Automotive Systems
Business Strategy
Hitachi IR Day 2012

June 14, 2012

Kunihiko Ohnuma
President & CEO
Hitachi Automotive Systems, Ltd.

© Hitachi, Ltd. 2012. All rights reserved.

Automotive Systems Business Strategy
Contents
1. Business Overview
2. Market trends
3. Business Targets
4. Growth strategy
5. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

1-1 Business Overview
Harness cutting-edge technologies in the environment, safety and information fields
Strengthen the global business foundation further[Information field]
Car information
systems (CIS)(20%)

Overseas(44%)
FY2010Consolidated
revenues¥737.9 billion[Environment field]
Powertrain &electronic control
systems(30%)

Other (10%)

Japan
(56%)

FY2011
Consolidated
revenues¥811.5 billion[Safety field]
Drive control systems(20%)[Environment field]
Engine components
systems(20%)© Hitachi, Ltd. 2012. All rights reserved.
3

1-2 Main Products
Environment field<Electromechanical><Fuel economy improvement>• Hybrid systems• Motors• Battery Modules • Battery Cells• Inverters• Lithium-ion batteries(Hitachi Vehicle Energy)<Driving support>• Variable valve
systems• Engine management
systems<Comfort and convenience>• Engine components• EV rechargers(TOKICOTECHNOLOGY)• Stereo camera• Suspension
systems• Power steeringsystems• Electrically-driven
intelligent brake

Safety field• ICT* solution services forelectric vehicles (EV)・Smartphone
controller (Clarion)
Cloud-based
telematics• Car Navigation Systems (Clarion)

Information field*ICT: Information and Communication Technology
Delivered to MITSUBISHI HEAVY INDUSTRIES BRIDGE & STEEL STRUCTURES ENGINEERING
used for vibration-proofing the TOKYO SKY TREE gain tower

Damper• Vibration-proof damper forconstruction*

Other© Hitachi, Ltd. 2012. All rights reserved.

4

Automotive Systems Business Strategy
Contents
1. Business Overview
2. Market Trends
3. Business Targets
4. Growth Strategy
5. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

2-1 Automobile Technology Requirements Perspective
Needs and regulations

Environment

CO2 reductions, stringent
emission regulations
Measures for greater fuelefficiency and new energy

SafetyRegulations for safety
technologies such as lane
departure warning
Zero accident and fatalities,
pedestrian protection

Technology requirements

Increase efficiency of internal
combustion engines, advance
electronic control environmental
technology in idling stop andelectric drives

Systems
linked byelectronics
technologies

Evolve from collision safety tosensing preventive safety
technologies

Comfort andconvenience

Use of smartphone-linked apps

Cloud information service
platforms

Support of data center analysis
information such as probe
traffic information

Data center always-on
connection and interactive
communications

Pursuit ofhigher level
mobility andvalue© Hitachi, Ltd. 2012. All rights reserved.

6

2-2 Global Auto Production Trends (1)Compete with electronic control and electric drive technologies for both electric
drive vehicles and internal combustion vehicles

Global Automobile Production by Motive Power Type(Million units/year)

Key points

109.3096.63

100

HEV・EV*

15％ HEV・EV

5％

77.73

80
2％

Internal combustion engines
only

60
40

Strengthen the advanced
development of nextgeneration environmentfriendly vehicle
technologies

85％
Internal
combustion
engines only

95％
98％

Pursue fuel-efficienttechnologies for internal
combustion engines

20
02011 12

13

14

15

16

17

18

19 2020

Promote the greater use ofelectronics(Source: Data compiled in-house from data provided by IHS Automotive and Nomura Research Institute, Ltd.)*HEV : Hybrid Electric Vehicle

EV : Electric Vehicle© Hitachi, Ltd. 2012. All rights reserved.

7

2-2 Global Auto Production Trends (2)Promote global business development suited to local needs

Automobile Production by Region

Key points(Million units/year)

109.30Strengthen
MONOZUKURI in
emerging markets

96.63

100
77.73

80
60

62％

58％
54％

Emerging nations

40
20

42％

46％

38％
Industrialized nations

Rest of Asia
Centraland South
America
EasternEurope andothersJapan
WesternEuropeNorth
America02011 12

13

14

15

16

17

18

19 2020

Create high-valueadded products

Strengthen locally based
management(Source: Data compiled in-house from data provided by IHS Automotive)© Hitachi, Ltd. 2012. All rights reserved.

