Medium-Term Business-2012)
Medium-TermBusinessPlan
Plan(FY2010(FY2010-2012)—
For Achieving
—
2020
—For
AchievingKawasaki
KawasakiBusinessBusinessVision
Vision2020—
2020—

Kawasaki Heavy Industries, Ltd.
President Satoshi Hasegawa
April 27, 2010

1

Contents
I. Company Section
1. Summary of Global K(FY2006(FY2006-2010)
2. Background to and Key Features ofthe MediumMedium-Term Business Plan
3. Kawasaki Business Vision 2020
(1) Business Vision(2) Quantitative Vision(3) Basic Strategy
1) Advancement of new
products and new businesses
2) Global business development
3) Focused allocation ofmanagement resources
4. MediumMedium-Term Business Plan
(FY2010(FY2010-2012)(1) Basic Objectives(2) Priority Issues(3) Quantitative Plan
(4) Key Policies and Measures

II. Business Segment Section
Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering

Motorcycle & Engine
Precision Machinery

Attachment: ByBy-Segment
Quantitative Plan

2

I. Company Section

3

1. Summary of Global K (FY2006(FY2006--FY2010), the Previous MediumMedium-TermBusiness PlanFirst half

Results

Structural reform of individual businesses and withdrawal
from unprofitable businesses
Steady improvement of overall Group profitability■■ Overseas
Overseas businessbusiness expansion
expansion

FY2008 second half onwardSudden change in the business environment anddeterioration of business performance, especially from massproduction businesses●● Rolling
Rolling Stock:
Stock: Winning
Winning ofof many
many orders
orders fromfrom North
North
America
America andand otherother overseas
overseas markets
markets●● Motorcycle:
Motorcycle: Establishment
Establishment ofof aa structure
structure forfor low-cost
low-cost
production
production in
in Asia
Asia andand sales
sales inin developed
developed countries
countries●● BusinessBusiness expansion
expansion in
in China:
China: Shipbuilding,
Shipbuilding, Plant
Plant &&
Infrastructure
Infrastructure Engineering,Engineering, Precision
Precision Machinery
Machinery

Section 1■■ Development
Development ofof new
new products
products andand newnewtechnologies
technologies

Review of the Business Plan
Net sales
2,800 yen)(Billion

Recurring profit
140(Billion yen)
Net sales (actual)

2,400

120

Net sales (Global K plan)
Recurring profit (actual)

2,000

100

Recurring profit (Global K plan)

1,600

80

1,200

60

800

40

400

20

0

0
'06

'07

'08

●
● Transportation
Transportation Systems:
Systems: XP-1/XC-2(patrol
XP-1/XC-2(patrol aircraft/cargo
aircraft/cargo
aircraft)aircraft) ,aircraft,aircraft manufacturing
manufacturing using
using composite
composite materials,
materials,
newnew LRVLRV models,models, etc.
etc.
●
● Energy
Energy && Environmental
Environmental Engineering:Engineering: Gigacells,
Gigacells, gas
gas
engines,
engines, new
new energy
energy (biomass,(biomass, small-scale
small-scale hydropower),hydropower), etc.
etc.

'09

'10

Issues■■ Management
Management reflecting
reflecting consciousness
consciousness ofof thethebreakevenbreakeven point
point●● Fixed-cost
Fixed-cost increases
increases thatthat exceed
exceed appropriate
appropriate levels
levels inin somesomemass-production
mass-production businesses
businesses●● Delays
Delays inin coping
coping with
with changes
changes inin thethe market
market environment
environment■■ Commercialization
Commercialization ofof new
new products
products andand newnewbusinesses
businesses
42. Background to and Key Features of the MediumMedium-Term Business Plan

Immediate Issues

Business Environment Paradigm Shift● Deterioration of business performance in massproduction businesses due to market contraction● Decrease in new orders in businesses that produce
custom-built products based on individual orders

MediumMedium-Term Business Plan
(FY2010(FY2010-2012)

Actionplan

FY2010● Advancing multipolarity in the global economy due togrowth in emerging countries● Worldwide increase in concern about the global
environment

Kawasaki
KawasakiBusinessBusiness
Vision020
22020
Vision2020

FY2012Return to a growth path
Strengthen business foundations in
preparation for future growth

Formulate new products andnew business concepts
Anticipate societal needs
until around 2030

FY2020

FY2030

Sustain a growth pathAchieve the Group mission● Establishment of the long-term vision “Kawasaki Business Vision 2020—Strategic Moves

toward the Future” to achieve the Group mission “Kawasaki, working as one for the good of
the planet”● Shortening of the period of the Medium-Term Business Plan from five years to three years to
rapidly and flexibly respond to changes in the business environment

5

3. Kawasaki Business Vision 2020 (1)Business(1)Business Vision“Kawasaki, working as one for the good of the planet”

A
A company
company thatthat provides
provides products
products andand services
services suited
suited toto thethe diverse
diverse needs
needs ofof people
people aroundaround the
the
world
throughadvanced
technologicalcapabilities
in
threeprincipal
business
sectors:
world through advanced technological capabilities in three principal business sectors: Land,
Land, Sea,
Sea, andandAir
Transportation
Systems,
Energy&Environmental
Engineering,andIndustrial
Equipment
Air Transportation Systems, Energy & Environmental Engineering, and Industrial Equipment
Transportation Systems

Energy & Environmental Engineering

Industrial Equipment

Shipbuilding, rolling stock, aircraft,aircraft engine, ship machinery,
motorcycle, etc.

Gigacells, industrial gas turbines, gas engines,
steam turbines, compressors, energy
and environmental plant engineering, etc.

Industrial plants, tunneling equipment,
hydraulic equipment, robots,
construction machinery, crushers, etc.

Improvement
Improvement ofof thetheglobalglobal environment
environment

Reinforcement
Reinforcement ofof thetheearnings
structure
earnings structure

AAcompany
companythat
thatcreatescreates
products
productsthat
thatincorporate
incorporatethetheultimate
ultimatein
inlow
lowenvironmental
environmental
impactimpacttechnologies
technologiesin
ineacheachbusinessbusinesssector
sectorAAcompany
companythat
thatestablishes
establishesananearnings
earningsstructure
structurethat
thatmakes
makes
possiblepossiblesustainable
sustainablegrowth
growthinvestment
investmentand
andprovides
providesstablestableshareholder
shareholderreturns
returns

GlobalGlobal businessbusinessdevelopment
development andandemphasisemphasis onon
monozukuri
monozukuri(manufacturing)(manufacturing)AAcompany
companythat
thatupgrades
upgradesplantsplantsin
inJapanJapanandandactively
actively
pursues
pursuesbusinessbusinessdevelopment
developmentoverseas
overseas

EmphasisEmphasis on
on CSR
CSR
AAcompany
companytrusted
trustedwhereverwhereverititdoesdoesbusinessbusinessaroundaroundthe
the
world
world

