robot

The 37th Annual Conference of the Robotics
Society of Japan

Design and Experimental Verification of a High Force
Density Tubular Permanent Magnet Linear Motor for
Aerospace Application

Smart Road Monitoring
Patrol record

Analysis ofdeterioration level

Detection of potholes, grooves anduneven road surfaces

AEROTECH EUROPE

Diagnosis of road surface deteriorationfrom road patrol data

Engineer Education Programs

Participation in the National Skills Competition

At KYB, it is important that engineers are involved not only intheoretical work, but also in trial and error in actual situations andwith actual products. That is why our engineer education is focusedon developing human resources who can act independently in othertechnical fields. We have 50 unique engineer education programstaught by employees. To respond flexibly to diversifying social andcustomer needs, we are developing engineers with skills in a variety
of fields beyond hydraulics, mechanics and vibration, such as
electronics and language education. We are also involved in industryacademia collaboration with several universities in Japan and overseas,and engineers from research institutes and universities from around theworld visit our Company and engage in engineer exchanges.

As part of its training for young skilled workers, KYB participatesin the “Manual Turning” section of the National Skills
Competition held by the Ministry of Health, Labour and Welfare
and the Japan Vocational Ability Development Association. In
2019, KYB won its first award for “Fighting Spirit.” We willcontinue to take advantage of this opportunity to develop
skilled workers with processing skills, judgment, critical thinking
and perseverance.

Main Fields ofEngineering
Education
Programs• Mathematics/Physics/
Quality assurance• Statistics• Material strength• Hydraulics• Shared fields• Mechanics and vibration• Electronics• Production technology

The 57th
National Skills
Competition

KYB Group Report 202013

Previous Management Plans

Management Plans and Business Results
FY2011-2013 Medium-Term Management Plan

FY2014-2016 Medium-Term Management Plan

FY2017-2019 Medium-Term Management Plan

Sowing Seeds andStrengthening Our Foundation

From Strengthening Our
Foundation to GrowthInnovation for
Sustainable Growth• Established technology development facilities
including the Developmental Experiment Centerand the Machine Tools Center• Consolidated and eliminated bases for construction
machinery products in Japan and China (CADAC/YS
integration in Japan, KIMZ1 integration in China)• Initiatives for “the first year of KYB’s recovery”(quality management, measures to prevent
recurrence of improper acts)• Established regional headquarters in China, theAmericas and Europe, and a procurement center
in ASEAN to build a global management network• Started plan for high-value-added products
and innovative manufacturing for automobiles(high-performance SA, integrated valve line concept)• Business reorganization (small businessdepartment system introduced)• Established domestic production system forconstruction machinery products (established
Gifu East Plant/New CADAC Plant (currently
Ueda Plant of KYB-YS Co., Ltd.))• Expanded overseas production bases (SA at
KMEX2 in Mexico, motorcycles at KMSI3 in India,
construction machinery at KHMI4 in Indonesia)(Billions of yen)

412.2

393.7

370.3

352.7

337.2

• Started transfer of production and business(PS business division incorporation at KYB
Trondule Co., Ltd., layout change of small
motorcycle production in ASEAN)

355.3

381.6

355.3

305.8
22.9

21.5
18.2

17.6

15.5

22.0

18.6

17.6

10.5

2011

2012

2013

2014

2015

2016

JGAAP

2017

2018

2019

(FY)

IFRS

■ Net sales (left scale) ■ Operating proﬁt/Segment proﬁt 5 (right scale)Notes: 1. KIMZ: KYB Industrial Machinery (Zhenjiang) Ltd.
2. KMEX: KYB Mexico S.A. de C.V.
3. KMSI: KYB Motorcycle Suspension India Pvt. Ltd.
4. KHMI: PT. KYB Hydraulics Manufacturing Indonesia
5. Operating profit up to FY2013, segment profit in FY2014 and thereafter (calculated by deducting cost of sales and selling, general and administrative expenses from net sales)

Review of the FY2017-2019 Medium-Term Management Plan
The FY2017-2019 Medium-Term Management Plan started as our
final medium-term management plan in our aim for annual Groupnet sales of ¥500 billion, a target we conceived in 2010 as part ofour vision for 2020. The development of high-value-added
products and the implementation of measures to ensure theprofitability of our bases had been issues since the FY2014-2016
Medium-Term Management Plan. By introducing small businessdepartments under the control of the operational headquarters,
we ensured flexibility and made shared responsibilities clearer,which enabled us to launch high-value-added products forautomobiles and set a tentative timetable for transferring andconsolidating production of construction machinery products.

On the other hand, matters for further reflection include thenonconforming acts associated with seismic isolation/mitigation oil
dampers announced in October 2018 and the improper claims to
the Ministry of Defense announced in January 2019. These matterscaused particularly great inconvenience to all those involved andmade us realize our lack of an awareness of compliance, whichshould be at the core of the Company’s operations.
Under these circumstances, we made FY2019 “the first year of
KYB’s recovery.” As the Company’s foremost task, we worked tothoroughly establish a corporate culture that gives the highest
priority to compliance and safety, and added awareness ofcompliance to our Corporate Spirit in October 2019, with a focus
on promptly bringing nonconforming seismic isolation/mitigation
oil dampers into conformity.

Future Direction
The various measures we implemented during “the first year
of KYB’s recovery” in FY2019 enabled us to pave the way forpracticing thorough compliance and preventing a recurrence of
our improper acts related to seismic isolation/mitigation oil dampers
and the Ministry of Defense. Using this as a foundation, we will bringevery last damper into conformity during the period of the FY20202022 Medium-Term Management Plan. We will also implement
each measure of the plan while strengthening compliance.

14

KYB Group Report 2020

In addition, we have changed our Company policy and aremaking a clear shift in emphasis from net sales to high profitability.
In the current situation, where the COVID-19 pandemic has madeforecasts impossible, we intend to begin by increasing profitability
with a focus on our current businesses.
▶ For details, see the Investor Relations section of the Company website.

http://www.kyb.co.jp/english/ir/index.html

FY2019 Performance
Analysis of Losses in FY2019

In FY2019, net sales were ¥381.6 billion, a decrease of ¥30.6
billion from ¥412.2 billion in the previous year, segment profit was¥17.6 billion, a decrease of ¥4.4 billion from ¥22.0 billion in theprevious year, and loss attributable to owners of the parent was¥61.9 billion, an increase of ¥37.1 billion from a loss of ¥24.8
billion in the previous year, for a second consecutive fiscal yearwith a net loss. The decreases in net sales and segment profit weremainly caused by weakening economic growth in China due totrade friction with the United States and a decline in sales volume
due to the COVID-19 pandemic in the fourth quarter. The main
reasons for the net loss were ¥12.2 billion in expenses incurred
during the fiscal year to bring seismic isolation/mitigation oil
dampers into conformity, ¥22.5 billion in provision for estimatedfuture expenses under product warranties for such oil dampers,¥17.4 billion in impairment losses at multiple plants, ¥20.4 billion
in income tax expenses for the partial reversal of deferred tax
assets, and ¥7.0 billion in foreign exchange and other losses. Of
these expenses, the only items entailing actual or expected cash
outflows are ¥12.2 billion in expenses for product warranty
measures to bring seismic isolation/mitigation oil dampers into
conformity and ¥22.5 billion in provision for product warranties;
the other items are all evaluation losses.

(Billions of yen)

(12.2)(22.5)

17.6(17.4)(7.0)(61.9)(20.4)

Proﬁt
Segment Expenses Provision Impairment Foreign Income tax
for productforlossesexchange expenses attributable
proﬁtwarranty
product
and otherto owners
measures warranties
lossesof theparentMost negative factors are non-cash items

Overseas Expansion
Since 2000, we have expanded our global supply system aswell as our provision of products, technologies and services toemerging countries. Since 2013, our overseas sales ratio has
exceeded 50%, and we are working to create high-quality
products tailored to the needs of each region. Going forward,
we will conduct optimal procurement through local production
for local consumption that is able to respond to risks fromuncertainties such as exchange rate fluctuations, and aim to
improve profitability by establishing a production system that
responds to changes in customer demand.

KYB’s aspirations for overseas expansion began at an earlystage, when it established a long-term management visionin 1966 to become a global player as a comprehensive
manufacturer of hydraulic equipment. In 1973, we accelerated
our activities outside Japan by establishing an Overseas
Business Division to accommodate our customers’ overseas
expansion and increase our product export ratio. As a result,
the KYB brand spread widely outside Japan, centering on
shock absorbers, and in 1981 our export ratio reached 10.1%
with a value exceeding ¥10 billion.

Sales by Region and Overseas Sales Ratio(%)(Billions of yen)

60

500

52.0
400

46.0
337.2

300

51.9

54.9

54.6

53.5

46.9
352.7

370.4

393.7
355.3

55.2
412.2

355.3

55.2
50

381.5
40

305.8
30

200
20
100

10

0

0

2011

2012
JGAAP

■ Japan (left scale) ■ Europe (left scale)
Overseas sales ratio (right scale)

2013

2014

2015

2016

2017

2018

2019

(FY)

IFRS

■ Americas (left scale) ■ China (left scale) ■ Southeast Asia (left scale) ■ Other (left scale)KYB Group Report 202015

Overview by Segment

Automotive Components Operations
Strategy under the
FY2017-2019 Medium-Term
Management Plan

For long-term growth, map out plan for consolidating bases
and companies to match geographical shifts in customer
demand, and for developing and promoting sales ofhigh-value-added products.

Review of the FY2017-2019 Medium-Term Management Plan
Under the FY2017-2019 Medium-Term Management Plan,
Automotive Components Operations aimed to optimize
production by consolidating bases and focused on developing
and expanding sales of high-value-added products to provide afoothold for sustainable growth.
Over the three years of the medium-term management plan,we achieved some success in restructuring unprofitable products
and bases. In the electric power steering (EPS) systems business,where profitability has become an issue, we leveraged theknowledge we have accumulated in Japan to establish a joint
venture in China, and we are rolling out sales activities. We alsodecided to close our production base in Spain for hydraulic power
steering systems, which is a shrinking market. On the other hand,

we laid the foundation for building a production system for
automobile and motorcycle shock absorbers that is optimized fortransferring products among bases, but faster setup is necessary.
While bolstering this foundation, we have worked to extend thebusiness into high-value-added products and fields where we
expect demand to increase, with the aim of future growth.
High-value-added products and products for future growth fields
such as SUVs, electric vehicles and pickup trucks are already being
installed in some mass-produced vehicles, and we expect morewidespread use going forward. We also established the Europe
Technical Center in Germany to strengthen our technologicalcapabilities and cultivate new customers.

FY2019 Overview
In FY2019, despite increased sales volume of automobile
shock absorbers in North America and the Middle East, net
sales decreased 5.6% year on year due to the impact of theappreciation of the yen, the chilling effect of a consumption
tax rate hike on the domestic market and a decrease in sales
volume of electric power steering and hydraulic equipment for
automobiles, mainly electric power steering products and vane

pumps for the continuously variable transmission (CVT). On theother hand, segment profit increased year on year due to growthin sales volume of highly profitable products. Our shift over the
past few years to highly profitable products and the expansion ofsales of high-value-added products are generating results. We
have now established a structure that can secure profits evenwhen sales decline.

Net Sales1

Segment Profit2(Millions of yen)

(Millions of yen)

300,000

20,000240,903

231,025

243,725

245,807

232,101

15,00015,504200,000
10,00011,043

10,6182016

2017

11,696
9,806

100,000
5,000

0

0
2015

2016

2017

2018

2019

(FY)

2015

2018

2019

(FY)

■ Shock absorbers for automobiles ■ Shock absorbers for motorcycles■ Hydraulic equipment for automobiles ■ Others
Notes: 1. As of FY2017, “Royalty income” and “Revenue related to mold compensation,” which were previously recorded in “Other income” in the Consolidated Statementsof Income, are included in “Net sales.”
2. Segment profit is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.

16

KYB Group Report 2020

Hydraulic Components Operations
Ensure stable sales and profit that are unaffected by market
fluctuations, and maintain foundation in hydraulic excavators
while promoting sales in growth markets in which we were
not fully active.

Strategy under the
FY2017-2019 Medium-Term
Management Plan

Review of the FY2017-2019 Medium-Term Management Plan
Under the FY2017-2019 Medium-Term Management Plan, in order
to secure stable sales and profits resilient to market fluctuations, theHydraulic Components Operations segment bolstered its foundationin mainstay products for hydraulic excavators and worked to expand
sales in growth markets for products other than excavators where
we were not fully active. We have been transferring production of
products for hydraulic excavators in Japan, as well as reorganizing
production of control valves over the past three years to create an
integrated line. In addition, we aim to shorten the development
period and enhance product capabilities by integrating development
and production bases, and we are working to improve production
efficiency by consolidating production of hydraulic motors at asingle base. In the mini and ultra-large excavator markets, where
demand is expected to remain stable, we have maintained highmarket share by expanding production capacity.
As for growth markets other than hydraulic excavators, we also
worked to expand sales of products for agricultural machinery,skid-steel loaders (SSL) and compact track loaders (CTL). The
SSL/CTL and small construction machinery and agricultural
machinery markets are expected to grow, mainly in emerging
countries, and we introduced new products to the market,
establishing a foothold for future sales expansion.
Despite this progress in bolstering our foundations, conditions
were severe in FY2019 as cost reductions were not enough tocompensate for the decrease in sales volume due to a decline indemand and the occurrence of large-scale disasters. Securing
stable sales and profits will require faster implementation of
structural improvements.

FY2019 Overview
Net sales in FY2019 decreased 10.9% year on year due to a
decline in demand caused by weakening economic growth inChina, worsening market conditions in Europe and the Americas,
natural disasters in Japan and the slump in economic activity as aresult of the COVID-19 pandemic. Cost reductions were notenough to compensate for the rapid decline in demand, resulting
in a year-on-year decrease in segment profit. It was a challenging

year for the Hydraulic Components Operations segment, with aseries of unforeseen events. On the other hand, we have madesteady progress in transferring production of control valves andconcentrating production of motor products. By working to makeproduction lines more flexible, we are creating a structure that isresilient to fluctuations in volume.

