KYB Group Report
April 1, 2020 - March 31, 2021

2021

Contact

World Trade Center Bldg., South Tower 28F,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-5128, Japan
Tel. +81-3-3435-3511
Fax. +81-3-3436-6759

KYB’s Heritage

Our Precision,Your Advantage

What KYB Aims to Be

Value

By providing technologies and products thatmake people’s lives safe and comfortable,
the KYB Group contributes to society.

Technology for
comfortable living

With society placing increasing importance on corporate social responsibility, KYB seeks to be a corporate group

Visionthat meets the expectations of its stakeholders. Guided by our Corporate Spirit, each and every one of us at KYB isaware of our responsibilities as a company, and will act with awareness of that in complying with laws andMonozukuri thatbrings happinessregulations, and enhance our corporate value to remain a trusted enterprise.

Corporate Spirit (What KYB Aims to Be)

By providing technologies and products thatmake people’s lives safe and comfortable,
the KYB Group contributes to society

Relationship between
the KYB Group and Stakeholders

2. We shall build a corporate culture full of vitality, and hold high goals.

Contribute to thecommunity

3. We shall value kindness and sincerity, cherish nature and care for theenvironment.

Coexistence with suppliers
and local communities

4. We shall constantly pursue creativity to contribute to the prosperityof customers, shareholders, suppliers and society.

Management Vision

Human Resource Development

Customers

To develop human resources who have a thorough understanding ofour policies and strategies and can accomplish our goals with passion.

KYB’s aim is to support the development of society through the joyof monozukuri, and make people happier as a result.
The mission of the KYB brandMonozukuri that goes the extra mile

Coexist withthe global
environment

KYB
Group

Environmental management,
energy-saving
plantsKYB will remain an enterprise that delivers value to customers andmarkets by making use of the reliable technical expertise we havebuilt up over the years. Through our efforts, we provide monozukurithat goes the extra mile to offer our customers new value andgreater satisfaction than they have ever known.

The KYB Group’s Social
Responsibilities

Value the KYB brand creates

Technology for comfortable living

The KYB Group always seeks to be creative in its businessTechnology and Product Development
To offer products that gain the admiration, provide comfort and satisfy
all of our customers throughout the world.

Monozukuri (Japanese manufacturingexpertise) that brings happiness

GlobalEnvironment

Provide usefultechnologies
and products
Quality, customer
satisfaction, and new
product and technology
development

What the KYB brand offers the world

Monozukuri that
goes the extra mile

Society

1. We shall follow all rules and face all issues with honesty.

MissionShareholders

Monozukuri (Japanese Manufacturing Expertise)

Provide soundreturns on
business activities

To operate plants filled with the creative inspiration of committedmonozukuri, and joy of creating products that satisfy our customers.

Economic contribution
and internal
controls

Management

Employees

Achieve a
healthy workplaceenvironment
Human rights, worker
safety and health,human asset
development

activities and to contribute to the progress of customers,

Value we can feel: Comfortable living, the joy of monozukuri
Value we can use: Reliable quality
The value KYB promises to end users: A higher level of comfortableliving through our creative technology and dedication to productdevelopment.
The value KYB promises to its customers: Reliable quality that comesfrom thinking of end users as our customers, too.
The value KYB promises to its employees: The joy of monozukurithat comes from knowing they are changing the world.

shareholders, business partners and local communities.
Each department sets out the corporate social responsibility(CSR) activities that it will implement during the fiscal year
based on the Corporate Spirit and Management Vision. The
outcome of each activity is reviewed in an ongoing cycle ofimprovement and renewal.

To be always self-aware of our corporate social responsibilities and to
pursue efficient management.

Employees follow the Corporate Guiding Principles in theirwork and deepen their awareness of the importance of CSR.

For details, see the “Corporate Guiding Principles”
section of the Company website.

Contents

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

KYB’s Heritage
Editorial Policy
The KYB Group has issued this integrated report since FY2019 to communicate
its management policies, business strategies and CSR activities to shareholders,investors and all other stakeholders. We hope to create new opportunities for
dialogue by covering business performance, management strategies andother financial information, as well as the environment, society, governance(ESG) and other non-financial information in order to inform readers about
our efforts to increase corporate value over the medium to long term. For abetter reading experience, we will continue to improve the report based on
stakeholder feedback. We welcome your suggestions.
Reporting Period
FY2020 (April 1, 2020 to March 31, 2021)(Includes some activities and information from outside the above reporting
period)01

KYB Group Report 2021

Scope
The report covers KYB Corporation and subsidiaries and affiliates in Japan andaround the world. Environmental data is for KYB Corporation (Sagami Plant,
Kumagaya Plant, Gifu North Plant, Gifu South Plant and Gifu East Plant)
unless otherwise annotated.
Date of Issue
November 2021

Corporate Spirit, What KYB Aims to Be
KYB’s History
Message from the President
Roadmap to Our Vision
KYB’s Manufacturing
FY2020-2022 Medium-Term Management Plan

Business Strategy
01
03
05
07
09
13

Basic Policy for ESG
Corporate GovernanceRisk Information
Social Initiatives
Environmental Initiatives

43
45

Strategy by Business
Automotive Components Operations

47

Hydraulic Components Operations
Other Businesses
Contributing to Social Issues through Our Business

ESG Initiatives
Forward-Looking Statements
This report includes plans and forecasts as of the issue date, and estimates
based on our business plans and management policies. Forward-looking
statements are based on information available at the time of report preparation,
and actual results may differ depending on changes in relevant conditions.