Workplace
Workplace environment
environment
development
development
AAcompany
companywhose
whoseemployees
employees
havehavehopes
hopesandanddreams
dreamsandandwork
work
withwithvigor
vigorandandenthusiasm
enthusiasm

6

3. Kawasaki Business Vision 2020 (2) Quantitative Vision
Pursue greater competitiveness in existing

Net Sales by Business Sectors

businesses, nurture new products and new
New products and new
T ransportation Systems
businesses (600.0)
businesses, and enter new markets.
Existing businesses
Energy & Environmental Engineering(220.0)2,000.0(Billion
yen)
2,000

10%

Industrial Equipment

Emerging
countries (400.0)

Ratio of recurring profit to sales

1,501.1
1,5001,438.6
1,338.6

1,280.0
1,173.4

Japan (110.0)
Products Areas

5.0%

4.3%

1,000

Developed
countries (310.0)

1,400.0

Breakdown ofgrowth inGroup net sales(2009→2020)

2.9%

500

3.4%
2.5%

●Pursuit of safety, comfort, and convenience●Establishment of a business structure that cancompete against the world’s leading companies

Energy & Environmental Engineering

5%

4.0%

Transportation Systems●Greater efficiency from existing products,
market entry in emerging countries●Active nurturing of new products and new businesses

Industrial Equipment
1.2%●Reinforcement of competitiveness in core technologies
and core components, expansion of solutions businesses●Expansion of KHI technologies and products into newmarkets and business fields

0%

0
'06

'07

'08 '09

'10

'12

'20

Quantitative Vision (FY2020)
Consolidated net sales: ¥2 trillion
Ratio of recurring profit to sales: 5.0% or higher

Further boost competitiveness with low
environmental impact technologies
Energy conservation, resource conservation,
environmental load mitigation

7

3. Kawasaki Business Vision 2020
(3) Basic Strategy 1) Advancement of new products and new businesses - 1

Nurturing of new products and new businesses for future growth
Net Sales of New Products and New
Businesses

New products
and newbusinesses
Existing
businesses



Nurturing and reinforcement of new products
and new businesses in anticipation of societal
needs until around 2030
Transportation systems growth, advancement of a modal shift

600.0

Expansion of energy demand¥2 trillion…

1,173.4

1,400.0Billion ye n

FY2009

CO2 reduction, environmental load mitigation

Utilize the Group’s overall intellectual assets tocreate products and services.
Key concepts: High efficiency, low carbon,
comfort, convenience

FY2020Contribution of KHI Group Products to Customers’ CO2 Emissions
Reduction
CO2 reduction due to new products and alreadyalready-developed lowlowCO2 products (estimate for 2020)
2020)(Million tons)
Modal shift to low-CO2 rolling stock9
Low fuel-consumption, high-efficiency
3commercial aircraft and engines
High-efficiency gas turbine cogeneration
Power plant efficiency improvement, waste
heat power generation
Other
Total

18
19
16
65

・・Approx.
Approx.5%
5%ofofJapan’sJapan’semissions
emissions(2006)(2006)
・・Approx.
Approx.200
200times
timesthetheKHIKHIGroup’sGroup’semissionsemissionsofof0.3
0.3million
milliontons
tons(2007):(2007):In addition,
CO2-freenew products andnew businesses
Hydrogen, oceanenergy, etc.

8

3. Kawasaki Business Vision 2020
(3) Basic Strategy 1) Advancement of new products and new businesses - 2

Involvement with CO2-free new products and new businesses
Long-term social trends○Further advancement toward low-carbon societies
Reinforcement of CO２ reduction measures (carbon taxes, emissions trading,power purchase obligation, etc.)○Supply and demand crunch and sharp price increases forexisting fossil fuels (crude oil, etc.)

Fossil fuel costs increase,creating an advantageoussituation for CO2-free fuels.

1Primary
次エネルギーenergyNatural energy (hydropower,
wind power, solar power,etc.),
自然エネルギー（水力、風力、太陽光
水力、風力、太陽光など）など）
自然エネルギー（
NuclearPower,
Fossilfuels(oil,natural
gas,
coal,
etc.)
・原子力 ・化石燃料（石油、天然ガス、石炭など）
化石燃料（石油、天然ガス、石炭など）

1) Efficiency improvements in existing
equipment, energy conservation②

Secondaryenergy2次エネルギー
Electricity
電力

Hydrogen
水素

Electric
power storage
電力貯蔵
電力貯蔵

③

2) CO2-free hydrogen production

Hydrogen storage
水素貯蔵3) Efficient use of hydrogen

Use of CO2-free hydrogen as a newform of secondary energy

Power,
thermal
動力 energy
動力・熱Transportation equipment, power
輸送機器・動力機器
equipment,
boilers, etc.

9

3. Kawasaki Business Vision 2020
(3) Basic Strategy 1) Advancement of new products and new businesses - 3

KHI’s CO2-free hydrogen concept
Resource-producing
countries

The energy chain from resource-producing
countries to consumer countries

Natural energy

Consumer countries

Use in processes

Electrolysis

Semiconductor and solar cell production,
oil refining and desulfurization, etc.

Liquid hydrogen lorries褐炭褐炭Transportationequipment

Gasification

2
CO2-freehydrogen

ガス化
ガス化
ガス化
Hydrogenpurificationhydrogen精製Hydrogen carriers
化石燃料(従来型)
バイオマス

Brown coalLiquid hydrogen storage tanks
Hydrogen cars, etc.

Energy equipment(C)JAXA

High-efficiency CCS(Carbon dioxide Capture andStorage)

Pipeline
Injection

CO2 sequestration,
concentration, and storage

CO2 emission source
CO
CO22

Hydrogen Production
Low-cost production of hydrogen from unused
resources (brown coal) in resource-producing
countries
High-efficiency CO2 sequestration, transition to
CO2-free hydrogen

Current KHI products

Hydrogen Transportand Storage
Optimized transportation andstorage of hydrogen

Hydrogen gas engines, gas
turbines, boilers, fuel cells, etc.

Hydrogen Use
Efficient use of hydrogen that
does not generate CO2
Note: Visuals are for illustration purposes only.