Net Sales1

Segment Profit2(Millions of yen)

(Millions of yen)

150,000

15,000140,625

125,321

122,787

11,304
100,000

88,024

11,907

10,00096,327

6,634
50,000

5,000

0

0
2015

2016

2017

2018

2019

(FY)

5,534

451
2015

2016

2017

2018

2019

(FY)

■ Hydraulic equipment for industrial use ■ Others
Notes: 1. As of FY2017, “Royalty income” and “Revenue related to mold compensation,” which were previously recorded in “Other income” in the Consolidated Statementsof Income, are included in “Net sales.”
2. Segment profit is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.

KYB Group Report 202017

Overview by Segment

Other businesses (system products, aircraft components, special-purpose vehicles, electronic components, etc.)

FY2019 Overview
Other businesses include system products, aircraft components,
special-purpose vehicles and electronic components. Sales
decreased in each business, resulting in a 6.3% year-on-year
decrease in net sales for the segment. On the other hand,segment profit increased and the profit margin improved.
As announced in October 2018, the system products
business was involved in nonconforming acts in the inspection
process for seismic isolation/mitigation oil dampers, causing
great inconvenience for all those involved. We are currently
working to bring all nonconforming dampers into conformity,
aiming for completion by March 31, 2021. In the aircraftcomponents business, we completed payment of refunds forovercharges associated with improper claims regarding working
hours for defense equipment announced in January 2019.
In the special-purpose vehicles business, we are working tosecure sales and market share by steadily capturing domestic
demand in fields including public works and urban development,
and our mainstay concrete mixer trucks maintain stable sales witha market share around 80% in Japan. We are working to establish
a network that can respond promptly to fluctuations in demandand strengthen after-sales service in Japan, as well as to establish a
global network for special-purpose vehicles.

e-Mixer Computer Controlled Concrete Mixer Truck
The e-Mixer is an environmentally friendly concrete mixer that achieves low noise, low exhaustand energy efficiency through computer controlled operation. Optimal computer control of theflow rate of the hydraulic transmission system according to the level of load capacity reduces
engine speed to about half that of a manual mixer. In addition, eliminating the operating lever
and replacing it with a hand-held rear controller substantially improves operability. Use of theradio controller enables minute adjustments during concrete discharge. Other functions thatmeet the needs of users include programmed auto-clean and auto-mixing functions, automatic
stirring during running, and a function to prevent reverse rotation.
The initial model e-Mixer that was launched in 2004 was upgraded to the e-Mixer II in 2011.
We are currently incorporating further advances to develop the e-Mixer III.

Net Sales1

Segment Profit2(Millions of yen)

(Millions of yen)

30,000

Remote control operation near thedischarge chute

2,000

26,39427,964

27,23125,782

1,633

24,1631,500

20,000
1,000

947

1,028

10,000
500

0

297

346

2018

2019

0
2015

2016

2017

2018

2019

(FY)

2015

2016

2017

(FY)

Notes: 1. As of FY2017, “Royalty income” and “Revenue related to mold compensation,” which were previously recorded in “Other income” in the Consolidated Statementsof Income, are included in “Net sales.”
2. Segment profit is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.

18

KYB Group Report 2020

Contributing to Social Issues through Our BusinessApproaches to ICT and IoT in Hydraulic Equipment
Support for ICT and IoT in Hydraulic Equipment
In recent years, computerized operation using information and communication technology (ICT) and monitoring functions using the Internet ofThings (IoT) have increased in the construction industry. Combining traditional hydraulic equipment with advanced electronic equipment
requires overcoming challenges in terms of cost, durability and systemization, but we are continuing our development initiatives, mainly insensing technology.

Launch of Hydraulic Cylinder Compatible with ICT (Stroke Sensing Cylinders for ICT
Construction Equipment)
We have launched a cylinder with a stroke sensing function as a productfor computerized construction equipment. In the case of an externalsensor, there is a risk of damage due to contact with soil or othersubstances. However, a built-in sensor that is interchangeable withstandard cylinders can prevent damage. For ease of use and high accuracy,
the stroke sensing cylinders support controller area network (CAN)
communication and utilize absolute output (absolute position detection).

Development of Monitoring System for Hydraulic Cylinders and Other Equipment
We are developing a cylinder failure detection system as a product formonitoring systems utilizing IoT. A fully wireless sensor mounted on thecylinder monitors the inside of the cylinder and reports malfunctions. KYB
has continued to make advances in its hydraulic cylinders to improve their
durability. Moreover, by providing advance notice of the inevitable
deterioration of consumable items or accidental failures, this systemminimizes the effect on theoperation of construction
Relief valve
machines, thus contributing to
the maintenance operationsof construction machine
manufacturers. The product isWireless
sensorin the evaluation stage of theSeal housingdevelopment process as a
subsystem that provides data
Sensor holder
to the construction machines.

Wireless sensor(for cylinder
mounting)

CAN communication(SAE J1939)
Terminals used aspressure andtemperature
sensors

Internal
communication

Receiver• Judgment
function• Communication
function

Personal area
network (PAN)
communication

System developed by KYBConstruction
machineECU

Construction
machine network
communicationequipmentLine for CAN
communication(SAE J1939)

Construction
machine system

Joint Development of a Next-Generation Modular EV Platform
KYB has entered into a strategic partnership with REE Automotive of
Israel, a company with advanced electric vehicle (EV) platform
technologies, to develop suspension capabilities for future EV
platforms. Our suspension technologies will contribute significantly
to improving the performance of REE Automotive’s next-generation
EV platform, providing cost-effective, scalable solutions in e-mobility.
The new platform features a high degree of design freedom andis expected to enable innovations in EV design, with all drivetrain
components, including steering, braking, suspension and e-motor,
integrated into the wheel. Through this partnership, we will promote
the development of a suspension subsystem that supports the needsof tomorrow’s mobility ecosystem to revolutionize methods oftransporting people, goods and services.

KYB Group Report 2020

19

Progress of Measures to Prevent Recurrence of Seismic
Isolation/Mitigation Oil Damper Problems
Following the announcement on the KYB website entitled “Investigation into the causes of nonconforming acts in the inspection process, etc.
for seismic isolation/mitigation oil dampers for buildings manufactured by KYB Corporation and its subsidiary, and measures to prevent theirrecurrence” dated February 13, 2019, we have been taking preventive measures and working to restore trust.
As of June 30, 2020, approximately 70% of the measures to prevent recurrence have been addressed, and we are continuing our efforts tocomplete unfinished measures.
On its website, KYB periodically posts reports of its progress in preventing the recurrence ofimproper acts and measures to identify and address such acts.

https://www.kyb.co.jp/company/progress/index.html (Japanese only)

Progress of Measures to Prevent Recurrence (As of June 30, 2020)

Establish compliancemanagement

Foster strict
compliance awarenessand reform thecorporate culture
Change the mindset of all
officers and employees

Establish a balanced
business operation system

Evaluate businessfeasibility, and revise
business operations,information-sharing
systems and othermatterEnsure personnel
are rotatedCollect information andestablish a feedback
system

Implement inspection
systems

Improve inspection
systems and methods

Implement preventive
measures against
fraudulent operation of
inspection machines

Enhance internal quality
inspection system

Strengthen internal
audit and control
systems
Tighten the subsidiarymanagement system* Kayaba System Machinery Co., Ltd.

20KYB Group Report 2020

Establish compliance awareness at KYB Corporation and KSM*

Completed

Foster compliance awareness throughout the Group

Completed

Revise the Corporate Guiding Principles and other guidelines

Completed

Emphasize the importance of compliance regularly

Completed

Implement personnel evaluations and related measures

Completed

Conduct education and training to raise awareness of social responsibility

In progress

Conduct education that incorporates numerous case studies and best practices from other companies

Completed

Conduct education on laws and regulations specific to businesses and products

In progress

Make education regarding quality mandatory

Completed

Ensure appropriate business management at KSM

In progress

Review how decisions to accept orders are made at KSM

Completed

Develop business systems

Completed

Revise use of mass-production evaluation procedures for individual and small-batch products

Completed

Nurture successors and increase the transparency of operations by sharing expertise/know-how in
the Company through effective job rotation.

In progress

Ensure thorough documentation of meetings, reports and instructions at KSM

Completed

Ensure that internal regulations are applied in the event of an emergency

Completed

Review the internal whistleblowing system to improve its effectivenessCompleted

Clarify the actions to be taken when quality misconduct is detected

In progress

Create a mechanism for extracting information

Completed

Strengthen the independence of quality assurance

In progress

Improve methods for onsite oil damper inspections with the customer present

In progress

Review inspection manual

In progress

Tighten internal procedures for changing the software of oil damper inspection machines

Completed

Regularly monitor the software of oil damper inspection machines

Completed

Automatically record inspection results without human involvement

In progress

Automate inspection processes

In progress

Tighten controls on access to oil damper inspection machines

In progress

Ensure traceability of performance test data

In progress

Perform audits that consider quality misconduct

Completed

Perform audits that effectively verify inspection data

In progress

Institute audits by KYB Corporation

Completed

Leverage the support of experts

Completed

Strengthen systems for sharing information and collaborating among Group companies

Completed

Review management systems for Group companies

In progress

Analyze and monitor Group companies’ business risks

In progress

Reorganize Group companies

In progressStakeholder Communications

Basic Policy
Our Corporate Spirit states, “By serving technologies and productsthat make people’s lives safe and comfortable, KYB group dedicatesto the society.” To fulfill this we must comply with the following:
1. We shall follow all rules and face all issues with honesty.
2. We shall build a corporate culture full of vitality, and holdhigh goals.
3. We shall value sincerity, cherish nature, and care for theenvironment.
4. We shall constantly pursue creativity to contribute to theprosperity of customers, shareholders, suppliers and society.

In this spirit, we will deepen our dialogue with all stakeholders
and help them gain a better understanding of our company.
Through dialogue, we will clarify the issues we should address andsolve them one by one, thus earning the trust and meeting the
expectations of stakeholders.
In addition, as we strive to become a better company we willcontribute to the development of a sustainable society through thecreation of products that are friendly to people and the Earth, basedon the technological capabilities that we have enhanced throughceaseless, creative and innovative research and development.

Current Status of Stakeholder Communications
Engagement Policy

Customers(Manufacturers and end users)
Provide quality products and services
that satisfy customers at the right timeand price to earn the trust of society.

Impact on Business Activities

Collect information on
customer needs andimprove customer
satisfaction

Shareholders
Disclose business details, management
policies, business forecasts and results
to shareholders in a timely andappropriate manner.

Increase corporate value
through dialogue

Business Partners
Respect our suppliers as valuablebusiness partners, and build
relationships of prosperity and trust.

Employees
Contribute to the sustainable developmentof companies and the creation of aprosperous society, which are common
interests for labor and management.

Strengthen relationships
based on mutual trust

Strengthening labor
management relations/Improve employee
motivation

Local Communities
Contribute to the development of local
communities through active engagement,
and by energetically participating involunteer activities, local events, andother activities.

ApproachFrequency

Details

Answer phone inquiries

As needed

Phone call or e-mail form

Communicate via the
Company website

As needed

Company information and business announcements

KYB Technical Review

Twice a year

Introduction of technologies and products

KYB Group Report

Once a year

Disclosure of financial and non-financial information

KYB Museum

As needed

Museum displaying KYB products and other materials

General Meeting of
Shareholders

Once a year

Business report that includes consolidated financial
statements, financial statements, report on audit results,
deliberation and resolution of matters to be resolved

Reports (Annual
Securities Report, Flash
Report, etc.)

Once a year
or moreReport to shareholders

Plant tours forshareholders

Once a year

Promote dialogue through plant tours

Procurement policy
information meetings

As needed

Policy sharing

Regular visits

As needed

Various meetings

Labor-management
meetings

Several times
a yearVarious meetings between labor and management

President’s messages

Twice a year
or moreNew Year convocation and speech

Employee Satisfaction
SurveyOnce a year

Questionnaire survey

Internal newsletter

Once a monthCommunication via internal newsletter

Invitations to KYB
eventsAs needed

Events held at each plantParticipation in local
community events

As needed

Interaction with community residents

Coexist with local
communities

KYB Group Report 2020

21

FY2019 Highlights
Contributing to the Development of Chair Skis and Sports for People with Disabilities
KYB first became involved in the development and improvementof shock absorbers for chair skis in the early 1990s. Before that,Japanese-made chair skis used commercially available motorcycle
shock absorbers, which the skiers tuned themselves. Because of
the similar configuration, we received an order. Thereafter, adevelopment project in 1998 related to supporting alpine skiing
competitions led us to work together more closely with thePara-Alpine National Ski Team of the Japan Para-Ski Federationon the development of a shock absorber specifically for chairskis. The team won a gold medal at the Nagano Olympic Gamesin 1998, and in 2015 we stepped up our support for chair skis aspart of our social contribution activities by becoming a sponsorof the Federation. In addition to product development, we
provide technical support for team camps and competitions heldin various countries. Product development depends onunderstanding the skiers’ impressions of the product andconverting that feedback into numerical values to be reflected in
product settings. Engineers therefore regularly conduct
development by talking directly with athletes and teams, andthese activities also play an important role in engineer training. In
recent years, chair skis have advanced in tandem withimprovements in the level of competition and skiers’ abilities,
requiring precise adjustments in accordance with conditions.
Based on the product development and technical support
know-how we have cultivated with motorcycle shock absorbers,
we will continue to work with athletes to develop and improvehigh-performance products as we contribute to the developmentof sports for people with disabilities.