Product Lineup

KYB Group Business Overview

19
21
29
31
38

49
51
52

Company Data
Financial Highlights
Global Network
Shareholder Information
Corporate Information

53
55
57
58
KYB Group Report 2021

02

KYB’s Heritage

KYB’s History

Original technologies and dependable
quality that have met the needs of the times
The origins of KYB date back to 1919, when inventor Shiro Kayaba
founded the Kayaba Research Center at the young age of 21. Shiro
Kayaba’s invention, which utilized the most advanced hydraulic technology
at the time, had a structure and design that no one else had thought of
before, and his more than 100 patents supported the Company’s survivaland growth. He also contributed to the advancement of hydraulictechnology in Japan in ways such as making original products available
and providing guidance to engineers of other companies.

One of KYB’s strengths, in addition to the technologies it has built up
through the years, is its global production and sales network.
KYB set its sights on overseas markets early on, when it presented along-term management vision in 1966 to become a global player as acomprehensive manufacturer of hydraulic equipment, and established
the Overseas Business Division in 1973. The KYB brand spread widely
outside Japan, centering on shock absorbers. In 1981, our export ratio
reached 10.1% with export value exceeding ¥10 billion.
Meanwhile, Japanese automakers began focusing on developmentof luxury cars with high added value in response to the rapid rise in thevalue of the yen following the Plaza Accord.*
KYB, in partnership with Nissan Motor Co., Ltd., began developmentof an electronically controlled suspension, and became the first in theworld to successfully commercialize it. In 1990, we received theTechnology Development Award from the Japan Hydraulic &Pneumatic Society.
* Plaza Accord: An exchange rate stabilization agreement signed in September 1985 at theG5 (Japan, the United States, the United Kingdom, Germany and France) meeting offinance ministers and central banks.

1990-

Improvement of Management Structure and Productivity Gains

1919

Establishment

Active Overseas Expansion“Everything in use is still developing, a legacy from the past. The world continuously seeks that which isnew. The unique ability of humankind to progress lies in its constant search for perfection. ”
Founder Shiro Kayaba

Amid the collapse of Japan’s economic bubble and dramaticallychanging times, KYB, with its future at stake, set the goal ofestablishing a slim and resilient management structure, andfocused on transforming its business structure and strengthening
its financial position. Harnessing the power of the KYB Group, wedeveloped new products and created new businesses, while
enhancing productivity throughout our operations by promoting
total productive maintenance (TPM; an approach that engages all
employees in production maintenance and production management)
and total quality control (TQC).

2000-

Weathering the Recession by Reducing Costs
1945-

Entering New Fields with Creative Technologies
In the second half of 1946, just after World War II, KYB began
research and development of a new product—shock absorbers—incooperation with car manufacturers, and its share of that market
gradually expanded with the popularization of automobiles. In the
postwar construction boom, KYB in-licensed production technology
for concrete mixer trucks from overseas. After further developing thetechnology, in 1959 it started production of a revolutionary “tilting

mixer,” in which the drum body rotated and agitated the concrete
through gravitational force. This product put KYB on the map.
In 1951, we began development of oil dampeners for railways carsin collaboration with Japanese National Railways (now the Japan
Railways Group). We have since established a strong customer basewith a variety of partners including automobile manufacturers,
motorcycle makers and construction machinery companies.

performance, and in the 1990s we developed and successfullycommercialized a high-efficiency control valve. We have continued
to enhance human resource development to improve the level ofunderstanding of technologies, safety and quality. As part of thateffort, we gathered engineers from overseas for training to deepen
their understanding of monozukuri (Japanese manufacturingexpertise) and share their expertise in 2006.

2010-

Aiming for Further Growth Based on the Hydraulic Technologies We Have Cultivated Since Our Founding

1980-

Shifting to High-Value-Added Products
Hydraulic excavators, which were created in the 1950s, took amajor step forward after technology was introduced in Japan in
the 1960s. Today, Japan is at the world’s forefront in terms oftechnology development for hydraulic excavators. In fact, thehistory of technological advances in hydraulic excavators mirrors the
progress of KYB’s hydraulic products. The product that is considered
the culmination of that technology is the KCH high-pressure
cylinder that KYB began producing in 1984. With a new structurethat conquered the simple challenge of creating a cylinder thatTechnological DNA

would not leak, rust or break, this became a core product. The basic
data and calculation methods behind the meticulous design necessary
to ensure the proper strength, right down to each screw, have been
passed on, and improvements continue to be made even today.
In the mid-1980s, we began to focus on computer-aided
engineering (CAE) ahead of our industry peers, and our accumulationof data from that is reflected today in our use of big data from theintroduction of digital transformation (DX) technology.

