4. Transportation Machine Sector

4. Transportation Machine Sector
4.1. Automobiles
4.1.1 Supply and demand trend(1) Outline

The Lehman shock that struck a heavy blow globally in the fall of 2008 caused a grave crisis tothe automobile industry not only in Japan but also in the rest of the world. In the U.S., that had had astrong presence in the market, the three big players, GM, Ford and Chrysler, were faced with amanagement crisis one after another, and the North American market, which had expected tocontinue growing, shrunk. The Japanese automakers, which had brought foreign currencies to Japanby exporting their products to the market in North America, were hard hit naturally, suffering a sharp
decline in export.
In the supply-demand trend of the automobile industry in 2009, when the industry had a major
turning point, the domestic production experienced a big fall of about 38% from 2008, totaling to¥15,144.2 billion (Ministry of Economy, Trade and Industry, “Annual Report of Machinery Statistics
2009”). Considering that the output was over ¥24 trillion in 2007 and 2008 when the industry
enjoyed a global boom in automobiles, the situation in 2009 may well be expressed by the words a“sudden plunge.”
The number of automobiles produced and sold at home showed a downward trend: 7.93 million(down 31.5% year on year) and 4.609 million cars (down 9.3%), respectively.
(2) Production and demandFig. 4.1.1

Trend of domestic automobile production by the type of vehicle
No. of cars
Passenger cars

TrucksYear

Standard-sized

Small-sizedLight motor

Standard-sized

Small-sizedLight motor

2005

4,191,360

3,416,622

1,408,753

9,016,735

723,663436,763546,185

1,706,611

2006

4,915,428

3,302,265

1,537,210

9,754,903

699,410

419,404

521,879

1,640,693

2007

5,864,354

2,638,842

1,441,441

9,944,637

718,901

365,532

453,587

1,538,020

2008

5,786,333

2,714,413

1,427,397

9,928,143

734,923

329,758443,718

1,508,399

2009

3,459,589

2,145,279

1,257,293

6,862,161

371,685

215,139398,276

985,100

Year

Large-sized

Small-sized

2005

11,76364,55076,313

10,799,659

2006

11,06377,574

88,637

11,484,233

2007

11,516102,154

113,670

11,596,327

2008

11,660127,442

139,102

11,575,644

2009

9,243

78,01287,255

7,934,516

Buses

Note:

Source:Subtotal

Subtotal

Subtotal

Total

Of passenger cars, “standard-sized cars” mean the cars with a cylinder volume over 2,000ml, “small-sized cars,” thecars with a cylinder volume over 660ml but less than 2,000ml and “light motor cars,” the cars with a cylinder volume
less than 660ml.
Based on the Japan Automobile Manufacturers Association, “Automobile Industry in Japan 2010” (May 2010).

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4. Transportation Machine Sector

The domestic production of four-wheeled vehicles continued to increase in 2002 and after,
followed by a slight drop in 2008, and this upward trend stopped in 2009 with about 7.934 million(Fig. 4.1.1). The production of passenger cars, trucks and buses all decreased: that of passenger cars
was 6.862 million (down 30.9% year on year), that of trucks, 985,000 (down 34.7%) and that ofbuses, 87,000 (down 37.3%) Standard-sized trucks had an especially sharp decline of 49.4% year on
year with 372,000, accompanied by standard-sized passenger cars with 3.460 million (down 40.2%).
Smaller trucks and passenger cars showed a relatively slow fall: the output of light trucks was
398,000 (down 10.2%) and that of light passenger cars, 1.257 million (down 11.9%). This reflected
the tendency for drivers to prefer light vehicles in Japan. The situation of the number of passenger
cars produced until 2007 shows an upward trend of the output of standard-sized cars and a slightdeclining tendency and a small increase and then a little fall for small-sized and light vehicles. The
results in 2009 suggest that the size of automobile production in Japan in the future will depend on the
output of small and light cars.

Fig. 4.1.2

Trend of domestic automobile production by manufacturer

Year

ToyotaNissan2005

3,789,582

1,451,212

864,929

664,900

210,253

2006

4,194,188

1,234,400

966,547

758,4782007

4,226,137

1,179,080

995,5112008

4,012,388

1,293,082

2009

2,792,274

894,575

Year

UD Trucks

2005

41,071

96,985

1,090,786

132,274

1,667

10,799,659

2006

42,833

100,122

1,206,805

141,503

2,110

11,484,233

2007

45,993

106,893

1,218,297

141,280

2,470

11,596,327

2008

47,960106,216

1,218,235

126,184

2,479

11,575,644

2009

19,831

66,670908,30254,467545

7,934,057

No. of cars

Hino

Mazda

Honda

Fuji

724,509

1,261,994

469,497

230,807791,291

1,332,866

482,283

846,083

240,287786,601

1,331,845

475,850

1,078,690

853,943

253,913793,257

1,264,381

524,916

717,175

426,530

120,110684,255

840,924

408,399

Suzuki

Mitsubishi

Mitsubishi
Fuso

Isuzu

Daihatsu

OthersAll
automakers,
total

Note:

The figure for the “All automakers, total” for 2009 differs from that in Figure 4.1.1 but the data of the source was shown
here as it is.
Source: Based on the statistical data on the website of the Japan Automobile Manufacturers Association (http://www.jama.or.jp/).

Fig. 4.1.2 shows that the size of decrease differs from manufacturer to manufacturer. The
automaker that experienced the biggest drop was UD Trucks Corp.1 with a decline of 58.7% year on
year with 20,000, accompanied by Mitsubishi Fuso with a 56.8% fell with 54,000. It can thus bepointed out that the manufacturers focusing on the truck segment got damaged most. By contrast, thesize of decrease was the smallest at Daihatsu Motor Co. that has concentrated on light cars: down
13.7% (684,000). It can be considered that as stated above, the output of small-sized andlight-weight cars remained relatively stable at the time of recession.
Now let’s look at the trend of domestic sales of automobiles (Fig. 4.1.3). The number of
automobiles sold in Japan in 2009 was 4.609 million or a decline of 9.3% from the previous year;
1

This company changed its name from Nissan Diesel into UD Trucks in February 2010.

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4. Transportation Machine Sector

this was the drop for the sixth consecutive year after 2003 when the figure was 5.828 million. As in
the previous years, the sales of trucks fell most of all to 673,000 (down 19.8% year on year), and thisprobably reflected the reluctance of businesses to buy trucks. In addition, considering the fact that, of
the 11.56 million cars produced in 2008, those sold at home were 5.082 million, it can be seen that asmuch as nearly 60% of automobiles were made for overseas markets. In 2009, the total automobile
production was 7.934 million, of which 4.609 million or 58.1% were sold in Japan; these figures tell
us how difficult the export market in 2009 was for Japanese automakers.

Fig. 4.1.3

Trend of domestic automobile sales by the type of vehicle
No. of cars
Passenger cars

TrucksYear

Standard-sized

Small-sizedLight motor

Standard-sized

Small-sizedLight motor

2005

1,271,349

2,089,992

1,387,068

4,748,409

197,548351,708

536,648

1,085,904

2006

1,225,867

1,908,267

1,507,598

4,641,732

209,283

354,870

516,0211,080,174

2007

1,299,168

1,654,025

1,447,106

4,400,299

171,998

293,021472,713937,7322008

1,250,987

1,549,677

1,426,979

4,227,643

146,690249,655

442,914839,259

2009

1,160,175

1,480,137

1,283,429

3,923,741

87,692

180,509404,742

672,943

Year

Large-sized

Small-sized

2005

5,856

11,89817,754

5,852,067

2006

6,064

11,536

17,6005,739,506

2007

5,153

10,464

15,617

5,353,648

2008

5,357

9,976

15,333

5,082,235

4,234

8,338

12,572

4,609,256

Buses

2009

Source:Subtotal

Subtotal

Subtotal

Total

Same as that for Figure 4.1.1.