Shock absorbers for chair skis

Technical support for skiers

Takeshi Suzuki Wins Asian Cup Gold Medals
Para-skier Takeshi Suzuki joined KYB in 2015 andremains active in competitions around the world.
He is also a skier chosen by the Japan Para-Ski
Federation to compete in Paralympic games. During
FY2019, he won bronze medals at the first slalom in
Italy and first and second slaloms in Slovenia as partof the World Para Alpine Skiing World Cup held inJanuary 2020. He also won gold medals for the first
giant slalom and the first slalom at the World Para
Alpine Skiing Asian Cup held in Nagano Prefecture,
Japan in February 2020.

Takeshi Suzuki at
the Asian Cup

Parent-Child Event Held
We held our first parent-child event at five factories
in Japan, where participants worked on making
syringe-operated excavators. A maximum of 20
families were allowed to attend, and through theevent children learned about the mysteries ofhydraulics as they deepened family ties by getting
to know the company where their parents work.
The many comments on post-participationquestionnaires ranged from “They looked coolat work” and “The big factory was great” to “Ienjoyed learning about Pascal’s law.”

22

KYB Group Report 2020

Asian Cup awards ceremony

Stakeholder Communications

Factory Tour for Elementary School Students
We invited 68 children from Seki City Shimouchi Elementary School in October
2019 and 104 children from the Gifu University Faculty of Education AffiliatedElementary School in November 2019 to tour the KYB Gifu North Plant. On
tour days, we provided an overview of KYB and its products throughstorytelling with pictures, showed students
actual production lines and a safety
awareness training facility, and presented
KYB’s environmental efforts. After the
tour, the students asked many questions,creating a fun opportunity for everyone
to get to know one another better.

Exhibit at the Industrial Fair in Kani 2019
The Industrial Fair in Kani 2019 was held in October 2019. The fair aims torevitalize the local economy, and in 2019 many visitors flocked to the Taiga
Drama (historical drama) exhibit associated with the start of broadcast of the
NHK taiga drama Kirin ga Kuru. KYB was highly regarded for its shock
absorber display and for providing visitors with a hands-on experience of theprinciple of hydraulics through operation of a syringe excavator, as well as for
accepting high school students as volunteers to gain corporate experience.

Marché to Support Areas Afflicted by the Great East Japan Earthquake
Following an event at the head office, we held exhibitions of local products from the Tohoku area at the Sagami and Kumagaya plants.
The Sagami Plant cafeteria also provided about 300 Tohoku-style meals. We will continue to support reconstruction so that memoriesof the earthquake never fade.

Letter of Appreciation from the Tokyo Metropolitan Government Community Chest
In February 2020, we received a letter of appreciation from the Tokyo Metropolitan Government
Community Chest (Central Community Chest of Japan) for KYB’s fundraising activities spanningmore than 20 years. We will continue our support for social welfare projects.

KYB Group Report 202023

Quality Management

KYB Group Basic Policy for Quality
KYB and its Group companies are committed to restoring the trust they have lost, and have established a medium-term action plan forcompliance with the KYB Group Basic Policy for Quality to do so. To prevent a recurrence of quality-related misconduct, we will continue
to foster and establish an awareness of compliance as the prerequisite for and foundation of quality management.

The KYB Group shall:
1. Address quality improvement with honesty driven by the belief that quality is the basis for business.
2. Deliver safe and secure products in compliance with promises to customers as well as with laws
and regulations.

Quality Assurance System
We have built and operate an ISO 9001-compliant quality
assurance system that emphasizes the quality of work processes
as well as the quality of products and services. We strive each
day to make improvements in all aspects of quality.
At KYB, we implement what is called a three-step evaluation
system for the development and mass production of products, thedevelopment of technologies, manufacturing methods, and so on.
We make every effort to achieve high quality throughout the
product life cycle, from the product planning stage, to defectreduction and change management after mass production andshipment. At our production bases, we take a variety of quality
improvement measures under the leadership of base managers
and plant managers, and we are working to promote the unerring
operation of our three-step evaluation system. Furthermore, toensure the quality of mass-produced products, we also follow thissystem for single, small-lot orders and when production is moved
to another production base.

Development of Products and Technologies througha Three-Step Evaluation System and the Quality
Safety Audit
Step
Prior and model
development
DR0 evaluation meeting

Orderdevelopment
DR1 evaluation meeting

Mass-production
development andproduction
preparations

Goal of the Three Steps

Quality
Assurance Step

Proof of possibility(Description and evaluationof development quality)

Development
quality

Proof of mass production(Description and evaluationof development quality)

Start quality

Proof of applicability andserialization(Demonstration andevaluation of start quality)

Mass-production
quality

Quality Safety Audit
Evaluate manufacturing site, manufactured products anddata to confirm that mass-production quality is problemfree and that reliable production and shipment are possible.

Quality Safety Audit
DR2 evaluation meeting

Mass production
Initial flow
management

Bad News First
Execute (until the reporter receives feedback)
When abnormalities arise: Stop, Call, Wait

Strengthening the Quality Audit System
KYB is strengthening its quality audit system to thoroughly
prevent quality-related misconduct. Quality audits evaluate thematerialization of risks of quality-related misconduct, improvementof such risks, and the effectiveness of the improvement measurestaken. In addition, we are working to achieve our goals by
evaluating whether our plans for quality assurance and quality
control activities are being implemented effectively andsystematically, and the effectiveness of our measures, among
other factors.

Revision of Quality Audit Regulations (March 2020)
We conduct quality audits to prevent quality-related misconduct
and to identify the actual conditions of quality assurance andquality control activities. We reflect the results in our business
management, and work to improve the level of our quality
assurance and quality control activities.

Establishment of Procedures for Dealing with
Quality-Related Misconduct (April 2020)
We newly established procedures to strengthen compliance inmanagement and maintain social credibility by establishing a
24

KYB Group Report 2020

framework for appropriate response to reports of organizationalor personal quality-related misconduct from employees or otherparties and by conducting early detection and correction ofquality-related misconduct.

Improvement of Quality Division Structure
Within the Quality Division, a functional division at the head office,the Quality Control Department was previously responsible for
quality auditing and quality control operations. The QF Promotion
Department was newly established within the division as the coreof quality improvement operations from analyzing quality data to
taking measures against quality defects. By separating thefunctions of management and practical execution, we intend tostrengthen the functions of our quality maintenance management
and improvement activities.

New Structure of Quality Division
Quality Division

Quality Control Department

QF Promotion Department

Supply Chain Management

Basic Policy for Procurement
KYB works to fulfill its corporate social responsibility (CSR) andcontinues to be a company that society can rely upon. Suppliers
are important partners for us in continuously developing ourbusiness through monozukuri (Japanese manufacturing expertise)and contributing to the realization of an affluent society.
Our basic policy for procurement is described below.

Basic Approach to Procurement① Procurement activities aimed at the coexistence and mutual
prosperity of KYB and its suppliers② Legal compliance③ Quality first④ Safety and health, human rights and labor⑤ Continuous cost reduction activities⑥ On-time delivery⑦ Protection of the natural environment⑧ Construction of global procurement system⑨ Risk management⑩ Classified information management⑪ Prevention of corruption▶ For details, please see the Company website.

https://www.kyb.co.jp/english/company/csr.html

Specific Initiatives
FY2019 Procurement Policy Briefing
We held the FY2019 Procurement Policy Briefing in April 2019 in
Tokyo and Nagoya. Suppliers involved in manufacturing were invited,
and to strengthen cooperation, the Chairman, President Executive
Officer and other members of KYB senior management explained our
corporate policy, procurement
policy, quality policy and thepolicies of each of ourbusinesses to representativesof our suppliers. They also
recognized excellent suppliers
who contributed greatly to
QCD,* and presented
commemorative shields andAt the Tokyo briefing
mementos.
* Quality, cost and delivery

Supplier QC Circle Convention
In November 2019, the 49th Supplier QC Circle Conference was heldat Atsuta Shrine Hall in Nagoya. This competition is held every year toencourage improvement activities among our suppliers. This year,
237 people from 152
companies attended.
Representative teams fromeach company announced theresults of their activities for theyear, and NTN Corporation
was awarded the gold medal.

Theme Study Group Improvement Activities
Thirty suppliers who participate in our theme study groups worked
on improvement activities throughout FY2019 under the themesof quality and business continuity plans (BCP). Results included
reduction of quality defects and the creation of a BCP crisis
management system, and the groups also obtained approval from
the Ministry of Economy, Trade and Industry for tax incentives,
financial support and manufacturing subsidies for the BCP activities
of small and medium-sized enterprises. We will use the results ofthese activities to improve quality and BCP management systems
at our suppliers.
In FY2020, the name will be changed to Keneikai and a newteam will be used to conduct improvement activities.

Survey of Status of BCP
To understand the BCP status of suppliers we conducted aquestionnaire for self-assessment consisting of 100 items in sevencategories (actions for anticipated risks; securing personal safety andemergency evacuation; emergency measures taskforce; confirmationof employee safety; confirmation of property damage; instructions
for returning home and measures for people who have difficulty
returning home; and restoration taskforce). Moreover, we surveyed
the status of readiness of the entire supply chain with regard to amajor earthquake. In this way, we have all suppliers review thestatus of their BCPs and encourage them to study issues requiring
improvement and systematically implement BCP activities.

Initiatives to Prevent Human Rights Violations in
the Supply Chain
In recent years, there has been growing demand for companies toprevent human rights violations globally, including in their supply chains.
For example, under the Dodd-Frank Wall Street Reform andConsumer Protection Act, companies are required to perform due
diligence and identify whether their products contain tantalum,
tungsten, tin or gold purchased from mines in the Democratic
Republic of Congo (DRC) and nine neighboring countries, where theextraction of such mineral resources may be used to finance or
benefit armed groups that are causing human rights violations andenvironmental destruction. The aim of the Dodd-Frank Act is toindirectly cut off financial sources from these “conflict minerals” toprevent such human rights violations. The EU has taken a broader
approach to restricting conflict minerals by requiring all companies
importing mineral resources into the EU to take similar actions.
In light of the Dodd-Frank Act, the KYB Group annually checks its
products with the cooperation of its suppliers, summarizes the results
and reports to customers that request such information.
In addition, in accordance with the U.K. Modern Slavery Act 2015
we annually release a statement on KYB Group business activities andinitiatives to prevent slave labor and human trafficking in our supply
chain, including the above-mentioned conflict mineral measures. We
will carry on with our awareness-raising activities on prohibiting
human rights violations and slavery labor.
▶ For details, see the “Supply Information” section of the Company website.

https://www.kyb.co.jp/english/company/supply_
information.html

At the awards ceremony

KYB Group Report 202025

Human Resources Management

Human Resources Development
We nurture people with a high awareness of compliance who
can compete internationally by linking (1) our education system,(2) employee rotation and (3) promotion and evaluation to
improve the attributes of each employee.

The KYB Human Resources Development System
Nine Required Attributes

Ability to meet social responsibilities

Specialized knowledge/skills

Reduced riskof misconduct

Basic knowledge/skills

Improvement and reform ability

Task and strategy formulation ability

Challenge orientation

Instruction and training ability

Mutual respect and teamwork

Awareness of compliance and ethics

People with ahigh awarenessof compliance
who can competeinternationally

Employeerotation

Training
rotation

Educationsystemto improve
attributes

Specific Initiatives
Compliance Awareness Education
The KYB Group is committed to an open corporate culture in which
management and employee communication is energized by sharing
perceptions of the current state of affairs.
We promote quality management, which is fundamental tomanagement, by positioning compliance awareness as thefoundation of the KYB Group. We are working to foster a mindset
of following moral, ethical, legal and societal rules among not only
senior management but all employees.

Regain trust
Senior management
Shared perceptionof the current
state of affairs

Strategy of successthrough quality management

An opencorporate culture

Executives, managers
and supervisors
Promotion(selection) andevaluation
Appointment of
human resources
with a highawareness ofcomplianceTransparency

Energetic communication

Employees
Delivering 100% quality

Compliance awareness*
The foundation of the KYB Group* Mindset of abiding by moral, ethical, legal and social rules

Small Group Activities
In each workplace, we form small teams that have been optimized for specific objectives. Guided by a supervisor, they work to establish
compliance awareness and improve safety, quality and productivity. The goal of these Companywide activities is to help prevent
improprieties, enhance corporate performance, energize the workplace and improve communication, and to develop our people byenhancing their ability to make improvements.

Basic Approach for Small Group Activities
Formulate policies (Goals and measures)
Execute policies (Goals and measures)Supervisor support must be suited to the problems and tasks that arise in policy execution.

Select and address next theme

Continuous initiatives as an organization

Identify problems and tasks
Theme resolution

Continuous initiatives as individuals

Select themes

Assess abilities and certify qualiﬁcations

Formulate action plans
Resolve problems and achieve tasks
Summarize, report and announce

Deploy and use results
Reﬂect on and review activities

26

KYB Group Report 2020

Acquire methods for
improvement andbusiness knowledge

Education and training
Improve motivation
and awarenessEvaluate and commend

Promoting Health Management
KYB Health Declaration
KYB sees the health of employees and their families as an important management resource and a source of corporate vitality,
and is working to achieve sustainable growth through the creation of an environment in which all employees can work in good
health both physically and mentally.
We are committed to actively supporting employees who are engaged in health promotion activities and to promoting
organizational measures for health promotion in order to live up to our Corporate Spirit by “building a corporate culture full ofvitality and holding high goals.”
November 1, 2019

Masao Ono
Representative Director and President Executive Officer

Organizational Structure for Promoting Health Management
Health management ofﬁcer(Representative Director,
President Executive Ofﬁcer)

Health management promotionofﬁcer (Director in charge of
Human Resources)

Health management
promotion team

Human Resources Planning Department
Health Management Center

Policy execution

Health Insurance Association
Functional andbusiness divisions

SupportLabor Union

Key Initiatives
1. Measures for Lifestyle-Related Diseases

Class-Specific Education in FY2019(Collaboration with Health Insurance Association)• Creating an environmentthat facilitates exercise
We have installed walking
courses and hold Companywide
walking events.

