KYB Group Report 2019
(April 1, 2018 - March 31, 2019)

To Our Stakeholders

I am pleased to present you with KYB Group Report 2019.
Until now we have published an Annual Report and an Environmental andSocial Activity Report to keep you informed about our business and CSR
activities, respectively. This year, we have issued KYB Group Report 2019, ourﬁrst integrated report, featuring enhancements including details on our new
management structure and non-ﬁnancial information. We hope that this reportwill be a starting point not just in terms of content, but for deeper dialogue
with our stakeholders.
We have positioned FY2019 as the ﬁrst year of KYB’s recovery. The entire KYBGroup will conduct various measures as it returns to the basis of monozukuri.

Regaining Trust

The First Year of
KYB’s Recovery

In FY2018, we announced nonconforming acts by
KYB Corporation and one of its subsidiaries
associated with building-use seismic isolation/

We will drastically reform our corporate
culture as we rebuild the KYB Group,by returning to the basis of monozukuri,
Japanese manufacturing expertise, andsteadily implementing measures toprevent the recurrence of improper acts.

mitigation oil dampers, as well as improper claims
related to working hour billing for defense
equipment. I would like to offer my deepest
apologies for the trouble and concern we havecaused our stakeholders.
We are addressing nonconforming acts
associated with seismic isolation/mitigation oil
dampers by seriously embracing the guidance andrecommendations of the external investigative

committee, implementing measures to prevent recurrence, and posting
quarterly progress reports on our website. With respect to these acts,
eliminating concerns among related parties as quickly as possible is a top
management priority. In addition, the improper claims related to working
hour billing for defense equipment are currently under investigation. We willpromptly report the details as soon as they have been clariﬁed.
We revised our Corporate Spirit* on October 1, 2019 as one measure toprevent recurrence of improper acts. Our Corporate Spirit is based on the spiritof creative development inherited from founder Shiro Kayaba. The revised
Corporate Spirit remains true to this spirit, but we have added “We shall follow
all rules and face all issues honestly.” This expresses our intention to comply
and face the facts, given that the guidance of the external investigative
committee pointed out a lack of compliance awareness and a corporate culturethat did not face up to inconvenient facts. It also expresses our determination

to preclude improper acts in the future. In addition, fostering complianceawareness among all employees is a top priority because it is crucial for
supporting quality management, which has always been one of our coremanagement tenets.
* For details, please see page 4.

Our Future Approach
FY2019 is the ﬁnal year of the FY2017-2019 Medium-Term Management Plan.
During FY2017 and FY2018, we largely completed preparations for launching
high-value added automotive products and consolidating the production lines
for our construction machinery products to increase efﬁciency. However, there
are still issues that require attention. We have been slow to restructure
unproﬁtable businesses, and we have experienced construction machinery
production delays because our manufacturing capacity has not kept pace withgrowth in demand.
We are now working to bring our seismic isolation/mitigation oil dampers
into conformance with required standards as quickly as possible, and in view ofissues in the past two years, we are restructuring our organization, including
closing unproﬁtable businesses and locations, in order to sharpen our focus
on our core operations. We are also preparing for the next medium-term
management plan that will begin in FY2020 by developing competitive new
products and innovative monozukuri.
The KYB Group will continue to devote itself to the challenging task of
implementing reforms while fundamentally reviewing conventional approaches
to its businesses with the goal of creating a fair and honest corporate groupthat has high ethical standards and places the highest value on compliance.
We will transition to an operating structure that ensures stable earnings while
appropriately fulﬁlling our corporate social responsibilities. We are determined
to regain trust in the KYB brand, so that it can continue to contribute to an
afﬂuent, vibrant society through the power of monozukuri.
We look forward to your continued support as we take on the challenges ahead.

Masao Ono
Representative Director,
President Executive Ofﬁcer

KYB Group Report 201901

Nonconforming Acts in the Inspection Process for
Seismic Isolation/Mitigation Oil Dampers and Other Matters
Outline of Improper Acts
1. Falsiﬁed Coefﬁcients: In the inspection process, measurement results for damping force were deliberately increased or decreased bymultiplying them by designated coefﬁcients to keep them within an intended range.
2. Origin Adjusting: In the inspection process, measurement results for damping force were deliberately changed to keep them within adesired range by using a Balance ON function (a program that moves the median damping force on extension and compression in the
direction of the origin) and an Ampliﬁer function (to adjust the zero point of the load on the inspection machine) of the personal computers
installed in inspection machines.
3. Use of Materials That Did Not Conform with Speciﬁcations Certiﬁed by Minister: Materials were used that did not comply withspeciﬁcations certiﬁed by the Minister for seismic isolation oil damper components, including the pistons, packing and paints.
4. Falsiﬁed Device Coefﬁcient of Stiffness: Figures for device stiffness (the ability to resist deformation when force is applied) were deliberately
increased to desired values when customers agreed that device stiffness values exceeded prescribed values.
5. Screw Problems: Galling prevents screws used to attach the piston and piston rod from tightening fully. As a result, the seismic isolation oil
dampers were shipped with a gap between the piston and piston rod.

Causes of Improper Acts
Contents

Corporate
cultureBusiness
operationsystemQualityinspection
systemInternal audit
system02

Cause

Comments

Lack of complianceawareness

Inspectors at KYB Corporation and Kayaba System Machinery Co., Ltd. (KSM) who acted improperly,
the supervisors who were aware of their improper acts but did not correct them, people in otherdepartments, and certain managers and executives, lacked the fundamental compliance awarenessthat is an essential part of monozukuri.

Corporate culture that
did not face up toinconvenient facts

Certain managers and executives in the oil damper business at KYB Corporation and KSM were in
positions where they should have stopped improper acts and rectiﬁed the situation in the ﬁrst
place. Instead, they perpetuated a corporate culture in the oil damper business of failing to faceinconvenient facts by directing or giving their tacit approval for improper acts.

Factory management
focused on simply ﬁllingorders received

In their factory operations, KYB Corporation and KSM accepted orders that exceeded theirtechnical capabilities and production capacity for multiple reasons including a lax view of productperformance requirements for sustaining the oil damper business and their focus on sales targets
and delivery dates.

Incomplete informationsharing systems

The systems for sharing information among KSM frontline operations and senior management,
and between KYB Corporation and KSM, were deﬁcient. Moreover, the Group’s whistleblowing
system was ineffective.

Important business
operations dominated byentrenched personnel

Certain entrenched management and frontline personnel dominated important operations in theoil damper business of KYB Corporation and KSM.

Problems related tocommercialization

The oil damper business relied heavily on specialized technicians before mass production began,and a system that would allow other managers to carefully and conservatively verify factors
including oil damper technology, performance, quality inspection and production capacity was not
fully in place. This situation was not remedied even after mass production began, so management
was not able to properly monitor the business on a continuous basis as it expanded, or to
implement appropriate improvements as they should have.

Deﬁcient inspections

Manufacturing departments with a strong incentive to falsify inspection data had conducted
performance inspection of themselves, which made it difﬁcult to adopt cross checks, and therefore
effective checks and balances were lacking in manufacturing departments.

Lack of mechanisms toprevent improper acts
involving inspection
machines

Inspection equipment lacked systems to prevent improper acts, such as automatically recording raw
data that would expose subsequent falsiﬁcation of that data. Inspection machine administration
was also inadequate, as it allowed inspection machine software itself to be improperly modiﬁed.

Deﬁcient internal audit
system (deﬁcient quality
audits)

Quality audits by KYB Corporation or KSM were insubstantial and ineffective because they wereconducted perfunctorily using a checklist of predetermined questions prepared in advance. In
addition, companies were selected for audits on the basis of quality and percentage of process
defects, but not on the basis of investigating improper acts.

Deﬁcient internal audit
system (deﬁcient auditsof similar quality
misconduct)

There were deﬁciencies in the internal audit system of KSM and our system for internal audits of
KYB Group companies. Therefore, internal audits did not function properly. For example, internal
audits conducted for improper acts similar to quality misconduct lacked rigor.

KYB Group Report 2019On its website, KYB periodically posts reports* of its progress in preventing the recurrenceof improper acts and measures to identify and address such acts.
*First report posted in July 2019. Second report posted in October 2019.

https://www.kyb.co.jp/english/company/progress/index.html
The KYB Group released the report by an external investigative committee and published the results of the Group’s
internal investigation of the causes of improper acts and measures to prevent their recurrence. Please refer to thesereports for details.
• Report by the external investigative committee on nonconforming acts in the inspection process for seismic isolation/mitigation oil
dampers manufactured by KYB Corporation and its subsidiary for buildings
https://www.kyb.co.jp/company/progress/progress_20190213_02.pdf (Japanese only)• Investigation into the causes of nonconforming acts in the inspection process for seismic/mitigation oil dampers manufactured by KYBCorporation and its subsidiary for buildings, and measures to prevent their recurrence
https://www.kyb.co.jp/company/progress/progress_20190213_01.pdf (Japanese only)

Outline of Measures to Prevent Recurrence

Foster strict
complianceawareness andreform thecorporate culture

Evaluate businessfeasibility, andrevise business
operations,informationsharing systems
and other matters

Improve inspection
systems andmethods

Strengthen internal
audit and control
systems

Establish compliancemanagement• Establish compliance awareness at KYB Corporation and KSM• Foster compliance awareness throughout the Group• Revise the Corporate Guiding Principles and other guidelines• Emphasize the importance of compliance regularly• Implement personnel evaluations and related measures

Change the mindsetof all ofﬁcers
and employees• Conduct education and training to raise awareness of social responsibility• Conduct education that incorporates numerous case studies and best practices fromother companies• Conduct education on laws and regulations speciﬁc to businesses and products• Make education regarding quality mandatory

Establish abalanced business
operation system• Ensure appropriate business management at KSM• Review how decisions to accept orders are made at KSM• Develop business systems• Revise use of mass-production evaluation procedures for individual and small-batch
products

Ensure personnel
are rotated• Nurture successors by sharing expertise/know-how in the Company through effective
job rotation and by increasing the transparency of operations

Collect informationand establish afeedback system• Ensure thorough documentation of meetings, reports and instructions at KSM• 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

Implement inspection
systems• Strengthen the independence of quality assurance• Improve methods for onsite oil damper inspections with the customer present• Review inspection manual

Implement preventive
measures against
fraudulent operationof inspection machines• Tighten internal procedures for changing the software of oil damper 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

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

Tighten the subsidiarymanagement system• Strengthen systems for sharing information and collaborating among Group companies• Review management systems for Group companies• Analyze and monitor Group companies’ business risks• Reorganize Group companies

KYB Group Report 201903

Corporate Spirit

Imbued with the spirit of creative development of founder Shiro Kayaba, the KYB Group will
dedicate its collective strengths toward being a highly ethical, fair and honest corporate group inorder to regain trust in its brand through monozukuri (Japanese manufacturing expertise) thatdelights people and consistently contributes to a prosperous society.

Corporate Spirit (What KYB Aims to Be)
By serving technologies and products that make people’s lives
safe and comfortable, KYB group dedicates to the society.
1. We shall follow all rules and face all issues with honesty.
2. We shall build a corporate culture full of vitality, and hold high goals.
3. We shall value sincerity, cherish nature and care for the environment.
4. We shall constantly pursue creativity to contribute to the prosperity of customers,
shareholders, suppliers and society.

VisionWhat the KYB Brand Can Do for the World

Monozukuri That Delights People
KYB aims to support the development of society through the joy ofmonozukuri, and to make people happier as a result.

VisionMission
The Mission of the KYB Brand

Monozukuri Taken One Step Further
Value
MissionValue
The KYB Brand Delivers Value

Technology for Comfortable Living
Sensory value: Comfortable living and the joy of monozukuri
Functional value: Reliable quality
The value KYB promises end users is greater comfort fromcreative technology and honesty in product development.
The value KYB promises clients is the reliable quality that comesfrom thinking of end users as clients.
The value KYB promises employees is the joy of monozukurithat comes from knowing they are changing the world.

04

KYB Group Report 2019

KYB draws on technical expertise acquired over many years tocontinue delivering value to clients and markets. Using ourunique capabilities, we take monozukuri one step further toprovide clients with new value and greater satisfaction.

