Mid-Term '17 : New Medium-Term Business Plan
~ Towards 2020 ~March 10th 2017

TOYO TIRE & RUBBER CO., LTD.

Mid-Term '17: New Medium-Term Business Plan
1. Review of Mid-Term '14

1) Net Sales and Operating Income Trends
2) Review of Operations

2. Mid-Term '17

1) Management Objectives2) Capital Investments

3. Growth Strategies

1) Tire Business
2) DiverTech Business4. Corporate Reform

1) Strengthening Our Management Foundation
2) Reforming Corporate Culture

Business plans and projected results described in this document were created based on projections of the
future economic climate as of this point in time. Actual performance may vary due to a variety of factors.
This document is not a guarantee of the Company’s future performance.

Mid-Term '17: New Medium-Term Business Plan
1. Review of Mid-Term '14

1) Net Sales and Operating Income Trends
2) Review of Operations

2. Mid-Term '17

1) Management Objectives2) Capital Investments

3. Growth Strategies

1) Tire Business
2) DiverTech Business4. Corporate Reform

1) Strengthening Our Management Foundation
2) Reforming Corporate Culture

Business plans and projected results described in this document were created based on projections of the
future economic climate as of this point in time. Actual performance may vary due to a variety of factors.
This document is not a guarantee of the Company’s future performance.

1. Review of Mid-Term '14(Billions of yen)

Results

407.7

393.7
Net Sales

47.5

Forecast

470.0

381.6

63.3

49.3

52.0

Operating
IncomeFY2014FY2015FY2016FY2016

Operating
Income Margin

12.1%

15.5%

12.9%

11.1%

US$

105 Yen121 Yen

110 Yen100 Yen€140 Yen136 Yen121 Yen135 YenExchange
Rate Generated operating income mainly in N. America and achieved 12% plus operating margins
 Net sales and operating income levels were impacted by fluctuation in exchange rates and raw
material costs
 Continued cash dividend payments of 45 yen/share41. Review of Mid-Term '14
Tire Business
Mid-Term '14 Business Strategy

Primary initiatives during the period

 Establish firm brand position in the
SUV/CUV market, where Toyo Tires has
strong presence Completed expansion of U.S. and Malaysia
plants Realize distinctive technologies toachieve top-class productcompetitiveness Strengthen product development
capabilities for truck and bus tirecategory Expanded Pickup truck/SUV/CUVs tire
sales in key North American Market
 Developed new customers in North
America and Europe Developed and launched SUV products inNorth America
 Advanced our new design platform
technology: Nano Balance Technology
 Launched our fuel-efficient NANOENERGY
truck and bus tires

Mid-Term '14 (FY2016)
Targets¥380.0 billion
Operating Income¥46.0 billion
Operating Income Margin
12.1%
Net Sales

FY2016 Results
Net Sales
Operating Income
Operating Income Margin¥303.9 billion¥45.4 billion
14.9%
5

1. Review of Mid-Term '14
DiverTech Business
Mid-Term '14 Business Strategy
 Establish a profit structure to promote
growth by business units Fortify businesses with key advantages
and build a solid foundation in Japan
 Strategic expansion of overseas markets
focused on improved costcompetitiveness and growth foundation

Primary initiatives during the period Acquired new customers for automobile
rubber parts
 Promoted a global supply structure for
automobiles rubber parts
 Improved profitability by reorganizing
production bases
 Overseas expansion of railway carcomponents business and rigid
polyurethane business Rebuilt our quality assurance system

Mid-Term '14 (FY2016)
Targets

FY2016 Results

Net Sales¥90.0 billion

Net Sales¥77.5 billion

Operating Income¥6.0 billion

Operating Income¥3.8 billion

Operating Income Margin

6.7%

Operating Income Margin

4.9%
6

Mid-Term '17: New Medium-Term Business Plan
1. Review of Mid-Term '14

1) Net Sales and Operating Income Trends
2) Review of Operations

2. Mid-Term '17

1) Management Objectives2) Capital Investments

3. Growth Strategies

1) Tire Business
2) DiverTech Business4. Corporate Reform

1) Strengthening Our Management Foundation
2) Reforming Corporate Culture

Business plans and projected results described in this document were created based on projections of the
future economic climate as of this point in time. Actual performance may vary due to a variety of factors.
This document is not a guarantee of the Company’s future performance.