Seminars Heldin FY2019

Attendance Rate

Supervisors–

Postponed to the following fiscal year
as a COVID-19 countermeasureManagers

476.4%• Activities for promoting freedom from harassment incooperation with functional and business divisions• Initiatives to keep the percentage of employees undergoingscheduled health checkups at 100% and to improve thepercentage of employees undergoing specified health checkups
Percentage of Employees Undergoing Health Checkups
Regular Health
Checkups

Specified Health
Checkups

FY2017

100%

73.5%

FY2018

100%

77.4%

FY2019

100%

88.3%

• Health seminars
Visiting lecturers give annual
health seminars at all of ourbusiness locations in order toraise health consciousness
among employees.

2. Mental Health Measures• Promoting mental health education
We promote class-specific education for primary prevention of mental
health issues in the workplace.

Based on the belief that freedom from harassment is essential for
creating a vibrant and rewarding workplace, we have made freedom
from harassment a corporate priority and are executing policies for all
functional and business divisions.

3. Passive Smoking Countermeasures• Smoking environment countermeasures
Based on the secondhand smoke prevention policy established in
April 2020, we are in the process of prohibiting smoking in all areas
in stages.
April 2020: Abolition ofindoor smoking areas
January 2021: No smoking
during working hours (notobacco break)April 2022: Complete
prohibition of smoking anddiscontinuation of tobacco
sales at all business sites• Support for smoking cessation
We provide ongoing support for employees who want to quit smoking.

KYB Group Report 202027

Promoting Work Style Reform
Basic Approach
We are focusing on building and enhancing systems using thethemes shown on the right to achieve a rewarding workplace inwhich diverse individuals can contribute over the long term.
In addition, in FY2018 we began conducting an Employee
Awareness Survey for all KYB employees regarding workplace
climate, working conditions, management policy and othermatters. Answers are anonymous, and an external organizationcompiles and analyzes the results. Consequently, response rates
have been high (95.6% for the first survey in 2018, 97.1% for
the second survey in 2019) and we have learned the true
opinions of employees.
We will continue to conduct this survey regularly and use thedata to promote Companywide initiatives for employee work
style reform.

1. Support for work-life balance
Flextime system, encouragement of taking annual paid
leave in a continuous block, etc.
2. Consideration of diverse work styles
Promotion of telecommuting, shortened working
hours to accommodate childcare, etc.
3. Promotion of employee healthSee “Promoting Health Management” on page 27
for details.
4. Improvement of work process efficiency
Includes projects to streamline operations

Specific Initiatives
Enhancing the Productivity of Administrative Operations
In FY2017, we launched the Administrative Operations Productivity
Improvement Project and are working to improve efficiency andadded value in administrative operations, including general affairs,
accounting, human resources and production management.
Each administrative department aims to improve work process
efficiency through a transition to higher added value by reviewing
existing work from the perspectives of Eliminate, Reduce andChange. As part of this initiative, we have introduced robotic
process automation (RPA) tools to automate routine work processes
and we are conducting activities to shorten internal meetings (30smart meeting activities). We will continue to study and verify all
measures to increase efficiency in order to improve the productivityof administrative operations.

Eliminate

Eliminate process
entirely① Terminate process② Eliminate

redundancies

ReduceIncrease processing
speed and quality(Quantity andQuality ÷ Time)① Standardize② Systematize

ChangeReduce work processunit costs(Yen ÷ Time)① Change managers② Outsource

Support for Work-Life Balance
KYB supports work-life balance for its employees as a means tocreate an environment in which employees can participate withenthusiasm. In April 2018, we extended the childcare leave period

28

KYB Group Report 2020

to the end of April after the child turns three in order to support
employees raising children. Employees had indicated that thechildcare leave period stipulated by law made it difficult to placechildren in nursery school because the leave period ended in the
middle of the fiscal year, before the start of the school year.
Furthermore, we revised the flextime system in April 2019 byextending the period of the workday available for flextime workand applying the system uniformly at all business locations. This
enables flexible work styles that match employees’ private lives
and work schedules.

Promoting Telecommuting
One of our work style reform initiatives has been to promotetelecommuting, with the goal of reducing time and energy spent incommuting, and using the time saved more effectively. In November
2017, we launched a trial program focused on supporting work-lifebalance for employees raising children or providing nursing care forfamily members. Following a series of reviews of eligibility andsystem improvements, the program became an official system asof April 2020. We have now expanded its scope to coveradministrative operations at all business sites, including plants,
allowing employees to telecommute up to twice a week.
In addition, we registered with the organization implementing the
Telework Days 2019 and Winter Smooth Biz Practice Period programs
conducted by government ministries and the Tokyo Metropolitan
Government, and encouraged employees to telecommute.
Based on employee
feedback, we plan to improve
our telecommuting system bymaking it more user-friendly,
and to broaden eligibility.

Winter Smooth Biz Practice Period

Human Resources Management

Diversity
Empowering Diverse Human Resources
The entire KYB Group accepts and respects diversity regardless of gender, nationality, disability or other attributes. To be able to support
the active participation of our diverse human resources, we are working to create an environment where all employees can play anactive role while gaining satisfaction from their work. To that end, we are stepping up job rotation and encouraging the use of annual
paid leave.

From “Continuing to Work” to “Playing an Active Role”
By accepting and respecting the diversity of women, people with disabilities,
non-Japanese employees and others, we aim to be a company that is attractive to stakeholders.

Top management

Diversity management

Managers

Raising awareness

Employees

Improved working environment

Self-directed career planning

Recruit talented women

Key Initiatives
Stepping Up Job Rotation

Encouraging Use of Annual Paid Leave• Stepping up job rotation in cooperation with each /businessdivision/function• Manager-led encouragement of use of annual paid leave

To facilitate women’s career planning, we are proactively promoting
career development and new career opportunities through job rotation.

To help support work-life balance through the use of paid leave, weare conducting activities to encourage managers to take the lead inusing their annual paid leave.

Certification as a 2020 Health & Productivity
Management Organization
In March 2020, KYB received certification under the Health &Productivity Management Organization Recognition Program as acompany that considers employee health management strategically.
We view the health of employees and their families as an importantmanagement resource and the source of corporate vitality, and wewill continue to strive to create a work environment where each
employee is physically and mentally healthy and can work
enthusiastically to achieve the sustainable growth of the Company.

KYB Group Report 202029

Environmental Management

Basic Approach
KYB launched a new medium-term strategy in FY2020. Environmental
initiatives are a global issue, and countries worldwide are working
to reduce CO2 emissions to prevent global warming. The KYBGroup has introduced solar power generation systems andimproved the efficiency of heat source equipment. We have also
reduced CO2 emissions by adopting energy-saving technologies
such as LED lighting. Furthermore, with the cooperation of external
experts, we are steadily making other improvements such as
visualizing wasted energy through diagnostics, reducing leakageof air and steam used in production equipment, and decentralizing
air compressors.
Overseas, we are implementing 100% green power purchasesof wind and solar power at our base in Spain, and we are also
considering introducing green energy at our base in Mexico. We willcontinue to work toward achieving environmental impact targets, andin so doing contribute to a sustainable society. One measure will be tofurther promote energy-saving activities that support the reduction of
CO2 emissions, and to boost waste volume reduction and recycling.

Basic Environmental Policy
Environment & Safety Management System

SloganProtect the Green Earth and Create
Environmentally Friendly Products

Basic Environmental Policies
The KYB Group creates user- and earth-friendly products.
We actively promote environmental conservation
activities as an important tool for evaluating
management.
1. Develop and build up production and corporate
activities based on recycling to reduce impacts on
the environment.
2. Strive to ensure long-term and sustainable
operations throughout the entire KYB Group.
3. Work to promote relationships with local
communities and contribute to society as a good
corporate citizen.
4. Clarify the role of each employee and encourage
the participation of all employees.

We established the Environment & Safety Committee, and havepositioned officers responsible for environment and safety as
leaders. Under the following system, KYB works to promote unity
in environment and safety initiatives.
KYB’s Environment & Safety Management System
President Executive Ofﬁcer
Executive Ofﬁcer in chargeof Environment & Safety
Environment & Safety
Committee

Respective business units
Plant General Manager

Chairman: Executive Ofﬁcer incharge of Environment & Safety

Subcommittees
Environment Preservation
Subcommittee
Energy-saving Plant Subcommittee
Safety and Health Subcommittee

Overall Safety
Supervisor

Environment
Supervisory Ofﬁcer

Safety and HealthCommittee

Environment
Supervisory Committee

Subcommittees

Subcommittees

Environmental & Safety Mid-Term Policy
Phase 1 (2011-2013)
1. Creation of energy-saving plants• Reduce CO2 per basic unit by 1%each year and cut CO2 emissions
by 25% compared with FY1990
levels by 2020
2. Creation of waste-free plants• Reduce final disposal amount ofindustrial waste by 65% comparedwith FY2000 levels by 2015
3. Creation of accident-free plants• Prevent industrial accidents
through risk assessment• Develop safety simulation facilities,
etc.

30

KYB Group Report 2020

Phase 2 (2014-2016)
1. Creation of plants that aim tominimize energy consumption
and waste• Reduce energy consumption per
basic unit by 1% compared with
FY2013 levels• Reduce amount of industrial waste
per basic unit by 3% comparedwith FY2013 levels
2. Creation and expansion of
production bases with zeroindustrial accidents• Improve employees’ awareness ofsafety and eliminate critical hazard
sources

Phase 3 (2017-2019)
1. Creation of plants that aim tominimize energy consumption
and waste• Develop environment for partial
supply of energy• Promote measures through energy
visualization• Promote waste volume reduction
and recycling
2. Creation and expansion of
production bases with zeroindustrial and fire accidents• Promote risk assessment andcountermeasures against industrial
accidents• Promote measures for zero fire
accidents

Phase 4 (2020-2022)
1. Creation of plants that aim tominimize energy consumption
and waste• Consider environmental
friendliness by reducing energy
consumption and CO2 emissions• Utilize energy sources with low CO2
emissions and promote initiatives toprevent global warming• Promote measures through energy
visualization• Contribute to creation of sustainable
society while considering ESG
initiatives and develop energy andfacilities that are environmentallyfriendly• Promote waste volume reduction
and recycling
2. Creation and expansion of
production bases with zeroindustrial and fire accidents• Promote risk assessment andcountermeasures against industrial
accidents• Promote measures for zero fire
accidents

Results of Environmental Conservation Efforts and Future Initiatives
We developed the Environmental Management Activity Plan basedon the Company’s environmental policy and implemented avariety of activities at each production base to achieve our targets.
However, compared with FY2016 levels, which was thebenchmark, we failed to achieve our targets for CO2 emissions,due in part to an increase in production volume. For industrial

waste, until FY2018 we presented it as the amount of overall
emissions, but from FY2019 we clarified the definition of recycling
and presented it as the volume of actual emissions. In addition,
we will work to improve the efficiency of production facilities,
further reduce energy consumption, improve productivity andpromote recycling.

Results for FY2019○: Goal attained ×: Goal not attained

Theme

Target ValueFY2019 Result

Prevention of
global warming

CO2 emission volume

93,650 t-CO2 or less

96,745 t-CO2

×

Energy saving

Energy consumption
per basic unit

0.69 kℓ/million yen or less0.75 kℓ/million yen

×

Improvement of
resource recovery
and recycling rate

Recycling rate

92.8% or higher

91.8%

×

Zero emission

4.6% or less

3.4%

○

General waste

489 t or less

515 t

×

General waste perbasic unit

2.03 kg/million yen or less2.25 kg/million yen

×

Metal scrap

17,393 t or less

19,319 t

×

Metal scrap per basic
unit

244 kg/million yen or less285.0 kg/million yen

×

Industrial waste

3,157 t or less

3,557ｔ×Industrial waste perbasic unit

25.94 kg/million yen or less28.8 kg/million yen

×

Reduction ofwaste

Overview of Major
Initiatives in FY2020

Evaluation

Global Warming Prevention
Measures include replacing lightingwith LEDs, LVDs, and other highly
efficient devices, adopting inverter
control for hydraulic units,
upgrading to high-efficiency
compressors, eliminating leakage of
air, reducing air consumption inplants, and implementing activities
for environment impact reduction
by installing high-efficiency air
conditioning equipment andcontrolling facility temperatures.
Waste Material Reduction
Measures include reducing paintdust through biological treatment,
introducing waste treatment andreduction systems, turning waste
into valuable products andpromoting recycling.

Notes: 1. Basic units are calculated using marginal proﬁt.
2. For energy, crude oil equivalent is calculated for electricity and fuel, and the total value indicates energy consumption.
3. CO2 emissions and energy consumption per basic unit are calculated using methods determined by KYB.
4. We have been promoting recycling activities to reduce industrial waste since FY2019. Therefore, recycling that turns waste into valuable products has been excluded.

Environmental Impact by Business Activity
KYB uses energy, water, chemicals and a variety of other resources. In order to make efficient use of those limited resources in production,
we take steps to reduce waste, CO2 and other emissions.

Input

Production Activities

Raw materials (Metal, non-metal)

Development/Design

192,982 t
Procurement

EnergyElectric power

Fuel/Gas

108,607 MWh

20,229 kℓ

1,604 km3
Chemical substances (PRTR law target substances)

316 t

Production process

Amount of waste

3,557 t(Reuse, etc.)(Landfill disposal)

Production

2,606 t772 tDistribution

Emission into atmosphere
CO₂
NOx(Crude oil equivalent)

Water

Output• Development of technologies andproducts that are environmentallyfriendly as a result of recycling,energy saving and safety, etc.
• Promotion of green procurement• Promotion of modal shift

96,745 t-CO2

37 t

SOx

Dust

2t

0.37 tRecycling inside Company

Recycling outside Company• Scrap (Effective utilization in the KYB Group)• Deteriorated solution for chrome plating• Water used for rinsing in chrome plating process, etc.