103. Kawasaki Business Vision 2020
(3) Basic Strategy 2) Promotion of Global business development - 1

Global business development for future growth
Net Sales by Area

(Billion yen)

2,500
2,000
1,500
1,000
500

■Emerging countries
Nonconsolidated businesses in China(shipbuilding, plant engineering)
Emerging countries

300.0

Developed countries

6 5 0 .0

Japan

1 3 0 .0
3 0 0 .0

●Expansion of local production, including at joint ventures●Response to expansion in energy demand, transportation
demand, and other demands■Developed countries
90.0
2 4 0 .0

6 5 0 .0

3 2 0 .0

6 3 0 .0

6 1 0 .0

7 0 0 .0

FY2000FY2009FY2020●Response to increasing demand for aircraft and for rollingstock, for which increased demand is expected due to a modal
shift

0

 Development
Developmentand
andprovision
provisionofofproducts
productsadapted
adaptedtoto
regional
regionalneeds
needsandandmarket
marketdevelopment
development

 Optimal
Optimalbusinessbusinessdevelopment
developmentininline
linewith
withexpansion
expansionofof

Contribution from O ve rseas Sales

70%
65%

50%

41%

**Increase
Increasepreparedness
preparednessfor
forforeignforeignexchange
exchangefluctuations
fluctuations
due
toexpansionof
local
production
anddue to expansion of local production andoverseas
overseasprocurement
procurement

48%

30%
FY2000FY2009overseas
overseasbusinesses,
businesses,including
includingthe
theupgrading
upgradingofofoverseas
overseas
production
productionand
andengineeringengineeringsites
sitesandandpursuit
pursuitofof
international
internationalalliances
alliances

FY202011

3. Kawasaki Business Vision 2020
(3) Basic Strategy 2) Global business development - 2

Current Overseas Business Sites
Kawasaki Precision Machinery (U.K.) Limited
Dalian COSCO Shipbuilding Industry Co.,Ltd.
(Precision Machinery)(Shipbuilding)Tonfang Kawasaki Air-conditioning Co., Ltd. (Gas Turbines & Machinery)

Kawasaki Motors Manufacturing Corp., U.S.A.
Lincoln Plant (Motorcycle & Engine, Rolling Stock)

Qingdao Sifang Kawasaki Rolling Stock Technology Co., Ltd. (Rolling Stock)

Kawasaki Motors Manufacturing Corp., U.S.A.
Maryville Plant (Motorcycle & Engine)
Changzhou Kawasaki and Kwang Yang Engine Co., Ltd. (Motorcycle & Engine)
Flutek, Ltd. (Precision Machinery)
Canadian Kawasaki Motors Inc.
(Motorcycle & Engine)
Kawasaki Motors Corp., U.S.A.
Anhui Conch Kawasaki Engineering Co., Ltd. (Plant &(Motorcycle&
Engine)Infrastructure Engineering)
Wuhan Kawasaki Marine Machinery Co., Ltd. (Gas
Turbines & Machinery)

Nantong COSCO KHI Ship Engineering
Kawasaki Rail Car, Inc.
Co., Ltd. (Shipbuilding)(Rolling Stock)
Shanghai
COSCO
KHI
Steel
StructureCo.,
Ltd.
KCMA Corporation
Kawasaki Precision Machinery (Suzhou) Ltd.
(Plant & Infrastructure Engineering)(Construction(Precision Machinery)
Kawasaki Chunhui Precision Machinery (Zhejiang) Ltd. Machinery)(Precision Machinery)
Kawasaki Motors Europe N.V.
Kawasaki Precision Machinery (U.S.A.)(Motorcycle & Engine)
Kawasaki Motors (Phils.) Corporation(Precision Machinery)(Motorcycle & Engine)
India Kawasaki Motors Pvt. Ltd.
KawasakiMotores do Brasil Ltda.
P.T. Kawasaki Motor Indonesia(Motorcycle & Engine)(Motorcycle & Engine)(Motorcycle & Engine)
Kawasaki Motors Enterprise(Thailand) Co., Ltd.
(Motorcycle & Engine)
Kawasaki Motors Pty. Ltd. (Motorcycle & Engine)

Major sales site
Major production and sales site
Major production and sales site (capacity
increase during the past few years)

Further Promotion of Overseas Business Development● Shipbuilding: Business scale expansion through means including establishment of a two
dock structure at Nantong● Rolling Stock: Expansion of North American production capacity through upgrading of
the Lincoln Plant● Plant & Infrastructure Engineering: Product line expansion at a joint venture in China● Precision Machinery: Geographically optimized production structure in Japan, the U.K.,
the U.S., China, and South Korea● Motorcycle & Engine:・Expanded production in Thailand of models for developed countries
・Business expansion in emerging countries through means including the launch ofa plant in Brazil and establishment of a company in India
・Low-cost production through the establishment of a general-purpose engine joint
venture in China

12

3. Kawasaki Business Vision 2020
(3) Basic Strategy 3) Focused allocation of management resources

Concentrate management resources on developing businesses and implement a businessstructure shift.
● Identify businesses to nurture for the future from an overall Group
Group perspective and concentrate management resourceson those businesses● Identify problem businesses with respect to competitiveness or market growth potential and implement
implement radical structuralreform, downsize,
downsize, or withdraw from those businesses

Rank businesses using the following categories.
Category

Definition / Business operation

Developing
business■Businesses from which future growth
can be expected■Actively inject management resources
and aim to nurture and expand businesses.

Core
profitmaking
business

Businessrequiring
review■Profitable, competitive businesses fromwhich stable returns can be expected■Reinforce profitability throughsustained investment, bearing cash flow in
mind.
■Businesses with poor profitability
prospects as they now stand and fromwhich future growth cannot be expected■Implement radical structural reform,
downsize, or withdraw

Developing Businesses
Business sector

Business

New products andnew businesses
connected withmultiple businesses

Transportation
Systems

Energy &Environmental
Engineering

・Hydrogen-related
businesses
・Ocean energy

Merchant vessels (business in China)
Overseas high-speed trains, LRVs
Commercial aircraft (including
conversion of the next-generation
cargo aircraft to commercial use)
Civil Aero engines
Motorcycle for emerging countries
Gigacells
Industrial gas turbines
Compressors
Aerodynamics
New energy-related businesses

・Low environmental
impact marine
propulsion systems

Factory automation and mechatronics

Industrial
Equipment

・Others(Automated cell culture system, etc.)

Electro-hydraulic hybrid systems
Robots for semiconductor production
and new business fields

13

4. Medium-Term Business Plan (FY2010-2012)(1) Basic Objectives

Rebuild the earnings structure and return to a growth path.
Reinforcement
Reinforcementof
ofoveralloverallGroup
Groupprofitability
profitability
Mass-production businesses → Consciousness of the breakeven point

Produce toorderImplementation of fixed cost reductions, lowering of the breakeven point inresponse to changes in the business environment
Maintenance of appropriate inventory levels rapidly optimized to market
fluctuations*Putting the motorcycle business in the black is an especially important priority.