Higher Added Value in Our Core Products: Evolution of Technologies
Automotive shock absorbers

The Kayaba Award, a technology award born from the wishesof our founder (the awards ceremonies were held at each
operating base in 2020 and 2021 due to the pandemic)

03

During Japan’s prolonged economic downturn, we actively expanded
overseas, mainly through joint ventures in the United States andEurope, with the goal of becoming “No. 1 Globally.” At the sametime, we implemented a total cost-cutting program Company-wide,and continued to strengthen our operations in an effort to reduce
lead time by half.
As exhaust gas regulations for hydraulic excavators became stricter
in various countries, customers required better environmental

KYB Group Report 2021

The Developmental Center, a long-held dream of our engineers,
opened in 2011. This enabled us to develop and test products more
quickly, and greatly improved our technology development
capabilities. The new center sought to link the knowledge and theexpertise of all KYB engineering divisions to boost productdevelopment efficiency and establish a quality assessment method.
As the importance of environmental issues increased worldwide,
people’s interest began to shift to safety, peace of mind, and comfort.
To pursue these, we would need even stronger technologicalcapabilities. Therefore, we established the DX Improvement

Department in 2019. We are utilizing various digital technologies tosupport the creation of new ideas and businesses, as well as improve
quality and productivity, and are building KYB’s IT systems in line with
global standards.
Based on the precise hydraulic technologies that have been
continuously refined since its founding, KYB is applying and combining
various basic technologies, such as automobile and motorcycle
suspensions, vibration control technologies exemplified by power
steering systems, and power control technologies used in drive systemequipment, to create new products that meet the needs of society.

100th Anniversary

We marked the 100th anniversary of KYB’s founding in November 2019.
The heritage left by KYB’s founder remains a part of the Company today.

Technology Applications

Basic Research (Tribology)

Uniform Quality Worldwide

DLC coating with excellent sliding
characteristics and beautiful appearance

Global engineer training

Pursuit of Quality

Hydraulic cylinders, valves and pumps
for construction machinery

Para-skier
Takeshi Suzuki(KYB employee)
Variable damping shock absorbers with proportional solenoids

KCH hydraulic cylinder

Load-sensing system formini excavators

Shock absorber for a chair ski we began
developing for the 1998 Winter Olympics

Extensive track record of quality awards

KYB Group Report 2021

04

KYB’s Heritage

Message from the President

KYB contributes to the sustainable
development of the earth and society
as a global leader in vibration control
and power control technologies.

I would like to extend my thoughts to all those who havebeen impacted by the ongoing COVID-19 pandemic,
and hope for the earliest possible recovery. I also want
to express my heartfelt respect and appreciation for thehealthcare professionals working hard to treat patients on
the front lines every day.
The KYB Group is working to prevent the spread of thevirus, and will respond promptly and appropriately basedon the requests of the relevant authorities, with the safetyof our customers, suppliers, and employees and theirfamilies as our top priority.

Start of FY2020-2022 Medium-Term
Management Plan—
Return to Profitability amid
the Pandemic
FY2020, the start of our new medium-term management
plan, presented very challenging conditions, including a
sharp decline in shipments due to stagnation of economic
activity in Japan and globally because of the COVID-19
pandemic in the first half of the year. However, weaggressively implemented various improvement measures,with a focus on reduction of fixed costs, and thesemeasures, coupled with the later recovery in demand,
resulted in a turnaround to profitability at a higher level
than we expected.
While the COVID-19 pandemic has caused various
problems, it has also highlighted some issues we needed toaddress, and served as an opportunity to make drastic
structural reforms including organizational restructuring
and a review of our businesses, as well as reform of work
styles for our employees. It was a year that reminded us
how important it is to maintain a positive outlook and keep
moving forward even in difficult conditions.

Stabilization of Our Revenue Base
Aiming for Higher Corporate Valueand Sustainable Growth
In FY2021, the uncertain operating climate is expected topersist due to COVID-19, the chip supply shortage andother factors, but we will make up for the slow start to themedium-term management plan by continuing toreorganize our production bases and focusing on issues
such as scaling back or discontinuing unprofitablebusinesses and products in order to stabilize our revenue
base. Regarding the problem of our seismic isolation/
mitigation oil dampers, which has caused trouble andconcern for our stakeholders, we will sincerely address theissue at remaining properties to finish bringing all dampers
into conformity. To make sure we do not repeat the same

mistakes, we will instill awareness of compliancethroughout the Company, from top management tofrontline workers.
The growth strategy in the FY2020-2022 Medium-Term
Management Plan, in addition to solving current
challenges, also seeks to address societal issues such as theaging population and declining birthrate as well as
environmental problems. Our approaches will include thecreation of high-value-added products that further deepen
KYB’s core technologies and innovative monozukuri thatraises the level of automation. At the same time, we will
actively promote measures to enhance medium-to-longterm corporate value and ensure sustainable growth.

Monozukuri to Leave a Better
Environment for the Next Generation
We established the ESG Promotion Office in July 2021 toroll out and promote our ESG Policy throughout the Group.
We also plan to reduce the Group’s overall CO2 emissions
and develop products that contribute to the sustainableadvancement of society. In addition, we will take a fresh
look at our existing business activities from ESG
perspectives, and proactively promote monozukuri to leavea better environment for the next generation.

A Global Leader in Vibration Control
and Power Control Technologies
KYB has a history of more than 100 years since its
founding in November 1919, and continues to lead theway as a top global manufacturer specializing in vibration
control and power control technologies. KYB’s products
support people’s daily lives worldwide, delivering safety,
peace of mind and comfort. Going forward, KYB willcontinue to evolve to provide products that satisfy
customers throughout the world, with the goal of being “atrusted brand that contributes to the prosperity of society.”
We ask for your continued support and guidance.