Fig. 4.1.4

Trend of domestic automobile sales by manufacturer
No. of cars

Year

Toyota2005

1,703,185

866,226

286,919244,251

84,197

601,154714,115

258,2172006

1,660,380

766,763

269,152

263,488

91,982

622,484

702,291

245,234

2007

1,551,876

721,025

254,061

226,91369,723626,847

621,935

225,818

2008

1,443,335

678,160

244,532

189,943

59,696642,464

624,547

206,743

2009

1,346,419

599,466

204,296

159,815

36,695596,215

625,510

173,488

Year

UD Trucks

2005

21,40754,528695,787

61,171

10,293

250,617

5,852,067

2006

19,75453,952

691,033

71,41431,097

250,482

5,739,506

2007

14,98847,310671,264

50,52034,803

236,565

5,353,648

2008

12,562

40,666

670,485

40,52225,945

202,735

5,082,335

2009

6,939

24,434

617,229

22,104

28,167

168,479

4,609,256

Source:Nissan

Hino

Mazda

Suzuki

Mitsubishi

Mitsubishi
Fuso

Isuzu

Lexus

Daihatsu

Others

Honda

Fuji

All
automakers,
total

Same as that for Fig. 4.1.2.

Figure 4.1.4 shows the automobile sales in Japan by manufacturer. In 2009, a year-on-yearincrease was recorded only by Honda (626,000; up 0.2%) and Lexus (28,000; up 8.6%), while all theother manufacturers suffered a negative growth. What is noteworthy is the figures of this Honda andToyota (1.347 million; down 6.7%): these automakers registered a slight increase or decrease in sales

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4. Transportation Machine Sector

as compared with Nissan and Mazda, which sell cars of a similar class to Honda and Toyota. The
good performance of the two companies was highly dependent on the large sales of their models,
including Toyota’s Prius that achieved the greatest number of cars sold in the passenger car market
in 2009, Honda’s FIT and Toyota’s Vitz. The sales of Prius in 2009 totaled to 209,000, up 285.7%
year on year, and those of FIT and Vitz slightly decreased with 157,000 or down 10.1% and 118,000
or down 4.6%, respectively; the remarkable growth of Prius and even the small fall of FIT and Vitz
greatly contributed to the performance of the two automakers in the dull market as a whole. In
addition, Insight, the model ranking fifth in sales in 2009, is the hybrid electric vehicle (HEV)
Honda first introduced into the Japanese market; its sales totaled to 93,000, recording a higher
growth than Toyota’s Carolla.2
The subsidy program for eco-friendly cars implemented from April 2009 to the end of
September 2010 probably helped expand replacement demand for HEVs, such as Prius and Insight.
The tax cut policy will be continued after September 2010, too, and this trend is likely to continue
for some time.
(3) Export and import

Fig. 4.1.5

Trend of automobile export by the type of vehicle
No. of cars

Passenger cars

TrucksYear

Standard-sized

Small-sizedLight motor

Standard-sized

Small-sizedLight motor

2005

3,164,603

1,198,273

292

Subtotal
4,363,168

521,856

89,938162

Subtotal
611,956

2006

3,843,387

1,451,302

808

5,295,497

488,644

89,189141577,9742007

4,305,067

1,505,281

1,611

5,811,959

527,060

89,078312

616,450

2008

4,187,227

1,727,317

885

5,915,429

567,596

90,581

41

658,218

2009

2,403,359

804,980300

3,208,639

267,060

48,4470315,507Year

Large-sized

Small-sized

2005

9,953

67,984

77,937

5,053,061

2006

11,565

81,636

93,201

5,966,672

2007

13,868

107,663

121,5316,549,940

2008

17,527

135,917

153,444

6,727,091

2009

11,10680,91692,022

3,616,168

Buses

Source:Subtotal

Total

Same as that for Fig. 4.1.1.

While the domestic production and sales of automobiles were on the decrease, automobile
export suffered a big fall of 46.2% with 3.616 million as shown in Fig. 4.1.5. This means that therising trend of export since 2002 ended. By the type of vehicle, the export of passenger cars dropped
by 45.8% year on year to 3.209 million cars, that of trucks, 316,000 or a 52.1% decline and that ofbuses, 92,000 or a decline of 40.0%. It is supposed that the decrease in automobile export wascaused mainly by the impact of the recession due to the Lehman shock and also by the strong yen
tendency after 2007. It can readily be imagined that increasing overseas production by Japanese2

The sales of automobiles in 2009 shown thus far are quoted from the web site of the Japan Automobile
Dealers Association (http://www.jada.re.jp/ index. html).

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4. Transportation Machine Sector

automakers in an attempt to minimize the influence of strong yen will continue to be a major factor
contributing to the growth rate of automobile export in the years ahead.

Fig. 4.1.6

Trend of Japan’s automobile export by the type of vehicle
and by destination

10,000 cars

800.0
672.7

700.0
596.7
600.0
505.3
500.0
400.0

44.8
21.0
19.2
22.2

300.0

185.4

44.2
27.0
23.2
24.7

655.0
43.4
33.1
28.0
29.0

245.5

AfricaAfrica361.6

Middle America
America
Middle

34.7
14.5

North
North America
America
EuropeEurope

158.9

137.9
68.5

81.2

95.3

44.1

52.5

42.8
37.9

2007

2008

2009

149.8

200.0
130.6

100.0
0.0

Oceania
OceaniaSouth
South America
America
231.8

248.8

117.8

OthersOthers

46.1
35.2
25.9
25.9

52.0
42.0

59.0
38.2

2005

2006

Middle East
East
Middle
Asia
Asia

Year

Source:Same as that for Fig. 4.1.2.

By destination, the export to North America was still the largest: 1.379 million or 38.1% of all
the export (Fig. 4.1.6). But it is expected that in the future, Asia, whose market is growing rapidly,
will become an increasingly important destination for automobile export from Japan relative to
North America. The export to Asia in 2009 accounted for 10.5% of all, an increase of 2.7 percentage
points from 7.8% in 2008, while that to Oceania also grew by 2.8 percentage points to 9.6% from
6.8% in the previous year. The share of all the other regions fell, and that of Europe was 18.9%,
down 4.7 percentage points from 23.6% in 2008.
The import of automobiles in 2009 declined by 39.2% year on year to ¥452.56 billion: that ofpassenger cars, which showed the largest figure, amounted to ¥427.65 billion (down 39.2%), that oftrucks, ¥14.62 billion (down 43.8%) and that of special-purpose vehicles, ¥9.43 billion (down
37.6%). Noteworthy is the import of buses, which increased by 619.0% year on year to ¥100 million,
although the amount was small (Ministry of Finance, “Trade Statistics of Japan”). By the number ofimported automobiles registered, Volkswagen, Germany, led all the other brands for the tenthconsecutive year, accounting for 20% of all, with 161,000 cars (down 17.0% year on year) (data of
the Japan Automobile Importers’ Association).