2. Mid-Term '17
Mid-Term '17

Results

381.6

CAGR 6.7%

395.0
49.3

60.0

47.0

Net Sales

480.0

Tire:
45.4 bil. yen
DiverTech: 3.8 bil. yen

Tire:
45.1 bil. yen
DiverTech: 1.8 bil. yen

FY2016FY2017

Operating
Income Margin

12.9%

11.9%

[Exchange rate]

12.5%

Tire

14.9%

14.1%

1US$＝110 Yen

14.0%

DiverTech

4.9%

2.4%

1€＝115 Yen

5.0%

Operating
IncomeTire:
56.0 bil. yen
DiverTech: 4.0 bil. yen

FY2020 Dedicate efforts to strengthen business functions and management foundation to enable sustained
growth Maintain and expand operating income margin, and aim for solid growth in key target areas
82. Mid-Term '17
On-going investment in order to achieve business growth focusing on mobility

Capitalinvestment

FY2013-FY2016 (4-year)
Results

FY2017-FY2020 (4-year)Plan

132.8 bil. yen

Approx. 128.0 bil. yen

Review ofOperations

Tire
DiverTech and other

113.0 bil. yen

19.8 bil. yen

Tire
DiverTech and other112.0 bil. yen

16.0 bil. yen
9Mid-Term '17: New Medium-Term Business Plan
1. Review of Mid-Term '14

1) Net Sales and Operating Income Trends
2) Review of Operations

2. Mid-Term '17

1) Management Objectives2) Capital Investments

3. Growth Strategies

1) Tire Business
2) DiverTech Business4. Corporate Reform

1) Strengthening Our Management Foundation
2) Reforming Corporate Culture

Business plans and projected results described in this document were created based on projections of the
future economic climate as of this point in time. Actual performance may vary due to a variety of factors.
This document is not a guarantee of the Company’s future performance.

3. Growth Strategies
Our challenges; Targets & Policies
Our awareness of business environment

Our challenges for Mid-Term '17

 North America: demand is robust for largesize vehicles, but competition is intensifying
 Europe: improving technologicalcompetitiveness is essential
 China: the growth rate of tire market is high,but competition is severe Asia: growth is robust, but low-priced
products are the mainstay
 Emerging markets: a slowdown in rate of
growth Bolster product portfolio
 Enhance sales force and promote brandstrategy
 Develop distinctive technology
 Strengthen product and costcompetitiveness Develop new global production
methodologies
 Restructuring our plants in Japan

Mid-Term '17 Targets(FY2020)
Net Sales

400.0 bil. yen

Operating
Income56.0 bil. yen

Operating
Income Margin

14.0%

Mid-Term '17 Business Policies
Bolster business foundation for maximizing profit
 Fortify structure to bolster product strength and increase
sales in the North American market
 Optimize product mix responding to market trends
 Advance development and technological capabilities to help
create products that surprise the world
 Improve brand strength and establish efficient supply
system11

3. Growth Strategies
Technological Strategy(1) Advance our original tire design technology
Nano BalanceTechnology

Computer Simulation
Technology

Measuring and
Evaluation Technology

Boost to a new level the coexistenceof low rolling resistance andconflicting performance goals

Improve prediction accuracy
for technological innovation

Visualization of contact area
Solve technological challenges toimprove performanceNano-level analysis
observation of real time tire rubber road surface fitness
by synchrotron radiation imaging technology

Nano-level simulation

Tire & vehicle simulation

Observing and evaluating
the contact behavior underbraking

Aerodynamic simulation

quantitative tan delta evaluation

12

3. Growth Strategies
Technological Strategy(2) Innovating our Underlying Technology to Create New Products
Aggressive Design Technology

Breakthrough realizing
competing goals of
distinctive design(tread, sidewall)and performance(wear life, noise, wet) Design technology
 Rubber material technology

Wet Performance
Enhancing Technology

Long-life Technology

Breakthrough realizing
competing goals ofworld-leading wet performance(such as µ, braking, handling),
and low rolling resistance

Breakthrough realizing
competing goals of
improved wear life
fuel efficiency, endurance Structure/shape design
technology
 Pattern design technology
 Rubber, fiber material technology

 Structure/shape design
technology
 Pattern design technology
 Rubber material technology<New material and processing technology>
Reduction of energy loss through developmentof filler ultra-dispersion technology

slip ratio

Conventional
product(with
agglomerations)

Developed
product

Example of noise optimization

Example of optimization ofcontact behavior under braking(Ultra dispersion
capability)133. Growth Strategies
Product Strategy(1) Strengthen Product Development Expertise
Pickup Truck Tires

Passenger Car Tires

Bolster product competitivenessthat further leverages our strengths

Bring about technological expertisewith a global presence

Establish position with superior
technology







Pickup truck/SUV/CUV tires
Continually launch distinctive
products

Key expansion area: North America

Launch high-performance
products (including OE
products) capable ofrecognition in Europe

Key expansion area: All markets

Truck and Bus Tires



Launch premium products for N.
America
Launch fuel-efficient products
for Japan
Key expansion area:
North America, Japan14