Contents
To Our Stakeholders

Foreword

Nonconforming Acts in the Inspection Process
for Seismic Isolation/Mitigation Oil Dampers andOther Matters

02

Corporate Spirit

04

Feature: The History of KYB and Its Businesses

06

KYB Group Business Activities

12

Stakeholder Communications

18

Environmental Management

22

Quality Management

27

Human Resources Management

28

Corporate Governance

32

Internal Control and Compliance

36

Risk Information

40

Management Team42

Financial Highlights

44

Global Network

46

Corporate Information/Shareholder Information

47

Editorial Policy
From FY2019, the KYB Group issues this integrated report tocommunicate 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 businessperformance, management strategies and other 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 a better reading experience, we will continue to improve thereport based on stakeholder feedback. We welcome yoursuggestions.
Reporting Period
FY2018 (April 1, 2018 to March 31, 2019)(Includes efforts that are outside the above reporting period)

Scope
The report covers KYB Corporation and subsidiaries and afﬁliates
in Japan and around 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
December 2019 (We plan to issue our next report in August 2020.)
Forward-Looking Statements
This report includes plans and forecasts as of the issue date, andestimates based on our business plans and management policies.
Forward-looking statements are based on information available atthe time of report preparation, and actual results may differ
depending on changes in relevant conditions.

KYB Group Report 201905

Feature: The History of KYB and Its Businesses

KYB’s current businesses have been built on the creativity and tireless technological exploration of thedevelopment people who have followed in the footsteps of founder Shiro Kayaba. As we strengthen
our foundation for further rapid growth, we take a look back at KYB’s progress over more than 80
years and the origin of its monozukuri (Japanese manufacturing expertise).

Our Founding DNA
KYB Began with the Creativity of Its
Founder and His Tireless Pursuit ofTechnology.
A search for the origins of KYB’s advanced technologies andcorporate philosophy leads back to founder and inventor
Shiro Kayaba. At the age of 21, he founded the Kayaba
Research Center (which celebrated its 100th anniversary
on November 19, 2019) and used cutting-edge hydraulictechnology and creativity to invent and develop practicalapplications for takeoff and landing equipment including
for aircraft carriers. The hydraulic buffers (oleo struts) that
he developed for aircraft takeoff and landing equipment
became the basis for KYB’s vibration control technology,1a precursor to automotive shock absorbers and otherproducts. The metal plating of oleo struts on the sliding
components of a Japanese Zero ﬁghter plane discovered on

History

the bottom of Japan’s Seto Inland Sea in 1977 was still
shiny after more than 30 years underwater, demonstrating
the sophistication of KYB’s technologies in the 1940s.
Furthermore, KYB’s hydraulic components for aircraft
control systems greatly improved control that until then had
relied on physical force, thus helping to lessen the burden on
pilots. Kayaba’s hydraulic technology subsequently evolved
into the power control technology2 central to modern
construction machinery and industrial cylinders. Today,
products that use KYB’s core vibration control and power
control technologies account for the majority of sales.
Shiro Kayaba’s spirit of creative development andadvanced technology were the driving force behind KYB’s
establishment and remain part of the Company’s DNA today.
Notes: 1. Technology to absorb and mitigate shock and vibration
2. Technology that transmits and controls a large amount of power with a small
amount of force

An Independent Company with an
Enduring Spirit of Freedom and Creativity
KYB has been an independent company unassociated withany larger corporate group throughout its 84-year history.

Selected List of Kayaba Award Recipients

November 1919

Founder Shiro Kayaba established Kayaba Research Center

January 1927

Kayaba Seisakusho establishedMarch 1935

Kayaba Manufacturing Co., Ltd. established

November 1948

Kayaba Industry Co., Ltd. established

October 1959

Company stock listed on the Tokyo Stock Exchange

Promotes the Development and Commercializationof Product Applications

1975
Kayaba Award established one year after the death of founder
Shiro Kayaba
Development of an embarkation ramp
Development of a compact internal position control valve

1976
Development of an electronic control system (ECS) for linear lockstitching1978

Development of a one-chamber air-type front fork
This product absorbs more shock and delivers better ride quality andhandling stability than a conventional product by combining an air springwith the metal spring in the chamber to generate counterforce. KYB was
first in the world to develop this type of product, which has been
adopted for use in motocross bikes and also in large street motorcycles
with upright front forks.

1979
Development and application of a motorcycle suspension
simulation systemShib ((circa
i1945)
Shiro K
Kayaba06

KYB Group Report 2019

Shiro Kayaba imbued the company he founded with thebasic tenets of vitality, love and creativity. Our independent
perspectives and ideas give us the will to respond ﬂexibly tocustomer issues and contemporary needs. For example, in theautomotive industry we have co-developed and proposed alarge number of products to ensure a safe and comfortableride. Deploying this strong independence, we have acquired
unmatched experience and technologies by collaboratingwith a wide variety of manufacturers.
Shiro Kayaba stated that ultimately, the ability to deliver
quality with exceptional reliability supported by technologicalcapabilities is the result of the cumulative knowledge andefforts of individual employees on the manufacturing ﬂoor. In
other words, it comes from manufacturing skills backed byboundless energy. Our founder believed that the developmentof new technologies was the basis of KYB’s growth, and his
spirit has been the force driving us to become the leader inhydraulic technology. The ambitions of our founder live on in
our Corporate Spirit and Management Vision, and remain thefoundation supporting the KYB Group.

Our Pioneering Spirit of Development
Opens the Door to the Future.
Our founder considered the development of new technologies
to be the basis of corporate development. Following his
death, in 1975 we embodied this philosophy in the Kayaba
Award, which is given to employees who make remarkableachievements from acreative perspective in thearea of technologicaldevelopment.
A vane pump now widelyused as a component in
Adjustable damping force
continuously variableshock absorber with aproportional solenoidtransmissions (CVT) for
vehicles received the Kayaba
Award in 2004. The hydraulic pressure from the vane pumpenables smooth gear shifting. An important component that
determines fuel efﬁciency, the vane pump addressed a varietyof needs, including space saving, high efﬁciency, low noiseand low cost, in addition to fundamental performance. We
also completely renovated our production line to install thevane pump inside the transmission, which thoroughly
eliminated contamination.3 As a result of our commitment
to quality, as of 2015 we had achieved cumulative
production of approximately 20 million CVT vane pumps
with zero complaints. The 2017 Kayaba Award went to thedevelopment of an adjustable damping force shock absorberwith an external proportional solenoid. This computercontrolled shock absorber optimizes the attitudeof automobiles. The use of a proportional solenoid as theactuator allows the shock absorbers to control attitude
according to driving conditions eight times faster thanconventional shock absorbers that use a stepping motor.
Note 3. Extraneous material left over from the manufacturing process or caused bywear inside the product.

Adding Greater Value to Products

Use of Composite Technology

Pursuing New Dimensions of Performance

1981

1992

2004

Development of a new suspension for the 82MX model

Development of an unmanned production line for PV shafts

Development of a vane pump for use in CVTs

1983

1996

2006

Development of an automated production line forlarge valves

1986

Development of a high-capacity actively
controlled suspension (HICAS) system
In addition to steering the front two wheels, this system
predicts vehicle behavior based on vehicle speed and steering
angle to improve stability at high speeds. It changes the
position of the front and rear tires according to steering.
Hydraulics have now been replaced with electronics using theknowledge gained from HICAS to develop its successor, arear active steering actuator that uses an electric actuator forthe rear steering rack.

1987
Development of a cut card-type direct jacquard machine

1989
Development of a hydraulic active suspension forpassenger vehicles

Development of a semi-active suspension system
for railroad equipment
This system contributes to a comfortable ride for railroad cars using electronic
control to optimally adjust the damping force of railroad oil dampers according
to car vibration. Highly rated by customers, this system attracted attention as
the world’s first such technology for mass-produced railroad cars.

1999
Development of the KVMG-200H control valve

2000

Development of a lightweight, high-performance front
fork for extreme-performance sports motorcycles
This product brings together several new and outstanding technologies,
including titanium ion plating on the inner tube sliding surface to improve
front fork performance, and the world’s lightest titanium alloy bolts, withsignificant advantages over competing products.

2001
Development of 4KW2 and 4KW3 power steering pump products andassociated production line

2002
Development of diamond-like carbon (DLC) coating
Development of a semi-active system using a proportional
electromagnetic relief valve for railroad equipment

Achievement of sophisticated performance forsuspensions used in extreme-performance sports
motorcycles

2009
Development of the 7K vane pump for use in
CVTs in light and compact automobiles

2010
Development to reduce oil leakage from seals

2017

Development of method for massproducing adjustable damping force
shock absorbers with an external
proportional solenoid
Given the growing market for adjustable damping force
shock absorbers with a proportional solenoid, wedeveloped a method for mass-producing them with asmall, external individual damping control unit (IDC) thatdelivers excellent performance and ease of installation.
We expect the product to be adopted in an increasing
range of vehicle models because of its responsivenessand damping force range are superior to competingproducts and because of its ease of installation.

KYB Group Report 201907

Evolution into aComprehensive Hydraulic
Equipment Manufacturer
From the Automobile Shock AbsorberMarket to the Special-Purpose Vehicle
Market
KYB has always valued joint development with manufacturers.
Shortly after World War II, we started jointly developing
shock absorbers with two Japanese automakers. Japanesecars at that time were not equipped with shock absorbers,
so we researched multiple prototype iterations to improvedriving performance and durability. Our success led toorders for 4,000 shock absorbers for the jeeps of the U.S.
occupation forces in Japan in 1948, and we began full-scale
production of shock absorbers for domestic automobiles.
The products we delivered excelled in functionality, durability,
and cost, so they were fully adopted in domestic passenger
cars in 1955 and our market share grew to over 75%.
We subsequently deployed original technology inautomotive hydraulic equipment in markets for specialpurpose vehicles such as U.S. military trucks and large dump
trucks and concrete mixer trucks used for construction,
which are customized with a wide range of equipment.

Rapidly Extending Our Acclaimed
Technology into New Markets
After World War II, KYB laid its foundation as a hydraulicequipment manufacturer by expanding into hydraulic oilpresses and hydraulic jacks for automobiles. Due to theircontrollability and functionality, KYB’s hydraulic jacks havebeen used in a wide range of applications including aircraft
maintenance, civil engineering and construction, ship
hatches, and lifting work.
In 1951, we began collaborating with Japan National
Railways (JNR), now Japan Railway (JR), to develop oil
dampers for railroad cars. The equipment we developed,
which was similar in appearance to the shock absorbers
for large four-wheeled vehicles, demonstrated superior
railroad car speed, ride comfort and cost performancecompared with the dampers then in use, which combined
several types of springs. As a result, all JNR railroad cars
built from 1952 onward used the product we developed. Its
use subsequently expanded to JNR’s diesel railroad cars, andto private railroad companies.
In the railroad equipment business, our steering dampers
and pantograph hydraulic shock absorbers have a dominantmarket share. The technologies we have evolved and thestrong and diverse customer base we have built, which
includes major automobile, motorcycle, and construction
machinery manufacturers, have become our strengths.

KYB’s Technologies
KYB works to improve people’s quality of life by solving societal issues through the use of a wide range of technologies that it
has cultivated over many years based on its core technologies, and by combining these technologies with AI, IoT and otherleading-edge digital technologies.

KYB’s Core Technologies
Vibration Control

Elemental Technologies

KYB Group Report 2019

Leading-Edge Technologies

HydraulicElectronic Control

Motorization

AI and IoT

SystemMaterials

Testing and
Evaluation

Sophisticated Simulation

Monozukuri (Japanese manufacturing expertise)

08

Power Control

Digital Technology

Feature: The History of KYB and Its Businesses

KYB’s Advanced Technology for a
Better Future
Precision hydraulic technology is essential for safety,
reliability and comfort. KYB has continued to reﬁne thistechnology since its establishment, leveraging vibration
control to supply shock absorbers for automobiles,
suspensions for motorcycles and power steering; andleveraging power control technology to supply components
such as valves, pumps, hydraulic cylinders, actuators andreservoir modules for construction machinery, industrial
vehicles, railroad cars and aircraft, as well as reservoirs forspace rockets. Few companies worldwide offer this range ofelemental technologies.
Control technology that combines suspension andsteering is key to achieving autonomous driving. KYB is
involved in both of these areas, and has been developing
and using electronic control technology since the late 1960s.
Two of KYB’s key features are its system development
capabilities including software for applications such as
electric power steering and active suspension, and its
in-house production of electronic control modules.