Shipbuilding○

Rolling Stock○

Aerospace○

Produce-to-order businesses → Focus on risk management

Gas Turbines& Machinery○

Emphasis on profitability
Implementation of rigorous risk management in project management

Incorporate the design-to-cost principle from the development and estimate stage
and increase the accuracy of estimated costs.
Implement radical cost reduction and productivity improvement in monozukuri(from development to manufacturing)Cash flow improvement, reduction of interest-bearing debt

Strengthen
Strengthenbusinessbusinessfoundation
foundationfor
forfuture
futuregrowth
growthActive R&D to nurture new products and new businesses and upgrade existing products
Acceleration of overseas business development in emerging countries in addition todeveloped countries

Motorcycle& Engine
Plant &
Infrastructure
EngineeringMassproduction○○

Precision
Machinery○

Other(Construction
Machinery)○144. Medium-Term Business Plan (FY2010-2012)(2) Priority Issues (Structural Reform of Motorcycle & Engine business)
Drastic contraction
Sharp deterioration

Market environment
P&L situation

Fiscal year

Bottoming out
Return to profit

Gradual recovery
Profit stabilization

FY2009FY2010FY2012

U.S. motorcycle

748

461

467

485

Europeanmotorcycle

588

480

468

488

Net sales

303.7

203.0

260.0

290.0

Operating income

-10.4

-27.0

0.0

8.0

Breakeven point

345.0

298.0

260.0

265.0

Marketenvironment

FY2008(Thousand units)(Billion yen)

・FY2009: Production adjustments (reduced unit shipments) to reduce channel inventories→FY2010 and beyond: Increase in unit production and wholesale unit sales attendant on progress with inventory adjustment
・Increase in sales to emerging countries

Breakdown of structural reform (lowering of the breakeven point)
Fixed cost reduction

Improvement of the marginal profit ratio●Rigorous fixed cost reduction on a global basis●Workforce reduction●Reductions in selling expenses, advertisingexpenses, and racing costs (suspension of MotoGP, etc.)●Lower development expenses due to development
efficiency improvements●Construction of a production system in line with unit shipments●Design for cost and quality from the initial stage of development●Cost improvement through optimized procurement on a global
basis and establishment of an optimized production system(Including expansion of production in Thailand of models fordeveloped countries)●Implementation of marketing policies and measures thatemphasize profitability and efficiency

15

4. Medium-Term Business Plan (FY2010-2012)(3) Quantitative Plan - 1

Consolidated Quantitative Targets(Billion yen) Reference

Net sales

FY2009FY2010FY2012

FY2020(actual)(forecast)(target)(vision)

1,173.4 1,280.0 1,400.0

2,000.0

Operatingincome

-1.3

32.0

52.0

(Ratio tosales)

-0.1%

2.5%

3.7%

Recurringprofit

14.2

32.0

56.0

(Ratio tosales)

1.2%

2.5%

4.0%

Before-tax
ROIC

0.2%

5.6%

8.5%

Debt-toequity
ratio

1.55

1.55

1.30

Equity ratio

20.4%

20.8%

Steadily
Steadilyimplement
implementmeasures
measurestotoreinforce
reinforce
profitability
andreturntothesustained
profitability and return to the sustained
growth
growthpath
pathenvisioned
envisionedininGlobal
GlobalKKduring
during
the
term
of
the
new
medium-termbusiness
the term of the new medium-term businessplan.
plan.

Net sales
2,800(Billion yen)
2,400

100.0
5.0%

24.0%

－

¥90=US$1¥90=US$1

120

Net sales

2,000

100

Recurring profit

1,600

80

1,200

60

800

40

400

20

0

0
'06

Exchange
rate
assumption

Recurring profit
140(Billion yen)

'07

'08

'09

'10

'12

'20

¥90=US$1

16

4. Medium-Term Business Plan (FY2010-2012)(3) Quantitative Plan - 2

Management Resource Allocation Plan

Capitalinvestment(purchase orderbasis)

R&D
investment

No. ofemployees(Billion yen)100

(Employees)
40,000(Billion yen)

Reference

FY2006FY2009

FY2010FY2012

FY2010FY2020

average (actual)(plan)(vision)75

35,00070.3/year

58.0/year

60.0/year50

30,00036.6/year

42.0/year

60.0/year25

25,000FY2009year-end

FY2012
year-end

FY2020
year-end0(actual)(plan)(vision)32,29733,00035,000Capital investment
R&D investment
No. of employees

20,000'06 '07 '08 '09 '10 '11 '12'20

Management
ManagementResource
ResourceAllocation
AllocationPolicy
Policy Capital
investment:
Althoughinvestment
Capital investment: Although investmentwill
willnot
notreachreachthethelevellevelofofthe
theaggressive
aggressiveinvestment
investmentinincapacity
capacityexpansion
expansionofofthethepastpastfew
fewyears,
years,steadilysteadilyimplement
implementnew
newproject-related
project-relatedinvestments,
investments,updating
updatingofofaging
agingfacilities,
facilities,etc.
etc.
 R&D
R&Dinvestment:
investment:Expand
Expandinvestment
investmentatatboth
bothheadquarters
headquartersand
andbusinessbusinessunits
unitsininpreparation
preparationfor
forfuture
futuregrowth.
growth.
 Numberofemployees:
Controlhiring
to
below
the
level
of
the
sales
increase
by
means
of
productivity
Number of employees: Control hiring to below the level of the sales increase by means of productivity
improvements.
improvements.Maintain
Maintainstablestableemployment
employmentand
andsecuresecureandandutilize
utilizehuman
humanresources
resourcesoverseas.
overseas.

17

4. Medium-Term Business Plan (FY2010-2012)(4) Key Policies and Measures - 1
1) Reinforcement and nurturing of businesses that will constitute the future earnings structure● The business units and headquarters collaborate in nurturing and reinforcement of new products and businesses, taking a perspective that
extends to 2030.
● Put in place mechanisms to create linkage from R&D to commercialization.
● Engage in M&A to acquire new businesses and strengthen existing businesses.

2) Acceleration of global business development● Engage in product development and market development that take into account the individual market characteristics of China, India, Brazil,
and other emerging countries in addition to developed countries.
● In response to overseas business expansion, develop an optimal business structure at the global level through means including the upgradingand expansion of overseas production.

3) Group-wide sharing and utilization of intellectual assets● Put in place mechanisms to promote group-wide sharing and utilization of intellectual assets such as technology and marketing information.
● Efficiently and rapidly merge intellectual assets held by individual companies through the reintegration of four Group companies.

4) Strengthen technological capabilities● Expand R&D investment at business units and headquarters and reinforce the upgrading existing products and development of new products.
● At the Corporate Technology Division, engage in anticipatory research into core technologies for future businesses and reinforce R&D of basic
technologies shared throughout the Group.
● The Corporate Technology Division supports technology development at the business units and cross-implements technologies within theGroup.

5) Strengthen monozukuri capabilities● Pursue optimization of all development, design, procurement, and manufacturing processes and implement radical cost reduction andproductivity improvement.
● Headquarters provides priority support for model businesses, focusing on procurement, manufacturing, and logistics, and cross-implements
results within the Group.

184. Medium-Term Business Plan (FY2010-2012)(4) Key Policies and Measures - 26) Effective utilization of plants and business sites● Responding to changes in the business environment, restructure the plants and business sites, focusing on plant complexes where multiple
business units are located.

7) Development of human resources and the workplace environment● Implement policies and measures to reinforce management capabilities, business execution capabilities, and autonomy and develop global
human resources.
● Develop a balanced performance-based compensation system and personnel systems that increase employee motivation and the desire todevelop skills.
● Create a workplace culture of putting safety first and implement policies that place importance on work-life balance and diversity.

8) The practice of environmental management● Establish the seventh Environmental Management Activities Plan and reduce green house gas and waste emissions in business activities.