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4. Transportation Machine Sector

4.1.2

Results of operations and the trend of the automobile industry(1) Trend of management and overseas businessFig. 4.1.7

Share of automakers in domestic automobile sales by the type of vehicle

Fuji 富士重工業
Heavy Industries
3.0%
2.9%
(-0.1)
（0.1）
マツダ

三菱自動車
Mitsubishi
Motors
6.6%（▲0.8）
6.1%
日産自動車(-0.5)

OthersMazda
5.8%
5.2%（0.1）(-0.6)

Honda
17.5% (2.5)

7.5%
NissanMotor（▲0.3）

Toyota Motor
48.0% (1.0)

8.0% (0.5)

Passenger
cars

ホンダ

Honda
10.7%
9.6%（▲1.0）(-1.1)

Nissan Motor
15.4% (-1.2)

OthersDaihatsu Motor
34.8% (0.8)

LightvehiclesSuzuki
32.7% (1.1)

日産ディーゼUD
Trucks
ル工業
15.5%
(0.1)
15.4%
（▲0.3）

Mitsubishi
三菱ふそう
Fuso
Truck
トラック・バス
and
Bus
21.1%
18.5%
(-2.6)（▲0.3）

Note:
Source:Hino Motors
33.9% (0.7)

Standardsized trucks
Isuzu Motors
32.1% (1.8)

Figures in parentheses are year-on-year ratios (“ – ” indicates negative figures).
Based on the “Nikkei Sangyo Shimbun,” July 28, 2010 for passenger cars, ibid., July 29, 2010 for light vehicles andibid., August 4, 2010 for standard-sized trucks. The figures for standard-sized trucks are those of the share of thenumber of vehicles registered.

Figure 4.1.7 shows the share of Japanese automakers in domestic sales for passenger cars
(standard-sized and small-sized passenger cars), light vehicles (light motor cars and light trucks) andstandard-sized trucks.
In 2009, the domestic sales of passenger cars (here the standard-sized and small-sized cars)
decreased by 5.7% from the previous year to 2.640 million. As stated already, the automakers who
introduced HEV, whose replacement demand was increased by the subsidy program for eco-friendly
cars, and small-sized vehicles popular in cities, too, achieved a better performance than othermanufacturers. Honda Motor, which took third in the research conducted by the Nikkei Sangyo
Shimbun in 2008, attained a good result and went up to second place in 2009, taking the place of
Nissan Motor. Nissan introduced Serena, whose sales were the largest of minivans (sales in 2009:
79,000, ranking eighth in the sales of passenger cars in Japan in 2009), Note, a small-sized car(66,000, ranking tenth) and Cube, another small-sized car (60,000, ranking 12th)3, but the fact thatthe company did not sell any HEV was probably the reason for its failure in battles for market shares.
Fourth-ranking Mazda and Fuji Heavy Industries put new models, such as Axela and Legacy, on themarket, but did not succeed in increasing their sales.
3

The number of cars sold and ranking are the data of the Japan Automobile Dealers Association.

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4. Transportation Machine Sector

The sales of light vehicles in Japan in 2009 were 1.689 million or a 9.7% drop from theprevious year, and the battles between Daihatsu and Suzuki came to an end. Since 2007, Daihatsu
has taken first in the light vehicle market but the gap between Daihatsu and Suzuki has been very
narrow, and thus what type of models they introduce in a year will be an effective strategy for them.
Especially in 2009, the introduction of Mira Cocoa, a model for women, in August and TANTO Exe,a model with a tall figure popular among young men, in December is the probable reason for
Daihatsu’s victory. By contrast, Honda has reduced its share in light vehicles but it is supposed thatthe company had many customers who switched to Fit, its small-sized model, taking advantage ofthe subsidies for eco-friendly cars. Thus, the subsidy program affected the consumer’s car selectionin the segment of light vehicles and small-sized cars, too.
The number of standard-sized trucks registered in Japan decreased by 46.4% year on year to
39,000. Hino Motors has ranked first for 37 years running since 1973 when it took the place of
Mitsubishi Motors (at that time). The market of standard-sized trucks is strongly affected by the
reduction of investment by distribution industries, and in September 2010, the Post New Control on
Automobile Emissions for diesel engine vehicles will be applied to large-sized trucks on a full scale.
The price of trucks subjected to the control will be raised by about ¥1 million4 and a last-minute risein demand for new models is expected to occur. Thus the figures may change greatly in 2010.
As to the trend of management, Toyota, which has the top automobile production and sales inJapan, experienced a decrease in consolidated sales for 2009 as in the previous year: ¥18,950.9
billion or a drop of 7.7% year on year. The company’s consolidated sales of cars fell, too, by 4.4% to7.237 million, seriously affected by the global financial crisis (Fig. 4.1.8).

Fig. 4.1.8

Consolidated sales of automobiles of the top three automakers
Unit: 1,000 cars
Toyota Motor
2008

Nissan Motor
2009

2008

Honda Motor
2009

2008

2009

Japan

1,945

2,163

612

630

556

646

North America

2,212

2,098

1,133

1,067

1,496

1,297

Europe

1,062

858

530

517

350

249

1,136

1,301

793

950

3,411

3,515

Asia

905

979

Others

1,443

1,139

Total

7,567

7,237

Note:
Source:

322

250

3,517

3,392

Nissan Motor classifies the regions into four: Japan, North America, Europe and other overseas markets.
Based on the brief statement of accounts of each company.

Just as Toyota, Nissan registered a fall in consolidated sales as in 2008: ¥7,517.3 billion or adecrease of 10.9%. But the consolidated number of cars sold increased by 3.0% year on year to3.515 million, which is probably because greater sales in the Chinese market, on which Nissan has
concentrated its efforts, continued to make an important contribution to its sales. As in 2008, Nissan

4

The “Nikkei Sangyo Shimbun,” August 4, 2010.

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4. Transportation Machine Sector

achieved an all-time high in China, selling 756,000 cars, a growth of as much as 38.7% year on year.
Sylphy, Teana and Livina contributed to the company’s larger sales in China, and the sales of theInfiniti model reached 546,000 or a 43.9% rise over the previous year, too.
The consolidated sales of Honda Motor (four-wheeled vehicle business) in 2009 were ¥6,554.8
billion or down 14.6% and the number of cars sold, 3,392,000 or down 3.6%.
(2) Future prospects and problems

It can be pointed out that the automobile industry in Japan is in a major turning point as themarket and customers are changing greatly. What type of cars will sell well in the markets of newly
industrializing countries where future economic growth and population growth are likely, such as
China and India? In the situation where the pace of introduction of environmental regulations is
speeding up in all countries, what is the technology to be adopted, and where cars using suchtechnology should be manufactured? How will automakers map out strategies for dealing with these
problems?