• Metal scrap• Waste oil• Waste plastic• Grinding powder • Waste thinner • Paper, cardboard, etc.

Scrap

Recycling company

Related company

KYB Group Report 202031

Chemical Substance Management
Response to Environmental Controls on Products
For the protection of the environment, the REACH Regulations,other ELV1 and RoHS directives,2 and various laws and regulations,which contain increasingly stringent provisions, have been establishedand are being implemented. In order to address stricter REACH
and other regulations, in FY2013 we built a chemical substance
database, which is a breakdown of each of our products containing
chemical substances subject to the regulations. By FY2015, we
had implemented its use throughout the KYB Group, conductedinvestigations of the relevant substances contained in our
products, and collected relevant data. By using our database, we
can rapidly respond to requests from clients to determine thepresence or absence of not only banned substances and restricteduse materials but also of substances of very high concern, whichhave been periodically added to the REACH Regulations since theenforcement of the rule.
We will continue to provide products that meet client andmarket needs.
Notes: 1. A directive that came into effect in the EU in October 2000 to reduce
environmental impact caused by end-of-life vehicles.
2. A directive that came into effect in the EU in July 2006 that restricts the useof speciﬁc hazardous substances found in electrical and electronic products.

Risk Assessment of Chemical Substances
In FY2015, we assessed the health risks related to chemical
substances at all of our production bases in Japan. In FY2016, we

assessed risk of explosion and fire from chemical substances at
the Gifu South Plant and Gifu East Plant. For the assessment,
we explained to all of our departments that handle chemical
substances about the three elements for combustion (i.e.,combustibles, oxygen and ignition sources), flashpoint and ignition
temperature, which are the basic factors in explosions and fires.
Chemical substances handled by the plants include invisible
gaseous substances and those with flashpoints below room
temperature. By conducting risk assessments and sharing
information Groupwide through the chemical substance database,we strive to provide useful information to those who handlechemical substances so that they understand the importance ofeliminating ignition sources to prevent explosions and fires causedby chemical substances.

Response to PCB Disposal
Transformers and other electrical equipment containing PCBs are
stored securely at each of our business establishments. We
concluded a disposal contract with a company specializing indetoxification processes and started disposal in FY2012.
We have been promoting the disposal of transformers at eachGroup company, and will complete the disposal of the electricalequipment we have stored by the end of summer 2020. We willcontinue with appropriate disposal of equipment that exhibits low
concentrations of PCBs.

ISO 14001 Certification Acquisition
In order to systematically develop initiatives for environment conservation, we are introducing and promoting an ISO 14001 environmental
management system. We will shift to the 2015 edition sequentially in renewal examinations.

Japan

32

Overseas
KYB

Year of Certiﬁcation
Registration

Gifu South Plant (Including Gifu East Plant,
Production Technology R&D Center, Machine Tools
Center, KYB Motorcycle Suspension Co., Ltd.)

Feb. 2000

Sagami Plant (Including the Basic Technology R&D
Center and the Electronics Technology Center)

Dec. 2000

Kumagaya Plant

Group Companies Overseas

Year of Certiﬁcation
Registration

KYB Manufacturing Taiwan Co., Ltd. (Taiwan)

Jun. 2001

KYB Steering Spain, S.A.U. (Spain)

Jun. 2001

KYB Suspensions Europe, S.A.U. (Spain)

Dec. 2001

KYB Americas Corporation (United States)

May 2002

KYB (Thailand) Co., Ltd. (Thailand)

Jul. 2003

Dec. 2000

KYB Steering (Thailand) Co., Ltd. (Thailand)Aug. 2003

Gifu North Plant (Including KYB Kanayama Co., Ltd.)

Dec. 2001

PT. Kayaba Indonesia (Indonesia)

Nov. 2004

Group Companies in Japan

Year of Certiﬁcation
Registration

KYB-UMW Malaysia Sdn. Bhd. (Malaysia)

May 2005

KYB-UMW Steering Malaysia Sdn. Bhd. (Malaysia)

May 2005

Kayaba System Machinery Co., Ltd. (Mie Plant)

Dec. 2000

Takako Vietnam Co., Ltd. (Vietnam)

Jan. 2007

Takako Industries, Inc. (Shiga Plant)

Feb. 2003

KYB Manufacturing do Brasil Fabricante deAutopeças S.A. (Brazil)Mar. 2007

KYB-YS Co., Ltd.

Apr. 2004

KYB Industrial Machinery (Zhenjiang) Ltd. (China)

Apr. 2009

KYB Trondule Co., Ltd.

Nov. 2008

KYB Manufacturing Czech, s.r.o. (Czech Republic)

Aug. 2009

Changzhou KYB Leadrun Vibration Reduction
Technology Co., Ltd. (China)

Jan. 2010

Wuxi KYB Top Absorber Co., Ltd. (China)

Nov. 2013

KYB Group Report 2020

Takako America Co., Inc. (United States)

Feb. 2013

KYB Manufacturing Vietnam Co., Ltd. (Vietnam)

May 2013

KYB Advanced Manufacturing Spain, S.A.U. (Spain)

Jun. 2015

Environmental Management

OSHMS and ISO 45001 Certification Acquisition
In order to systematically implement initiatives to build an
occupational health and safety management system andstrengthen its foundation, we are introducing and promoting
OSHMS ISO 45001. We introduced OSHMS at the Gifu North
Plant in FY2004, and we have been rolling it out Groupwide(OSHMS in Japan and ISO 45001 overseas).

Our overseas bases have acquired OHSAS 18001 certification.
We will gradually promote the shift to the international standard
ISO 14001 environmental management system.

Bases with OSHMS and ISO 45001 Certification (As of April 2020)
Japan (OSHMS)

Overseas (OHSAS 18001 and ISO 45001 Certification)

Gifu North Plant (Including KYB Kanayama Co., Ltd.)KYB Americas Corporation (United States)

Gifu South Plant (Including Gifu East Plant, Production Technology R&D
Center, Machine Tools Center, KYB Motorcycle Suspension Co., Ltd.)KYB (Thailand) Co., Ltd. (Thailand)
PT. Kayaba Indonesia (Indonesia)

Sagami Plant (Including the Basic Technology R&D Center and theElectronics Technology Center)

KYB-UMW Malaysia Sdn. Bhd. (Malaysia)

Kumagaya Plant

KYB Industrial Machinery (Zhenjiang) Ltd. (China)

KYB-UMW Steering Malaysia Sdn. Bhd. (Malaysia)

KYB Manufacturing Czech, s.r.o. (Czech Republic)

Takako Industries, Inc. (Shiga Plant)

Changzhou KYB Leadrun Vibration Reduction Technology Co., Ltd. (China)
KYB-YS Co., Ltd.

Wuxi KYB Top Absorber Co., Ltd. (China)

KYB Trondule Co., Ltd.

KYB Manufacturing Vietnam Co., Ltd. (Vietnam)

Environmental Accounting
The amounts of investment and cost were calculated with reference to the Environmental Accounting Guidelines, 2005, provided by the
Ministry of the Environment.

(Millions of yen)

Cost Type(1) Businessarea cost

Major Contents

Invested Amount/Cost(1)-1 Pollution prevention cost

• Air pollution and water pollution prevention activities• Maintenance and inspection of pollution prevention facilities• Analysis and measurement of atmosphere and water quality

305.9(1)-2 Global environmental
conservation-cost• Energy conversion• Energy-saving activities

19.5(1)-3 Resource circulation cost

• Recycling of plant waste• Reduction of industrial waste

367.4(2) Upstream/downstream cost

Not available

0.0(3) Management activity cost

• Maintenance and management of ISO 14001• Monitoring of environmental impact

91.7(4) R&D cost

• Environmentally friendly product development• Lightweight products and products containing less hazardous chemical
substances

77.0(5) Social activity cost

• Support of non-proﬁt environmental protection• Afforestation and maintenance of scenery around plants

20.2(6) Environmental remediation cost

Not available

0.0(7) Other cost

• Internal environmental conservation• Welfare conservation

22.7

Grand total

Not available

904.3

Note: Classification and Definition of Environmental Conservation Costs
Invested amount: Expense for the purpose of environmental conservation during the target period with effect that continues for a number of terms and running cost for
those periods.
Cost: Cost or loss generated from expenditure of finances/services for the purpose of environmental conservation.

KYB Group Report 202033

Environmental Management

Activities at Production Bases
Energy Savings by Introducing Inverter Pumps for
Coating Equipment Pretreatment

Reducing Environmental Impact with LED
Lighting in Plants

KYBT (Thailand) is moving ahead with replacement of inverter
pumps when upgrading pretreatment pumps. By switching to
inverter pumps, we were able to reduce CO2 emissions by 87.75
t-CO2 annually. Furthermore, the equipment is expected to reduce
maintenance costs due to its few components.

The Gifu North Plant has been phasing in LED lighting since FY2017.
In FY2020, we also reduced lighting in conjunction with the move
to 2,500 LED spotlights in offices and plants. The use of LED
lighting reduces energy consumption by the crude oil equivalentof approximately 160 kℓ per year. We will promote the shift to
LED lighting at other Group plants.

Reducing Material Transportation throughIn-house Production
At KYB Advanced Manufacturing Spain, total truck mileage driven
was shortened by moving manufacturing in-house in FY2019 andreducing material transportation. As a result, we were able toreduce CO2 emissions by 55% and annual emissions to 14 tons.

Improvement of Local Environment(Reduction of Neighborhood Noise)KYB Suspensions Europe in Spain is near a residential area, and wehave reduced noise levels in the daytime by 55 dBA and by 50
dBA at night. We measured at 33 points, made a soundproofing
plan, tested effectiveness in advance, and then implemented theinitiative. As a result, noise was reduced at all measurement
points. Significant noise reduction was achieved at all of the mostimportant peripheral points, especially at night. The initiative wasalso approved by the government of Navarre.

Reducing Environmental Impact by Upgrading
Cationic Electrodeposition Coating Equipment
The Kumagaya Plant
now employs zirconium
conversion coating, a first in
the special-purpose vehicleindustry, as the pretreatment
for undercoating. In 2018,
we upgraded cationicelectrodeposition coating
equipment and started
full-scale operation in May 2019. Compared to the zinc phosphatecoating used by many companies with cationic electrodeposition
coating equipment for chemical conversion coating, sludge was
reduced by about 90%, and since heavy metals, phosphorus andnitrogen dioxide are not used, the amount of environmentallyhazardous substances generated was greatly reduced. In addition,
the upgrades improve the paint quality for concrete mixer trucks,
which need an exterior that is both highly durable and attractive.
We will make further efforts to create products that areenvironmentally friendly and contribute to society.
34

KYB Group Report 2020

Industrial Waste Reduction by Extending the
Cleaning Liquid Replacement Cycle
Plant No. 1 of KYB Kanayama Co., Ltd. made cleaning liquid
replacement quantitative rather than periodic in FY2018. As aresult, the plant was able to reduce the amount of effluent by
one-third. KYB Kanayama also broadened deployment of thissystem to Plant No. 2 in FY2019 to further reduce industrial waste.

Compressor Operation Review to Save Energy
KYB Kanayama reviewed
air supply operations due
to oversupply at certain
times of day. The resulting
improvements reduced monthly
electricity consumption by
21,120 kwh from 311,680 kwh
to 290,560 kwh, and reduced CO2 emissions by 11,088 t-CO2.

Waste Reduction by Introducing Garbage
Processing Equipment
Approximately 350 kg of garbage was discharged from thecafeteria at the Sagami Plant per month. A garbage processor was
introduced to enable in-house garbage disposal, resulting in zero
emissions and reduction of processing costs. In addition, this device
uses microorganisms to decompose food waste into water andcarbon dioxide, thus contributing to environmental protection.

“Special Award for Outstanding Foremen in
Occupational Safety” from the Minister of Health,
Labor and Welfare
In January 2020, the assistant manager of the Manufacturing
Department of Hydraulic Components Operations at the Gifu
South Plant received the “Special Award for Outstanding Foremenin Occupational Safety” from the Minister of Health, Labor andWelfare. This was the fourth time a KYB Group employee hasreceived this award, which recognizes an outstanding foreman
who has practiced appropriate safety guidance with a high levelof safety awareness. We will continue to put the safety of ouremployees first as we strive for zero occupational accidents.

Corporate Governance

Basic Policies
1. We shall respect the rights of shareholders, and ensure the equal and fair treatment of all shareholders.
2. We shall take the interests of shareholders and other stakeholders into consideration and endeavor to appropriately
cooperate with those stakeholders.
3. We shall disclose not only information in compliance with the relevant laws and regulations, but also actively provide
important and/or useful information to stakeholders to enable well-informed decision-making.
4. The Board of Directors shall be cognizant of its fiduciary responsibility and accountability to shareholders, and shallappropriately fulfill its roles and responsibilities in order to promote sustainable and stable corporate growth andincrease corporate value, profitability and capital efficiency.
5. We shall engage in constructive dialogue with shareholders, and make efforts to obtain their support regarding theCompany’s Business Policies and also reflect their opinions and concerns in efforts to improve management.

Basic Approach for Regaining Trust
We have established the Corporate Guiding Principles todemonstrate our values regarding appropriate cooperation withstakeholders, respect for their interests and sound business ethics.
We have inculcated these principles and make efforts to ensurethat compliance extends to the front lines of business activities
in Japan and overseas. For example, we hold briefings on the
Corporate Guiding Principles, conduct various types of complianceeducation, set compliance education as a requirement for
promotions, conduct in-person reviews of relevant employees,
and ensure that everyone in the Company is aware of thewhistleblowing system. Through these and other initiatives wehave endeavored to broadly instill a sense of urgency among
employees, making them keenly aware that the products andservices that we supply through our businesses are connected topeople’s safety, physical wellbeing and financial position, and thatthey are involved in quality management both directly andindirectly, and that laxity in any aspect of their work could impact
society at large. In addition, we have widely communicated our
Bad News First reporting system for identifying and resolving
issues when they are still minor. It calls for reporting any
workplace abnormalities whether favorable or unfavorable.
However, improper acts occurred. As announced on October 16,
2018, performance inspection data records were falsified forsome of the seismic isolation/mitigation oil dampers shipped
by KYB and a subsidiary. Products that did not conform toperformance evaluation standards approved by the Minister ofLand, Infrastructure, Transport and Tourism, and did not meetthe standards of our customers, were installed in buildings. In
addition, there were improper claims in connection with acontract with the Ministry of Defense for defense equipment.