3. Growth Strategies
Brand Strategy

Increase presence in the global market by expanding
communications that utilize sponsorship activities
Appeal to the high performance levels of our tires[Pickup trucks, SUVs][UHP]

Appeal to the aggressive nature of our brand through sports[Soccer][Major League Baseball]15

3. Growth Strategies
Sales Strategy(1) Optimize product mix in response to market trends
North America

Further leverage our product strengths and sales force as sources of income

Europe/Middle
East/Africa

Refine our technology and expand sales in the global market with products
developed in Europe

Japan/China/South
East Asia

Increase high-value-added products centered on expanding SUV/CUV categories

Oceania/Latin America

Markets in which to develop a foundation in the medium term by identifying market
characteristics［Tire sales ratio in each market］

3%

North America
Europe/Middle East/Africa
Japan/China/South East
Asia
Oceania/Latin America

43%

3%
36%

41%

37%

18%

19%

FY2016FY202016

3. Growth Strategies
Sales Strategy(2) Improving upon our strengths

Pickup truck/SUV/CUV
product category

Our strengths
Composition ratio of pickup
truck/SUV/CUV OEM tire sales
among global OEM tire sales

Composition ratio of pickup
truck/SUV/CUV tire sales
among global tire sales

FY2020

FY202040%

FY201650%
FY201636%

45%[FY2020 Number of Tires Sold]

Up 39% over FY2016 results

17

3. Growth Strategies
Market Strategy(1) U.S. market: Raise our profile in the large-diameter Pickup truck tire segment
U.S./CANADA 2016

Sales(Bil.$)1

Bridgestone

$7.7

2

Goodyear$6.7

3

Michelin$6.5

4

Continental

$2.9

5

Cooper

$2.1

6

Hankook$1.6

7

Toyo Tire$1.4

8

Yokohama$1.1

9Sumitomo$0.8

10

Pirelli$0.5

Boost share in U.S.
in 2020 to 6% or above ,and build
the foundation for 5th position(market share is based on the Company's estimates)

Establish firm brand positionin Pickup truck/SUV/CUV tire segment

source） MTD January 2017

FY2020FY2016100％

130％

Pickup truck/SUV/CUV tire sales volume in North America 18

3. Growth Strategies
Market Strategy(1) North American market: Local operations that capture market trends
Strengthen marketing and R&D functions

Collect precise market
information andanalyze

Quickly develop andpropose moreadvanced products

Supply high-quality,
high-function, highvalue-added tires in atimely fashion
19

3. Growth Strategies
Market Strategy(1) North American market: Flexibility of supply to meet market trends
Automated construction method that accommodates small lot productionof high-value-added tires

20

3. Growth Strategies
Market strategy(2) Strengthening our technological foundation and pursuing global
development out of Europe
グローバル供給体制の強化により、自動車メーカーへ密着
European markets demand the highest performance specs
Strengthen marketing expertise
Aggregate information gatheredon markets and technology withan eye on the future

Strengthen product line to
win globally

Strengthen technological expertise
Establish European R&D functions

EuropeJapan

Deploy European-developed
products globally

Strengthen
tie-ups
Build strong platform technology
21

3. Growth Strategies
Supply Strategy : Optimize operations and strengthen portfolio

 Clearly define the features of each plant Optimize our supply chain management New production bases to ensure sustainable growth beyond 2020

Japan

North America

Strengthen production ofhigh-value-added products

Flexible supply responding
to market trends

New production bases

Malaysia

China

Strengthen cost competitivenessof commodity products

Production focusedon local strengths

22

3. Growth Strategies
Our challenges; Objectives & Policies
Recognizing the business environment

Our challenges for Mid-Term '17

 Acceleration of overseas expansion by Japanese
automakers
 Graduated transition to next-generation productswith environmental and energy friendly features
 Expanding mobility and infrastructure markets
mainly in emerging markets
 Intensifying competition in global markets

 Enhance lineup of highly functional products
 Promote establishment of a global supply
structure Develop new customers (regions) Increase technical idea creation
 Strengthen cost competitiveness

Mid-Term '17 Targets(FY2020)
Net Sales
Operating
IncomeOperating
Income Margin

Mid-Term '17 Business Policies

80.0 bil. yen

4.0 bil. yen

5.0%

Establish position as a global supplier whileemphasizing highly functional products
 Advance highly functional products leveraging our superior
technology, while also decreasing manufacturing costs
 Establish a global supply structure through a customerfocused strategy
 Acquire new customers through a new organizational
structure23

3. Growth Strategies
Basic Strategy

Focus resources on fields offering future growth.
(1) Synergies with Tire Business (sales, rubber technology, etc.)(2) Propose comprehensive solutions to automakers (modularization)(3) Aim for global growth through customer-focused strategies