These strategies have been observed in such activities as the licensing of technology

and technical cooperation between automobile manufacturers. As of September 2010, the policy ofmajor Japanese automakers for supplying cars differed greatly from that in the past.
Toyota, the top manufacturer in Japan, for example, started to review its light vehicle businessat Fuji Heavy Industries after it raised its equity ratio to Fuji to 16.5%. Following Toyota’s policychange, Fuji announced that it would discontinue the in-house production of light vehicles, while
Toyota began to enter the light vehicle market with its own products and to supply light vehicles andsmall-sized cars from Daihatsu, its group company, to Fuji on an OEM basis. Toyota plans todevelop sports cars in cooperation with Fuji, that has a reputation as the manufacturer of Legacy andother cars for sports use, and to introduce newly developed models into the U.S. market in 2012. As
outlined above, the Toyota Group has adopted the strategy of dividing the role according to productcategories and increasing the types of cars manufactured. This policy is not limited to Toyota; Nissan,
which is affiliated to Renault, for example, is joining hands with Daimler and is working to acquire
overseas automakers. Automobile manufacturers are likely to increase these activities not only inJapan but also abroad.
These strategies will provide automakers with more product alternatives of eco-friendly carsrequiring high technology, such as electric vehicles (EVs) and HEVs, or low-cost cars (LCCs)
having promising markets in newly industrializing nations. However, the industries supporting
automakers will have some period of time when they are uncertain which cars would be the main
products and would bring a high profit to them. In the years to come, it will be essential for Japanese
automobile companies to build up a manufacturing and procurement system taking account of bothof the alternatives in preparing for coping with possible great changes in the industry.

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4. Transportation Machine Sector

4.2. Automobile parts
4.2.1

Supply and demand trend(1) Outline

As in the case of the automobile industry discussed above, the manufacturers of automobile
parts were seriously affected in 2009 by the global business depression caused by the Lehman shock.
The management of the automobile parts industry had a great impact of the recession, and theindustry’s sales and profit suffered a sharp decrease from those in 2007 when all-time highs wererecorded, showing a downward trend as in 2008.
(2) Production and demandFig. 4.2.1

Trend of production results of automobile parts
Unit: ¥ million

EnginesEngine parts
Motor and steering gear parts
Suspension and braking system parts
Chassis and car body parts

2004

2005

2006

2,564,679

2,689,508

974,912992,398

2,180,206
550,624
1,324,251

Year-on-year
ratio (%)

2007

2008

2009

2,842,521

2,891,857

2,864,589

1,737,933-39.3

1,024,332

1,060,740

1,027,584

693,204-32.5

2,404,011

2,560,772

2,766,614

2,731,101

1,997,628-26.9

554,739

575,434

538,635

504,015

330,546-34.4

1,379,349

1,677,960

1,837,865

1,861,397

1,329,932-28.6

Other automobile parts

508,704

512,625

563,193

587,549

557,726

406,522-27.1

Related automobile parts

1,381,006

1,487,808

1,543,158

1,618,147

1,623,013

1,218,480-24.9

397,539

414,996

430,140

445,054433,050

286,815-33.8

Internal combustion engine electric partsTwo-wheeled vehicle parts
Total

Note:
Source:115,328

125,248

136,416

131,636

114,330

55,499-51.5

9,997,249

10,560,682

11,353,926

11,878,097

11,716,805

8,056,559-31.2

Figures for “Engines” are sum of those for automobiles and two-wheeled vehicles.
Based on the Ministry of Economy, Trade and Industry, “Annual Report of Machinery Statistics” and “Statistics of Iron
and Steel, Non-ferrous Metal and Metal Products.”

The output of automobile parts in Japan was ¥8,056.6 billion or a big fall of 31.2% from theprevious year (Fig. 4.2.1). In particular, the production of two-wheeled vehicle parts decreased
greatly as in 2009 due to the continued reduction of the production of two-wheeled vehicles with
¥55.5 billion or a drop of 51.5% year on year. The output of engines and other parts also suffered amarked decline of 20-30%. Because demand for automobile parts is created before the production
planning of automobiles, negative production figures clearly appeared for automobile parts prior tothose for automobiles as a whole.
Figure 4.2.2 shows the trend of shipment of automobile parts by the member firms of the Japan Auto
Parts Industries Association by the type of product.5 The size of the negative growth in production in2009 was shown in advance in the shipment of automobile parts manufacturers in 2008 and stood at¥17.9 trillion or a fall of 14.5% from the figure of the previous survey. This survey has been

5

The “41. Automobile parts and internal combustion electric parts” section in “Annual Report of Machinery
Statistics” by the Ministry of Economy, Trade and Industry, shows the quantity and amount of production
only. Thus, the data of the Japan Auto Parts Industries Association, “Results of Surveys on Shipment ofAutomobile Parts,” was used here instead. Note that because no figure for 2009 was published as of
October 2010, the above table shows the results of the survey in 2008.

77

4. Transportation Machine Sector

conducted on the members of the above-mentioned association only, but because these members are
representative automobile parts manufacturers in Japan and it is evident that the shipment trend of all
Japanese automobile parts producers was similar to that of these member manufacturers.

Fig. 4.2.2

Trend of shipment of automobile parts by the type of product
Unit: ¥ million

Parts

Year (no. of responding manufacturers)

2004
(405)

2005
(394)

2006
(392)

2007
(386)

2008
(361)

Engine parts

2,583,878

2,768,356

2,854,106

3,328,368

2,819,255

Electric and electronic parts

1,424,724

1,586,284

1,913,558

2,073,763

1,760,629

Electric and electronic parts for lighting
apparatus, measuring instruments, etc.

2,210,855

2,593,539

2,958,665

3,160,907

2,697,903

Driving, transmission and steering system parts

3,065,197

3,323,015

3,666,212

4,123,256

3,656,672

Suspension and braking system parts

1,028,027

1,021,812

1,079,183

1,218,940

1,075,181

Car body parts

3,766,155

4,253,604

4,529,608

4,815,138

4,014,216

Parts, total

14,078,836

15,546,610

17,001,332

18,720,372

16,023,856

Car radios and stereos

462,500

453,492

443,870

408,494295,728

Cooling and heating equipment

833,625

840,212836,175

902,059

560,762

Other equipment

118,575

109,821116,515

117,631

348,562

Equipment, total

1,414,700

1,403,525

1,396,560

1,428,184

1,205,052

520,403614,898

604,772

767,906

672,468

16,013,939

17,565,033

19,002,664

20,916,462

17,901,376

Equipment

OthersInformation-related parts

Total

Note:

Note that no simple year-to-year comparison is possible because the number of the manufacturers surveyed differ
from year to year. The survey in 2008 covered the 407 regular members of all of the 447 members of the Japan Auto
Parts Industries Association (as of October 1, 2008) excluding the 40 non-regular members, with 361 responding
companies and an effective response rate of 88.7%.
Based on the Japan Auto Parts Industries Association, “Results of Surveys on Shipment of Automobile Parts” for eachyear.

Source:Fig. 4.2.3

Trend of shipment of automobile parts by user
Unit: ¥ million
Year-on-year
ratio (%)

2005

2006

2007

2008

Japan

10,827,642

11,696,517

12,899,648

11,373,413-11.8%

Overseas

1,171,859

1,341,433

1,438,495

1,178,177-18.1%

Japan

375,276

361,617392,664

360,837-8.1%

Overseas

36,69024,576

21,673

20,381-6.0%

Parts for For car body manufacturers
fourFor parts sellers and cooperative sellers
wheeledJapan
vehiclesFor parts manufacturers
Overseas356,015280,299

260,222

207,796-20.1%

AssemblyForautomakers
RepairFor direct markets

44,206

36,79739,94285,283113.5%

2,438,689

2,840,879

3,197,716

2,570,055-19.6%

742,063807,747

877,052

640,980-26.9%

Japan

400,481381,256

372,276

347,057-6.8%

Overseas

677,845719,267

911,468

704,495-22.7%

Total
Assembly
Parts fortwowheeled Repair
vehicles
Total
Grand total

Source:17,070,766

18,490,388

20,411,156

17,488,474-14.3%

Japan

380,856

395,034

385,664

294,152-23.7%

Overseas

79,797

85,121

97,366

98,771

1.4%

Japan

15,764

12,738

8,704

7,169

-17.6%

Overseas

17,85019,383

13,572

12,810-5.6%

494,267

512,276505,306

412,902-18.3%

17,565,033

19,002,664

20,916,462

17,901,376-14.4%

Same as that for Fig. 4.2.2.