Initiatives to Strengthen the KYB Group’s GovernanceInitiated in-person interviews
with relevant employees
FY2014

Established independence
standards for outside directors
and outside Audit & Supervisory
Board members

Appointed two independent
outside directors andestablished a discretionary
Nomination Committee
FY2015FY2016FY2017
Established a discretionary
Compensation Committee

Appointed one independent
outside director

FY2018FY2019Established the Special Audit
Committee on Wrongdoing Risk andthe Internal Control Department
Raised the ratio of independent
outside directors on the Board of
Directors to one-third

Non-Financial Corporate Governance Achievements

Corporate Guiding Principles
now available in 13 languages(Japanese, English, Chinese (simplified and traditional script
versions), Portuguese, Vietnamese, French, German, Czech,
Russian, Thai, Indonesian, Spanish (European and Latin
American versions), and Tagalog

Ratio of independent outside
directors on the Board of
Directors now one-third

Independence standards foroutside directors and outside
Audit & Supervisory Board
members formulated

KYB Group Report 202035

To prevent recurrence of the improper acts and demonstrate
our commitment to regaining trust, we revised our Corporate
Spirit by adding the item “Follow all rules and face all issues withhonesty,” and, based on the revised Corporate Spirit and Basic
Policies, we will work to strengthen and enhance corporate

governance. Having clearly codified the prevention of qualityrelated misconduct in our Corporate Guiding Principles, we will
deeply inculcate these principles in all of our people at the frontline of business operations in Japan and overseas, and will
resolutely ensure compliance.

Overview of the Corporate Governance System
The corporate governance of KYB, which is structured as acompany with an Audit & Supervisory Board in accordance with
the Companies Act, centers on the Board of Directors and the
Audit & Supervisory Board and its individual members. In addition,
KYB has instituted an executive officer system to expedite decisionmaking and streamline business execution.
Three of the seven members of the Board of Directors are
independent outside directors, and two of the four members of
the Audit & Supervisory Board are independent outside members.
KYB believes it has strengthened independent and objective
management supervision by the Board of Directors because
one-third of the board consists of independent outside directors.
KYB determines whether outside directors and outside Audit &Supervisory Board members are independent based on KYB’s
independence standards, and only selects individuals who can be
independent of other members of management.
Furthermore, the Internal Control Department is the organization
responsible for overall planning and coordination of global governanceand compliance, and the J-SOX Correspondence Office within theInternal Control Department conducts evaluations based on Japan’s
Financial Instruments and Exchange Law (J-SOX). We have alsoestablished the Special Audit Committee on Wrongdoing Risk,
which is chaired by an outside director and has broad responsibility
for detecting signs of misconduct and situations that give rise to it.
▶ Please refer to the Corporate Governance section on our Company
website for details on independence standards.

https://www.kyb.co.jp/english/company/governance.html

Corporate Governance Structure
General Meeting of Shareholders
Elect/Dismiss

Elect/Dismiss
Consult

Special Audit Committee on Wrongdoing Risk

Board of Directors
ReportAudit & Supervisory Board

Accounting Auditor

Audit

Audit

Advisory Committees(Nomination, Compensation)

Representative Director,
President Executive Ofﬁcer

General Manager
CSR & Safety Control Division

Board of Executive Ofﬁcers,
Other Management Committees

Internal Control Department
J-SOX Correspondence Ofﬁce

Audit Department

Evaluation based on J-SOX

Audit

Responsible head ofﬁce departments, operational headquarters, Group companies, branches, representative ofﬁces

Evaluation of the Effectiveness of the Board of Directors
KYB defines the effectiveness of the Board of Directors as
fulfillment of its expected roles and functions to achieve sustainablegrowth of the Company and improve corporate value. Committed
to a highly effective Board of Directors, we analyze and evaluate
the effectiveness of the Board of Directors once a year.

36

KYB Group Report 2020

Based on the results of the FY2017 evaluation, in FY2018 KYB
fully verified the appropriateness of the agenda and the ease ofunderstanding of meeting materials in advance through channels
including the Council of General Managers and the Corporate
Strategy Council.

Corporate Governance

In FY2019, we administered written self-assessment

we need to address after obtaining third-party analysis andevaluation by external experts.

questionnaires for all directors and Audit & Supervisory Board
members. We used the questionnaire responses to identify issues

Questionnaire Methodology

2019 Results

Respondents: 10 respondents, comprising 6 directors(including 2 independent outside directors) and4 Audit & Supervisory Board members (including
1 independent member)
Survey period: September to November 2019
Methodology: External experts administered a self-assessment
questionnaire, analyzed and evaluated theresults, and interviewed officers

We have identified the following specific issues for resolution
in FY2020:
1) Further improve information sharing (between outside
directors and Audit & Supervisory Board members, andbetween the Board of Directors and the Nomination
Committee and the Compensation Committee)2) Improve the ease of understanding of meeting materials
for the Board of Directors

Key questionnaire items
1. Roles and responsibilities of the Board of Directors
2. Composition of the Board of Directors
3. Roles and qualities of Directors
4. Administration of the Board of Directors
5. Level of satisfaction among outside directors
Number of survey questions
66 (75 for outside directors)
Questionnaire methodology
Evaluation of the current situation: 4-level evaluation
Specific suggestions for improving the current situation: openended response

Future Actions
In order to strengthen the supervisory function of the Board of
Directors, the Board of Directors and Audit & Supervisory Board
members provided multiple opinions on matters to be discussed
at Board meetings and the composition of the Board of
Directors, and shared their awareness of issues. We willcontinue to discuss both internal and external issues in order toimprove effectiveness.

Takeover Defense Measures
Countermeasures to Large-Scale Purchase of the Company’s
Shares (Takeover Defense Measures) is a KYB initiative to increase
corporate value and thus ensure the common interests ofshareholders for the medium and long term. The 97th Ordinary

General Meeting of Shareholders on June 25, 2019 approveda resolution to renew this initiative until the end of the 100th
Ordinary General Meeting of Shareholders scheduled forJune 2022.

Officer Compensation
Compensation Structure
Officer compensation consists of fixed monthly compensation (basic compensation) according to position and responsibilities, andperformance-linked compensation (bonus) that varies depending on the Company’s business results. Outside directors and Audit &Supervisory Board members only receive fixed compensation according to their respective roles, and in view of their independence do notreceive performance-linked compensation.
Type ofCompensation

Maximum Total Compensation

Date of Resolution of the General
Meeting of Shareholders

Calculation Process

Directors¥30 million per month(¥360 million per year)

June 27, 1997
75th Ordinary General Meetingof Shareholders

Consultation with
Compensation Committee

Audit & Supervisory
Board members¥8 million per month(¥96 million per year)

June 24, 2011
89th Ordinary General Meetingof Shareholders—

Directors (Excluding
outside directors)

40% or less of total compensation(Fixed compensation +Performance-linked compensation)

Approval annually by resolution
at the Ordinary General Meetingof Shareholders

Consultation with
Compensation Committee

Eligible Officers

Fixed
compensation

Performancelinked
compensation

Note: The limit on total ﬁxed remuneration for directors does not include salary for employees concurrently serving as directors.

KYB Group Report 202037

Corporate GovernanceCompensation Decisions
For director compensation, the discretionary Compensation
Committee composed of representative directors and outside
directors verifies the propriety of the criteria for calculating fixedand performance-linked compensation and reports the proprietyof criteria to the Board of Directors.
Fixed compensation for directors is determined by resolutionof the Board of Directors upon receiving the report from theCompensation Committee, within the limit on totalcompensation decided at the Ordinary General Meeting of
Shareholders. Payment of performance-linked compensation for
directors (excluding outside directors) is approved annually by
resolution at the Ordinary General Meeting of Shareholders.
Fixed remuneration for Audit & Supervisory Board members isdetermined in consultation with Audit & Supervisory Board
members, within the limit on total compensation decided at theGeneral Meeting of Shareholders.

Calculation and Determination of Performance-Linked Compensation to Be Paid
1. Criteria and Business Results That Serve as the Basisfor Calculation
Performance-linked compensation is calculated according to thedegree of achievement in the preceding fiscal year (the “basefiscal year”) of the consolidated performance forecast according to
the following calculation criteria (four items).
Calculation Criteria

TargetResult20,60017,575(fixed compensation + performance-linked compensation) of
directors (excluding outside directors) shall not exceed 40%.
The total amount to be paid is calculated by multiplying the
maximum amount payable by a payout ratio derived from thenumber of calculation criteria targets in 1. that were achieved.
Performance-linked compensation is not paid in the case of aloss attributable to owners of the parent.

5.02

4.61

Profit (loss) attributable to owners of
the parent (Millions of yen)Calculation
Criteria
Targets
Achieved

14,000(61,879)

Payout ratio

Profit (loss) margin attributable toowners of the parent (%)

3.41(16.22)

Segment profit (Millions of yen)Segment profit margin (%)

Note: The targets are the consolidated ﬁnancial results forecast for the base ﬁscal year
(FY2019, or the ﬁscal year ended March 2020) described in the ﬁnancial
statements at the end of the ﬁscal year prior to the base ﬁscal year (FY2018, or
the ﬁscal year ended March 2019). The ﬁrst consolidated performance forecast
will be the baseline if the announcement of results for the recently ended ﬁscal
year does not include a consolidated performance forecast.

2. Calculation of Amount to Be Paid
Total performance-linked compensation is limited to 1.0% of
profit attributable to owners of the parent. Moreover, the ratioof performance-linked compensation to total compensation

4

3

2

1

0

Loss
Attributableto Owners of
the Parent

100％

80％

60％

40％

20％

0%

3. Determination of Amount to Be Paid according to Position
The amount of performance-linked compensation to be paid toindividual directors (excluding outside directors) is calculated basedon proportional distribution of the total amount to be paid in 2. toeach director according to the following payment points for eachposition. Amounts are rounded down to the nearest ¥100,000.

Position

Chairman

Payment points

8

SeniorVice
Vice
Managing
President
ChairmanPresident Executive
Officer

7

10

6

5

Total Compensation for Each Officer Category, Total Compensation by Type, and Number of Eligible Officers
Compensation by Category (Millions of yen)

Total Compensation(Millions of yen)Fixed Compensation

Performance-linked
Compensation

Directors(Excluding outside directors)

155

155

—

6

Outside directors

16

16

—

2

Audit & Supervisory Board members(Excluding outside members)

44

44

—

2

Outside Audit & Supervisory
Board members

45

45

—

3

Category

Number of Eligible
Officers

Notes: 1. Total compensation for directors (excluding outside directors) does not include salary for employees concurrently serving as directors.
2. The above data includes two directors and one Audit & Supervisory Board member who retired at the conclusion of the 97th Ordinary General Meeting of Shareholders on
June 25, 2019.
3. KYB abolished the retirement beneﬁts system for directors at the conclusion of the 89th Ordinary General Meeting of Shareholders on June 24, 2011, but the payment of
retirement beneﬁts according to tenure as of the close of that meeting was also approved. Based on this approval, in addition to total compensation shown above, thefollowing retirement beneﬁts for directors (excluding outside directors) were paid for FY2019.
¥44.8 million (two directors)
Note: This amount includes the payment of ¥41.0 million to two directors, which was disclosed in previous years as allowance for retirement beneﬁts.
4. FY2019 retirement beneﬁts for directors did not increase because the retirement beneﬁt system for directors was abolished as described above.

38

KYB Group Report 2020

Internal Control and ComplianceInternal Control System
Basic Policy
The Board of Directors of the Company ensures effective corporate governance by adhering to the Basic Policy for Internal Control
System1 in accordance with the Companies Act, and by implementing various measures including a risk management system, a Groupmanagement system and an internal compliance system. The KYB Group also maintains and assesses the implementation of internal
control over financial reporting using the procedures stipulated by the Financial Instruments and Exchange Act. In this way, the KYBGroup ensures reliable financial reporting and appropriate information disclosure through internal control reports.

Key Points for Internal Control
1

KYB Group Risk Management

The Risk Management Committee reports to the Board of Directors. Based on the Risk Management
Rules, it designates responsible departments to conduct risk management activities for major risks suchas quality problems and occupational accidents during the fiscal year.

2

KYB Group Information
Protection

Based on the Basic Policy for Information Security, KYB shall implement a system to protect information
assets and take measures against the risk of information leaks and information system failures causedby cyberattacks.

3

Rigorous Application of Internal
Regulations during Emergencies

We inform all employees of Group companies of their reporting obligations to ensure rigorous reporting
under internal reporting rules that include the Rule of Prompt Report2 and Bad News First system, whichcalls for employees of Group companies to immediately notify the Company should they become awareof a potentially serious problem.

4

Review to Improve theEffectiveness of the
Whistleblowing System

We carefully explain the internal reporting system to indirectly related departments and frontline
workers. We have also made whistleblowing compulsory for improper acts related to product quality
and safety.

Notes: 1. Please refer to the Company website for additional details.
https://www.kyb.co.jp/english/company/governance.html
2. A core component of the KYB Group’s crisis management system, in which department heads and production base managers promptly and accurately report important
information to the president of the Company.