8

Automotive Systems Business Strategy
Contents
1. Business Overview
2. Market Trends
3. Business Targets
4. Growth Strategy
5. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

3-1 Business Policy
Develop into a system supplier that leads the world in electronic control andelectric drive technologies

Environment field
Energy control with ecofriendly and high-efficiency
CO2-reducing engine management systems, motors,
inverters, lithium-ion batteries, etc.

Information field
Improve relief, convenience andcomfort by using information andcommunications technologies
Cloud-based telematics,
connected solutions, etc.

Ultra fuel-efficientand safe vehicles
that connect
people and society

Safety field
Optimal vehicle kinematic performancein terms of driving, steering and braking
Brake system cooperative with energy
regeneration, stereo cameras, etc.

© Hitachi, Ltd. 2012. All rights reserved.

10

3-2 Business Targets
FY2015 targets: revenues: over ¥1 trillion, operating income ratio: over 5.0%
Overseas revenue ratio for global customer bases*

Over 60%
50%

51%

811.5

800.0

Over ¥1 trillion

48%
Operating income ratio (%)

Revenues (Billion yen)

737.9

Over 5.0%
4.6%

4.6%
3.2%

FY2010(Actual)Powertrain & electronic
control systems

FY2011(Actual)

FY2012(Forecast)Engine components
systems

Drive control
systems

FY2015(Target)
Car information
systems (CIS)

Other*Customer bases that install automotive components in finished vehicles.
This is different from overseas revenues in the consolidated accounts. Excluding exchange rate differences © Hitachi, Ltd. 2012. All rights reserved.

11

3-3 FY2011 Results and FY2012 Forecasts(Billion yen)

FY2010
Actual

FY2011
Actual

FY2012
YoY

Forecast

YoY

Revenues

737.9

811.5

110%

800.0

99%

Operating income

23.7

37.0

+13.2

37.0

±0

Revenues

Operatingincome・Revenues increased in FY2011, reflecting higher global automobile demand,
including growth in emerging markets and a recovery in the U.S. market
・Forecasting flat revenues for FY2012, with emerging countries expected to continue
performing strongly

・Operating income increased in FY2011 mainly due to higher revenues and cost
reductions, etc.
・Forecasting earnings on a par with the previous fiscal year in FY2012© Hitachi, Ltd. 2012. All rights reserved.

12

3-4 Global Position Analysis
Enhance growth potential by increasing electronics share* to world-leading level
Companies applying electronics in its
Environmental, Safety and Information
business

Positioning of Top 10 Global Parts
Suppliers by Revenues in FY2010
Revenues
Company A¥3 trillion

Environment
field

Safety field

Information
field

Company A◎○○

Company B◎○△

Company C◎

Company D○○

Company E○△

Company F○△

Company G○○

Hitachi◎◎Company B

Company C
Company D
Company E
Company F
Company G(FY2015)¥1 trillion

Hitachi (18th by revenues in FY2010)
50％

○

◎

Electronics share:Global Top 10 Domain by Revenues in FY2010 (Source: Arthur D. Little)*Share of revenues accounted for by electronic control and electric drive products
such as electronic control units, hybrid systems, etc.

© Hitachi, Ltd. 2012. All rights reserved.

13

Automotive Systems Business Strategy
Contents
1. Business Overview
2. Market Trends
3. Business Targets
4. Growth Strategy
5. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

4-1 Global Growth Strategy

Develop into a system supplier that
leads the world in electronic control
and electric drive technologies

Deepen global business
operations
Implement global
strategic investments
based on the concept of
local production for local
consumption
Expand business with
global customers
through GAM/GAT**GAM：Global Account Manager

Develop strong businesses
Tighten focus onelectronic control andelectric drive products
Create global-winning
new products andtechnologies

GAT：Global Account Team

Strengthen global managementfoundation
Strengthen global
MONOZUKURI capabilities
Strengthen global quality
Reduce global costs© Hitachi, Ltd. 2012. All rights reserved.