78

4. Transportation Machine Sector

For the shipment by user, too, the negative growth trend was prevalent in almost all of the user
categories, while the figure for parts for four-wheeled vehicles for parts sellers and cooperative
sellers grew by 113.5% to ¥85.3 billion and that for two-wheeled vehicles for assembly factories
abroad, by 1.4% to ¥98.8 billion although the amounts were small (Fig. 4.2.3).
(3) Export and import

As a result of the downturn in the automobile industry at home and abroad, the export ofautomobile parts from Japan suffered a sharp decrease of 27.4% from the previous year (¥4,200
billion) (Fig. 4.2.4). In 2008, a drop in automobile production in the U.S., the source of the subprime
loan problems and the Lehman shock, led to a considerable decline in the export of Japanese
automobile parts to North America, and in 2009, export to Europe suffered the steepest decline of
42.4% year on year to ¥728.1 billion. Considering that export to Asia, Middle East and SouthAmerica was on an increasing trend in 2008 but showed a fall, too, in 2009, it must be supposed thatthe moves unable to be forecast from the situation of export, such as those for local procurement of
automobile parts, are expanding. What should also be taken account of in the future is the possibility
that Japanese automobile parts manufacturers will quicken the pace of changing their manufacturingbases.

Fig. 4.2.4

Trend of Japan’s export of automobile parts by year and by region
Unit: ¥ million

Asia
Middle East
Europe

2005

2006

2007

2008

2009

Year-on-year ratio

1,608,008

1,734,702

1,977,270

2,028,679

1,780,136-12.3%

179,700

220,320

267,896287,720

235,654-18.1%

972,321

1,109,228

1,351,173

1,264,698

728,093-42.4%

North America

1,973,889

2,008,872

1,925,516

1,532,711

1,006,630-34.3%

Middle America

140,836

221,241

255,857

230,015

148,218-35.6%South America

147,507

188,737

242,641

264,479

190,077-28.1%

Africa129,678

162,193

188,825

171,642103,256-39.8%

Oceania

104,025

107,140

127,926

109,377

82,798-24.3%

5,255,964

5,752,433

6,337,104

5,889,321

4,274,862-27.4%

Total
Note:
Source:No data for 2007 was published, and thus the figures for that year were calculated using the year-on-year ratios in thedata of the source shown below.
Based on the export and import data on the website of the Japan Auto Parts Industries Association (searched in
October 2010).

On the other hand, the import of automobile parts, which had been in an increasing trend until
2008, turned into a decrease in 2009, with ¥1,000 billion or a drop of 41.8% from the previous year
(Fig. 4.2.5). As in the past, the amount of import from Asia was the largest and the scale of decrease
was smaller than that for North America and Europe by over 10 percentage points. Behind this isprobably the fact that import from Chinese and South Korean manufacturers was in a large amount,and it is considered that the main competitors for automobile parts businesses in Japan are Asiancompanies.

794. Transportation Machine Sector

Fig. 4.2.5

Trend of Japan’s import of automobile parts by year and by region
Unit: ¥ million
2005

Asia

2006

2007

2008

2009

Year-on-year ratio

680,081

931,950

1,127,216

1,177,941

738,851-37.3%

142

185

143

291

286

-1.7%

Middle East
Europe288,117

325,029

421,990414,394

209,159-49.5%

North America

141,728

168,878

167,171

159,147

73,593-53.8%

Middle America

19,36020,20922,212

16,726

8,630-48.4%South America

1,830

1,918

3,183

2,607

1,273

-51.2%

Africa

1,855

2,821

3,075

2,927

1,023

-65.0%

Oceania
Total

4,843

4,675

6,312

6,457

2,588

-59.9%

1,137,956

1,455,666

1,751,303

1,780,490

1,035,403-41.8%

Note and source: Same as those for Fig. 4.2.4.

4.2.2

Results of operations and the trend of the automobile parts industry(1) Trend of management and overseas business activities

Fig. 4.2.6

Trend of management of the automobile parts industry
Unit: ¥100 million
2005

2006

2007

2008

2009

AmountPercentage

AmountPercentAmountage

Percentage

AmountPercentAmountage

YearPercent- on-year
ratio
age

Sales

163,815100.0% 207,520

100.0% 228,462

100.0% 190,899

100.0% 169,023

100.0%-11.5%

Cost of goods sold138,103

84.3%

176,115

84.9% 193,251

84.6%

170,569

89.4%

146,72286.8%-14.0%

Selling and generaladministrative expenses

15,625

9.5%

18,547

8.9%

20,1198.8%

19,05910.0%

16,3939.7%-14.0%

Operating profit

10,087

6.2%

12,857

6.2%

15,091

6.6%

1,071

0.6%

5,907

3.5% 451.5%

Non-operating income

1,677

1.0%

1,847

0.9%

1,915

0.8%

1,713

0.9%

1,665

1.0%

-2.8%

Non-operating expense

958

0.6%

1,250

0.6%

1,876

0.8%

2,306

1.2%

1,381

0.8%

-40.1%

Ordinary profit

10,8196.6%

13,445

6.5%

15,131

6.6%

477

0.2%

6,191

Extraordinary profit

646

0.4%

721

0.3%

555

0.2%

350

0.2%

437

0.3%

24.9%

Extraordinary loss

945

0.6%

1,017

0.5%

838

0.4%

3,261

1.7%

1,828

1.1%

-43.9%Net profit before
adjustment for tax, etc.

10,5206.4%

13,1496.3%

14,847

6.5%-2,434

-1.3%

4,800

2.8%

-

Net profit

6,239

3.8%

7,727

3.7%

8,831

3.9%

-4,768

-2.5%

2,091

1.2%

-

Note:

Source:3.7% 1197.9%

The above figures for 2008 and 2009 are for the 83 specialized automobile parts manufacturers of the 407 member
firms of the Japan Auto Parts Industries Association on April 1, 2010, which were listed, whose ratio of sales ofautomobile parts to the total sales was 50% or more and whose figures were comparable with those for previous
years.
The Japan Auto Parts Industries Association, “Trend of Management of Auto Parts Industries,” yearly editions.

According to the Japan Auto Parts Industries Association, the business results of the 83 main
automobile parts manufacturers in 2009 continued to fall as in 2008 when the performance suffereda substantial decline from 2007 when both sales and profits were all-time high (Fig. 4.2.6). But theoperating profit increased as compared with 2008 when the production was reduced greatly thanks to
the review of “cost reduction measures”6 and reforms by each manufacturer.

6

Quoted from the Outline section of the Japan Auto Parts Industries Association, “Trends of Management of
the Automobile Parts Industry in 2009.”

80

4. Transportation Machine Sector

By region, sales in Japan amounted to ¥11,800 billion or down 9.6% year on year, those in
North, Central and South America, ¥2,800 billion (down 17.0%) and those in Europe, ¥1,400 billion(down 18.4%), experiencing a two-digit fall, while sales in Asia was ¥3,100 billion or a one-digit
drop of 5.7% (Fig. 4.2.7). Of the 83 member companies, 82 experienced lower sales in 2009, but
because of the above-mentioned efforts to review manufacturing activities, the number of themembers having a decrease in operating profit, ordinary profit or net profit was much smaller: 21, 21
or 17.