New Technology Initiatives forAutonomous Driving
The use of lane keep assist
systems (LKAS) to support
autonomous driving isincreasing, so we havedeveloped electric power
steering that can be equipped with LKAS to ﬂexibly operatein-vehicle systems.
We have begun developing
electronically controlled pumps
to address needs in operating
agricultural and construction
machinery, for whichautonomous driving is
becoming practical. We are miniaturizing the electronic servo tomeet demand for computerized design and autonomous operationof vehicles in which space for installation is limited.
To support autonomous operation of
construction machinery and application of
IoT, we have also begun developing
electronic control valves for 20-30 ton
excavators. We are miniaturizing theelectronic control portion to allow
installation with no additional spacerequirements.

KYB’s Core Technologies and Businesses
KYB combines system, electronic control and other technologies with its core vibration control and power control technologies tosupply products to customers in a wide variety of ﬁelds.
Automobiles
Motorcycles

Vibration
ControlTechnology

HydraulicTechnology

Railroad equipment

Electronic
ControlTechnology
Power
ControlTechnology

Automotive
Components
Operations

SystemTechnology

Aircraft components
Construction machinery
Special-purpose vehicles
System productsElectronics components

HydraulicComponents
Operations

Other(Special-Purpose Vehicles,
Aircraft Components,
System Products
and Electronics
Components Business)

KYB Group Report 201909

Global Expansion
Creating Production and Sales BasesWorldwide
Another KYB strength complementing its hydraulictechnology portfolio is its global network of production
and sales bases. Quick to expand overseas, KYB formulated
a long-term Management Vision in 1966 with the goal of
becoming a comprehensive global hydraulic equipment
manufacturer. In 1973, we moved to accelerate operations
outside of Japan by establishing overseas headquarters to
respond to international expansion among customers andimprove the product export ratio. Centered on shock
absorbers, the KYB brand gained popularity overseas as aresult, and in 1981 our export ratio exceeded 10.1% andthe value of exports exceeded ¥10 billion.
In 2002, we established a wholly-owned subsidiary,
KYB Industrial Machinery (Zhenjiang) Ltd. (KIMZ) as a
production and sales base for automobile shock absorbers
in Jiangsu Province, China. In 2004, we established KYB
Hydraulics Industry (Zhenjiang) Ltd. in Jiangsu Province
as our ﬁrst overseas production base for HydraulicComponents Operations. In the same year, we alsoestablished KYB Technical Center (Thailand) Co., Ltd. fortechnology development in Thailand. Thus we created a
global development network spanning the four regionsof Japan, the United States, Europe and Asia, enabling
development that meets the unique needs of local markets.

Manufacturing the Best-Designed,
Highest-Quality Products Worldwide
KYB has the third largest4
share of the global
automobile shock absorbermarket. Currently, we have
38 production bases, ﬁve
research and development
The Developmental Experimentbases, and 35 sales bases
Center test trackin 23 countries. We provide
products, technologies and services in the United States andEurope, and in the leading emerging economies of Brazil,
Russia, India and China, as well as other emerging countries
such as Vietnam, Indonesia, South Africa, Turkey andArgentina.
Moreover, we established the Developmental ExperimentCenter in Gifu Prefecture in 2011 to create high-quality
products that meet the needs of the regions we serve. On
its expansive site, we have built a large-scale test track that
reproduces road surface conditions around the world,allowing simulations and road tests with actual vehicles todevelop better products.
We will continue to challenge the status quo by pressing
forward with the creation of high-value-added products toachieve stable sales and increase proﬁtability unaffected bymarket ﬂuctuations.
Note 4. Source: KYB data (As of March 2019)

Key Milestones Overseas

1974

1987

1996

2002

Sales subsidiary established in
the United States

Shock absorber manufacturingsubsidiary established in the
United States

Joint venture establishedin Spain to manufacture
hydraulic components
for automobiles

Automobile shock absorber
manufacturing subsidiaryestablished in China

Chicago Ofﬁce established in 1972,and sales subsidiary KYB Corporationof America following feasibility studyof entering the U.S. market.

10

KYB Group Report 2019

Kayaba Industries established as a
production base for shock absorbers
in response to the rapid appreciationof the yen and the entry of Japanese
automobile manufacturers into theUnited States.

First production and sales baseestablished in Europe for vane
pumps for power steering through a
joint venture with ArvinMeritor, Inc..

Wholly-owned subsidiary KIMZ
established as a production and sales
base for automobile shock absorbers.
Mass production started in 2004.

Feature: The History of KYB and Its Businesses

The KYB Group by the Numbers
Net Sales by Geographic Region and Overseas Sales Ratio(Millions of yen)(%)

500,000

60

54.9

51.9

54.6

53.5

400,000

393,743
370,327355,32055.2
412,214355,31650

40

300,000
30
200,000
20
100,000

10

0

0
2014

2015

2016

2017

2018

(FY)

IFRS*

■ Japan■ Europe■ America ■ China■ Southeast Asia

■ Others (All left scale)

Overseas sales ratio (Right scale)* International Financial Reporting Standards

Market Share of Major Products
Shock Absorbers

No. 1 40%in Japan

Motorcycle Front Forks

No. 3 15%in the world

Hydraulic Cylinders

No. 1 31%in the world

No. 1 51%in Japan

Concrete Mixer Trucks

No. 1 83%
in Japan

Source: KYB data (As of March 31, 2019)

KYB Group Report 201911

KYB Group Business Activities■ Business Overview
Since its establishment, KYB Corporation has offered a variety of products with hydraulic technology
at their core based on a spirit of creative development. We will continue evolving to deepen the trustand support we have gained from customers around the world through product development that
integrates technologies including vibration control, power control, systems, and electronic control.
Net Sales by Business Segment

Segment Profit by Business Segment*
Other*

Other¥25.8 billion¥0.3 billion

Segment Proﬁt by
Business Segment

Net Sales¥412.2 billion¥22.0 billion

HydraulicComponents
Operations

Automotive
Components
Operations¥140.6 billion¥245.8 billion* “Other” includes special-purpose vehicles, hydraulic equipment for aircraft,system products and electronics components not included in the other tworeportable segments.

HydraulicComponents
Operations

Automotive
Components
Operations¥11.9 billion¥9.8 billion* Segment proﬁt corresponds to operating proﬁt in JGAAP.

Main Businesses
Automotive Components Operations

Ultra-low velocity valves forshock absorbers

Air-oil-separate system (AOS) for thefront forks of motocross motorcycles

This business primarily develops and supplies a wide variety
of products for automobiles and motorcycles. Leveraging
vibration control technology, it serves market requirements
for comfort, safety and maneuverability in day-to-day
driving and motorsports.

Hydraulic Components Operations

Control valves

Active suspension systems forrailroad cars

This business develops and supplies a variety of hydraulicequipment for construction machinery, industrial vehicles andrailroad cars. It also leverages vibration control technology
to meet the needs of onsite monozukuri and railroad
infrastructure for precision miniaturization, digitalizationand systemization.

Major Products
Shock absorbers for automobiles: Shock absorbers (original
equipment (OE), aftermarket)
Shock absorbers for motorcycles: Front forks, rear cushion units
Hydraulic equipment for automobiles: Vane pumps, vane
pumps for continuously variable transmissions (CVT), hydraulicpower steering systems, electric power steering (EPS)
Others: Stay dampers, shock absorbers for all-terrain vehicles,
free locks
12

KYB Group Report 2019

Major Products
Hydraulic equipment for industrial use: Cylinders, valves,
pumps, motors, mini-motion packages (MMP), hydrostatictransmissions (HST)
Others: Dampers for railroad cars, brakes for railroad cars, active
suspension systems for railroad cars, seals

Net Sales by Business Segment and Segment Profit Margin1(Millions of yen)(%)

500,000

20

400,000

320,082

300,000

352,710337,158

370,327

393,743355,320412,21415355,316

305,752

252,02010200,000

7.5
6.4

5.2

3.4

100,000

5.8

5.2

4.9

4.2

5.3

5

1.5
0

0
2009

2010

2011

2012

2013

2014

2015

JGAAP 2

■ Automotive Components Operations

2016

2017

2018

(FY)

IFRS3

■ Hydraulic Components Operations■ Other (All left scale)

Segment proﬁt margin (Right scale)Notes: 1. Before FY2014 segment proﬁt margin was presented as operating proﬁt margin under JGAAP.
2. Japanese Generally Accepted Accounting Principles
3. International Financial Reporting Standards

Other

Concrete mixer trucks

Actuators for aircraft• Special-Purpose Vehicles DivisionThis business develops and manufactures special-purpose
vehicles, focusing on a lineup of small to large concrete mixer
trucks that have the largest market share in Japan. The
excellent mixing, discharging, environmental performanceand other features of our products boost work efﬁciency.
• Aircraft Components DivisionThis business supplies ﬂight control systems, landing
systems, hydraulic and pneumatic systems and otherhydraulic equipment for aircraft. In the aerospacetechnology market, which requires outstanding reliability,
we leverage cutting-edge hydraulic technology to support
ﬂight safety and comfort.

Chair ski shock absorbers fordisabled skiing

Floor equipment• System Products and Electronics Components BusinessWe are opening up new possibilities for hydraulic technology,
such as auditorium and stage control systems that support
theater performances. In addition to hydraulic technology,
we are also focusing on electronic control technology todevelop products such as electronic control units (ECU) for
automobiles and other uses.

Major Products
Special-purpose vehicles: Concrete mixer trucks, granularmaterial carriers, special-function vehicles
Hydraulic equipment for aircraft: Actuators, valves, wheels,brakesSystem products and electronics components, etc.: Auditoriumand stage control systems, ECU, mobile communication devices
KYB Group Report 201913

■ Product Lineup
KYB products support monozukuri (Japanese manufacturing expertise) in a broad range of fields. The
products presented here support daily life by providing safety and comfort in a variety of situations.

14

Automotive

Motorcycles

Railroad Equipment

KYB makes automotive components thatgive users the drivability they want inany situation, from a family outing to achallenging motorsports event.

KYB makes motorcycle components forthe highest level of riding stability andsuperior maneuverability by using raceproven technology designed for extreme
speed and safety.

KYB railroad equipment helps achieve
comfortable high-speed travel bybuffering rolls from air pressure when
cornering, passing oncoming trains orentering tunnels.

Aircraft Components

Construction Machinery

Industrial Vehicles

KYB provides a wide range of aircraftcomponents that meet the strict reliability
requirements of the aerospace technology
market, including components for ﬂight
control and landing, and for hydraulic andpneumatic systems.

KYB construction machinery components
are widely incorporated in equipment used
at construction sites under severe conditions.

KYB puts its components to work in
forklifts and other industrial vehicles toprovide powerful support for improved
operational efﬁciency.

KYB Group Report 2019

KYB Group Business Activities

Agricultural Machinery

Industrial Machinery

Special-Purpose Vehicles

KYB agricultural machinery components
save space and energy for easier farming.

KYB supplies components for industrial
machinery from elevators to factoryequipment to help accelerate production.

KYB special-purpose vehicles support
comfort in all environments. KYB concrete
mixer trucks have the highest market sharein Japan.

Theater Equipment andEquipment for Theater
Construction

Marine ProductsSports and Welfare

KYB technology supports theatrical
productions by providing rigging, acoustic
reﬂectors and other essential equipment
for performance venues.

KYB hydraulic and tension control
technologies make work at sea easier,including for ships operating remotedevices for deep sea exploration, as well
as for transport, supply and rescue.

KYB uses its core technologies to develop
products for sports and welfare.

KYB Group Report 201915

■ Business Strategy Overview
FY2017–2019 Medium-Term Management Plan ProgressIFRS
FY2017 Actual

FY2018 Actual

FY2019 Forecast

FY2019 Target(As of May 2019)(Announced May 2017)

Net Sales¥393.7 billion¥412.2 billion¥410.0 billion¥398.0 billion

Segment Profit*¥22.9 billion¥22.0 billion¥20.6 billion¥26.0 billion(Segment Profit Margin)

5.8%

5.3%

5.0%

6.5%

ROE

8.8%

―

8.4%

10.0%

*Segment proﬁt corresponds to operating proﬁt in JGAAP.