Internal Control System
Managing Executives Organization

Independent ofManaging
Executives

Impartial Organization
Supervise

ReportSpecial Audit Committee
on Wrongdoing Risk

EntrustChair: Outside director

KYB President Executive Ofﬁcer(Supported by external attorneys)

Risk and compliance management
Board of Executive Ofﬁcers

Risk Management Committee
Departments withhead ofﬁce functions

Chief Compliance Ofﬁcer(In the future, we will consider
expanding and transitioning to a
standing Compliance Committee)
Support asneededLegal Affairs Department

Business operations

Internal Control Department

Identiﬁcation, evaluation andmanagement of risks

Each headquarters or division
Key compliance personnel

Overall planning and coordinationof corporate governance and compliance
Enhance support
for targeted
expansion

Non-compliancerisk

Quality Control Department
ReportGroup companies
Compliance ofﬁcer

Outside Directors and Outside Membersof the Audit and Supervisory Board

Board of Directors

Audit Department
Wrongdoing risk
investigation

Request for investigation
Support as needed

External investigative
companyKYB Group Report 202039

Internal Control and Compliance

Compliance
Basic Policy
We regard compliance as adherence to the laws, orders andrules of society at large, as well as to the Company’s Articles ofIncorporation, rules and agreements associated with businessactivities, in addition to corporate ethics that promote soundbusiness activities.
1. We have developed the Corporate
Guiding Principles as rules for the
execution of business activities byofficers and employees, and arefocusing on initiatives including
establishing legal compliance andcorporate ethics. In response to theimproper acts related to the damper
Publicity poster for the
problem, we revised our Corporate
whistleblowing system
Spirit and Corporate Guiding
Principles in October 2019 to clearlystate that quality fraud will never recur.

2. We are implementing compliance education through training
sessions by job title and section.
3. We have established communication channels to management
by using the Rule of Prompt Report and Suggestion Box as asystem for the Company and all Group companies to identify
company risks in a prompt manner. We have also establishedand are operating contact points for whistleblowers.

A meeting of compliance officers andkey compliance people in Japan

A gathering of employees forCompliance Improvement Week

Key Points for Compliance1

Fostering Compliance
Awareness in the KYB GroupTo improve compliance awareness, officers of the Company and Group companies regularly attend
lectures on compliance awareness at training sessions for senior management. We also foster
compliance awareness for employees of the Company and the Group through e-learning, lecturetranscripts and videos.

2

Education and Training to Raise
Awareness of Social Responsibility

We will systematize repeated top-down education on corporate ethics. We are also proactively
reviewing the content of teaching materials to incorporate multiple case studies that lead to change in
the awareness of all executives and employees, including frontline employees.

3

Emphasize the Importance ofCompliance Regularly

Top management of the Company communicates internally through channels including speeches inJanuary, April and October.

4

Personnel Evaluations andRelated Measures

Personnel evaluations include a system for evaluating attitudes among employees, managers andexecutive officers toward compliance initiatives, such as compliance with laws and internal rules.

5

Organizational Upgrade

We have established compliance officers and key compliance people at Group companies andCompany business units. They manage and lead the compliance activities of the company or business
unit to which they belong to facilitate compliance activities.

Initiatives to Prevent Recurrenceof Antitrust Violations

We are working on the following measures to prevent violations of antitrust laws based on lessons
learned from violations in the United States.
1) Establishing an anti-monopoly compliance policy2) Securing written pledges from sales personnel that they will not violate antitrust laws
3) Formulating rules for contact with competitors
4) Conducting educational activities related to antitrust laws5) Conducting in-person interviews with sales personnel

7

Initiatives to Prevent Briberyrelated Violations

We are working on the following measures to prevent violations of bribery-related laws and regulations.
1) Establishing an anti-bribery policy
2) Establishing internal regulations3) Conducting educational activities related to bribery-related laws4) Conducting in-person interviews with sales personnel

8

Initiatives to Raise Awareness ofthe Whistleblowing System

We have complemented internal contact points with external contact points for reporting fromoutside the Group in order to detect corporate scandals early and prevent them from occurring.
Regarding the whistleblowing system, we also provide e-learning education and posters to Company
and Group employees. The publicity posters are available in Japanese, Tagalog and Portuguese.

640

KYB Group Report 2020

Management Team(As of June 25, 2020)

Directors

Yasusuke Nakajima1

Masao Ono1

Takaaki Kato1

Keisuke Saito1

Director, Chairman

Representative Director, President
Executive Officer

Representative Director, Executive Vice
President Executive Officer

Member of the Board of Directors,
Executive Vice President Executive Officer

Rokurou Tsuruta1, 3Shuhei Shiozawa1, 3Masakazu Sakata1, 3

Member of the Board of Directors (Outside)

Member of the Board of Directors (Outside)

Member of the Board of Directors (Outside)

Audit & Supervisory Board Members

Tomoo Akai2

Junichi Tanaka2, 3

Eiji Hisada2

Masahiko Sagara2, 3

Audit & Supervisory Board Member(Full Time)

Audit & Supervisory Board Member(Full Time) (Outside)

Audit & Supervisory Board Member(Full Time)

Audit & Supervisory Board Member(Full Time) (Outside)

Notes: 1. Term of ofﬁce: One year from the conclusion of the Ordinary General Meeting of Shareholders held on June 25, 2020.
2. Term of ofﬁce: Four years from the conclusion of the Ordinary General Meeting of Shareholders held on June 25, 2020.
3. Members of the Board of Directors Rokurou Tsuruta (Outside), Shuhei Shiozawa (Outside) and Masakazu Sakata (Outside), and full-time Audit & Supervisory Board Members
Junichi Tanaka (Outside) and Masahiko Sagara (Outside) are independent ofﬁcers as prescribed in Rule 436-2 of the Securities Listing Regulations of the Tokyo Stock Exchange.

Please refer to the “Notice of the 98th Ordinary General Meeting of Shareholders” on our Company website for more detailed information, including brief career histories.
▶https://www.kyb.co.jp/english/ir/stock_meeting.html

Executive Officers
Masao Ono
Representative
Director, President
Executive Officer
Takaaki Kato
Executive Vice
President Executive Keisuke Saito
Officers

Senior Managing
Executive Officers

Hiroshi Ogawa
ToshihikoHatakeyama
Hitoshi Nitta

Managing
Executive
Officers

Masahiro Kawase In charge of Global Production (Automotive Components Operations

General Manager, Seismic Isolation/
Mitigation Correspondence Operations
In charge of European Operations; President,
KYB Europe GmbHIn charge of Technology and Quality

In charge of Cost Planning; General Manager,
Production Division; Deputy General Manager, Seismic
Isolation/Mitigation Correspondence Operations
General Manager, Engineering Division; General
Ikuo Inagaki
Manager, Engineering Planning Department
In charge of North, Central & South American Operations
Hajime Sato
(Automotive Components Operations Relations); General
Manager, Automotive Components Operations; General
Manager, Motorcycle Headquarters
Kenji Yamanouchi President, KYB Americas Corporation
Hideki Nonoyama In charge of Purchasing; Deputy General Manager,
Seismic Isolation/Mitigation Correspondence Operations;
General Manager, Promotion Headquarters
Osamu Kunihara General Manager, Finance & Accounting Division

Kazuaki Shoji

Takashi Tezuka
Ryuji Uda

In charge of Global Corporate Finances

In charge of Special Purpose Vehicle Division; General
Manager, General Affairs & Human Resources Division

Minoru Ishikawa
Ichio Nemoto

Takashi Saito

Executive
Officers

Koji Yamamoto
Takashi Kondo
Kimiro Sudo
Tomoki Takaoka
Ukuru Tsuchida
Shozo Amano
Minoru Tamai
Toshimichi Izeki

Relations); General Manager, Suspension Headquarters; General
Manager, Steering Headquarters, Automotive Components Operations
General Manager, Quality Division
In charge of China; Chairman & President, KYB (China) Investment Co.,
Ltd.; Chairman, KYB Industrial Machinery (Zhenjiang) Ltd.; Chairman,
Wuxi KYB Top Absorber Co., Ltd.
General Manager, CSR & Safety Control Division
In charge of Global Corporate Planning and Domestic AffiliatedCompanies; In charge of Aircraft Components Divisions; General
Manager, Corporate Planning Division; General Manager, Corporate
Planning Department
In charge of auditing; In charge of President’s Office
General Manager, Gifu South Plant, Hydraulic Components Operations
Deputy General Manager, Seismic Isolation/Mitigation Correspondence
Operations; Deputy General Manager, Customer Correspondence
Headquarters
In charge of India; General Manager, Chennai (India) Branch
General Manager, Purchasing Division
General Manager, Special Purpose Vehicles Division
General Manager, Hydraulic Components Operations
General Manager, Sagami Plant, Hydraulic Components Operations
Deputy General Manager, Engineering Division; General Manager,
Basic Technology R&D Center; Curator, KYB Museum

KYB Group Report 2020

41

Risk Information

This section explains the major risk factors relevant to the KYB Group’s operating results and ﬁnancial condition
that may have a signiﬁcant effect on decisions by investors. The KYB Group’s Risk Management Committee reports
to the Board of Directors. Based on the Risk Management Rules, it identifies material risks the Group must address
and the business units responsible for managing them, and also addresses large-scale natural disasters throughGroupwide BCP initiatives. Business units are responsible for managing their risk exposure while the Risk
Management Committee monitors their actions.
Forward-looking statements in this section represent the judgments of the KYB Group (KYB and its consolidated
subsidiaries) as of March 31, 2020.

1. Nonconforming Acts in the Inspection Process
for Seismic Isolation/Mitigation Oil Dampers
The Company and its subsidiary Kayaba System Machinery Co.,
Ltd. manufacture and sell seismic isolation/mitigation oil dampers
for buildings. Some did not conform to performance evaluation
standards certiﬁed by the Minister of Land, Infrastructure,
Transport and Tourism (the “Minister”),* or to the standards ofcustomers, because of falsiﬁcation of performance inspection
record data (the “Incident”). We reported the Incident to the
Ministry of Land, Infrastructure, Transport and Tourism (MLIT) andannounced the status of our response on October 16, 2018.
* There is no Minister’s certiﬁcation system for seismic mitigation oil dampers.

Since July 5, 2019, we have announced the status and progressof measures to prevent recurrence and countermeasures
regarding this issue once every three months on the following
website of the Company. For details, please refer to Progress of
Measures to Prevent Recurrence on page 20.
Status and progress of measures to prevent recurrence:https://www.kyb.co.jp/company/progress/prevent.html(Japanese only)
Status of countermeasures:https://www.kyb.co.jp/company/progress/exchange_progress.html(Japanese only)

Also related to the Incident, the Company records provisions
for product warranties for seismic isolation/mitigation oil dampers
using information and facts currently available and considered
reliable. Provisions have been recorded in our accounts for costs
to produce seismic isolation/mitigation oil dampers, to replace
seismic isolation/mitigation oil dampers, to make structural
modiﬁcations, and to cover compensation expenses. At this point,
however, no provision has been recorded for litigation costs
related to this matter, for which a reliable and reasonableestimate is difficult. Therefore, additional provision recorded as aresult of future events could have a significant impact on thebusiness results of the Group.

2. Important Events Related to Going
Concern Premise
The Company recorded a significant operating loss for FY2019,
which resulted in a breach of the financial covenants of the
syndicated loan agreements that the Company has with all

42

KYB Group Report 2020

applicable financial institutions. To resolve this situation, theCompany negotiated with the applicable financial institutions,which have agreed not to demand immediate redemption due tothe default event pursuant to a breach of financial covenants.
Based on the above, the Company has determined that any
significant uncertainty regarding the premise of its standing as agoing concern is not justified.

3. Risk Due to the COVID-19 Pandemic
Due to the global COVID-19 pandemic, national and local
governments worldwide have implemented measures that include
lockdowns and restrictions on movement. Adverse effects on theGroup’s business performance have included suspension ofoperations and production adjustments due to production cutsby major customers. In addition, the future remains difficult topredict due to the possibility of secondary and tertiary outbreaks
even in areas where life is returning to normal. As a result, thepandemic could have a significant impact on the KYB Group’s
operating results and financial position.
Given these circumstances, the Group will promote flexible
measures such as ensuring liquidity and expanding local
production for local consumption. In addition, to prevent the
spread of COVID-19, each Group company is implementing
measures that include thorough hygiene management, restricting
domestic and overseas business trips, and expanding telecommuting
and web conferencing in accordance with the requests andguidelines of national and local governments worldwide.

4. Risks in Business Operations
4-1. Demand Trends
Sales of the KYB Group’s Automotive Components and HydraulicComponents Operations segments depend heavily on the global
production volume of automobiles and construction machinery.
The Group’s main products are components supplied to
manufacturers of automobiles, construction machinery andindustrial vehicles. A decline in demand for these products due toa global economic downturn could have a signiﬁcant impact on
operating results. The KYB Group sells most of its systemproducts, aircraft components, special-purpose vehicles andelectronics components in Japan. In particular, demand for theKYB Group’s special-purpose vehicles, which are primarily
concrete mixer trucks, can ﬂuctuate signiﬁcantly due to changes
in the amount of construction activity, which is closely correlatedwith the economic outlook.

4-2. Prices and Quality
The KYB Group’s products are subject to intense pricecompetition in both domestic and international markets.
Customers regularly request cost cuts and lower prices. Quality
is also critical. The Group supplies vital automotive components,
such as shock absorbers that maintain vehicle stability and power
steering systems. For construction machinery and commercial
vehicles, the Group supplies key functional components suchas motors and hydraulic cylinders that drive the main unit.
Consequently, the Group may incur substantial expenses,
including the payment of damages demanded by customers, if it
supplies defective products. Furthermore, sales volume and prices
for aftermarket automotive shock absorbers are subject to theimpact of regional economic conditions and competition.

4-3. Procurement of Materials and Components
The KYB Group purchases materials and components from alarge number of suppliers. Prices of these items are closely linked
to prices on international commodity markets. The KYB Groupmay not be able to fully reﬂect an increase in the cost of materials
or components in its selling prices, or to reduce prices of materials
and components sufﬁciently to reﬂect a reduction in selling prices,which could have a signiﬁcant impact on operating results.