Fig. 4.2.7

Sales and profits of Automobile Parts Manufacturers by region
Unit: ¥100 million, %Year-on-year
ratio

Operatingprofit118,375

-9.6

2,411

-

2.0

28,090

-17.1

70

-

0.2

Europe14,754

-18.4

202

153.1

1.4

Asia

31,746

-5.7

3356

0

10.6

Not classifiable, etc.

2,974

-26.2

166

-44.5

5.6

(-26,916)-(-298)--

169,203

-11.5

5907

451.6

3.5

Region

Sales

Japan
North, Central and South America
Overseas(Elimination)

*2

Total

*1

Year-on-year
ratio

Profit ratio

Notes: 1. The figures for sales overseas are those of the sales of consolidated subsidiaries in each region. For example, thedirect sales to overseas customers from Japan (sales not through subsidiaries) are counted as sales in Japan.
2. The figures for elimination show the sales between different regions.
Source: Same as that for Fig. 4.2.6.

(2) Technological innovation and the business environment

Fig. 4.2.8

Viewpoints that automobile parts manufacturers are required to have
◆Technology for weight reduction= technology for price reduction
Examples:y New materials, manufacturing
costs
y Reduction in car body prices
y Reduction in the price of internal
engines and allied partsy Modularization of partsy Good ideas for manufacturingmethods
Internal(Method for forming complex
engine-driven
shapes, method for making plain
automobiles
mass manufacturing parts)

Low-priced
automobiles

Next-generation
automobiles◆Technology for lower fuel costs
y Low-priced next-generation
automobiles

Source:Prepared by the authors.

814. Transportation Machine Sector

The model that had the largest presence in the number of cars sold in Japan in 2009 was Prius,
Toyota’s hybrid electric vehicle (HEV).7 Insight, another HEV Honda introduced in Japan in 2009,
ranked higher, too. As shown in the case of these models, eco-friendly cars accounted for nearly 20%of the total sales in 2009, partly supported by the subsidy program for these cars, making the year the“first year of eco-friendly vehicles.” Although the subsidy program ended at the end of September
2010, the tax reduction system for eco-friendly cars will be continued, and thus demand for these
HEVs is expected to remain large. Leaf, the electric car (EV) Nissan will start to sell at the end of
December, 2010, has got into the news, too, and much attention will be paid to the market of
eco-friendly cars in Japan.
On the other hand, the enlarging market of low-priced cars in India and China cannot be
neglected either, and it will also be essential for automobile parts manufacturers to supply
inexpensive products for these cars. Japanese automobile parts industries in Japan will thus berequired to have the technology not only for making high-quality and highly accurate parts necessaryfor eco-friendly vehicles but also for producing inexpensive parts, as well as the technology forinnovating automobile parts themselves. But the strategy needed now will not be blindly pursuing
the technology but identifying the viewpoint necessary for all types of automobile parts. Denso
Corp., for example, is working on the project named “DP-EM (DENSO Project for Emerging
Markets),”8 by carrying out the program for reinforcing local procurement by locally deciding on
the optimum specifications for vehicles made abroad and by simplifying the functions andspecifications of parts for low-priced cars. What is behind the project will be an attitude of thecompany trying to respond flexibly to the requests for functions and specifications from eachautomaker without lowering the quality needed for cars.
As seen in the case of Denso mentioned above, automobile parts manufacturers will need,instead of developing the technology necessary for each car individually, to polish the skills requiredin the overlapped stages whose examples are shown in Fig. 4.2.8, such as the modularization of parts
and the innovation of manufacturing methods.
(3) Future prospects and problems

In 2010, the automobile parts industry will have recovery to some extent because theautomobile industry is expected to improve. As described above, as Japanese automakers haveshifted their manufacturing bases to overseas one after another, automobile parts manufacturers will
be faced with the question, “Where can we earn profits?”, in 2010. The members of the Japan Auto
Parts Industries Association expect that in 2010, they will be able to secure better sales and profits
than 2009, but this positive forecast is based on their recognition of too difficult business situationsin 2009. The domestic sales of cars are likely to decrease in 2010 due to the end of the subsidy
program for eco-friendly cars in the second half of the year, and the environment of the automobile
parts industry will perhaps remain unfavorable.
7

For more detail, see 4.1 Automobiles.

8

See Denso Corp. “Materials for the Briefing Meeting of the Settlement of Accounts for the Year Ended in
March 2010.”

82

4. Transportation Machine Sector

In such a circumstance, the problems facing Japanese automobile parts manufacturers are thoseof strengthening their overseas presence, such as business activities abroad and global strategies. As
seen in the labor problems at the Japanese subsidies in China, including the labor disputes where
Chinese workers demanded wage hikes, business management abroad has a number of difficult
management issues. Shrinking domestic market is now posing a serious problem, and automobile
parts manufacturers should turn their eyes to overseas markets, too, and plan strategies forsegmenting their activities into those in Japan and in foreign markets.

4.3. Aircraft
4.3.1

Supply and demand trend(1) Outline

The production of aircraft in 2009 (calendar year; final report) was ¥1,103.7 billion or adecrease of 7.0% from the previous year, affected by the stagnant production of the aircraft industry.
On December 15, 2009, Boeing 787, the next-generation main medium-sized aircraft, made thefirst flight over two years behind schedule. This made it almost certain that the delivery of the first
787 to All Nippon Airways (ANA), the launch customer for the aircraft, will be made in the fourth
quarter of 2010. The output of this aircraft after this will be about ten a month, and thus demand forthe product will increase among the aircraft industry in Japan, too, which is expected to help aircraft
production. The number of orders for the aircraft totaled to 863 as of June 2009 (including 229
option orders), an increase of about 13 orders (option orders down 150), a reversal of the situation in
the previous year.
On the other hand, Mitsubishi Aircraft Corp. signed a memorandum on an order for 100 MRJ,
which Mitsubishi launched the program for developing, with Trans States Holdings, securing a totalof 125 MRJs, but has had no new orders until the Farnborough International Airshow in Britain in
July 2010. Not only Brazil’s E-Jets and Canada’s CRJ, which have gone ahead in regional jet planes,
but also Russia’s SSJ got new orders for 30 planes for the International Airshow in Farnborough.
MRJ will join competition for orders in the months ahead in anticipation of entry of China’s ARJ.

83

4. Transportation Machine Sector

Fig. 4.3.1

Trend of aircraft production amount (fiscal year)

14,00012,262

12,00010,04910,00011,423
11,124

10,401
10,21910,065
9,842

10,496

10,864

9,688

9,517
8,864
8,672
8,110

8,000

8,692
8,629
8,265
7,907

9,052

7,562
6,365

6,000

5,740

5,133 5,171

3,977

4,969

5,888

6,238
6,221

5,391
4,916

6,203
5,948

6,490
6,114

5,251

3,809
3,473

4,191

19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09

0

5,831

3,679
3,610
3,306
3,222
3,057
2,808
2,062
2,322 2,406 2,538
2,538
1,770
2,013
1,718
1,506
1,977
2,251 2,446 2,453
2,686
1,834 1,525
2,029
1,1951,556
1,881
1,728 1,630 1,456 1,380
1,624
1,346
1,583
1,081
1,484
1,202 1,264
959
854
1,555 1,754
1,490
1,656 1,548
1,574
1,460
1,348
1,210
1,272
1,331
1,694
1,236
1,152
884 1,015
1,210
1,192
767
4,307

3,643

2,000

6,097

4,916
4,543

4,065

6,854

6,694

6,239

4,651

4,000

7,306

7,055
6,602

Airframes
Airframes

Source:EnginesEngines

Related appliances
appliances
RelatedAircraft, total
Aircraft,total

Based on the data of the Society of Japanese Aerospace Companies (SJAC).