Basic Strategy for FY2019
FY2019 is the ﬁnal year of the FY2017–2019 Medium-Term
Management Plan. Positive outcomes during the ﬁrst two
years of the plan include the launch of value-added
products for automobiles, and preparations for the transfer
and consolidation of the manufacture of products forconstruction equipment are nearly complete. On the other
hand, issues that remain include delays in the restructuringof unproﬁtable businesses, and delays in production tomeet growing demand, especially for hydraulic equipment
for construction machinery. In addition, improper acts in theseismic isolation/mitigation oil damper business have caused
great concern and inconvenience for all those involved.

Given these circumstances, in FY2019 the Group’s toppriority is to thoroughly inculcate a corporate culture ofcompliance and safety ﬁrst, while focusing on bringing our
seismic isolation/mitigation oil dampers into compliancewith regulatory standards. In addition, we will move ahead
with reorganization by making decisions about pending
matters including withdrawing from unproﬁtable businesses
and closing production bases, and will develop competitive
new products and promote innovative monozukuri.
Reforms will be challenging, but seeing them through will
strengthen our earnings structure.

Vision for the Next Medium-Term Management Plan
In the next medium-term management plan, we will focus on
stabilizing our revenue base and generating sustained growth.
Key initiatives to maximize earnings will be closing unproﬁtable
Current situation

production bases and implementing global restructuring inorder to selectively focus on further improving the proﬁtabilityof businesses in which we are highly competitive.

High proﬁtability

Vision for the next medium-term management plan

Shock absorbers(Aftermarket)

Railroadcars
Railroadcars

Construction
machineryBusiness environment= Market share × Market growth rate

Unfavorable
business environment

Shock absorbers(Aftermarket)

Construction machinery

Motorcycles

CVT

Favorablebusiness environment

EPS
CVT

AircraftSpecial-purpose
vehicles

Shock absorbers(Original equipment)

Aircraft

Motorcycles
Shock absorbers(Original equipment)

EPS

Source: Meeting Materials for FY2018, May 17, 2019

16

KYB Group Report 2019

Low proﬁtability

KYB Group Business Activities

Medium-Term Strategy
For long-term growth, map out plan for integrating and reorganizing production bases andcompanies to match geographical shifts in customer demand, and for developing andpromoting sales of value-added products

Progress and Future Initiatives

Auttomotive
Automotive
Components
Operations

Fundamental structural reforms are progressing, with geographic and business integration including thereorganization of our operations in Europe and the consolidation of production bases in the motorcycle
business. We also expect China to be a growing market for the EPS business and have launched a joint
venture there to improve proﬁtability.
We will stabilize our revenue base by globally unifying shock absorber speciﬁcations for mass
markets, and are planning to start doing the same for aftermarket products to expand sales. In
addition, we will use IoT and AI to accelerate the launch of innovative product lines in Japan andoverseas, gradually increasing the level of automation with the ultimate goal of eliminating processing
costs though fully automated operations.
We will also work to generate sustained growth through further rollouts of the high-value-added
products we are already mass-producing to increase orders, and by expanding product orders andpromoting sales of products for the growing sport utility vehicle, electric vehicle and pickup truck markets.

Medium-Term Strategy
Ensure stable sales and profit that are unaffected by market fluctuations
Maintain base in excavators while promoting sales in growth markets in which we were
not fully active

Progress and Future Initiatives

HydraulicComponents
Operations

Building a system that is resilient to market ﬂuctuations is a key initiative for the HydraulicComponents segment, which has therefore been transferring production of control valves for
medium-sized excavators to create an integrated line. Integrating casting, machining and assemblylines will improve productivity, and integrating production and development bases will reduce
development time and further improve product capabilities. In addition, we will consolidate theproduction of motor products to establish a system that can handle high demand.
In the mini and ultra-large excavator markets, where demand is forecast to remain stable, we
expect to maintain high market share by expanding production capacity.
In addition, to generate sustained growth, we will conduct sales promotion activities for products
for the railroad, agricultural machinery, skid-steer loader (SSL) and compact track loader (CTL) andother non-construction machinery markets.

Progress and Future Initiatives

Other

In the Special-Purpose Vehicle Division, we will leverage our solid domestic market share to strengthen
after-sales service and service part sales in Japan while further expanding business overseas.
In the Aircraft Components Division, we will focus on quickly resolving the issue of inappropriate
claims in connection with defense equipment and improve proﬁtability by reviewing conventional
channels for expanding private sector demand and by streamlining the public sector business.
In the System Products and Electronics Components Business, we will focus on preventing therecurrence of improper acts regarding seismic isolation/mitigation oil dampers and on manufacturing
replacement parts.

KYB Group Report 201917

Stakeholder Communications

Basic Policy
Our Corporate Spirit states, “The KYB Group contributes tosociety by providing technologies and products that makelife safe and comfortable.” To fulﬁll this we must comply
with the following:
1. We shall follow all rules and face all issues with honesty.
2. We shall build a corporate culture full of vitality, and holdhigh goals.
3. We shall value sincerity, cherish nature, and care for theenvironment.
4. We shall constantly pursue creativity to contribute to theprosperity of customers, shareholders, suppliers and society.

we should address and solve them one by one, thus earning
the trust and meeting the expectations of stakeholders.
In addition, as we strive to become a better company wewill contribute to the development of a sustainable society
through the creation of products that are friendly to people
and the Earth, based on the technological capabilities that
we have enhanced through ceaseless, creative andinnovative research and development.

In this spirit, we will deepen our dialogue with all
stakeholders and help them gain a better understanding of
our company. Through dialogue, we will clarify the issues

Current Status of Stakeholder Communications
Stakeholders

Engagement Policy

ApproachAnswer phone inquiries

Customers(Manufacturers andend users)

Communicate via the corporate website
Provide quality products and services that satisfy
customers at the right time and price to earn thetrust of society.

KYB Technical Review
KYB Group Report
KYB Museum

General Meeting of Shareholders

Shareholders

Disclose business details, management policies,
business forecasts and results to shareholders in atimely and appropriate manner.

Reports (Annual Securities Report,
Flash Report, etc.)
Plant tours for shareholders

Business Partners

Respect our suppliers as valuable business partners,
and build relationships of prosperity and trust.

Procurement policy information meetings
Regular visits
Labor-management meetings

Employees

Contribute to the sustainable development ofcompanies and the creation of a prosperous society,which are common interests for labor andmanagement.

President’s messages
Employee Satisfaction Survey
Internal newsletter

Local Communities

18

KYB Group Report 2019

Contribute to the development of local communities
through active engagement, and by energeticallyparticipating in volunteer activities, local events, andother activities.

Invitations to KYB events
Participation in local community events

Relationship between the KYB Group and Stakeholders
Customers

Provision of usefultechnologies and products

The KYB Group’s Social Responsibilities

Quality, customer satisfaction
and new product andtechnology development

Local
Communities

The KYB Group always seeks to be creative in its businessactivities and to contribute to the progress of customers,
Shareholders

Greater corporate
value through dialogue

Contribution tocommunities andsociety
Volunteer activities, local
community eventsKYB Group

General Meeting of
Shareholders, plant tours,
various reports

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 andManagement Vision. The outcome of each activity isreviewed in an ongoing cycle of improvement and renewal.
Employees follow the Corporate Guiding Principles intheir work and deepen their awareness of the importance

Employees

Healthy workplaceenvironment
Human rights, occupationalsafety and health, humanresource development

Business Partnersof CSR.

Coexistence withbusiness partners
Build relationships of trust,share policies

Frequency

Details

As needed

Phone call or e-mail form

As needed

Company information and business announcements

Twice a year

Introduction of technologies and products

Once a year

Disclosure of ﬁnancial and non-ﬁnancial information

As needed

Museum displaying KYB products and other materials

Once a year

Business report that includes consolidated ﬁnancial
statements, ﬁnancial statements, report on audit results,
deliberation and resolution of matters to be resolved

Relationship with Business Activities

Collect information on customer needs
and enhance customer satisfaction

Increase corporate value
through dialogue

Once a year or more

Report to shareholders

Once a year

Promote dialogue through plant tours

As needed

Policy sharing

As needed

Various meetings

Several times a year

Various meetings between labor and management

Twice a year or more

New Year convocation and speechStrengthening labor-management
relations

Once a year

Questionnaire survey

Improve employee motivation

Once a monthCommunication via internal newsletter

As needed

Events held at each plant

Strengthen relationships based on
mutual trust

Coexist with local communities
As needed

Interaction with community residents

KYB Group Report 201919

FY2018 Highlights
Support for the Para-Alpine National Ski TeamWe have been an ofﬁcial sponsor of and supplier to the ParaAlpine National Ski Team of the Japan Para-Ski Federation since2015. We develop shock absorbers for the chair-skis of theJapanese team and provide technical support at the team’s
training camps and for World Cup competitions in various
countries. Takeshi Suzuki, a KYB employee and skier chosen by

the Japan Para-Ski Federation to compete in the Paralympics,
has participated in numerous races and worked hard in practice.
He also contributes by maintaining positive media relations andgiving lectures. The KYB Group will continue working withpara-athletes to develop better products and promote sports forpeople with disabilities as part of its contribution to society.

Participation in Kanagawa Science Summer
In FY2018, we once again participated in Kanagawa Science
Summer, an activity that Kanagawa Prefecture promotes forchildren to develop an interest in science technology and toenhance motivation to study. We invited 30 fourth to sixth
grade primary school students and their guardians to KYB
Museum on three occasions in July and August. They learned

about Pascal’s principle and the mechanism of hydraulicpressure through making a simple hydraulics-themed modeland test driving a mini-excavator. It was very popular with thechildren, as before. In addition, we reﬂected suggestions frompast participants by holding a seminar for families at
Minamiashigara City Hall.

Marché to Support Areas Afflicted by the Great East Japan Earthquake
To support areas afﬂicted by the Great East Japan Earthquake,
KYB cooperated with the Tokyo Ofﬁce of the government of
Miyagi Prefecture to hold the fourth Reconstruction Support
Marché (street market for local products) at its head ofﬁce. By
FY2018 it had become a ﬁrmly established Companywide
event, with employees from KYB plants in areas other thanTokyo participating. We will continue to support reconstruction
so that memories of the earthquake never fade.

20

KYB Group Report 2019

Stakeholder Communications

Fundraising for the Children’s Future
Support Fund

Fundraising for the Tokyo Metropolitan
Government Community Chest

The Children’s Future Support Fund is an organizationthat helps children at the grassroots level. KYB received aletter of appreciation from the Cabinet Ofﬁce for its
ongoing support of the fund. We will continue to support
the fund to realize a society in which all children can growwith dreams and hopes, and to prevent the spread ofpoverty to future generations.

We received a letter of appreciation from the Tokyo
Metropolitan Government Community Chest for the
donations we make every year. The donations wecollect go to private-sector social welfare facilities andorganizations that serve the elderly, children, and people
with disabilities. We will continue to support various social
welfare projects through community fundraising efforts.

The 17th KYB Corporate Sports and Cultural Exchange Event
The 17th Sports and Cultural Exchange Event was held at
Sai-no-Kuni Kumagaya Dome in Kumagaya City, Saitama
Prefecture. About 700 KYB Group employees from 15 locationsin Japan and 18 locations overseas gathered to enjoy a day offriendly athletic competition. The event transcended age,gender, department, company, and nationality as theparticipants formed eight teams in an exciting competition
involving tug-of-war and relay races. The joint team comprising
members from the host Kumagaya Plant and KYB-Conmat Pvt.
Ltd. of India worked best together and won the championship.

Factory Tours for Elementary School Students
We invited 96 children from Minokamo Municipal Hachiya Elementary School to tour
the KYB Gifu North Plant. We provided an overview of KYB and its products, showed
students actual production lines and a safety awareness training facility, and presented
KYB’s environmental efforts. The tour was a fun opportunity for everyone to get toknow one another better, and the students contributed with many questions andvaluable opinions. We will continue to place importance on our relationships withlocal communities.