Masao Ono
Representative Director andPresident Executive Officer

05

KYB Group Report 2021

KYB Group Report 2021

06

KYB’s Heritage

Roadmap to Our Vision

KYB’s operating environment isin a once-in-a-century revolution

Societal needs• Changing technological and social landscapes• Focus resources on core businesses and turn

● Post-pandemic world
Focus oncore
businesseschange into opportunity• Bring to market products with high added value

Enhancement of long-term
corporate value—
A trusted brand that contributes
to the sustainability of the earthand society● Diversity & inclusion● Response to global warming

such as diverse features, automation, etc.

FY2020-2022
Medium-Term
Management Plan

Market expansion

Ensure compliance and achieve
high profitability
P. 13

KYB’s coretechnologies

Measures to recover trust and pride
Strengthen
compliance andgovernance

Respond tosocial demands

Human resource
development

Safety firstand quality
management
initiatives

Stabilize therevenue base

Growthstrategies incore businesses

Innovation Strategy
Utilize advanced technologies

Vibration
control
technology

Powercontrol
technology

Technology expansion

Hydraulictechnology

KYB’s Heritage

Corporate Spirit

07

KYB Group Report 2021

The business essence and technologies handed down since
KYB’s founding
By providing technologies and products that make people’s lives
safe and comfortable, the KYB Group contributes to society

Tackle production innovation

Artificial intelligence (AI)Respond to movement toward self-driving
and electric vehicles, energy-saving
vehicles and environmental restrictions

Internet of things (IoT)

Create new markets andnew products

Digital transformation (DX)

Create productsthat contribute tosocial sustainability
P. 11

P. 09

100th

Anniversary
P. 19

KYB Group Report 2021

08

KYB’s Heritage

KYB’s Manufacturing
KYB develops technologies and products by combining its two core businesses—
vibration control and power control technologies—with elemental technologies suchas electronic control technologies, and through cooperation among research facilities,businesses and Group companies.
In addition, KYB is carrying out Companywide activities to address environmental
issues, which cannot be ignored today, as well as looking at solutions to social issues,
the achievement of the SDGs, DX-driven production innovation, and the creation of
new businesses.

KYB’s Technology Development
The origin of KYB is the Kayaba Research Center, which
was established by the inventor Shiro Kayaba, theCompany’s founder, in 1919. Since the founding of
the center, we have spent a century refining hydraulictechnologies. Today, our shock absorbers are used in
one out of every five automobiles in the world, and haveachieved dominant market shares with their advanced
technology and high quality.
A major feature of hydraulic pressure is that it
produces a larger output in a more compact device thanelectric, pneumatic or other driving methods. The easeof control due to its superior responsiveness is anotherreason for its wide use. For instance, an automobile shock
absorber that absorbs impact from the road surface is agood example of the use of the viscosity of oil to exert
an appropriate damping force, and hydraulic pressure isconsidered the best system for construction machinery

because of the large output required.
KYB has created a variety of hydraulic products
in combination with other elemental technologies
such as electronic control, centering on the two coretechnologies of hydraulic vibration control and power
control. Even with today’s rapidly advancing technologies,
we have confidence in the meaningful contribution thathydraulic technology can make to the development ofsociety. Therefore, we are not only further deepening ourcore technologies, but also responding to changing times
by adopting cutting-edge technologies such as AI, IoT
and advanced simulations to promote the systemizationof products. We are also taking on the challenge ofdeveloping the next generation of hydraulic equipmentthat offers both higher efficiency and better safety,
such as automated ICT construction machinery using
electronic control.

KYB’s Technology Development System
KYB is actively developing advanced technologies,
primarily at the Basic Technology R&D Center and theProduction Technology R&D Center, to solve challenges
such as those relating to energy conservation and reductionof environmentally hazardous substances, as well as toimprove the performance of and add functionality toexisting products.
We aim to create new value by integrating ourtechnologies, global production operations and marketing
functions. To do this efficiently, we have created a vision of
future technology based on studies, analysis and forecastsof long-term environmental changes and the associatedchanges in society and customer needs. We are creating
a clear roadmap for sustainable growth and conducting
research and development to achieve that vision.
In basic research, we are conducting research for the next
generation of businesses and products as well as elemental
technology research. To convert the results of that research
into tangible assets, we are, for example, developing an
integrated system that combines electronically controlled

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

Future technology
research

Elemental technology
research

Digital technology

Vibration control

Intellectual property
strategy

Simulation technology

Product development

KYB’s CoreTechnologies

Intellectual Property
Department

CAE* Promotion Department/DX Improvement Department
AI and IoT

KYB’s Technologies

suspension and electronic power steering technologies forthe self-driving vehicles of the future.
At the same time, the technology divisions of eachbusiness area are also developing new products on theirown and moving them into mass production, in addition
to improving the performance and lowering the cost of
existing products.
The original product technologies and mass production
technologies developed from these activities will be used in
production by business divisions and Group companies, andwill be applied throughout the Group. The combination of
the new production methods developed by the Production
Technology R&D Center and the expertise cultivated ateach factory is leading to construction of new facilities andinternal production of jigs and tools.
Recently, we have begun promoting DX throughout
the Company to increase the efficiency and speed ofthese research and development efforts. We are also
actively working to boost efficiency and productivity withapproaches such as data analysis that uses AI.

Mass production
Businesses/Group companies*CAE: Computer-Aided Engineering. The use of computer simulations to resolve issues faced by technical departments.