(2) Production trend

The results of production (sales) of the aircraft industry in 20099 (Fig. 4.3.1) were poorer thanthose for the previous year by 11.4% with ¥1,086.4 billion. By the type of product, the output of
airframes decreased by 11.2% year on year to ¥649.0 billion, that of engines went down by 10.7% to¥322.3 billion and that of related appliances fell by 14.4% to ¥115.2 billion.
(3) Trend of export and import

According to the Customs Clearance Statistics, the export of aircraft engines, airframes, parts,
etc. in 2009 (calendar year) declined by 14.4% year on year to a total of ¥374.8 billion and theimport decreased by 22.6% to ¥818.7 billion (Figs. 4.3.2, 4.3.3).

9These figures are those of the production of the aircraft and related industries computed independently by
the SJAC on the basis of the Ministry of Economy, Trade and Industry, “Annual Report of Machinery
Statistics” and is the total of the amount of production and that of repair charges.

84

4. Transportation Machine Sector

Fig. 4.3.2

Export of aircraft in 2009 (calendar year)
Unit: ¥ million

ExportAircraft engines (pistons)

548

Parts for aircraft engines (pistons)

1,018

Aircraft engines (turbines, etc.)

747

Parts for aircraft engines (turbines, etc.)

136,089

Balloons and airships and gliders, hang gliders and other aircraft with no engine
Helicopters, total

503
464

Unladen weight: 2,000kg or less252

Unladen weight: over 2,000kg

212

Aircraft and other airplanes, total

147

Unladen weight: 2,000kg or less5

Unladen weight: over 2,000kg to 15,000kg

142

Unladen weight: over 15,000kg
Components, total

235,115

Aircraft propellers and rotors and their components

108

Other components for aircraft or helicopters

226,515

Landing devices and other components

3,478

Others5,014

Parachutes and rotochutes and their components

94

Aircraft catapults, arresting gears and other similar devices and their components
Ground training devices for aircraft and their components

62

Aerial battle simulators and their components

4

Other components

12

Total
Source:374,803
Based on the data of the SJAC.

85

4. Transportation Machine Sector

Fig. 4.3.3 Import of aircraft in 2009 (calendar year)
Unit: ¥ million

ImportAircraft engines (pistons)

520

Parts for aircraft engines (pistons)

844

Aircraft engines (turbines, etc.)

157,013

Parts for aircraft engines (turbines, etc.)

205,696

Balloons and airships and gliders, hang gliders and other aircraft with no engine
Helicopters, total

105
18,493

Unladen weight: 2,000kg or less

5,057

Unladen weight: over 2,000kg

13,463

Aircraft and other airplanes, total

290,000

Unladen weight: 2,000kg or less

917

Unladen weight: over 2,000kg to 15,000kg

10,043

Unladen weight: over 15,000kg

279,040

Components, total

139,086

Aircraft propellers

933

Helicopter rotors (including blades)

1,930

Other propellers and rotors and their components

3,246

Other components for aircraft or helicopters

111,557

Landing devices and other components

16,603

Others4,817

Parachutes and rotochutes and their components

1,138

Aircraft catapults, arresting gears and other similar devices and their components
Ground training devices for aircraft and their components

712

Aerial battle simulators and their components

853

Other components

4268

Total

818,728

Source:Based on the data of the SJAC.

(4) Future prospects

According to the survey on the 25 member firms conducted by the SJAC (Figs. 4.3.4, 4.3.5),
the estimated production in 2010 will increase by 4.1% year on year to ¥1,042.0 billion, a growth inproduction for the first time in three years. By the type of product, the output of airframes is
expected to grow to ¥564.2 billion and that of engines, to ¥325.6 billion, as reaction to the falls in
output until the previous year due to the Lehman shock. The production of aircraft equipment isestimated at ¥152.2 billion.
The estimated export in 2010 is ¥509.5 billion, as the trend of a slight increase in the previous
year continued, although the figure is below the level in 2007. This is composed of ¥257.2 billion forairframes, ¥216.8 billion for engines and ¥35.5 billion for aircraft equipment.

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4. Transportation Machine Sector

Fig. 4.3.4 Prospects for the production of aircraft in 2010
Production (¥ million)
Results in FY2008
Airframes

Engines

Prospects for FY2010

236,963

174,629200,084

Parts

351,381

365,373

364,101

Subtotal

588,344

540,002564,185

Bodies62,84969,56776,920Parts

290,617

248,002248,691

Subtotal
Equipment
Total
Source:Results in FY2009

Bodies353,466

317,569

325,611

128,941

143,714152,175

1,070,751

1,001,285

1,041,971

The SJAC, “Prospects for Production, Export and Orders of Aircraft (July 2010).”

Fig. 4.3.5 Prospects for the export of aircraft in 2010
Export (¥ million)
Results in FY2008
BodiesAirframes

EnginesResults in FY2009
1

Prospects for FY2010
1

0

Parts

230,579

255,455

257,229

Subtotal

230,580

255,456

257,229

Bodies23,25926,802

26,945

Parts

216,429

187,140

189,837

Subtotal

216,782

239,688

213,942

Equipment

21,63732,48235,488

Total

491,905

501,880

509,499

Source:The SJAC, “Prospects for Production, Export and Orders of Aircraft (July 2010).”

4.3.2

Results of operations and the trend of the aircraft industry(1) Results of operations

In the civil aviation-related segment, Mitsubishi Heavy Industries (MHI) experienced adecrease in orders not only for main wings for B787, rear fuselages for B777, etc. but also for engine
parts for civil transport planes owing to the inactive demand for aircraft resulting from the global
recession. In the self-defense field, the company suffered smaller orders for guided flying objects.
By contrast, in the area of space business, which belongs to the same sector as aircraft, MHI enjoyedan increase in orders for launching and transportation service for the H-II A rocket. As a result,
MHI’s sales dropped by 2.4% year on year to ¥500.3 billion.
Kawasaki Heavy Industries (KHI) had smaller orders for aircraft for the Ministry of Defense,
products for Boeing’s B777 passenger planes, etc. Because its sales to the Ministry of Defense fell,
KHI experienced a decrease in sales of 5.8% year on year to ¥188.8 billion.
IHI had a decline in orders for aircraft engines from private airline companies and the Ministryof Defense and also in orders for aircraft engine parts from the Ministry of Defense, and wasaffected by strong yen for aircraft engines for the private sector. Thus IHI’s sales decreased by 5.6%
year on year to ¥281.0 billion.