KYB Group Report 201921

Environmental Management

Basic Environmental Policy
Environment & Safety Management System
The Environment & Safety Committee was organized withdirectors responsible for environment and safety as leaders toharmonize KYB’s intentions regarding environment- and safetyrelated issues. KYB has implemented the system shown below.

SloganProtect the Green Earth and Create
Products Gentle to the Environment

KYB’s Environment & Safety Management System
President
Executive Ofﬁcer

Basic Environmental Policies
The KYB Group creates products gentle to bothpeople and the earth. We are dedicated to thepromotion of environmental activities as animportant tool for evaluating management.
1. Coordinate and build up production andcorporate activities based on recycling to
reduce impacts on the environment.

Executive Ofﬁcer incharge ofEnvironment & Safety
Respective business units

Environment & Safety
Committee
Chairman: Executive Ofﬁcer
in charge of Environment& Safety

2. Strive to ensure long-term and sustainable
operations throughout the entire KYB Group.
3. Work to promote harmony with society andcontribute to the global community as agood corporate citizen.
4. Clarify every employee’s role so that all
employees can participate fully.

Subcommittees
Environment Preservation
Subcommittee
Energy-saving Plant
Subcommittee
Safety and Health
Subcommittee

Plant General Manager

Overall Safety
Supervisor

Environment
Supervisory Ofﬁcer

Safety and HealthCommittee

Environment
Supervisory Committee

Subcommittees

Subcommittees

Environmental/Safety Mid-Term Policy
Phase 1 (2011-2013)
1. Creation ofenergy-saving plants• Reduce CO2 basic unit by 1%each year and reduce CO2
emissions by 25% compared to
FY1990 by 2020

2. Creation ofwaste-free plants• Reduce ﬁnal disposal amount ofindustrial waste by 65%
compared to FY2000 by 2015

3. Creation of
accident-free plants• Prevent industrial accidents
through risk assessment• Develop safety awarenesstraining facilities, etc.

22

KYB Group Report 2019

Phase 2 (2014-2016)
1. Creation of plants thatminimize energy
consumption and waste• Reduce energy consumption per
basic unit by 1% per year relative
to FY2013 levels• Reduce amount of industrial
waste per basic unit by 3% peryear relative to FY2013 levels

2. Creation and expansionof industrial accident-free
production bases• Improve employees’ awarenessof safety and eliminate criticalhazards

Phase 3 (2017-2019)
1. Creation of plants thatminimize energy
consumption and waste• Develop environment for partial
supply of energy• Promote measures throughenergy visualization• Promote waste volume reduction
and recycling

2. Creation and expansion ofindustrial and ﬁre accidentfree production bases• Promote risk assessment andcountermeasures for industrial
accidents• Promote ﬁre accident-freemeasuresEnvironmental Conservation Goals, Results and Future Initiatives
We developed the Environmental Management Activity Plan
based on the Company’s environmental policy and implemented
a variety of activities for each production base to achieve ourgoals. However, compared with FY2016, which was thebenchmark, we did not achieve our goals for CO2 emissions, due

FY2018 we only calculated emissions as a whole, but from
FY2019 we will clarify the deﬁnition of recycling in order tocalculate actual waste emissions. In addition, we will work to
improve the efﬁciency of production facilities, further reduceenergy consumption, improve productivity and promote recycling.

in part to an increase in production. For industrial waste, until

Activity Results for FY2018
Theme○: Goal attained

×: Goal not attained

FY2018 Result

Evaluation

Goal

Prevention of
global warming

CO2 emission volume

94,615 t-CO2 or less

97,419 t-CO2

×

Energy saving

Energy consumption
per basic unit

0.70 kℓ/million yen or less

0. 68 kℓ/million yen○

Improvement of
resource recovery
and recycling rate

Recycling rate

91.9% or higher

92.1%

○

Zero emission

4.6% or less

4.5%

○

General waste

474 t or less

597 t

×

General waste perbasic unit

1.96 kg/million yen or less2.09 kg/million yen

×

Metal scrap

16,855 t or less

20,364 t

×

Metal scrap per basic
unit

237 kg/million yen or less251.8 kg/million yen

×

Industrial waste

3,261 t or less

3,827 t×Industrial waste perbasic unit

26.79 kg/million yen or less28.5 kg/million yen

×

Reduction ofwaste

Overview of Major
Initiatives in FY2019

Global Warming Prevention
Measures include replacing
lighting with LEDs, LVDs, andother highly efficient devices,adopting inverter control forhydraulic units, reducing air
consumption in plants, andreducing the air-conditioning load.
Waste Material Reduction
Measures include reducing paintgas volume through biologicaltreatment, introducing waste
treatment systems and turning
sludge and white gasoline into
valuable products.

Notes: Basic units are calculated using marginal proﬁt.
For energy, crude oil equivalent is calculated for electricity and fuel and the total value is displayed as total energy consumption.
CO2 emissions and energy consumption are calculated using methods determined by KYB.

Environmental Load of Business Activities
KYB uses energy, water, chemicals, and a variety of other resources. We make efﬁcient use of limited resources in production by taking
steps to reduce waste, CO2, and other emissions.

Input

Production Activities

Raw materials (Metal, non-metal)

Development/Design

197,396 t
Procurement

EnergyElectric power

Fuel/Gas

112,062 MWh

20,689 kℓ

1,633 km3
Chemical substances (PRTR law target substances)

333 t

Production process

Amount of waste

3,827 t(Reuse, etc.)(Landfill disposal)

Production

2,109 t743 tDistribution

Emission into atmosphere
CO₂
NOx(Crude oil equivalent)

Water

Output• Development of technologies andproducts that are environmentallyfriendly as a result of recycling,energy saving and safety, etc.
• Promotion of green procurement• Promotion of modal shift

97,419 t-CO2

22 t

SOx

Dust

2t

0.3 t

Recycling inside Company

Recycling outside Company• Scrap (Effective utilization in the KYB Group)• Deteriorated solution for chrome plating• Water used for rinsing in chrome plating process, etc.

• Metal scrap• Waste oil• Waste plastic• Grinding powder • Waste thinner • Paper, cardboard, etc.

Scrap

Recycling company

Related company

KYB Group Report 201923

Chemical Substance Management
Response to Environmental Controls on
Products
For protection of the environment, the REACH Regulations,1
other ELV2 and RoHS directives,3 and various laws and regulations
have been established, under which increasingly stringent
provisions are being implemented. In order to address stricter
REACH and other regulations, we have built a database ofchemical substances subject to the regulations applicable to eachof our products, conduct investigations of such substances, andcollect relevant data. We can use this database to rapidly
respond to requests from customers about whether or notprohibited and restricted substances are used and to respond toinquiries about substances of high concern that are additionallyregistered as prohibited and restricted substances from time totime following the implementation of the REACH Regulations.
We will continue with activities that enable us to provide productsthat conform to the needs of our customers and of the market.

Risk Assessment of Chemical Substances
In FY2015, we assessed the health risks related to chemical
substances at all of our production bases in Japan. In FY2016,
we assessed risk of explosion and ﬁre from chemical substancesat the Gifu South Plant and Gifu East Plant. For the assessment,
we submitted an explanation to all departments that handlechemical substances about the three elements for combustion(i.e., combustibles, oxygen, and ignition sources), ﬂashpoint andignition temperature, which are the basic factors in explosions andﬁres. Chemical substances handled by the plants include invisible
gaseous substances and those with ﬂashpoints below room
temperature. Through risk assessments, we strive to provide useful
information to those who handle chemical substances so that they
understand the importance of eliminating ignition sources toprevent explosions and ﬁres caused by chemical substances.

Response to PCB Disposal
Transformers and other electrical equipment containing PCBs are
stored securely at each of our business establishments. We
concluded a disposal contract with a company specializing indetoxiﬁcation processes and started disposal in FY2012.
So far, we have completed the disposal of transformers stored
at KYB-YS Co., Ltd., its Casting Center, the Mie Plant of Kayaba
System Machinery Co., Ltd., and our Gifu South Plant andKumagaya Plant. We will proceed with disposal under the planfor each ﬁscal year.
Notes: 1. Regulations that came into effect in the EU in June 2007 with regard toregistration, evaluation, authorization and restrictions on chemicals
2. A directive that came into effect in the EU in January 2000 to reduce theenvironmental impact of end-of-life vehicles
3. A directive that came into effect in the EU in July 2006 that restricts the useof speciﬁc hazardous substances found in electrical and electronic products.

ISO 14001 Certiﬁcation Acquisition
In order to systematically develop initiatives for environment conservation, we are introducing and promoting an ISO 14001
environmental management system. We will shift to the 2015 edition sequentially in renewal examinations.

Japan

Overseas
KYB

Year of Certiﬁcation
Registration

Gifu South Plant (Including Gifu East Plant,
Production Technology R&D Center, Machine Tools
Center, KYB Motorcycle Suspension Co., Ltd.)

Feb. 2000

Sagami Plant (Including the Basic Technology R&D
Center and the Electronics Technology Center)

Dec. 2000

Kumagaya Plant
Gifu North Plant (Including KYB Kanayama Co., Ltd.)Year of Certiﬁcation
Registration

KYB Manufacturing Taiwan Co., Ltd. (Taiwan)

Jun. 2001

KYB Steering Spain, S.A.U. (Spain)

Jun. 2001

KYB Suspensions Europe, S.A.U. (Spain)

Dec. 2001

KYB Americas Corporation (United States)

May 2002

KYB (Thailand) Co., Ltd. (Thailand)

Jul. 2003

Dec. 2000

KYB Steering (Thailand) Co., Ltd. (Thailand)Aug. 2003

Dec. 2001

PT. Kayaba Indonesia (Indonesia)

Nov. 2004

KYB-UMW Malaysia Sdn. Bhd. (Malaysia)

May 2005

KYB-UMW Steering Malaysia Sdn. Bhd. (Malaysia)

May 2005

Dec. 2000

Takako Vietnam Co., Ltd. (Vietnam)

Jan. 2007

Takako Industries, Inc. (Shiga Plant)

Feb. 2003

KYB Manufacturing do Brasil Fabricante deAutopeças S.A. (Brazil)Mar. 2007

KYB-YS Co., Ltd.

Apr. 2004

KYB Industrial Machinery (Zhenjiang) Ltd. (China)

Apr. 2009

KYB Trondule Co., Ltd.

Nov. 2008

KYB Manufacturing Czech, s.r.o. (Czech Republic)

Aug. 2009

Changzhou KYB Leadrun Vibration Reduction
Technology Co., Ltd. (China)

Jan. 2010

Wuxi KYB Top Absorber Co., Ltd. (China)

Nov. 2013

Group Companies in Japan
Kayaba System Machinery Co., Ltd. (Mie Plant)

24Group Companies Overseas

KYB Group Report 2019Year of Certiﬁcation
Registration

Takako America Co., Inc. (United States)

Feb. 2013

KYB Manufacturing Vietnam Co., Ltd. (Vietnam)

May 2013

KYB Advanced Manufacturing Spain, S.A.U. (Spain)

Jun. 2015

Environmental Management

Environmental Accounting
The amounts of investment and cost were separately calculated with reference to the Environmental Accounting Guidelines, 2005,
presented by the Ministry of the Environment.

(Millions of yen)

Cost Type(1) Businessarea cost

Major Contents

Invested Amount/Cost(1)-1 Pollution prevention cost

• Air pollution and water pollution prevention activities• Maintenance and inspection of pollution prevention facilities• Analysis and measurement of atmosphere and water quality

204.3(1)-2 Global environmental
conservation-cost• Energy conversion• Energy-saving activities

21.1(1)-3 Resource circulation cost

• Recycling of plant waste• Reduction of industrial waste

216.7(2) Upstream/downstream cost

Not available

0.0(3) Management activity cost

• Maintenance and periodic renewal screening of ISO14001• Monitoring of environmental impact

97.0(4) R&D cost

• Environmentally friendly product development• Lightweight products and products containing less hazardous
chemical substances

89.8(5) Social activity cost

• Support of non-proﬁt environmental protection• Afforestation and maintenance of scenery around plants

12.8(6) Environmental remediation cost

Not available

0.0(7) Other cost

• Internal environmental conservation• Welfare conservation

22.7

Grand total

Not available

664.4

Note: Classiﬁcation and Deﬁnition of Environmental Conservation Costs
Invested amount: Expense for the purpose of environmental conservation during the target period with effect that continues for a number of terms and cost running for those
periods. (Amount acquired during the current term of the depreciable asset)
Cost: Cost or loss generated from expenditure of ﬁnances/services for the purpose of environmental conservation.