Power control

Environmental Initiatives

Elemental Technologies
HydraulicElectronic control

Motorization

AI and IoT

SystemMaterials

Testing andevaluation

Advanced simulations

Monozukuri (Japanese manufacturing expertise)09

KYB Group Report 2021

Leading-Edge Technologies

Digital technology

The need to address environmental issues is unavoidable
today. KYB is promoting research and development related
to environmental issues. For example, among our products,
we are working on electrification and weight reductionof the hydraulic pumps built into continuously variabletransmissions (CVTs) for automobiles and various devices,and energy savings and efficiency improvements in hydraulicequipment for construction machinery.
KYB has multiple operating bases in Europe. We conduct
research and development in close coordination withlocal subsidiaries in order to comply with the EU’s REACH
Regulations,* for example. To expedite these research anddevelopment activities, we established the Environmental
Regulation Response Group in FY2020. This will enable us
to share and stay one step ahead of information regarding
environmental regulations such as lead-free directives, inaddition to the REACH Regulations.
Recently, the EU stated its goal of becoming carbon neutral
by 2050. We will examine the details of implementationplans and develop specific measures with a technology
roadmap (backcasting).
*	REACH stands for Registration, Evaluation, Authorisation and Restriction of Chemicals.
It is an EU law intended to protect human health and the environment while fostering
competitiveness within the European chemical industry.

KYB Group Report 2021

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KYB’s Heritage
KYB’s Manufacturing

Four Initiatives to Solve Social Issues
13 	Research and development for new products and new markets (conscious of social

contribution and SDGs)

Creation of a technology roadmap (backcasting)now, have been insufficient. Therefore, we will envision
what we want KYB to become, with the future as thestarting point, and then use a “backcasting” approachin which we think about what we will need and what
we should do in order to realize that vision. From thatperspective, we will organize what we need to do, andformulate a roadmap that connects this approach with theconventional forecasting approach.

KYB has promoted research and development to meet theneeds of existing customers and provide a timely and stablesupply of excellent products to the market. As a result, wehave mainly conducted research and development witha view ranging from the recent past to the medium-term
future (i.e., a forecasting approach). However, our activities
connected to aspects such as contribution to society andachievement of the SDGs, which are required components

Backcasting

Set a vision (what we want to become)(Thinking with now as the starting point)• What will we need?
• What should we do?

Thinking as an extension of current technology• What we can do• What seems possible

Research anddevelopment
value

Societal needs, new services andresponding to various regulations

Data platform and design support system

Product development

DX-driven production innovation and creation of new businesses (innovation strategy)
from production facilities as initiatives for production
innovation, and to the research and development of asmart road monitoring system as a new business creation
initiative. In addition, we will actively recruit and develop
human resources proficient in using digital technology.

At KYB, we are making Companywide changes to the ways
we utilize data with strong support from management.
In 2020, we produced an IoT platform in-house as adata utilization platform. We will apply this platform toequipment failure prediction and collection of information

Construction of a Data Utilization Platform❷ Collect and store data in one location

Production

KYB

Quality
information

Overseas
bases

Productivity improvement

Visualization and analysis Administration

Designinformation

Sales
information

Quality improvement

Sales

Production site

• Sales information• Complaint information• Production information• Product informationcommercialization

11

KYB Group Report 2021

follow-up of projects. The aim is to create a system forexecuting projects as an organization. The ultimate goal
is not only to offer products at the price customers want,
but also to take into account the need to meet productdevelopment schedules and ensure the Company’s
profitability. This will help us become a corporate groupthat our stakeholders can rely on.

In advancing research and product development projects
derived from customer requests and the technology
roadmap, we have begun an initiative in which divisions
engaged in research and product development, as
well as other divisions, including cost planning, sales,
procurement, production technology, and manufacturing
divisions, work together to visualize the progress and❺ New business creation

Offering of new value

R&D

Production
technology

Manufacturing

Users

Product
planning

Companywide commercialization activities

Product added value
improvement

Research anddevelopment

Aiming to be a
corporate groupthat stakeholders
can rely on• Meet the needsof customers

Corporate Spirit• Design information• Research data

Costplanning

Technology roadmap(forecasting, backcasting)

Product
information❹ On-site visualization

Environmental regulations

4 	Promoting a seamless Companywide process from research and development to❸ Analysis with AI and statistical methods
Design & development

Groupcompanies

Carbon neutrality

SDGs
Changes in social conditions
Carbon neutrality

Market needs
Processing

Aging population and declining birthrate

Customer needs

Data collection and preservation

AI/ML■ Response to changes in social conditions

R&D

Market challenges
Customer needs
Social trends

IoT-Platform
Equipment
information

New markets
and products(Plus)

Our way forward

FutureProduction
information■ Targets of SDGs

IP landscapePresent❶ Collection of data from various devices (IoT)

Existing customers(OEM, etc.) and our businesses

Corporate Spirit

Short-term R&D initiatives
Balance of short- and long-term initiatives
Long-term R&D initiatives (anticipating and waiting)2(Backcasting)and responding to social and environmental regulations,which are likely to increase in number. We will include thisobjective in our technology roadmap and incorporate it into
every system in the Company to accelerate these activities.

Product development activities involving
the whole Company

SDGs, ESG, carbon neutrality, aging population anddeclining birthrate, environmental regulations, changes insocial conditions

Market issues, customer challenges,
self-driving vehicles, competitive trends,
ICT construction, social trends, etc.