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4. Transportation Machine Sector

Fuji Heavy Industries (FHI) achieved larger sales in the self-defense segment due to anincreased delivery of pilotless plane-related products, such as unmanned reconnaissance planes andpilotless plane research systems. In the area of civilian aviation, FHI’s sales for B777, which had
been adversely influenced by the strikes at Boeing, recovered, and the production of B787, thenext-generation main medium-sized plane for mass manufacture, was started; these factors
contributed to FHI’s good performance. As a result, FHI achieved a 15.3% growth in sales totaling to¥93.2 billion.
In the self-defense segment, ShinMaywa Industries received orders for the No. 3
search-and-rescue amphibian plane for mass manufacture for the Maritime Self-Defense Force andalso for the next-generation fixed wing patrol plane XP-1 for mass manufacture. The company hadlarger orders for regular repair service for search-and-rescue amphibian planes but its airframe
manufacturing work decreased. In the civilian aviation field, ShinMaywa suffered smaller orders forwing-body fairing for Boeing B777 and a fall in the delivery of components for Gulfstream’s G550
and main wing spars for Boeing B787. Affected by strong yen as well as the situations referred toabove, the company’s sales fell by 7.0% year on year to ¥22.9 billion.

Fig. 4.3.6

Financial situation of the five main aircraft industries (consolidated)
Unit: ¥100 million, %Sales

Mitsubishi
Heavy
Industriesof which the aerospace segment
Operating profit

Mar. ’10

Year-onyear ratio

25,90727,92130,68532,03033,756

29,408-12.9%

4,079

4,459

4,950

5,005

5,123

5,003

-2.3%

147

709

1,089

1,360

1,058

656

-38.0%-68.1%

503

830

1,095

753

240

2.5%

3.5%

4.2%

3.1%

2.2%

-

12,415

13,224

14,38615,01013,385

11,734-12.3%

1,882

2,185

2,691

2,373

2,004

1,888

-5.8%

247

417

691

769

287

-13

-104.5%-63.3%

Ordinary profit

210

308

490

639

387

142

Operation profit to sales ratio

2.0%

3.2%

4.8%

5.1%

2.1%

-0.1%

-

10,89011,271

12,34913,505

13,88012,427-10.5%

2,383

2,695

2,979

3,134

2,978

2,811

-5.6%

106

218

246

-168

257

472

83.7%
144.4%of which the aerospace segment
Operating profit
Ordinary profit
Operation profit to sales ratio
Salesof which the aerospace segment
Operating profit

42

159

215

-308

135

330

1.0%

1.9%

2.0%

-1.2%

1.9%

3.8%

-

14,464

14,764

14,94815,723

14,457

14,287

-1.2%

595

818

940

996

809

932

15.2%

420

583

479

456

-58

274

372.4%
317.9%

Ordinary profit

435

468

422

454

-46

224

Operation profit to sales ratio

2.9%

3.9%

3.2%

2.9%

-0.4%

1.9%

-

Sales

1,279

1,297

1,444

1,389

1,277

1,104

-13.5%

208

207

246

285

246

246

0.0%

60

49

53

50

10

31

210.0%of which the aerospace segment
Operating profit
Ordinary profit
Operation profit to sales ratio

Source:Mar. ’09

125

Sales

ShinMaywa
Industries

Mar. ’08

0.6%

of which the aerospace segment

Fuji Heavy
Industries

Mar. ’07

Operation profit to sales ratio

Operating profit

IHI

Mar. ’06

Ordinary profit
Sales

Kawasaki
Heavy
Industries

Mar. ’05

61

52

54

47

10

31

210.0%

4.7%

3.8%

3.7%

3.6%

0.8%

2.8%

-

Based on the quick reports on the settlement of accounts and financial statements of these companies.

Due to the slow economic recovery after the Lehman shock, airline companies put off orders
for new aircraft models and renewal orders, making the growth of new orders for aircraft products88

4. Transportation Machine Sector

stagnant. As a result, the orders received by the manufacturers of aircraft equipment failed toincrease, and most of them continued to suffer lower sales than in the previous year (Fig. 4.3.7).
More specifically, the mass manufacture of B787, the next-generation medium-sized aircraft having
many orders, was finally started, but decrease in government demand, including the demand of the
Self-Defense Force, has continued as in the past (Fig. 4.3.7). If demand for aircraft equipment is togrow, it is essential that demand for aviation rise and orders for aircraft pick up. In particular, theproduction of Airbus S.A.S. and Boeing, the major aircraft manufacturers, is the factor that
determines the quantity of orders for aircraft equipment, and aircraft equipment companies in Japanare likely to be greatly affected by the manufacturing activities of the two aircraft producers.

Fig. 4.3.7

Financial situation of aircraft equipment manufacturers
Sales of segments including aircraft(¥100 million)
FY2009(¥100 million)

Toray Industries
TeijinFY2010(¥100 million)

Year-on-year ratio

Consolidated sales
Percentage of(¥100 million)
consolidated sales

711

514

-27.7%

13,596

3.8%

2,732

2,526

-7.5%

7,658

33.0%

Mitsubishi Rayon

379

237

-37.5%

3,651

6.5%

Yokohama Rubber

1,367

1,103

-19.3%

4,663

23.7%

Nabtesco Corp.

520

418

-19.6%

1,263

33.1%

Sumitomo Precision Products

206

191

-7.3%

428

44.6%

Nikkiso

350

372

6.3%

780

47.7%

Koito Industries

350

262

-25.1%

515

50.9%

Japan Aviation Electronics Industry

144

105

-27.1%

1,230

8.5%

Kayaba Industry

60

59

-1.7%

2,520

2.3%

Koito Mfg.

387

267

-31.0%

4,084

6.5%

Showa Aircraft Industry

78

64-17.9%

213

30.0%

Jamco Corp.

418

402

-3.8%

402

100.0%

Shimadzu Corp.

632

479

-24.2%

2,382

20.1%

Source:Based on the quick reports on the settlement of accounts of these companies.

(2) Future prospects and problems

The global economy after the Lehman shock has not yet freed itself from uncertainties about
recovery as shown in the financial crisis in Greece. But growth in demand for aviation has beenremarkable in newly industrializing countries. In particular, low cost carriers (LCCs) have appeared
recently and are becoming important orderers for aircraft equivalent to major carriers. The absolutenecessity of LCCs is to provide service at lower fares by minimizing the operation cost of theaircraft and maximizing the operation efficiency. Because of this, LCCs have standardized theiraircraft models in an effort to make the procurement of parts easier and save costs. Because LCCs
adopt the policy of high-frequency operation, few LCCs will purchase large-sized aircraft.
Best-selling aircraft models for LCCs are generally those with about 150 seats, such as Boeing B737
and Airbus’s B320 series. Thus far, aircraft production for major airline companies known asnational flags has been the main activities of aircraft manufacturers. But recently, LCCs and thebusinesses intending to lease to LCCs have placed orders of relatively large lots, and Japaneseaircraft companies should pay attention to this tendency, too.

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4. Transportation Machine Sector

However, the situation where aircraft industry in Japan is highly dependent on Boeing is
unchanged. The mass production of B787, the next-generation medium-sized aircraft, is good news
for Japanese aircraft manufacturers who have long suffered smaller orders. In addition, if the
manufacture of MRJ, which is scheduled to be placed in service in 2014, has good effects on
Japanese aircraft industries, that will run in their favor. If aircraft manufacturers in Japan are toenlarge the range of their business, they will need to add new markets for aircraft to their existing
markets. Japanese manufacturers have some records of orders for the aircraft parts for Airbus,
EMBRAER and Bombardier, but these orders have not been very large. Considering their trackrecord as for Boeing, it is supposed that Japanese manufacturers have the capacity to supply theirproducts to the three aircraft companies mentioned above but the political and strategic factors are
great and hard for them to deal with. It is a tough problem for them to secure these markets, butsolving this problem will certainly be a big leap for the aircraft industry in Japan.

90