Environment-related Data
CO2 Emissions

Energy Consumption(t-CO2)150,000
1.25
100,000

95,081

1.31

92,7091.26
96,545(t-CO2/million yen)
1.5
1.34
1.30
101,289

Waste Emissions(㎘)(㎘/million yen)
0.80

80,000
0.654

0.689

0.713

0.704

0.684

60,00097,41950,0000.60

1.046,79848,66450,76453,081

51,031

0
2014

2015

■ Emissions (Left scale)

2016

2017

2018

0.40

20,000

0.20

0

0
2014

2015

2016

■ Consumption (Left scale)

2017

2018

5,000
0

■ General waste

Water Usage

Energy Consumption for Transportation*
(kℓ)
2,500
2,241
1,633

1,383

1,243

1,251

20,364

3,469

3,506

539
2015

504
2016

■ Metal scrap

3,827

3,539
597

504
2017

2018

(FY)

■ Industrial waste

2,171

2,000

1,331

19,755

17,931

16,998

3,729
535
2014

(FY)

Basic unit (Right scale)

(km3)
2,000
1,500

18,923

10,000(FY)

Basic unit (Right scale)

20,00015,00040,0000.5

0(t)25,000

1,946
1,756

1,673

2015

2016

1,500

1,000
1,000
500

500
0

0
2014

2015

2016

2017

2018

(FY)

2014

2017

2018

(FY)

* Amount as crude oil

KYB Group Report 201925

Environmental Management

Activities at Production Bases
Energy Savings from Introducing UltraHigh-Efﬁciency Amorphous Transformers
The Sagami Plant has 50 transformers at each of its substations.
Four of them had deteriorated over time and were at high risk offailure. We therefore replaced two of the transformers in 2017
and two more in 2018 with Super Amorphous Zero S ultra-highefﬁciency amorphous transformers that greatly reduce power loss.
The annual energy saved is equivalent to approximately 26 kℓ ofcrude oil.

is within the wastewater standard set under the Water Pollution
Control Law. We installed the oil and water treatment equipment
about 40 years ago and it had deteriorated over time, lowering
treatment capacity, raising the possibility that it would no longer
comply with water quality standards going forward. At the sametime, the eighth round of standards for efﬂuents (total nitrogenand total phosphorus in water) became more stringent withrevision of the Water Pollution Control Law. Given this situation,
the plant has upgraded the existing facilities to maintain thequality of treated water with even greater accuracy, thus fulﬁlling
its social responsibility to prevent pollution.

Turbo Compressor Upgrade
Since FY2016, the Gifu North Plant has been upgrading to turbo
compressors. Turbo compressors with three-stage compression
are more efﬁcient than screw compressors with two-stagecompression, thus reducing annual electric power cost. In addition,
turbo compressors are expected to lower maintenance costs because
they have fewer parts. In FY2018, the Gifu North Plant installed
its second turbo compressor, and will successively upgrade fromscrew compressors to turbo compressors to reduce energy costs.

Reducing Environmental Load with Bus Service
The bus used by employees of the Gifu North Plant to commute
between the plant and the nearest train station stopped operatingover 30 years ago, so the plant has provided taxi service from thestation for such people ever since. Given the cost and environmental
considerations, we established a bus service synchronized withtrain arrival times. There are four trips daily. The route includes
the Gifu North, Gifu South and Gifu East plants, eliminating an
average of 11 taxi trips perday. Although not a major
initiative, the bus service has
reduced CO2 emissions andcosts. We will continue to
implement environmentallyfriendly initiatives.

Reducing Compressor Power Consumption
The power consumed by compressors accounts for about 27%of the total energy consumed at the Nakanojo No. 2 Plant of
KYB-YS Co., Ltd. The company therefore introduced a control
system that can shut down compressors inconjunction with production line operation
using the touch panel for automatic
compressor operation and shutdown
shown in the photo. The result was
exceptionally energy-efﬁcient operation,with compressor power consumption
reduced 13%, a 3.5% saving for theplant as a whole.

Upgrade of Oil and Water Wastewater
Treatment Facilities
The oil and wastewater treatment equipment at the Gifu North
Plant treats wastewater that contains oil from the entire plant and26

KYB Group Report 2019

Reducing Industrial Waste by Extending
the Cleaning Liquid Replacement Cycle
KYB Kanayama Co., Ltd. is reducing industrial waste as part of its
environmental activities. Plant No. 1 made cleaning liquid
replacement quantitative rather than periodic, which changed
replacement frequency from once a month to once every threemonths. As a result, the plant was able to reduce the amount of
efﬂuent from 47,520 ℓ/
Effluent Volume
year to 15,840 ℓ/year and(ℓ)
reduce the cost of
50,000purchasing ancillary
40,000materials by two-thirds.
30,000The change has no20,000impact on quality, and10,000KYB Kanayama will0
Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
deploy this system at
FY2017FY2018 (After improvement)
Plant No. 2 as well.

Quality Management

KYB Group Basic Policy for Quality
KYB Group shall:
address quality improvement with honesty driven by the belief that quality is the basis for business.
deliver safe and secure products in compliance with promises to customers as well as with laws and regulations.

KYB and Group companies shall comply with the Bad News First policy,* promptly report any abnormalities
they uncover, and work earnestly to resolve problems quickly in order to provide monozukuri and services
with a level of quality that satisﬁes our customers and society.
* A system for promptly reporting abnormalities when they are uncovered. It promotes early detection and response to issues that could leadto a serious crisis.

Quality Assurance System
We have built and operate an ISO 9001-compliant quality
assurance system that emphasizes the quality of work processes
as well as the quality of products and services. We strive each day
to make improvements in all aspects of quality.
Quality at the development design stage, which includes thedevelopment of manufacturing methods and processes, is adetermining factor in the market quality of our products.
Furthermore, the adequacy and thorough implementation of shop
ﬂoor work procedures and rules will contribute to a reduction inprocess defects and other quality losses that occur in monozukuri.
At KYB, we implement what is called a three-step evaluation
system for the development and mass production of products,

What KYB Aims to Be: Quality Problem Prevention Cycle

Development of Products and Technologies through aThree-Step Evaluation System and the Declaration of
Quality and Safety
Step

Development
and Design

Creategood blueprints
Improvementof robustness

and the development of technologies, manufacturing methods,
and so on. We make every effort to achieve high quality
throughout the product life cycle, from the product planningstage, to defect reduction and change management after mass
production and shipment. At our production bases, we take avariety of quality improvement measures under the leadership ofbase managers and plant managers, and we are working topromote the unerring operation of our three-step evaluation
system. Furthermore, to ensure the quality of mass-produced
products, we also follow this system for single, small-lot orders
and when production is moved to another production base.

By following the blueprint,
the required functions
are guaranteed.

Prior and model
development
Realization of
products that satisfy
design requirements

Goal of the three steps

Qualityassurance step

Proof of possibility(Description and evaluationof development quality)

Development
quality

Proof of mass production(Description and evaluationof development quality)

Start quality

DR0 evaluation meeting

Orderdevelopment
DR1 evaluation meeting

Manufacturing
and Inspection

Production
Technology

Maintenance,
management
and improvement

Create goodconditions
By following the establishedprocessing conditions,
quality is guaranteed tomatch the blueprints.

By observing work standards
based on good blueprints andgood conditions, only good
products can result.

Establishment ofgood conditions formaintenance and management

Mass-production
development andproduction
preparations
Declaration of
Quality and Safety

Proof of applicability andserialization(Demonstration andevaluation of start quality)

Mass-production
quality

Declaration of Quality and Safety
Evaluate manufacturing site, manufactured products anddata to confirm that mass-production quality is problemfree and that reliable production and shipment are possible.

DR2 evaluation meeting

Mass production
Initial ﬂow
management

Bad News First
Execute (until the reporter receives feedback)
When abnormalities arise: Stop, Summon, Wait

Supplier Award List (FY2018)
Base

Award

Description

Customer

KIMZ (China)

Supplier Commendation

Received all three commendations: QCDS, Quality, Special Award

Jatco Guanzhou Ltd.

KYBT/KST (Thailand)

Regional Quality Award

Received commendation for contributing to quality

Nissan Motor Co., Ltd.

KYB Kanayama

Supplier Commendation

Received commendation in recognition of excellent quality

General Motors Japan Limited

KYBT (Thailand)

Quality Excellence Award

Received commendation in recognition of excellent quality

General Motors (Thailand)Co., Ltd.
KYB Group Report 201927

Human Resources Management

Human Resources Development
We nurture people with a high awareness of compliance – people
who can compete internationally. We use a broad spectrum ofeducation and training to enable them to enhance their expertise,
operate independently across borders and regions, and performtheir duties competently. Programs include class-speciﬁc education,compliance education, specialized technical education, production

system improvement, monozukuri (Japanese manufacturingexpertise), globalization, and health and safety.
In addition, employees of Group companies in Japan haveaccess to the same education system so that the entire KYB Groupcan develop people as valuable human assets.

The KYB Education System
Class-speciﬁc
education

New employee training
New manager training
Approx. 20 other courses

Compliance education
Compliance awareness education

High awarenessof complianceand quality
An open workplaceenvironment

Engineer
education

Specialized technical educationin ﬁelds including mechanics,
electricity, electronics, control
and materials
Approx. 50 other courses

KPS training and study abroad

Enhancementof techniques,
skills and ability tomake improvements

Monozukuri education

Quality education
Employeehealthand safety

Safety education
Mental health education

Languagetraining

Short-term language training
assignments
Overseas trainee systemand others

Training prior to overseas assignments

Globaloperations

Global engineer education
Distance learning (approx. 270 courses)

Support for selfdevelopment

Specific Initiatives
Compliance Awareness Education
The KYB Group is committed to an open corporate culture inwhich management and employee communication is energized bysharing perceptions of the current state of affairs.
We promote quality management, which is fundamental tomanagement, by positioning compliance awareness as the foundationof the KYB Group. We are working to foster a mindset of abiding withmoral, ethical, legal and societal rules at every level of the organizationfrom senior management to rank and ﬁle employees.

Regain trust
Senior management
Shared perceptionof the current
state of affairs

Strategy of successthrough quality management

An opencorporate culture

Executives, managers
and supervisors
Energetic communication

Employees
Delivering 100% quality

Compliance awareness*
The foundation of the KYB Group* Mindset of abiding by moral, ethical, legal and social rules

28

KYB Group Report 2019

Taking on the Challenge of the National Skills
Competition
The Ministry of Health, Labourand Welfare and the Japan
Vocational Ability Development
Association organize the
National Skills Competition
as a technical skill-based
competition for young people.
People throughout Japan in 42
occupations in ﬁelds that
include machinery are selected to participate.
KYB participates in the Lathe Operation category as part of its
activities to develop young, highly skilled technicians who possess
processing skills, judgment, insight, and patience. In FY2019, two
young employees will participate in this competition.

Global Engineer Training
We provide global engineer
training on an ongoing basis
for employees of overseas
Group companies.
We currently offer ninecourses: plating, welding,painting, centerless grinding,equipment maintenance, measurement and material inspection, KYB
Production System (KPS), casting, and heat treatment.

Small Group Activities
What Are Small Group Activities?
In each workplace, we form small teams that have been optimized
for speciﬁc objectives. Guided by a supervisor, they work toestablish compliance awareness and improve safety, quality andproductivity. The goal of these Companywide activities is to help

prevent improprieties, enhance corporate performance, energize
the workplace and improve communication, and to develop our
people by enhancing their ability to make improvements.

Basic Approach for Small Group Activities
Formulate policies (Goals and measures)
Execute policies (Goals and measures)Supervisor support must be suited to the problems and tasks that arise in policy execution.