(Forecasting)

Existing businesses
and products(Thinking from a future starting point)

Forecasting

KYB continues to provide quality products to existingcustomers every day.
To further expand our businesses, in addition to providing
products to existing customers, we will actively develop
new markets and products while contributing to society

Technology
trendsFuturehypothesisCore
technologies

Sales

Procurement• Ensure profitability
for the Company

Activities that involve alldivisions concerned
Competitive
trendsKYB Group Report 2021

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KYB’s Heritage

FY2020-2022 Medium-Term Management PlanIn FY2020, the first year of the new medium-term management plan, we implemented
measures to prevent the recurrence of nonconforming acts, and placed awareness ofcompliance at the core of management as part of reforms to our corporate culture
initiated under the slogan, “Recovering trust and pride.” However, the year started
under extremely challenging conditions, including the spread of COVID-19, which led
to lockdowns in many countries and the state of emergency in Japan. As such, we
needed to take countermeasures to address the situation.
In FY2021, we will make up for the delay in implementing measures of the mediumterm management plan and work to establish a highly profitable structure. Although
the spread of COVID-19 continues and the future of the global economy remains
uncertain, we will work together as a group to realize the goals of the plan andrecover the trust of our customers as soon as possible.

FY2020 in Review
In FY2020, the global economy was severely impacted by
the COVID-19 pandemic. Although there have been signs ofrecovery in economic activities in some countries, including
the U.S. and China, and there are growing expectations
that COVID-19 will be brought under control throughvaccination, the situation still remains unpredictable dueto the reemergence of virus variants and other factors.
In the Japanese economy, the government’s economic
stimulus measures have led to signs of recovery in exports
and production in some industries, and economic activity
seems to be picking up again. However, the outlook remains
uncertain due to the resurgence of COVID-19 cases.
In this environment, the automobile market, a major
source of demand for our products, saw a decrease indemand compared with the previous fiscal year due to thestalling of the global economy and the impact of factory

shutdowns and other factors. The construction machineryand other markets also experienced a similar decreasein demand.
As a result, net sales were ¥328.0 billion, a decrease of¥53.5 billion.
Operating profit was ¥18.3 billion (compared with anoperating loss of ¥40.3 billion in the previous fiscal year),and profit before tax was ¥16.3 billion (compared with a loss
before tax of ¥41.4 billion in the previous fiscal year), mainly
due to a reversal of the provision for product warranties forseismic isolation/mitigation oil dampers. Profit attributableto owners of the parent was ¥17.1 billion (compared with aloss attributable to owners of the parent of ¥61.9 billion in
the previous fiscal year).

KYB’s Operating Environment
The end of the COVID-19 pandemic is still nowhere in sight,
as variants have emerged. In addition, other uncertainties haveappeared, including the direction of tension between the U.S.
and China with the change of presidential administrations in
the U.S., a weakening of growth in emerging economies, andthe global tightening of supply and demand for semiconductors
and resins. KYB’s operating environment in Automotive
Components Operations is undergoing a once-in-a-century
revolution, symbolized by the terms “Mobility as a Service”(MaaS) and “connected, autonomous, shared, electric” (CASE).
We must respond to these trends without delay. Meanwhile, in
our Hydraulic Components Operations, we need to tailor our
strategies to the development stages of the mature markets ofJapan and Western countries, and new and growing markets suchas China and ASEAN. In the Aircraft Components Division, private
sector demand fell sharply due to the COVID-19 pandemic, but
the Special-Purpose Vehicles Division grew steadily on the backof solid domestic demand. In system products, KYB has nearlycompleted work to bring seismic isolation/mitigation oil dampers
into conformity, and is restoring the trust of customers.

Revolution in the
Operating
Environment

Diversification ofwork styles

ESG
SDGs

Globalization

Basic Policies of the FY2020-2022 Medium-Term Management Plan
1. Strengthen compliance and governance:

4.	Safety first and quality management initiatives:

	Instill awareness of compliance and reform thecorporate culture

Zero serious accidents
Strengthen Group quality inspection system

2. Respond to social demands:

5. Stabilize the revenue base:	Evolve into ESG management

	Discontinue unprofitable businesses, locations andproducts

3. Human resource development:	Companywide reorganization, including back-office
operations

	Thorough health management	Train Group human resources, including overseas
employees	Total cost reduction activities and innovative
monozukuri

Promote diversity

6. Growth strategies in core businesses:

	Improve productivity of back-office operations

	Strengthen new market and new product strategies

Consolidated Financial Results for FY2020 (IFRS)FY2019FY2020 Results [YoY Change]

Net sales¥381.6 billion¥328.0 billion[-¥53.5 billion]

Segment profit¥17.6 billion¥13.3 billion[-¥4.3 billion]“Recovering trust and pride”

Trust

Pride

Strengthen new market and new product strategies
Change to a high-profit structure
Thoroughly enforce safety first and quality management initiatives

Profit (loss) attributable to owners of
the parent(¥61.9 billion)¥17.1 billion[–]

Develop human resources that support management
Respond to social demands (ESG, SDGs)
Strengthen governance system

Cash dividends per share

¥0

¥75

Awareness and practice of compliance
13

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14

Progress of Measures to Prevent Recurrence ofSeismic Isolation/Mitigation Oil Damper Problems
Summary of Medium-Term Management Plan
The KYB Group has formulated the three-year FY20202022 Medium-Term Management Plan. In FY2020, theinitial year of the plan, we refrained from releasing targets
for management indicators because it was extremely
difficult to predict the impact of the COVID-19 pandemic.
However, we recently reviewed that policy in light of theexternal environment. The targets are shown below.