15

4-2 Increase Global Investment

Reversedomestic/global ratio

Domestic Overseas
60%
40%

Domestic
40%
Overseas60%¥200 billion
Increase global
investment by 2.2times¥90 billion
Increase investment inelectronic control andelectric drive
technologies by 3.7 times

Increased overseas
development
personnel by 2.4 times

50%
30%
Total sum of
FY2008-FY2010(Actual)electronics andelectromechanical

Total sum of
FY2011-FY2013(Plan)

Overseas development
personnel

FY2011(Actual)

FY2015(Plan)

Americas130200Europe20

40

China and Asia

50

240

Overseas development
personnel total

200

480
© Hitachi, Ltd. 2012. All rights reserved.

16

Measures by Region
4-3 Enhancement(FY2011 Measures (1))
China

Strengthened development and sales capabilities responding to local needs in China

New[Zengcheng, Guangdong]

Established Hitachi Automotive Systems (Guangzhou) (February 2012)
Launched mass production of Eco-friendly products (April 2013)
Strengthened system development capabilities by establishing technical center; now have 2 centers with one already in Suzhou

New

New

[Shanghai]

Established Hitachi Highly Automotive Systems (Shanghai) (April 2012)
Launched mass production of starters(Standard models: July 2012; idling stop: 2014)

Asia
Enhancement

Established two sales bases
Strengthened sales capabilities in addition to
Shanghai and Guangzhou

Strengthened Asia business foundation and advanced into India[Chachoengsao, Thailand]

Enhancement

Established local subsidiary in India(April 2012)[Nakhon Ratchasima, Thailand]
Increased production of drive systemproducts (Since April 2012)

Increased production of engine systemand drive system electronic products(From 2013)
New[Beijing and Wuhan/Hubei]

Consideration

Looking at carrying out local production inIndonesia© Hitachi, Ltd. 2012. All rights reserved.

17

Measures by Region
4-4 Enhancement(FY2011 Measures (2))
AmericasStrengthening electronic control and electric drive technologies in North America andexpanding business in Central and South America

Enhancement[Harrodsburg, Kentucky, U.S.]

Increased electronic parts production line
Building lithium-ion battery module line
Begin trial production (November 2012)

New

New

[Berea, Kentucky, U.S.]

Building hybrid vehicle motor plant
Begin trial production (November 2012)[Lerma, Estado de Mexico, Mexico] Consideration

Start production at second plant
Begin mass producing ignition coils (September 2012)

EuropeNew

Consideration[Mexico]Began establishing third
plant (February 2012)[Brazil]
Considering
local
production

Expand business by launching new plant in the Czech Republic[Czech Republic]

Hitachi Automotive Systems Czech
Plan to begin mass producing suspensions(From March 2013)

New[Espelkamp, Germany]

Acquired HUECO Automotive GmbH (January 2012)
Expanding aftermarket business in Europe by utilizing
HUECO’s sales channels[Russia][ロシア]
現地化の検討実施
Considering localizing production

Consideration© Hitachi, Ltd. 2012. All rights reserved.

18

4-5 Revenue Index by Overseas Region

Europe

China
300

160
100 113100 133

FY2010 FY2011 FY2015(Actual) (Actual) (Target)

FY2010 FY2011 FY2015(Actual) (Actual) (Target)

9 bases

17 basesAsia
200
100 104
FY2010 FY2011 FY2015(Actual) (Actual) (Target)

Americas120
100 114
FY2010 FY2011 FY2015(Actual) (Actual) (Target)

14 bases

11 bases

Revenue index (FY2010: 100)

Increase overseas revenue ratio for global customer bases* from 50% (FY2011) to over 60% (FY2015)*Customer bases that install automotive components in finished vehicles.
This is different from overseas revenues in the consolidated accounts. Excluding exchange rate differences © Hitachi, Ltd. 2012. All rights reserved.