Accelerate global growth of automotive parts24

3. Growth Strategies
Technology Strategy
A framework of new collaboration that ensures business growth, focusing on
mobility
Maximize technological expertise by combining resources and know-how
Comfort performance technology(responding to noise, vibration, and harshness)

Tire
Technology
Development

Safety support
technology

Automotive Parts
Technology
Development(sensing technology)

Rubber material andprocessing technology(push evolution of NBT further)

New material technology

Platform
Technology
Research(responding to the need forlighter weight and vibration dampening)

NVH: Noise Vibration Harshness
NBT: Nano Balance Technology

25

3. Growth Strategies[Customer-focused strategy]

Automotive Parts Business

Maintain position as a global supplier by keeping close connections toautomakers

Europe

Japan

U.S.

Gradual expansion

Enhance functionsof flagship plant

Expand sales of highly
functional products

Thailand

China

Latin America

Respond to
growing demand

Expansion of
product lineup

Gradual expansion

Moving to in-house
Process
production of
improvements
parts/materials
Strengthen cost competitiveness20%
27% and space-saving features
Increase value through lighter weights
Globalprocurement

Production plant
optimization
26

Mid-Term '17: New Medium-Term Business Plan
1. Review of Mid-Term '14

1) Net Sales and Operating Income Trends
2) Review of Operations

2. Mid-Term '17

1) Management Objectives2) Capital Investments

3. Growth Strategies

1) Tire Business
2) DiverTech Business4. Corporate Reform

1) Strengthening Our Management Foundation
2) Reforming Corporate Culture

Business plans and projected results described in this document were created based on projections of the
future economic climate as of this point in time. Actual performance may vary due to a variety of factors.
This document is not a guarantee of the Company’s future performance.

4. Corporate Reform
Reorganize to functional divisions to strengthen management foundation
Each function to develop professional skills, and deliver as one teamCorporate

Address
the seismic
isolation andindustrial
anti-vibration
rubber issues
Planning
functionsManagement
functionsTechnology

Production

Sales

North American Business Development

Coordinating each function

Platform functions to support each function

Compliance

Qualityassurance

Safety &environment28

4. Corporate Reform
We will fulfill our social responsibilities as a manufacturer and corporate
functions will assume their roles as leaders towards sustainable growth

Fully maximize business organizational
functions and skillfully coordinate
harmonization and integration
Management
functions

Planning
functionsSupport business organizational activities as "platformfunctions" prerequisite to business management
Compliance

Education that spreads Ourawareness of legal complianceto everyone without exceptions.
Establishment of a crisismanagement system that
includes early detection of
improper behavior.

Qualityassurance
Quality assurance framework thatallows customers to use our
products with peace of mind.
Greater visibility throughimprovement of methods for selfaudits and regularly receiving thirdparty audits.

Safety &environmentStrengthen rules, frameworks,
and training giving safety toppriority
Reduce CO2 emissions 15%(compared to FY2005) by
FY202029

4. Corporate Reform
Reformation and enhancement of work platforms that serve as sources of growth

Reformation of executives and employees awarenessand improvement of team strength
Cultivate a good
•Promotion of management based on principles
organizational culture •Spread and align Our awareness of our new
and align vectors
principles in order to bring group cohesiveness
Unify awareness andfunctions as a single
team•Encourage organizational coordination foreach business function•Vitalize cross-divisional communication

Create the foundation
for an open-minded
human resources
organization•Fostering and strengthening professional
human capital (training, placement, evaluation)•Hiring practices for acquiring diverse humanresources

Establishing a
positive job
environment•Enhance executives and employees healthmanagement•Encourage support for the careers of female
employees•Support the active participation of seniors
30

4. Corporate ReformNew principles enacted (January 1, 2017)
Cultivate a good corporate culture and reform our consciousness to become
a company desired by society
Company
Philosophy
Our Mission

Our Vision

We will endeavor to continuously improve our products, and create value foreveryone who we work with.
To create excitement and surprise with our products that exceed customer
expectations and enriches society.
Our goal is to be a company that: Stays one step ahead of the future through constant technologicalinnovation;
 Drives entrepreneurial and creative spirit through a progressive culture; and Shares in the enjoyment felt by everyone involved in our activities.
Fairness

Our Fundamental
Values:“The TOYO WAY”

Pride

Initiative
Appreciation

Solidarity

Be fair and selfless in one’s actions to benefit society.
Take pride in one's self, work and company, and to persevere.

Show initiative in all matters, and take ownership of one’s actions.
Demonstrate sincere compassion and appreciation for people andsociety.
Continuously advance creativity and innovation by working together
to mobilize our corporate knowledge and capabilities3132