Select and address next theme

Continuous initiatives as an organization

Identify problems and tasks
Theme resolution

Continuous initiatives as individuals

Select themes

Assess abilities and certify qualiﬁcations
Acquire methods for
improvement andbusiness knowledge

Formulate action plans

Education and training

Resolve problems and achieve tasks

Improve motivation
and awareness

Summarize, report and announce

Evaluate and commend

Deploy and use results
Reﬂect on and review activities

Specific Initiatives
Development of Trainers for Overseas Bases
Overseas Group companies aredeveloping trainers for key
onsite people who will be
responsible for running small
group activities. In March 2019,18 trainees from nine countries
participated in the ﬁrst trainer
development program, where
they learned about the role of the Small Group Activity Ofﬁce,
approaches, and quality control methods. We will continue to
conduct trainer development to increase the number of key onsite
people who can run small group activities.

Presentation of Outstanding
Small Group Activities
We share small group successstories at two Companywide
events – one for manufacturing
departments and one formanagement, administrativeand sales departments – thatshowcase the results ofoutstanding teams selected
through tournaments at each location, and at tournaments at Group
companies in Japan.

These events help create an open workplace environment anddevelop our people in ways such as promoting the use of small group
activities for preventing improprieties.

Training in Quality Control Methods
We promote small group activities through two-day courses that teachthe methods used by these groups and how to implement them.
1. Practical course on quality control methods and problem resolution
2. Practical course on new quality control methods and task achievement
We have steadily increased the number of participants by making
the courses a prerequisite for promotion.

Increase in the Number of Participants in Practical
Courses on Quality Control Methods(Cumulative number of participants)
800

771
698

600
462

511

■ Practical course on quality
control methods andproblem resolution

400
200

207

■ Practical course on new
quality control methods
and task achievement

155

0
2016

2017

2018

(FY)

KYB Group Report 201929

Promoting Health Management
KYB Health Declaration
KYB sees the health of employees and their families as an important management resource and source of corporate vitality,
and is working to achieve sustainable growth through the creation of an environment in which all employees can work in good
health both physically and mentally.
We are committed to actively supporting employees who are engaged in health promotion activities and to promoting
organizational measures for health promotion in order to live up to our Corporate Spirit by “building a corporate culture full ofvitality and holding high goals.”
November 1, 2019
Representative Director and President Executive Ofﬁcer

Organizational Structure for Promoting Health Management
Health management ofﬁcer(Representative Director,
President Executive Ofﬁcer)

Health management promotionofﬁcer (Director in charge of
Human Resources)

Health management
promotion team

Human Resources Division
Health Management Center

Policy execution

Health Insurance Association
Functional andbusiness divisions

SupportLabor Union

Key Initiatives
1. Measures for Lifestyle-Related Diseases(Collaboration with Health Insurance Association)

2. Mental Health Measures• Promoting mental health education• Creating an environmentthat facilitates exercise

We promote class-speciﬁc education for primary prevention ofmental health issues in the workplace.

We have installed walking
courses and hold Companywide
walking events.

Class-Speciﬁc Education in FY2018• Initiatives to keep the percentage of employees
undergoing scheduled health checkups at 100% and to
improve the percentage of employees undergoing
speciﬁed health checkups
Percentage of Employees Undergoing Health Checkups
Regular healthcheckups

Speciﬁed healthcheckups

FY2017

100%

73.5%

FY2018

100%

77.4%

• Health seminars
Visiting lecturers give annual health seminars at all of our businesslocations in order to raise health consciousness among employees.

Seminars held

Attendance rate

Supervisors

5 per year

92.5%

Managers

3 per year

96.0%

• Activities for freedom from harassment in cooperation
with functional and business divisions
Based on the belief that freedom from harassment is essential for
creating a vibrant and rewarding workplace, we have madefreedom from harassment a corporate priority and are executing
policies for all functional and business divisions.

3. Passive Smoking Countermeasures• Smoking environment countermeasures
87.7% of smoking areas areoutside and 66.7% of businesslocations have introduced ﬁxed
smoking times.
• Support for smoking
cessation
We provide support for employees who want to quit smoking.

30

KYB Group Report 2019

Human Resources Management

Promoting Work Style Reform
Basic Approach
We are focusing on building and enhancing systems using thethemes shown on the right to achieve a rewarding workplace inwhich diverse individuals can contribute over the long term.
In addition, in FY2018 we began conducting an Employee
Awareness Survey for all KYB employees regarding workplace
climate, working conditions, management policy and othermatters. Answers are anonymous, and an external organizationcompiles and analyzes the results. Consequently, response rates
have been high (95.6% for the ﬁrst survey in 2018, 97.1% for
the second survey in 2019) and we have learned the true
opinions of employees.
We will continue to conduct this survey regularly and use thedata to promote Companywide initiatives for employee work
style reform.

1. Support for work-life balance
Flextime system, hour-based annual leave system, etc.
2. Consideration of diverse work styles
Promotion of telecommuting, shortened working
hours to accommodate childcare, etc.
3. Promotion of employee healthSee “Promoting Health Management” on page 30
for details.
4. Improvement of work process efﬁciency
Includes productivity improvement projects foradministrative operations

Specific Initiatives
Enhancing the Productivity of
Administrative Operations
In FY2017, we launched the Administrative Operations Productivity
Improvement Project and are working to improve efﬁciency andadded value in administrative operations, including general affairs,
accounting, human resources and production management.
Each administrative department has formulated a Work Process
Improvement Action Plan to review existing work from theperspectives of Eliminate, Reduce and Change, with the goal of
improving work process efﬁciency by about 20% over three years
through a transition to higher added value.
In addition, we have introduced robotic process automation (RPA)
tools in some departments to automate routine work processes. We
will continue to study and verify all measures to increase efﬁciency inorder to improve the productivity of administrative operations.

Eliminate

Eliminate process
entirely① Terminate process② Eliminate

redundancies

ReduceIncrease processing
speed and quality(Quantity andQuality ÷ Time)① Standardize② Systematize

ChangeReduce work processunit costs(Yen ÷ Time)① Change managers② Outsource

employees raising children. Employees had indicated that thechildcare leave period stipulated by law made it difﬁcult to placechildren in nursery school because the leave period ended in the
middle of the ﬁscal year, before the start of the school year.
Furthermore, we revised the ﬂextime system in April 2019 byextending the period of the workday available for ﬂextime workand applying the system uniformly at all business locations. This
enables ﬂexible work styles that match employees’ private lives andwork schedules.

Promoting Telecommuting
One of our work style reform initiatives has been to promotetelecommuting, with the goal of reducing time and energy spent incommuting, and using the time saved more effectively. In November
2017, we launched a trial program focused on supporting work-lifebalance for employees raising children or providing nursing care forfamily members. We then expanded the scope of the program toinclude all employees at the head ofﬁce and branches, allowing
them to telecommute up to twice a week.
In addition, we registered with the organization implementing
Telework Days 2019, a program set up ahead of the 2020 Tokyo
Olympics and Paralympics by theministries involved and by the
Tokyo Metropolitan Government,
and encouraged employees towork from home.
Based on employee feedback,we plan to improve ourtelecommuting system by making
it more user-friendly, and to
broaden eligibility.

Support for Work-Life Balance
KYB supports work-life balance for its employees as a means tocreate an environment in which employees can participate withenthusiasm. In April 2018, we extended the childcare leave period
to the end of April after the child turns three in order to support

KYB Group Report 201931

Corporate Governance

Basic Policies
1. We shall respect the rights of shareholders, and ensure the equal and fair treatment of all shareholders.
2. We shall take the interests of shareholders and other stakeholders into consideration and endeavor to appropriately
cooperate with those stakeholders.
3. We shall disclose not only information in compliance with the relevant laws and regulations, but also actively
provide important and/or useful information to stakeholders to enable well-informed decision-making.
4. The Board of Directors shall be cognizant of its ﬁduciary responsibility and accountability to shareholders, and shallappropriately fulﬁll its roles and responsibilities in order to promote sustainable and stable corporate growth andincrease corporate value, proﬁtability and capital efﬁciency.
5. We shall engage in constructive dialogue with shareholders, and make efforts to obtain their support regarding theCompany’s Business Policies and also reﬂect their opinions and concerns in efforts to improve management.

Basic Approach for Regaining Trust
We have established the Corporate Guiding Principles todemonstrate our values regarding appropriate cooperation withstakeholders, respect for their interests, and sound business ethics.
We have inculcated these principles and make efforts to ensurethat compliance extends to the front lines of business activities inJapan and overseas. For example, we hold brieﬁngs on the
Corporate Guiding Principles, conduct various types of complianceeducation, set compliance education as a requirement for
promotions, conduct in-person reviews of relevant employees, andensure that everyone in the Company is aware of the whistleblowing system. Through these and other venues we haveendeavored to broadly instill a sense of urgency among employees
by making them keenly aware that the products and services that
we supply through our businesses are connected to people’ssafety, physical wellbeing and ﬁnancial position, and that they are
involved in quality management both directly and indirectly, andthat laxity in any aspect of their work could impact society atlarge. In addition, we have widely communicated our Bad NewsFirst reporting system for identifying and resolving issues when
they are still minor. It calls for reporting any workplace

abnormalities whether favorable or unfavorable. However,improper acts occurred. As announced on October 16, 2018,
performance inspection data records were falsiﬁed for some of theseismic isolation/mitigation oil dampers shipped by KYB and a
subsidiary. Products that did not conform to performance
evaluation standards approved by the Minister of Land,
Infrastructure, Transport and Tourism nor met the standards of ourcustomers were installed in buildings. In addition, there were
improper claims in connection with a contract with the Ministry of
Defense for defense equipment.
To prevent recurrence of the improper acts and demonstrate
our commitment to regaining trust, we revised our Corporate
Spirit by adding the item “Follow all rules and face all issues withhonesty,” and, based on the revised Corporate Spirit and basic
policy, we will work to strengthen and enhance corporate
governance. Having clearly codiﬁed the prevention of qualityrelated misconduct in our Corporate Guiding Principles, we will
deeply inculcate these principles in all of our people at the frontline of business operations in Japan and overseas, and will
resolutely ensure compliance.

Overview of the Corporate Governance System
KYB is structured as a company with an Audit & Supervisory Boardin accordance with the Companies Act, and corporate governancecenters on the Board of Directors and the Audit & Supervisory
Board and its individual members. In addition, KYB has instituted
an executive ofﬁcer system to expedite decision-making andstreamline business execution.
Two of the six members of the Board of Directors are
independent outside directors, and two of the four members of the
Audit & Supervisory Board are outside Audit & Supervisory Board
members (including one independent outside Audit & Supervisory
Board member). KYB believes it has strengthened independent andobjective management supervision by the Board of Directors
because one-third of the board consists of independent outside
32

KYB Group Report 2019

directors. KYB determines whether outside directors and outside
Audit & Supervisory Board members are independent based on
KYB’s independence standards, and selects individuals who can be
independent of other members of management.
Furthermore, the Internal Control Department is the organization
responsible for overall planning and coordination of global
governance and compliance, and the J-SOX CorrespondenceOfﬁce within the Internal Control Department conducts
evaluations based on Japan’s Financial Instruments and Exchange
Law (J-SOX). We have also established the Special Audit
Committee on Wrongdoing Risk, which is chaired by an outside
director and has broad responsibility for detecting signs of
misconduct and situations that give rise to it.

Corporate Governance Structure
General Meeting of Shareholders
Elect/Dismiss

Elect/Dismiss
Consult

Special Audit Committee on Wrongdoing Risk

Board of Directors
ReportAudit & Supervisory Board

Accounting Auditor

Audit

Audit

Advisory Committees(Nomination, Compensation)

Representative Director,
President Executive Ofﬁcer

General Manager
CSR & Safety Control Division

Board of Executive Ofﬁcers,
Other Management Committees

Internal Control Department
J-SOX Correspondence Ofﬁce

Audit Department

Evaluation based on J-SOX

Audit

Responsible head ofﬁce departments, operational headquarters, Group companies, branches, representative ofﬁces

Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members
KYB Corporation (the Company) has established the following independence standards for outside directors and outside Audit & Supervisory
Board members based on the requirements for independent ofﬁcers established by ﬁnancial instrument exchanges. Ofﬁcers are deemed to lackindependence if any of the following apply.
1. Persons who have work experience at the Company or its subsidiaries (KYB Group)
2. Persons who have work experience at principal lenders1 to the KYB Group3. Major shareholders2 of the Company, or their members or executives
4. Major customers3 for the KYB Group’s products and services, or their members or
executives
5. Major suppliers 4 of products and services to the KYB Group, or their members or
executives
6. Consultants, accounting professionals, legal professionals and the like who receive
annual payments or other goods in kind exceeding ¥10 million from the KYB Group,
excluding officer compensation (if a corporation or other organization is the recipient
and the amount received exceeds 2% of the organization’s annual income, any
member or executive of the organization).