9) IT strategy and systems development● Strengthen the capability at headquarters to formulate and implement a Group information strategy and develop and reinforce systems at
information departments throughout the Group.

10) Implementation of group-wide risk management● In addition to risk management implemented at the business units, strengthen systematic management of critical risks from a group-wide
perspective.

11) Qualitative improvement of headquarters departments● Enhance specialized skills and implement initiatives to increase the corporate value from the medium-term and long-term perspective of total
optimization.

19

Notes

20

II. Business Segment Section
 Growth Opportunities
 Shipbuilding Rolling Stock Aerospace Gas Turbines & Machinery Plant & Infrastructure Engineering Motorcycle & Engine
 Precision Machinery

Note:
Segment net sales and operating
income figures are calculated on thebasis of new accounting standards
implemented in FY2010.

21

Growth Opportunities
Annual growth rate of 5% until 2020 for KHI Group fueled by market expansion

Transportation Systems, Energy, the Environment, Asia------------------- Principal Growth Opportunities Until 2020 ------------------Transportation systems
MarineRail

Product needs:
Aviation

Energydemand:CO2 reduction
Low environmental
load
High efficiency

Convenience
Comfort:Asian
economic
growthShipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Motorcycle & Engine
Precision Machinery

22Shipbuilding
2020 Vision
One of the world’s leading shipbuilding groups and an enterprise that plays a key role inmarine transport, a critical part of the world’s economic infrastructure, and contributes tosolving global environmental issues through energy conservation, low environmental
impact products, and other measures

Net Sales●

230

Upper row: Operation in China(equity-method affiliate)(Billion yen)
63.1

60.4

73.0

Business Vision for 2020


Steady increase in seaborne cargo
movement volume due to sustained global
economic growth

Seek further growth of the business
operation in China while maintaining thequality of the operation in Japan

140

130.0

Business plan

1 5 1 .8
120.0
126.4

'08

'09

'10

1 1 0 .0

'12'20

(Target)(Vision)(Billion yen)

3.0

Operati ng income

6%

2.0

R ati o of operating
i ncome to s ales

4%

Key Points in the Medium-Term Business Plan



1.0

2%

0.0

0%

'08

'09

'10

'12

(Target)-1.0

Business plan

Profits until FY2011 are assured owing to an orderbacklog of almost two years.
Securing orders from 2012 onward is a key task. KHI will
await market recovery while implementing an operating
slowdown and fixed cost reductions.
Maintain stable operations in FY2012 benefiting from
our Chinese business.

-2%

23

Shipbuilding
Medium- to Long-Term Market Outlook
New shipbuilding markets will grow in the medium- to long-term, and the supply anddemand conditions will improve.

Principal Initiatives Toward 2020
Operation in Japan
Profitability assurance through maintenance of optimal scale ofproduction
Reinforcement of the role of the Engineering and LeadingLeading-Edge Technology
Development Center

SakaideShipyard

 Build high value-added ships through the application of theresults of technical development, with a focus on LNG
carriers and LPG carriers.
 Take the lead in horizontal deployment and technicalguidance to the operation in China.

Kobe
Shipyard

 Place the naval industry in core business following the futureowing to its contribution to the nation and advanced
technologies.
 Pursue maintenance and improvement of building andrepair infrastructure for submarines and improve
profitability.

Technical development for energy conservation and environmental impact
mitigation that takes advantage of the KHI Group’Group’s collective strength
Low environmental impact barges, new propulsion systems, marine resource
development equipment, etc.

Operation in China
Business scale expansion and profitability maintenance andimprovement based on a relationship of trust with China Ocean
Shipping (Group) Company

Reinforcement of Building Capacity
 Capital investment to supplement the second expansionaryphase Creation of a framework that takes advantage of two largedocks Accumulation of monozukuri expertise Reinforcement of detailed designing capabilities

Active construction of the ships for China’s national
projects
Further reinforcement of profitability through thesustainment and rigorous implementation of the
Kawasaki Method

Pursuit of operational integration of the business operations in Japan and China
Pursuit of cooperation in marketing, engineering, procurement, and building and enjoyment of mutual benefits

24

Shipbuilding (Operation in China)
Nantong COSCO KHI Ship Engineering Co., Ltd.

 Establishment of a joint venture with China
Ocean Shipping (Group) Company inDecember 1995
 Development into one of China’s largest
new shipyards with two building docks by
the second expansionary phase in May 2008

10,000 TEU container ship

5,000-unit Pure car carrier

Very large crude oil carrier(VLCC)

Very large ore carrier (VLOC)
25

Shipbuilding (Product Development)
Adding Value to Existing Products Development of a thermal insulation system that
dramatically curtails LNG vaporization LNG carriers equipped with reheat turbine and boilers

Clean Energy Transportation
Technologies
Liquid hydrogen carrier Insulation technology for liquid hydrogen, which iscolder than LNG

Reheat turbine plant

Artist’srendering(WE-NET PJT)

Development of Energy Saving and Environmental Load Mitigation
Technologies
 Propulsive efficiency improvement by adoption of
overlapping propeller system (OLP) Dual Fuel Diesel (DFD) electric propulsion system
 Hybrid power supply system (installation of Gigacellson actual ships)
 Main Engine for water emulsion fuel

OLP model testing26

Rolling Stock2020 Vision
To become a global rolling stock systems manufacturer that takes advantage of its worldclass technologies and quality to engage in a broad spectrum of businesses that range fromhigh speed rail (HSR) to light rail transit (LRT)30 0

Net Sales

Business Vision for 2020

(Billion yen)

16 0 .0
1 5 0.0 1 45 .0
13 5 .6
Business plan

 Develop businesses such as HSR, systems projects,
and LRT in expanding markets worldwide'08

 Expand Gigacell® business in the railway andrenewable energy sectors

'09

'10

'12

'20

(Target)(Vision)(Billion yen)

20.0

Operating income
Ratio of operating income to sales

10%

15.0
5%

10.0
5.0

Business plan

0.0

Key Points in the Medium-Term Business Plan Almost all sales during the medium-term business plan
have been secured
 Execute major overseas projects successfully Establish a foundation for increasing profit

0%

'08

'09

'10

'12

27

(Target)Rolling Stock
Medium- to Long-Term Market Outlook
Economic growth and environmentally suitable* products will help global expansion
 Infrastructure investment will be accelerated by advancing urbanization in Emerging countries in Asia
 Shift towards use of mass transit is being seen in the U.S. and other countries→ Provides opportunity for KHI, which has bases in North America and Asia, to deploy its strengths(* Rail travel CO2 emissions are one tenth those of automobiles.)Principal Initiatives Aimed at Achieving 2020 Vision
 Reinforce framework for executing overseas projects
 Optimize engineering and R&D units to address the increase in overseas projects
 Deepen collaboration between the Hyogo works and overseas bases in North America
and elsewhere Enhance framework for individual projects(Strengthen relationships with domestic and foreign companies)