19

4-6 Strengthen Global Sales Capabilities
Expand business with global customers
Over ¥1 trillion

Develop strategy and provide
support through GAM/GAT*For expanding global business with automanufacturers, bolster strategic proposals and¥737.9 billion

support by integrating contact points*GAM：Global Account Manager
GAT：Global Account Team

Other 29%46%

Mazda 2%
Isuzu 2%

Enhance advanced technology
development and system
proposals

Suzuki 2%

37%

VW/Audi 3%
Honda 4%
GM Group 7%

Establish technical sales division

Ford 8%Make full use of Hokkaido Tokachi test courses

Toyota Group 9%

Strengthen advanced technologies and new
RENAULTNISSAN 34%

product proposal capabilities such as
electronic control, electric drive and system

FY2010(Actual)

FY2015(Target)development© Hitachi, Ltd. 2012. All rights reserved.

20

4-7 Strengthen Product Development [Environment]
High-efficiency
engine systems
高効率エンジンシステム

HEV system
HEVシステム

Develop next-generation technologies andexpand into global markets

Build Hitachi-standard electric drive systems

E-VTCs*Motors・Fuel-efficient energy
・High performance even at ultralow temperatures

・Create high-efficiency control systems
・Promote development of rare earth-free
motors

3.5% improvement infuel efficiency

Contribute to greater HEV
fuel efficiency

Silicon air-flow sensors

Inverters

・Lower costs by reducing the number ofcomponents
・Improve robustness against dust andcontamination

・Develop compact, high-output
double side cooling power module

Maintain top global share

Improve heat dissipation performance by
35%, and reduce space by 50%

Starters applicable to idling stop systems

Lithium-ion batteries・Compact, lightweight and high-output technologies
・Cooperative control technology with engine

・Launch North American battery module line
・Promote sales expansion in the Chinese market

Add greater value to commoditized
products

Achieve cumulative production of
more than 3 million cells*VTC：Valve Timing Control System© Hitachi, Ltd. 2012. All rights reserved.

21

Product Development
4-8 Strengthen[Safety and Information]
Drive control systems

Car information systems

Further enhance products withelectronic control technologies

Enhance car information systems businessfoundation through cooperation with Clarion

Electrically-driven intelligent brakes

Connected solutions (EV-ICT solutions)・Commercialize regenerative braking system
without negative pressure for HEVs and EVs
・Develop a series of electrically-driven intelligent
brakes・Make general use of global data centers

Presently managing EV charging andvehicle status information for morethan 20,000 vehicles in real time

Build a product lineup catering toeverything from small passenger cars
to trucks

Cloud-based telematics services

Stereo cameras[Smart Access]・Promote development of high-performance, lowcost next-generation cameras
・Develop and expand sales of compact, lightweighttechnologies for compact and small cars

・Jointly develop service platform with Clarion

Popularize globally
Cloud network service

Improve detection distance, precisionand performance

Telematics service platform

Smartphone
controller

Navigation systemapplicable to
Smart Access© Hitachi, Ltd. 2012. All rights reserved.

22

4-9 Next-Generation Electric Drive Vehicle Systems
Ultra fuel-efficient and safe vehicles that connect people and society
Promote development of next-generation electric drive vehicle systems
Safety control
ADAS*
controller

Cloud network services

Global data center

Next-generation
camerasTCU*

Telematics service
platform

Next-generation
navigation
Enginemanagement
systemPowertrain control

Connected
solutions

Motor
Inverters
Energy integration
controller

In-vehicle controller for
smartphones

Electric power steering
Electronic control braking system

Heat management
systemNext-generation suspension

Battery system

Chassis control

Energy control

Clean energy and recharging stations

Aim to be No. 1 in high efficiency and energy conservation through collaboration with control systems
Proposing various optimal control systems, not just components
FY2015 target: Increase maximum mileage by more than 30% compared to current EVs(Based on identical battery capacity)*ADAS : Advanced Driver Assistance System*TCU : Telematics Communication Unit

© Hitachi, Ltd. 2012. All rights reserved.