To stabilize our revenue base, we will improve
profitability by strengthening our fixed cost management
system, restructuring unprofitable businesses, locations andproducts, implementing global total cost reductions, andoptimizing the Group’s production operations. To improve
our financial structure, our basic policy will be to secure
profit on a non-consolidated basis and improve the Group’s
equity ratio, with a target of 34% in FY2022.

FY2020-2022 Medium-Term Management Plan Financial Targets (Consolidated)
FY2020 Actual Results(comparison with previous fiscal year)

FY2022 Target

Net sales¥328.0 billion (-¥53.5 billion)¥378.0 billion

Automotive Components Operations¥197.5 billion (-¥34.6 billion)¥229.0 billion

Following the announcement on the KYB website entitled“Investigation into the causes of nonconforming acts in theinspection process, etc. for buildings installed with seismic
isolation/mitigation oil dampers manufactured by KYB Corporationand its subsidiary, and measures to prevent their recurrence”

dated February 13, 2019, we have been taking preventive
measures and working to restore trust.
As of June 30, 2021, approximately 97% of the measures toprevent recurrence have been completed, and we are continuing
our efforts to complete unfinished measures.

Progress of Measures to Prevent Recurrence (As of June 30, 2021)
Completed
Completed•	Revise the Corporate Guiding Principles and other guidelines
Completed•	Emphasize the importance of compliance regularly
Completed•	Implement personnel evaluations and related measures
Completed•	Conduct education and training to raise awareness of social responsibility
Completed•	Conduct education that incorporates numerous case studies and best practices from other companies Completed• Conduct education on laws and regulations specific to businesses and products
In progress• Make education regarding quality mandatory
Completed•	Establish compliance awareness at KYB Corporation and KSM*

Foster strict complianceawareness and reformthe corporate culture

Establish compliancemanagement

Change the mindset of all
officers and employees•	Foster compliance awareness throughout the Group•	Revise use of mass-production evaluation procedures for individual and small-batch products

Completed
Completed
Completed
Completed• Ensure personnel are rotatedCompleted• Ensure thorough documentation of meetings, reports and instructions

Completed
Completed
Completed
Completed
Completed• Ensure appropriate business management

Hydraulic Components Operations¥111.3 billion (-¥14.0 billion)¥13.3 billion (-¥4.3 billion)

Segment profit
Segment profit margin

4.1% (-0.5%)26%Equity ratio¥130.0 billion¥25.0 billion

Establish a balanced
business operation system
Evaluate businessfeasibility, and revise
business operations,information-sharing
systems and othermatters

6.6%

Ensure personnel arerotatedCollect information andestablish a feedback
system

Improve inspection
systems and methods

Strengthen Compliance and Governance

Based on the lessons we learned from the seismic isolation/
mitigation oil damper problem, during the FY2020-2022
Medium-Term Management Plan we will instill a corporate
culture that places top priority on awareness of compliance,
all the way through to frontline business activities, andimplement compliance programs to create a workplaceenvironment committed to treating all compliance-related
matters seriously.
To strengthen governance, we will aim to create a speedy
and efficient management structure and establish fair andtransparent management oversight centered on the Boardof Directors.
P. 21• Develop business systems• Ensure that internal regulations are applied in the event of an emergency• Review the internal whistleblowing system to improve its effectiveness• Clarify the actions to be taken when quality misconduct is detected• Create a mechanism for extracting information

34%
Implement inspection
systems

Measure ❶• Review how decisions to accept orders are made• Strengthen the independence of quality assurance• Improve methods for on-site oil damper inspections with the customer present• Review inspection manual• Tighten internal procedures for changing the software of oil damper inspection machines

Implement preventive
measures against
fraudulent operation of
inspection machines• Regularly monitor the software of oil damper inspection machines• Automatically record inspection results, without human involvement• Automate inspection processes• Tighten controls on access to oil damper inspection machines• Ensure traceability of performance test data
• Perform audits that consider quality misconduct

Enhance internal quality
inspection system• Perform audits that effectively verify inspection data
• Institute audits by KYB Corporation• Leverage the support of experts

Strengthen internal audit
and control systems• Strengthen systems for sharing information and collaborating among Group companies

Tighten the subsidiarymanagement system

Corporate Governance• Review management systems for Group companies• Analyze and monitor Group companies’ business risks• Reorganize Group companies

Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
In progressCompleted*	KSM: Kayaba System Machinery Co., Ltd. was merged into KYB Corporation on July 1, 2021.

Progress of Replacement Work, Etc. (As of August 31, 2021)
Replacement, etc. started1:

968 buildings (98%)

Replacement, etc. completed2:

937 buildings (95%)

1. Includes delivered dampers taken back and readjusted and dampers that will not be replaced.
2. The number of buildings where replacement work, etc. has started includes buildings where replacement or other work has been completed and buildings where it has been decided not to replace
the dampers. It is not the number of buildings in the Corrective Measures Completion Report submitted to the specified administrative agency.

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16

KYB’s Heritage
Medium-Term Management Plan

Measure ❷Measure ❺Respond to Social Demands

In response to significant changes in the external environment
related to ESG issues, we established the ESG Promotion
Office in July 2021. ESG-oriented management will be thebasis for formulating policies going forward.
In promoting ESG, we will not simply addressenvironmental and social needs, but will look for business
opportunities and promote activities that increase ourcorporate value. We will also summarize and actively
communicate our ESG-related activities to stakeholders inorder to foster trust.