 Product line extension
 Intercity Transportation→ High-speed trains designed for use overseas (efSET® )Push-pull coaches for North America (K-Star Express)
 Urban Transportation→ LRV (SWIMO®) (LRV : low floor light rail vehicle)
 Energy & Environmental Engineering → Gigacell®
◆ Railway-related sectors such as BPS and in-vehicle batteries◆ Renewable energy sector

28

Rolling Stock (Product Development)
efSET® (Environmentally Friendly Super Express Trains)
 Max. operating speed : 220mph (350km/h)
 The principle designs were completed by the end of March 2010
•High Speed Rail projects are underway in the U.S., Vietnam,
and other countries•→ efSET® meets increasing demand for high speed trains

SWIMO®

K-Star Express

 Push-pull coaches to increase the speed of existing
railways and replace aging trains in North America
 Max. operating speed : 125mph (200km/h)

 Low-floor, battery-driven light rail vehicle uses Gigacell®
 Development of SWIMO® for North America is underway

29

Rolling Stock (Product Development)
Gigacell® (High-Capacity, Fully Sealed Ni-MH Batteries)
Gigacell® offers high-speed
charging and discharging
Large-scalebatteries
High capacity enables
use as backup batteries
in renewable energy
applications◆ In solar power generation system
storage facilities◆ In wayside energy storage systems→ Effectively uses regenerated energy to lower energy
consumption from power company→ Increase efficiency by smoothing ofelectricity peaks
ピークカットPeak CutCommand
指令

Battery Power System
for Railways
ＷＨ

Substation
Solar Panels
太陽電池パネル

Substation
Wayside Energy Storage System

Charging/discharging
充放電

Station
CHARGING

Regenerative Braking

ギガセル®キュービクル
Gigacell ® Cubicle

工 Factory
場

DISCHARGINGPowering

30

Aerospace2020 Vision
A leader in Japan’s aerospace industry and an aircraft manufacturer with solidinternational competitiveness in terms of quality, cost, and delivery speed

Net Sales
200.4

188.8

300

(Billion yen)

2 1 5 .0

240.0

Business Vision for 2020
Develop the commercial aircraft
sector and grow it into a ¥300.0
billion business.

Enter the global market as asystems integrator.

Business plan

'08

'09

'10

'12

'20

(Target)(Vision)(Billion yen)

Operatingincome10

10%

Key Points in the Medium-Term Business Plan

Business plan
Ratio ofoperatingincome to sales

5

0

'08

'09

'10

5%



0%



'12

Defense: Securing of stable orders for XP-1/XC-2
projects etc.
Commercial :Supporting mass production of the Boeing
787 and improving productivity(Target)

-5

31

-5%

Aerospace
Medium- to Long-Term Market Outlook
 Medium- to long-term expansion of the commercial aircraft market
 Under a defense budget cut trend, further contributions to Japan’s defense based ona wealth of experience

Principal Initiatives Toward 2020
Reliable execution of two major projects
DefenseXPXP-1/XC1/XC-2 projects
Next-generation patrol aircraft (XP-1)
 Completion of development
 Execution of the mass production
contractNext-generation cargo aircraft (XC-2)
 Completion of development
 Achievement of the mass production

Commercial

Boeing 787 projectDevelopment of a production system for the rampup productionParticipation in the development of a derivative
aircraft (The 787-9)

Conversion of the nextnext-generation cargo aircraft(XC(XC-2) to commercial use
Promotion of various study for commercialization

Production system reinforcement through operational integration with NIPPI Corporation (a consolidated
subsidiary)32

Aerospace (Product Development)
XP-1/XC-2 Projects

Next-generation patrolaircraft (XP-1)
 Sept. 2007: First flight Aug. 2008: Delivery to the Ministry of Defense
 Execution of the mass production contract

Next-generation cargo aircraft(XC-2)
 Jan. 2010: First flight March 2010: Delivery to the Ministry of Defense Achievement of the mass production
 Consideration of conversion to a commercial cargo
aircraft33

Aerospace (Product Development)
Environment-Friendly Commercial Aircraft

Boeing 787
 Dec. 2009: First flight 20% improvement in fuel efficiency through themassive use of composite materials
 KHI’s responsible work packages: forward fuselage,
landing gear compartment, mid-wing fixed trailing edge

Commercial Helicopter

Helicopter for Emergency
Medical Service
 BK117 helicopter

34

Gas Turbines & Machinery2020 Vision
An equipment and system manufacturer that doing business globally in the transport
equipment and energy & environmental engineering sectors
450

Net Sales

Business Vision for 2020

(Billion yen)

195.1

Business scale expansion primarily on civil aeroengines and energy & environmental
engineering sectors

230.0

210.0
191.3

Business plan

'08

'09

(Billion yen)

'10

'12

'20

(Target)(Vision)15

Operating income
6%
Ratio of operating income to sales

10

4%

Business plan

5
0

2%

Key Points in the Medium-Term Business PlanNet sales stableDespite an increase of R&D investment for civil
aero engines, financial stability to be maintained
through productivity improvement

0%

'08

'09

'10

'12
(Target)35

Gas Turbines & Machinery
Medium- to Long-Term Market Outlook
 Expansion of the transportation system sector, mainly led by air fright market
 Increase in energy demand, mainly in Emerging countries
 Increased needs for higher efficiency and natural gas usage for CO2 emissions reduction

Principal Initiatives Toward 2020
Civil Aero Engines

Energy & Environmental
Engineering

Development and expansionof KHI’
KHI’s position as aninternational joint
development partner

Improvement of efficiency
and environmental
performance and aggressive
business expansion to overseas

 Smooth transition to mass
production of the Trent 1000
and Trent XWB

 Enhancing capabilities toprovide solutions

 Reinforcement of basic
technologies and productdevelopment capabilities

 Cooperation with overseas
engineering companies, etc.

MarineDevelopment of a nextnextgeneration propulsion system
Improving efficiency and reducing
environmental load

DefenseUpgrading technicalcapability as an engine andsystem manufacturer
Promotion of engine and auxiliary
equipment development

36

Gas Turbines & Machinery (Product Development)
Trent 1000/XWB New Aircraft
EngineDevelopment of the Trent 1000/XWB
 To be installed on B787 and A350
 Developer: Rolls-Royce CO2 reduction, low noise and NOx emissions
 KHI responsibility: Intermediate pressurecompressor moduleⒸ Rolls-Royce plc 2010

Environmental Response in
Marine Propulsion System
Development of a nextnext-generation propulsion
systemHigh-efficiency propulsion system, such as asuperconducting motor
Two-stroke diesel research engine

Involvement in environmental performance improvement
using research engine

37

Superconducting motor propulsion system

Gas Turbines & Machinery (Product Development)
High Efficiency, Low Emissions
Power Generation Gas Turbine
Cogeneration
Overall thermal efficiencyof 80% or higher
Development of lowemissions technology
Increase the efficiency of(NOx 9ppm or less)existing models and sequentiallydevelop new high-efficiency
equipment.