23

4-10 Strengthen Global Technology Development (1)Strengthen Group-wide
technology development andglobal design capabilities

Upgrade production
technologies(1) Strengthen electronic control andelectric drive development system(2) Improve global design and development
capabilities

Global engineering personnel 3,600
Double the number of
Personnel forelectronic control andelectric drive development500
FY2011(Actual)

4,000

1,000
FY2015(Target)¥80.0 billion

Expenditure for R&D(3) Innovate control development process¥52.8 billion
Increase expenditure for
global R&D by 1.5 times
Double the R&D expenditures
for electronic control
and electric drive products

Bolster technical centers in the U.S., Europe andChina [New base in China: September 2012]
Collaborate with overseas universities[Started joint development with German, U.S. andother universities such as Technische Universität
München]¥24.0
billion
FY2011(Actual)¥48.0
billionHalve the number of hours by developing digital
simulators

FY2015(Target)© Hitachi, Ltd. 2012. All rights reserved.

24

4-11 Strengthen Global Technology Development (2)Strengthen Group-wide
technology development andglobal design capabilities

Upgrade production
technologies(1) Develop new concept small-lot productionlines for emerging markets(2) Strengthen forging and molding
technologies

Reduce the number of equipment units bybottleneck management
Procure global facilities locally
Using general-purpose robots to handle various
types of products

Strengthen center for forging and molding
prototypes, integrate group companies
Shorten prototype lead times by upgrading highprecision mold technologies and facilities© Hitachi, Ltd. 2012. All rights reserved.

25

Global Management foundation
4-12 Strengthen- Improve Quality and Cost Structure
Reinforce management function of global quality assurance
コストの更なる圧縮に向けた取り組みを推進中
Bring global quality oversight management system fully into operation

Global quality

Measures tocombat yen
appreciation

Production
costs

Direct material
costs

Indirect
costs

Implement special quality assurance activities focused for overseas products,
locally procured parts and other products

Expand international parts, materials procurement and local procurement
Extend local production for local consumption

Globalize and optimize the total value chain−Optimize business through global production reform activities
Increase global engineers, conduct production in optimal locations
and BCP
Lower costs through global procurement system
Implement VEC* activities for improving profits in strategic and underperforming
businesses
Improve procurement capabilities in products purchased centrally

Rebuild the globalization of mission-critical systems
Centralize and standardize administrative operations, continue activities to reduce
indirect expenses*VEC : Value Engineering for Customers© Hitachi, Ltd. 2012. All rights reserved.

26

Automotive Systems Business Strategy
Contents
1. Business Overview
2. Market Trends
3. Business Targets
4. Growth Strategy
5. Conclusion© Hitachi, Ltd. 2012. All rights reserved.

5 Conclusion

FY2015 Targets
Revenues: Over ¥1 trillion
Overseas Revenue Ratio for Global
Customer Bases*: Over 60%
Operating income ratio: Over 5.0%

Develop into a system supplier that leads theworld in electronic control andelectric drive technologies*Customer bases that install automotive components in finished vehicles.
This is different from overseas revenues in the consolidated accounts.

© Hitachi, Ltd. 2012. All rights reserved.

28

Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such“forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does notdirectly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions whichindicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks
and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain“forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forwardlooking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are notlimited to:neconomic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe,
as well as levels of demand in the major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;
nexchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly
against the U.S. dollar and the euro;
nuncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;nuncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds;
nthe potential for significant losses on Hitachi’s investments in equity method affiliates;
nincreased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Digital Media &Consumer Products segments;
nuncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptancefor such products;
nrapid technological innovation;nthe possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales;
nfluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals,
or shortages of materials, parts and components;
nfluctuations in product demand and industry capacity;
nuncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or
shortages of materials, parts and components;
nuncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;nuncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitivenessand other cost reduction measures;
ngeneral socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States andEurope, including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract
terms and conditions and labor relations;nuncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain
key products;
nuncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;
nuncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or
may become parties;
nthe possibility of incurring expenses resulting from any defects in products or services of Hitachi;nthe possibility of disruption of Hitachi’s operations by earthquakes, tsunamis or other natural disasters;
nuncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;
nuncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit-related costs; andnuncertainty as to Hitachi’s ability to attract and retain skilled personnel.
The factors listed above are not all-inclusive and are in addition to other factors contained in other materials published by Hitachi.

© Hitachi, Ltd. 2012. All rights reserved.

29