Measure ❸In an unstable market resulting from the COVID-19
pandemic and tight supplies of semiconductor chips, wehave been continuing to focus on fixed cost reduction
since the second half of FY2020. We will continue ourcost-cutting activities to build a production system that isresilient to fluctuations in demand.
For locations and businesses that are unable togenerate sufficient profits, we will strengthen themonitoring and administrative structure, and address
unprofitable businesses with a willingness to withdraw
from them if necessary. On the other hand, we willcapitalize on new trends such as MaaS, CASE and DX, andcontinue our drive to create new markets and new
products that will become future revenue sources.

Target for improved profitability+¥7.4 billion• Improve productivity (reduce manufacturing costs)+¥3.4 billion(FY2019: ¥17.6 billion→FY2022: ¥25.0 billion)

Innovative monozukuri (increase automation level), promote workforce streamlining, etc.

Measure ❻Creating healthy andrewarding workplaces

Developing human resources who can help
put our Corporate Spirit into practice

Improving productivity ofback-office operations

P. 34

Human Resources Development*	RPA: Robotic Process Automation

Discontinue domestic production of unprofitable automobile EPS, close European power steering plant, etc.

+¥1.0 billion• Reduce variable costs
VA and VE, promote local procurement, etc.

• Consolidate plants and build the optimal production system+¥0.7 billion

Reorganize European plants, build optimized global CVT production system, etc.

• Promote sales expansion+¥0.6 billion

Sales promotions for mini-excavators to accompany the application of electronic controls,
expansion of the sales network for aftermarket products, etc.

business, and working to prevent serious quality problems
by fostering positive and open workplace environments.
We will also achieve a high level of quality by improving
the quality assurance system and using a technique called
three-step evaluation.

Growth Strategies in Core Businesses

Automotive Components Operations
Unlock potential with strengthening, evolution andnew initiatives
In the FY2020-2022 Medium-Term Management Plan, tounlock the potential of our Automotive Components
Operations, we will strengthen and evolve existing businesses
while pursuing new opportunities as a growth strategy. In
FY2021, we are continuing the fixed cost reductions that wehave been applying since the second half of FY2020; securing
profit at individual locations by executing various
reorganization plans; enhancing mechanisms and systems forbusiness controls; conducting profit-oriented management by
securing cost competitiveness; developing new markets andproducts and cultivating new customers from MaaS and CASE
by establishing the position of customer development
partners; and making integrated structural reforms in theaftermarket business with cooperation among production,marketing and technology development operations.

Safety First and Quality Management Initiatives

We are reinforcing safety and strengthening the legal
compliance monitoring system with the aim of creating andexpanding industrial and fire accident-free production bases.
To ensure quality, we are imprinting awareness ofcompliance regarding our social responsibility to deliver
quality, with the belief that quality is the basis forGoals forFY2022

Establish a position as a core supplier byfurther strengthening existing businesses
and core technologies

Hydraulic Components Operations
Be a first-choice manufacturer that customers trustand “Shift to an emphasis on profits”
In Hydraulic Components Operations, our basic strategy in the
FY2020-2022 Medium-Term Management Plan is to improve
long-term profitability through selection and concentration.
We are carrying out regional strategies and product functionbased strategies according to the development stage of eachmarket. For example, we will focus on maximizing revenue
from high-value-added products in the mature markets ofJapan, Europe and the U.S., and aim to secure stable profitsby emphasizing cost reductions in new and growing markets
such as China and ASEAN. In FY2021, we are further
advancing these efforts and working on the development of
next-generation electronic hydraulic equipment, centered on
our regional strategy, with an eye on the future. At the sametime, we will aim to create the optimal structure for andenhance the functions of Hydraulic Components Operations
overall by reorganizing sales departments and improving the
productivity of back-office operations.

Strengthen: Stabilization of revenue base•	Optimize production by consolidating and reorganizing
major plants• Cost reduction activities• Structural reform of the aftermarket business

Basic
Strategy

Goals forFY2022• Respond to automation and complex needs•	Cost competitiveness

Basic
Strategy•	Strengthen original technology (respond to the shift toEVs, CASE and MaaS)P. 47
KYB Group Report 2021

Automotive Components Operations

Hydraulic Components Operations that continue to be trusted by customers
and used around the world
Be a first-choice manufacturer that customers trust

Evolve: Innovative monozukuriNewinitiatives: Creation of high-value-added products

17+¥1.7 billion• Discontinue or reduce activity in unprofitable fields

Human Resource Development

As one initiative to promote health management, in 2021
KYB acquired certification for the second consecutive year
as a Health & Productivity Management Organization. Weview the health of our employees and their families as animportant management resource and a source of theCompany’s vitality, and are creating rewarding workplacesin which all employees can work in good physical andmental health.
We are fostering awareness of compliance in order toregain trust, creating open workplaces free fromharassment and promoting diversification of humanresources. We are also working to develop the next
generation of leaders through small group activities and bytraining operating base managers globally. Moreover, we
are increasing the value-added productivity of back-office
operations, mainly with robotic process automation (RPA),
which will lead to lower fixed costs.

Measure ❹Stabilize the Revenue BaseDevelop electronically controlled, load-sensing products,
and develop medium- and large-sized pumps• Cost reductions and promotion of local procurement
Improve market competitiveness by launching low-priced models

P. 49

Hydraulic Components Operations
KYB Group Report 2021

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