Power Generation Gas
Engines

Sharp Reduction in Greenhouse
Gas Emissions
 Utilize KHI high combustion technology of gas turbine
for power generation(burn diluted methane being released into atmospherefrom coal pits and landfills)
 The global warming potential of methane is 21 times
than that of CO2. The reduction effect is extremely high.
→ Acquisition of CO2 emissions
Worldwide Greenhouse Gas Emissions
Carbon Dioxide (Land Use
Change and Forestry) 19%

Methane16%

 Power generation efficiency:
Improvement on existing 48.5%
 Low emissions:NOx 200ppm or less
 Business expansion in Japanand overseas

Carbon Dioxide (Fueland Cement) 55%

炭坑
Coal Pit（中国など）

電Electricity

気CO2, H2O

Ventilation
air methane
通気メタン

Development of a Binary Cycle
Power Generation System Effective use of low-temperature exhaust heat Application to geothermal power generation

38

Plant & Infrastructure Engineering2020 Vision
A distinctive plant engineering enterprise that provides products and technologies that cancontribute to global environment protection and CO2 reduction, with a focus on energy
conservation, resource conservation, and resource recycling

Net Sales

70

Upper row: Operation in China(equity-method affiliate)250(Billion yen)

40.0

31.5 32.0 38.0
140.0
124.4
110.0
107.5
Business plan

'08

'09

'10

'12

Business Vision for 2020
Initiatives for growth in Asia andreinforcement of competitiveness bymeans of new products, with a focus
on energy and environmental
engineering'20(Vision)(Target)(Billion yen)
Ope ratin g in c o me

15.0

10%

Ratio of o pe ratin g in c o me to sale s

Key Points in the Medium-Term Business Plan

8%

10.0

6%

Business plan
5.0

4%
2%

0.0





Reliable execution of large overseas projects
Orders for new municipal waste treatment facility
business
Steady efforts to win orders for small projects

0%

'08

'09

'10

'12

39

(Target)Plant & Infrastructure Engineering
Medium- to Long-Term Market Outlook
 An increase in environmental and recycling demand due to environmental and energy problems
 Expansion of demand for fertilizer plants and other industrial plants, due to increases in population, foodstuffs
demand, etc.

Principal Initiatives Toward 2020
Energy, Environment,
Recycling Use of petroleum alternative
energy, exhaust heat utilization
facilities, sales increases forenergy conservation equipment
 Reinforcement of natural energy
products
 Commercialization of biomass
utilization facilities(gasification power generation,
ethanol production, etc.)
 Increased sales of microhydropower generation facilities
for small dams

Industrial Machinery,
Factory Automation,
Infrastructure

Business Operationin China

 Reinforcement of sales
expansion efforts in Emerging
countries Nurturing and expansion of thejoint venture with CONCH* in
China

 Reinforcement of Harima works
and Yachiyo works, as key
hardware production works.

 Expansion of industrial
machinery, environmental
equipment, etc. in addition to
cement facilities
 Utilization as a low-cost base forexports around the world, andimprovement of costcompetitiveness Accelerated development of
next-generation products
 Expansion of application of theautomated cell culture system*CONCH (Anhui Conch Cement)
The Largest cement producer in China /The KHI Group has a 50% ownership at thejoint venture.

40

Plant & Infrastructure Engineering (Product Development)
Promotion of Energy Conservation (CO2 Reduction), Environmental
Protection Measures, and Resource Recycling
Bioethanol production
facilities
Production from rice straw
under verification

Waste processing facilities foruse at cement kilns

Woody biomass power generation

Circulating fluidized bed
Effective use of waste as fuel and raw boiler

 Completion of verification of a systemthat uses wood materials andpreparation for market introduction

Conversion of waste into fuelmaterial in cement production

Micro hydropower
generation facilities
Compact, low-noise,maintenance-free20 to 500kW systems currently
on saleIntegrated Solar Combined
Cycle power generation system
Solar Heat ＋Gas Turbines, etc.
Deployment in Middle East markets

Heat absorption pipe

41

Reflecting mirror

Plant & Infrastructure Engineering (Product Development)
Expansion of the Operation in
China
Cement (exhaust heatrecovery)recovery)Industrial Machinery, Factory
Automation, Infrastructure
FluidizedFluidized-bed
advanced cementkilnCooperation with
CONCH

Energyconservation
Low emissions
Verification of a
1000t/day systemcompletedExpansion to otherbusinesses (waste recycling,
sewage treatment, etc.)

Shield tunneling machines

LNG Tanks

 Increased demand for undergroundconstruction in urban areas

 Expansion of overseas
markets
 Increased orders forreceiving terminal
facilities

Advancement of New Businesses
Automated cell culture system With a view to the futureregenerative medicine market,
launched in 2009

Water jet cleaning
equipment Share expansion in thesolar cell manufacturingsector42

Motorcycle & Engine
2020 Vision
A world-class personal vehicle and engine manufacturer focused on motorcycles thatleverages further penetration of Fun to ride, supported by advanced environmental
technologies

Net Sales(Billion yen)

303.7

260.0

203.0

Business Vision for 2020

3 00

290.0



Business plan


'08

'09

'10

'12

'20

(Target)(Vision)Reinforcement of the earnings structure ofbusinesses in developed countries
Growth of the motorcycle business for
Emerging markets(Billion yen)

20.0

O pe r at in g in c o me
Rat io o f o pe r at in g in c o me to sale s

10.0
0.0
'0 8

'09

'10

Business plan
'1 2

-10.0

(Target)10%

Key Points in the Medium-Term Business Plan

5%



0%



-5%

-20.0

-10%

-30.0

-15%



Improved profitability through rigorous
breakeven point management
Recovery in production and wholesale unit sales
through rapid inventory level adjustment indeveloped countries
Expansion of sales of products for
Emerging countries

43

Motorcycle & Engine
Medium- to Long-Term Market Outlook
 For motorcycles, substantial recovery in developed countries cannot be expected,
and environmental regulations on CO2 and exhaust emissions are sequentiallytightened. Demand for leisure motorcycles, a KHI strength, will increase in
Emerging countries due to economic growth.
 For general-purpose engines, the U.S. market for mainstay lawn-related products
will gradually recover, and the market for agricultural equipment in Emerging
countries will expand.

Principal Initiatives Toward 2020
Motorcycles for Developed Countries(Including FourFour-Wheel Vehicles)







Profitability improvement
through limitation of the numberof models developed and partscommonality
Expansion of production inoverseas for selected models
Response to CO2 regulation
 Low fuel consumption
technologies
 Electric vehicles
Reinforcement of the earnings
structure of the four-wheel
vehicle business

Motorcycles for Emerging Countries

GeneralGeneral-Purpose Engines









Establishment of a premium
brand differentiated fromcompetitors, with a focus on
leisure motorcycles
Increased sales in Southeast Asia,
Brazil and elsewhere, new market
development (such as opening of
the Indian market through analliance with BAJAJ)
Business expansion andprofitability improvement bymeans including the utilization ofalliances with other companies



Development of markets for
agriculture, forestry,
construction, and industrial
equipment concurrent withsolidification of KHI’s
position in the market for
lawn-related equipment
Reinforcement of pricecompetitiveness and sales
expansion resulting fromthe development of low-costengines and expansion of
production in China

44

Motorcycle & Engine (Product Development)
Leisure Motorcycles (Including FourFour-Wheel Models)
Z1000

Vulcan 1700

ER-6n

Increase sales toReinforcement of product competitiveness with
Emerging markets“Fun to Ride,”
Ride,” “Ease of Riding,”
Riding,” and“Environment”
Environment” as the key concepts.