4-4. Funding
The KYB Group obtains loans mainly from ﬁnancial institutions inJapan and other countries to fund capital expenditures and tosecure working capital. The Group obtains these loans while
carefully monitoring ﬁnancial markets. However, it may be unable
to procure funds when needed at favorable terms due to events
including a broad decline in the prices of the Group’s products,
an economic recession, a credit crunch, or a decline in theGroup’s credit rating, which could affect the Group’s ﬁnancial
condition and operating results.

5. Risks Associated with Natural Disasters,
Accidents, Etc.
An earthquake, wind and flood damage, fire, conflict, act ofterrorism or other event in Japan or an area outside of Japan
where the KYB Group has a plant could cause a substantial
decline in the Group’s production capacity. In Japan, many plantsof the KYB Group and many of its suppliers are located in the
Chubu area. A major earthquake, wind and flood damage orother event in this area that prevents these plants from operating
could cause a substantial decline in the Group’s production
capacity. In addition, many plants of the KYB Group produce
hydraulic products that utilize the properties of oil. In addition,some plants have coating equipment that uses organic solvents,and storage tanks for hydraulic oil, chemicals and other substances.
A ﬁre or hazardous substance leak could temporarily shut down
manufacturing activity.

6. Risks Associated with Fluctuations in Exchange
Rates and Interest Rate Increases
With an overseas sales ratio of 55.2%, the KYB Group relies
heavily on markets outside of Japan. As a result, ﬂuctuations inforeign exchange rates have a signiﬁcant impact on the Group’s
exports from Japan and the performance of Group companies inother countries. An increase in interest rates in Japan or othercountries could have a signiﬁcant impact on the KYB Group’s
operating results.

7. Risks Associated with Significant Lawsuits or
Other Legal Action
If the KYB Group is the defendant in a lawsuit and the outcome isunfavorable, the resulting payment and other demands may havea signiﬁcant impact on the Group’s operating results.

4-5. Business Downturn
Bankruptcy at KYB Group overseas production or sales bases
caused by factors including a decline in orders or proﬁtability
could signiﬁcantly impact the Group’s operating results.

4-6. Counterparty Credit Risk
The KYB Group sells its products to automobile and construction
machinery manufacturers and many other customers. An
unexpected problem involving customer credit could affect theGroup’s operating results.

KYB Group Report 202043

Financial and Non-Financial Highlights

FY

2009

2010

2011

2012

Accounting standards applied

JGAAP

JGAAP

JGAAP

JGAAP

Net sales

252,020

320,082

337,158

305,752

1

—

—

—

—

Operating profit

3,896

24,152

21,538

10,473

Profit before tax[Income (loss) before income taxes andminority interests]

1,671

24,44021,76012,994661

17,014

13,898

7,789

Capital expenditures

10,082

8,916

27,17339,215

Depreciation and amortization

15,31813,427

13,50814,554R&D expenses

2,817

3,218

4,035

5,468

Cash flows from operating activities

22,65535,433

17,39918,984

Cash flows from investing activities(12,828)(7,233)(20,000)(36,125)

Cash flows from financing activities(6,646)(16,968)(3,455)

8,529

Cash and cash equivalents at end of period

37,664

48,12342,01035,215

Total assets

269,361

285,134

301,349

327,912Segment profit

Profit (loss) attributable to owners of the parent[Net income (loss)]

98,14581,64180,51895,33878,48989,964

102,762

116,435

Basic earnings per share [Net income (loss) per share] 3 (Yen)

3.03

77.54

62.87

35.24

Cash dividends per share applicable to the year (Yen)

2.50

8.00

9.00

8.00

Return on equity attributable to owners of the parent[Return on equity] (ROE; %)

0.9

21.1

14.8

7.3

Ratio of equity attributable to owners of the parent[Equity ratio] (%)

27.3

30.6

33.2

34.5

P/E ratio (Times)

113.9

8.6

8.0

13.1

Number of employees

10,977

11,44011,97512,306

Interest-bearing debt

2

Total equity [Total net assets]

3

KYB Corporation and Consolidated Subsidiaries
Notes: 1. Segment proﬁt is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.
2. Interest-bearing debt = Short-term borrowings + Current portion of long-term borrowings + Current lease obligations + Long-term debt + Non-current lease obligations +Guarantee deposits received
3. The Company carried out a 1-for-10 reverse stock split effective October 1, 2017.
Items in brackets are Japanese Generally Accepted Accounting Principles (JGAAP) line item names applied prior to the year ended March 31, 2015 (FY2014).
*JGAAP

Environment-related Data
CO2 Emissions(t-CO2)150,000
1.31
100 000

92,7091.26
96,5451.34
101,289(t-CO2/million yen)
1.5
1.43
1.30
97,41996,74550 000

Energy Consumption

(km3)
2,000

(kℓ)
80,000
1,633

1 500
1,243

1,251

1,604

0.689

0.713

0.704

0.684

48,66450,76453,081

51,031(kℓ/million yen)
0.80
0.750

60,0001,331

0.60
50,5971,000

40 0000.40

500

20,000

0.20

0.5

0

0
2015

2016

■ Emissions (Left scale)

44

1.0

Water Usage

2017

2018

2019

Basic unit (Right scale)KYB Group Report 2020

(FY)

0

0
2015

2016

2017

2018

2019

(FY)

0
2015

2016

■ Consumption (Left scale)

2017

2018

2019

(FY)

Basic unit (Right scale)(Millions of yen)

2013

2014

2015

2016

2017

2018

2019

JGAAP

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

352,710370,327355,320355,316

393,743

412,214

381,584—

15,506

17,58818,62422,94922,01017,575

18,17014,461

4,327

19,247

20,885(28,496)(40,298)

21,032

14,892

2,825

18,852

20,881(29,510)(41,419)

12,761

8,036(3,161)

14,544

15,202(24,757)(61,879)

29,90830,087

21,30020,578

20,95625,34523,347

17,294

15,191

17,075

15,922

16,98817,581

20,6156,917

8,910*

7,760

7,621

8,102

6,750

6,312

28,78822,335

19,95831,15329,252

17,047(4,999)(36,078)(30,658)(20,320)(21,337)(16,386)(13,616)(21,505)

5,709

(555)

(3,395)(969)(4,482)

10,41822,57638,13230,51025,29633,98842,70256,09250,423361,083

387,877

359,002381,326

412,493441,074

410,454

88,81392,44891,68593,563

94,641

108,634

154,608

153,997

175,256

153,381

169,771

186,651

155,643

79,815

55.25

31.45

(12.37)56.93

595.09(969.18)(2,422.53)

9.00

12.00

11.00

12.00

150.00

0.00

0.00

9.7

5.1

(2.0)

9.3

8.8

(15.0)(55.4)

41.2

43.6

41.3

43.1

43.7

33.9

18.1

7.9

14.0

—

10.2

8.5

—

—

13,033

13,732

13,796

14,35014,754

15,427

15,439Energy Consumption forTransportation*

Waste Emissions

(kℓ)
2,500

(t)
25,000
2,171

2,000
1,756
1,500

1,946

1,961

20,00010,000

500

5,000

3,506

0 539

0
2015

2016

19,31915,0001,000* Amount as crude oil

20,36419,755

17,931

16,998

1,673

2017

2018

2019

(FY)

2015

■ General waste

2016

504

515

597

2017

■ Metal scrap

3,557

3,827

3,539

3,469

504

2018

2019

(FY)

■ Industrial waste

KYB Group Report 2020

45

Global Network(As of August 1, 2020)

JAPAN★ Regional Headquarters● Production Base

◆ R&D Base ■ Sales Base/Other Services

KYB Corporation★ KYB Head office● KYB Trondule Co., Ltd.

● Kumagaya Plant● KYB-YS Co., Ltd.

● Sagami Plant● KYB Kanayama Co., Ltd.

● Aikawa Plant● Gifu North Plant● KYB Motorcycle Suspension Co., Ltd.
● Kayaba System Machinery Co., Ltd.

● Gifu South Plant● KYB Stage Engineering Co., Ltd.

● Gifu East Plant● Takako Industries, Inc.

◆ Basic Technology R&D Center■ KYB Engineering and Service Co., Ltd.

◆ Production Technology R&D Center◆ Machine Tools Center◆ Developmental Experiment Center■ Hamamatsu■ Nagoya■ Osaka■ Hiroshima■ Japan Analysts Co., Ltd.
■ Kensiyuu Co., Ltd.
■ KYB Logistics Co., Ltd.
■ KYB Systemerit Co., Ltd.
■ Chikuyo Seiki Kogyo Co., Ltd.

■ Fukuoka

46

EUROPEASIA★ ◆ KYB Europe GmbH★ KYB (China) Investment Co., Ltd.

★ KYB Europe GmbH
(Navarra Branch)■ KYB Europe GmbH
(Düsseldorf Branch)■ KYB France■ KYB Iberia■ KYB Italy■ KYB Poland■ KYB Romania■ KYB Turkey■ KYB UK■ KYB Ukraine● KYB Suspensions Europe, S.A.U.
● KYB Steering Spain, S.A.U.
● KYB Advanced Manufacturing
Spain, S.A.U.
● KYB Manufacturing Czech, s.r.o.
● KYB CHITA Manufacturing
Europe s.r.o.
■ LLC KYB Eurasia■ KYB Eurasia Vladivostok■ KYB Middle East FZE● KYB Industrial Machinery(Zhenjiang) Ltd.
■ KYB Industrial Machinery(Zhenjiang) Ltd.
(Shanghai Branch)● ■ Wuxi KYB Top AbsorberCo., Ltd.
● Changzhou KYB Leadrun Vibration
Reduction Technology Co., Ltd.
● Hubei Henglong & KYB
Automobile Electric Steering
System Co., Ltd.
● CHITA KYB Manufacturing(Zhenjiang) Co., Ltd.
● KYB Manufacturing Taiwan Co., Ltd.
● KYB Steering (Thailand) Co., Ltd.
● KYB (Thailand) Co., Ltd.
● KYB Manufacturing Vietnam
Co., Ltd.
● Takako Vietnam Co., Ltd.
● PT. KYB Hydraulics Manufacturing
Indonesia

KYB Group Report 2020

AMERICAS● PT. Kayaba Indonesia● PT. Chita Indonesia● KYB-UMW Malaysia Sdn. Bhd.
● KYB Motorcycle Suspension India
Pvt. Ltd.
● KYB-Conmat Pvt. Ltd.
■ KYB Asian Pacific Corp. Ltd.
■ KYB Asian Pacific Corp. Ltd.
(Amata Nakorn Branch)■ Kayaba System MachineryCo., Ltd. Taiwan Office■ KYB Corporation
Chennai Branch★ ● KYB Americas
Corporation (Indiana)■ KYB Americas
Corporation (Chicago)■ KYB Americas
Corporation (Detroit Branch)■ KYB Americas
Corporation (Greenwood)● Takako America Co., Inc.
● KYB Mexico S.A. de C.V.
● KYB Manufacturing do Brasil
Fabricante de Autopeças S.A.
■ KYB International America, Inc.
■ KYB Latinoamerica, S.A. de C.V.
■ Comercial de Autopeças KYB do
Brasil Ltda.

Corporate Information/Shareholder Information(As of March 31, 2020)

Corporate Information
Company NameKYB Corporation

Date of Establishment

March 10, 1935

Head OfficeWorld Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6111, Japan
TEL: +81-3-3435-3511
FAX: +81-3-3436-6759
URL: https://www.kyb.co.jp/english/

Fiscal Year

April 1 to March 31

Paid-in Capital¥27,647.6 million

Number of Employees

15,439 (Consolidated basis)

Securities Traded

Tokyo Stock Exchange (First Section)

Shareholder Information
Major Shareholders

Common Stock Issued

25,748,431

Number of
Shareholders

14,965

Transfer Agent andRegistrar

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan

Name

Composition of Shareholders
Financial institutions
7,910 thousand (31%)

Treasury shares
205 thousand (1%)
Other domestic companies
5,491 thousand (21%)

Foreign companies
5,668 thousand (22%)

Individuals and others
6,474 thousand (25%)

Shareholdings Percent of Total(Thousands) Shares Issued (%)

Toyota Motor Corporation

1,965

7.7

The Master Trust Bank of Japan, Ltd.
(Trust Account)

1,258

4.9

Meiji Yasuda Life Insurance Company

1,004

3.9

Hitachi Construction Machinery Co., Ltd.

892

3.5

KYB suppliers’ stock ownership

825

3.2

Trust & Custody Services Bank, Ltd.
as trustee for Mizuho Bank, Ltd.
Retirement Benefit Trust Accountre-entrusted by Mizuho Trust andBanking Co., Ltd.

611

2.4

Ogaki Kyoritsu Bank, Ltd.

591

2.3

Government of Norway

499

2.0

Mizuho Bank, Ltd.

490

1.9

Japan Trustee Services Bank, Ltd.
(Trust Account 5)

455

1.8

Notes: 1. The shareholding ratio is calculated after the deduction of own shares(205,222 shares).
2. The number of shares held has been rounded down to the nearest
thousand shares.

Monthly Stock Price Range (Tokyo Stock Exchange)
Stock price (¥)

Stock price (Left scale)

Trading volume (Shares)■ Trading volume (Right scale)

8,000

800,000,000

6,000

600,000,000

4,000

400,000,000

2,000

200,000,000

00FY2015FY2016FY2017FY2018FY2019High (¥)

4,710

6,460

7,380

5,660

3,695

Low (¥)

2,630

2,980

4,705

2,312

1,712

At year-end (¥)

3,330

5,800

5,050

2,718

2,069

Note: The Company carried out 1-for-10 reverse stock split on the effective date of October 1, 2017. Numbers for the prior ﬁscal years are as recorded after the reverse stock split.

KYB Group Report 202047

Contact

General Affairs Headquarters, General Affairs & Human Resources Div.
World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6111, Japan
TEL: +81-3-3435-3545
FAX: +81-3-3436-6759