Ninja 250R

Vehicles shown are currently
available models.

TERYX 750
FI 4x445

Motorcycle & Engine (Product Development)
Increase Sales of General-Purpose
EnginesDevelopment of EnvironmentFriendly Technologies
 Exhaust cleaning
 Increased fuelefficiency (CO2
reduction)
 Electric vehicles, etc.

Solidification of top share in the professional lawn equipment
marketDevelopment of new markets such as agriculture, forestry, andconstruction
Reinforcement of price competitiveness and increased sales
resulting from expansion of production in China

46

Precision Machinery2020 Vision
Industrial Hydraulic Products
A manufacturer of top brands in the global motion control sector thatprovides customers around the world with drive and control systems,
engineering, and services centered on hydraulics technologies

Industrial Robots
A robot manufacturer that has established a position as a top provider ofquality and total solutions in the automotive, semiconductor, and solar
panel manufacturing sectors and opens up new market sectors with latent
automation needs

 Combining of these businesses into a single segment
beginning in FY2010
 Pursuit of synergies in precision processing, electronic
control, and other areas
47

Precision Machinery260

Net Sales
117.6
82.7

110.0

'09

(Billion yen)

'10

'12

'20

(Target)(Vision)8%

15.0

Business expansion due to recovery
in the automotive market,
increased use for manufacturinglines in other industries, and otherfactors

Key Points in the Medium-Term Business Plan

6%



4%



10.0

Business plan

5.0

2%

0.0

0%

'09



10%

Rat io o f o pe r at in g in c o m e t o sale s'08

Building up position as No. 1
hydraulic equipment manufacturer
for construction machinery(Billion yen)

Ope r at in g in c o m e

20.0


130.0

Business plan

'08

Business Vision for 2020

'10

'12
(Target)Increased hydraulic equipment sales to
Emerging countries
Increased demand for robots forsemiconductor production. Steady
implementation of measures to develop newmarket sectors
48Precision Machinery
Medium- to Long-Term Market Outlook
 Increased demand for hydraulic equipment from construction machinery sector backed by
growing needs for infrastructure development in Asia and Emerging countries
 For robots, in the backdrop of the advancement of computerization and global economic
development, automation needs such as high-quality, high-efficiency production lines
increased.

Principal Initiatives Toward 2020
Hydraulic Equipment
Acceleration of overseas business development
 Increased cost competitiveness from thedevelopment of a geographically
optimized production and sales structure
involving five bases (Japan, the U.K., theU.S., China, and South Korea)
 Reinforcement of business development
in China
 Consideration of local bases in Emerging
countries following establishment of abase in China
Development of environment-friendly products
 High-efficiency, low-noise pump motors
 Electro-hydraulic hybrid systems

Robots

Reinforcement of manufacturing line
construction capabilities



Expansion in growth sectors (semiconductors,
solar panels, etc.) and new sectors (logistics,
food products, etc.)



Expansion of market entry in Emerging
countries Reinforcement of the marketing structurein Asia Development of low-cost robots having
limited functions
 Consideration of production in Asia

49

Precision Machinery (Product Development)
Hydraulic Equipment: Development of Eco-friendly Products
 Kawasaki Eco Servo (electro-hydraulichybrid system for industrial machinery) Electro-hydraulic hybrid swing
motors for construction machinery High efficiency, low-noise pump and motor50

Precision Machinery (Product Development)
Robots: Sales expansion for Semiconductor Production Sector and New
Market Sectors
 Robots for newmarket sectors

Solar panels
Foods
Pharmaceuticals

 Robots for semiconductor
production

Parallel multi-joint W-hand(clean specification)

 General-purpose
multifunction hand

Automaton of tray
service made possible byability to accommodate avariety of parts shapes

Cosmetics, etc.

51

Attachment: By-Segment Quantitative Plan

52

Attachment: ByBy-Segment Quantitative Plan - 1(Billion yen)
Net sales

Operating income, Ratio of operating income to sales

FY2009(actual)

FY2010(forecast)

FY2012(target)

FY2009(actual)

FY2010(forecast)

FY2012(target)Shipbuilding

151.8

120.0

110.0

1.5

1.0%

2.0

1.7%

0.0

0.0%

Rolling Stock

150.0

145.0

160.0

8.7

5.8%

8.0

5.5%

8.0

5.0%

Aerospace

188.8

215.0

240.0

3.7

2.0%

4.0

1.9%

7.0

2.9%

Gas Turbines &Machinery

191.3

210.0

230.0

8.9

4.7%

10.0

4.8%

8.0

3.5%

Plant &
Infrastructure
Engineering

107.5

110.0

140.0

7.9

7.3%

6.0

5.5%

9.0

6.4%

Motorcycle & Engine

203.0

260.0

290.0

-27.0

-13.3%

0

0.0%

8.0

2.8%

Precision
Machinery

82.7

110.0

130.0

3.4

4.1%

8.0

7.3%

11.0

8.5%

Other

97.8

110.0

100.0

-8.8

-9.0%

-6.0

-5.5%

1.0

1.0%

Total

1,173.4

1,280.0

1,400.0

-1.3

-0.1%

32.0

2.5%

52.0

3.7%

Exchange rate assumption: ¥90=US$1
53

Attachment: ByBy-Segment Quantitative Plan - 2

Before-tax ROIC
FY2009(actual)

FY2010(forecast)

FY2012(target)Shipbuilding

10.0%

12.0%

5.7%

Rolling stock

13.6%

12.3%

12.9%

Aerospace

2.3%

2.0%

4.1%

Gas Turbines &Machinery

8.4%

10.0%

6.2%

Plant &
Infrastructure
Engineering

23.3%

17.0%

17.1%

Motorcycle & Engine-26.9%

3.2%

7.9%

Precision Machinery

9.6%

23.3%

30.0%

Other

－

－

－

Total

0.2%

5.6%

8.5%
54

Kawasaki,
Working as one for the good of the planet

Figures recorded in the business forecasts are forecasts that reflect the judgment of the Company based on theinformation available at the time of release and include risks and uncertainties. Accordingly, the Company
cautions investors not to make investment decisions solely on the basis of these forecasts.
Actual business results may differ materially from these business forecasts due to various important factors
resulting from changes in the external environment and internal environment. Important factors that may affectactual business results include, but are not limited to, economic conditions, the yen exchange rate against the
U.S. dollar and other currencies, the tax system, and laws and regulations.

55