7. Persons who receive donations of more than ¥10 million annually from the KYBGroup (if the recipient is a corporation or other organization, any member or
executive of the organization).
8. Members or executives of corporations or other organizations that engage in themutual dispatch of directors or executive officers with the KYB Group.
9. Persons who have work experience at an audit firm that is an accounting auditor of
the KYB Group
10. Persons to whom any of 3 to 9 above are applicable over the past 10 years
11. A spouse or relative within the second degree of kinship of a person to whom any of
1 to 10 above are applicable
12. Other persons who have special reasons that may cause a conflict of interest with
the Company

Notes: 1. The KYB Group’s principal lenders are ﬁnancial institutions and other large creditors that the KYB Group relies on for funding and could not readily replace.
2. Major shareholders of the Company are those that hold 10% or more of voting rights at the end of the Company’s ﬁscal year, whether directly or indirectly(including rights held indirectly through a trust bank or other vehicle).
3. Major customers for the KYB Group’s products and services are those with an annual transaction amount exceeding 2% of the KYB Group’s consolidated sales.
4. Major suppliers of products and services to the KYB Group are those with annual transaction volume exceeding 2% of the consolidated sales of the supplier group.

Evaluation of the Effectiveness of theBoard of Directors
In each of the past three ﬁscal years, KYB evaluated theeffectiveness of the Board of Directors and disclosed a summaryof issues and initiatives in the Corporate Governance Report. For
example, we reviewed the standards for matters to be submitted
for discussion at meetings of the Board of Directors, establisheda Nomination Committee and a Compensation Committee, andconducted factory tours for individual shareholders.

Takeover Defense Measures
Countermeasures to Large-Scale Purchase of the Company’s
Shares (Takeover Defense Measures) is a KYB initiative toincrease corporate value and thus ensure the common interestof shareholders for the medium and long term. The 97th
Ordinary General Meeting of Shareholders on June 25, 2019
approved a resolution to renew this initiative until the end of the100th Ordinary General Meeting of Shareholders scheduled forJune 2022.

KYB Group Report 201933

Strengthening the KYB Group’s GovernanceInitiatives

FY2014

Initiated in-person interviews with relevant employees

FY2015

Appointed one independent outside director

FY2016

Appointed two independent outside directors and established a discretionary Nomination Committee

FY2017

Established a discretionary Compensation Committee

FY2018Established independence standards for outside directors and outside Audit & Supervisory Board members

FY2019Established the Special Audit Committee on Wrongdoing Risk and the Internal Control Department
Raised the ratio of independent outside directors on the Board of Directors to one-third

Non-Financial Corporate Governance Achievements
1. Corporate Guiding Principles now available in 14 languages(Japanese, English, Chinese (simpliﬁed and traditional script versions), Portuguese, Vietnamese, French, German, Czech, Thai, Indonesian,
Spanish (European and Latin American versions), and Tagalog
2. Ratio of independent outside directors on the Board of Directors now one-third
3. Independence standards for outside directors and outside Audit & Supervisory Board members formulated

Ofﬁcer Compensation
Compensation Structure
Ofﬁcer compensation consists of ﬁxed monthly compensation(basic compensation) according to position and responsibilities,
and performance-linked compensation (bonus) that varies
depending on the Company’s business results. Outside directors
Type ofCompensation

and Audit & Supervisory Board members only receive ﬁxed
compensation according to their respective roles, and inview of their independence do not receive performancelinked compensation.

Maximum Total
Compensation

Date of Resolution of theGeneral Meeting of Shareholders

Calculation Process

Directors¥30 million per month(¥360 million per year)

June 27, 1997
75th Ordinary General Meetingof Shareholders

Consultation with
Compensation Committee

Audit & Supervisory
Board members¥8 million per month(¥96 million per year)

June 24, 2011
89th Ordinary General Meetingof Shareholders—

Directors(Excluding outside
directors)

40% or less of total compensation(Fixed compensation +Performance-linked compensation)

Approval annually by resolution
at the Ordinary General Meetingof Shareholders

Consultation with
Compensation Committee

Eligible Ofﬁcers

Fixedcompensation

Performancelinked
compensation

Note: The limit on total ﬁxed remuneration for directors does not include salary for employees concurrently serving as directors.

Compensation Decisions
For director compensation, the discretionary Compensation
Committee composed of representative directors and outside
directors veriﬁes the propriety of the criteria for calculating ﬁxed
and performance-linked compensation and reports the proprietyof criteria to the Board of Directors.
Fixed compensation for directors is determined by resolutionof the Board of Directors upon receiving the report from theCompensation Committee, within the limit on total compensation

34

KYB Group Report 2019decided at the Ordinary General Meeting of Shareholders.
Payment of performance-linked compensation for directors(excluding outside directors) is approved annually by resolution at
the Ordinary General Meeting of Shareholders.
Fixed remuneration for Audit & Supervisory Board members isdetermined in consultation with Audit & Supervisory Board
members, within the limit on total compensation decided at theGeneral Meeting of Shareholders.

Corporate GovernanceCalculation and Determination of Performance-Linked Compensation to Be Paid
1. Criteria and Business Results That Serve as the Basisfor Calculation
Performance-linked compensation is calculated according to thedegree of achievement in the preceding ﬁscal year (the “baseﬁscal year”) of the consolidated performance forecast according
to the following calculation criteria (four items).
Calculation Criteria

TargetResult22,00022,0105.30

5.34

Proﬁt (loss) attributable to owners of
the parent (Millions of yen)

16,600(24,757)

Proﬁt (loss) margin attributable toowners of the parent (%)

4.00(6.01)

Segment proﬁt (Millions of yen)Segment proﬁt margin (%)

Note: The targets are the consolidated ﬁnancial results forecast for the base ﬁscal
year (FY2018, or the ﬁscal year ended March 2019) described in the ﬁnancial
statements at the end of the ﬁscal year prior to the base ﬁscal year (FY2017, orthe ﬁscal year ended March 2018).

2. Calculation of Amount to Be Paid
Total performance-linked compensation is limited to 1.0% of
proﬁt attributable to owners of the parent. Moreover, the ratioof performance-linked compensation to total compensation(ﬁxed compensation + performance-linked compensation) of
directors (excluding outside directors) shall not exceed 40%.

The total amount to be paid is calculated by multiplying the
maximum amount payable by a payout ratio derived from thenumber of calculation criteria targets in 1. that were achieved.
Performance-linked compensation is not paid in the case of aloss attributable to owners of the parent.
Calculation
criteria
targets
achieved

4

Payout ratio 100%

3

2

1

0

Loss
attributableto owners of
the parent

80%

60%

40%

20%

0%

3. Determination of Amount to Be Paid according
to Position
The amount of performance-linked compensation to be paid toindividual directors (excluding outside directors) is calculated
based on proportional distribution of the total amount to be
paid in 2. to each director according to the following payment
points for each position. Amounts are rounded down to thenearest ¥100,000.

Position

Chairman

Payment points

8

SeniorVice
Vice
Managing
President
ChairmanPresident Executive
Ofﬁcer

7

10

6

5

Total Compensation for Each Officer Category, Total Compensation by Type, and Number of Eligible Officers
Compensation by Category (Millions of yen)

Total Compensation(Millions of yen)Fixed compensation

Performance-linked
compensation

Directors(Excluding outside directors)

225

225

—

7

Outside directors

17

17

—

2

Audit & Supervisory Board members(Excluding outside members)

46

46

—

2

Outside Audit &Supervisory Board members

47

47

—

3

Category

Number of Eligible
Ofﬁcers

Notes: 1. Total compensation for directors (excluding outside directors) does not include salary for employees concurrently serving as directors.
2. The above data includes one director and one outside Audit & Supervisory Board member who retired at the conclusion of the 96th Ordinary General Meeting of Shareholders on June 22, 2018.
3. KYB abolished the retirement beneﬁts system for directors at the conclusion of the 89th Ordinary General Meeting of Shareholders on June 24, 2011, but the payment of
retirement beneﬁts according to tenure as of the close of that meeting was also approved. Based on this approval, in addition to total compensation shown above, thefollowing retirement beneﬁts for directors (excluding outside directors) were paid for FY2018.
¥14 million (one director)
Note: This amount includes the payment of ¥12.1 million to one director, which was disclosed in previous years as allowance for retirement beneﬁts.
Retirement beneﬁts are paid to one director who retired during FY2018.
4. FY2018 retirement beneﬁts for directors will not increase because the retirement beneﬁt system for directors was abolished as described above.

KYB Group Report 201935

Internal Control and ComplianceInternal Control System
Basic Policy
The Board of Directors of the Company ensures effective
corporate governance by instituting the Basic Policy for Internal
Control System1 in accordance with the Companies Act, and byimplementing various measures including a risk management
system, a Group management system and an internal
compliance system. The KYB Group also maintains and assesses
the implementation of internal control over ﬁnancial reporting
using the procedures stipulated by the Financial Instruments andExchange Act. In this way, the KYB Group ensures reliable ﬁnancial
reporting and appropriate information disclosure through internal
control reports.

Key Points for Internal Control
1. Internal Control Department
The Internal Control Department is responsible for overall planningand coordination of global governance and compliance. The
J-SOX Correspondence Ofﬁce in the Internal Control Department
maintains and assesses the implementation of internal control
over ﬁnancial reporting.
2. Basic Policy for Internal Control System
The Company’s Board of Directors has instituted the Basic Policy forInternal Control System and monitors the status of related activities.
Summaries of its ﬁndings are disclosed in business reports.
3. Strengthening Systems for Sharing Information and
Collaborating among Group Companies
We are enhancing meetings between the Company and Group
company management. We are increasing the frequency of
meetings, and mainly at top management meetings, Domestic
Afﬁliated Companies Management Meetings and at global
division meetings, we are intensifying discussions about
identifying and preventing misconduct.
4. Upgrading the Business Organization
We enhance mandatory checklists used in planning new productand business development at product development assessment
meetings and executive ofﬁcer meetings in order to upgrade oursystem for verifying the adequacy of technologies, productperformance, quality inspection systems and manufacturing
capabilities.
5.Ensuring Personnel Rotation
We are developing effective lines of succession in ways such as
ensuring transparent operations through sharing knowledge andexpertise internally. In this way, we will conduct appropriate
personnel rotation.
6. Rigorous Application of Internal Regulations during
Emergencies
We remind all employees of the Company and Group companiesof their reporting obligations to ensure rigorous reporting underinternal reporting rules that include the Rule of Prompt Report2 andBad News First system, which calls for employees of the Company
or Group companies to immediately report to the Company should
they become aware of a potential serious problem.
7. Review to Improve the Effectiveness of the
Whistleblowing System
We conduct education concerning the whistleblowing systemusing e-learning for indirectly related departments, throughbrieﬁng sessions for frontline personnel, as well as bycomprehension tests and in-person interviews.3 In addition, weare considering measures including mandatory reporting to
improve the effectiveness of whistleblowing for improper acts
related to product quality and safety.
Notes: 1. Please refer to the Company website for additional details.
https://www.kyb.co.jp/english/company/governance.html
2. A core component of the KYB Group’s crisis management system, inwhich department heads and production base managers promptly andaccurately report important information to the president of the Company.
3. We proactively gather frontline information in ways such as conducting
in-person interviews to announce, explain and conﬁrm compliance withinternal regulations while collecting information about issues thatinterviewees are experiencing in their workplaces.

Compliance
Basic Policy
We regard compliance as adherence to the laws, orders and rulesof society at large, as well as to the Company’s articles ofincorporation, rules and agreements associated with businessactivities, in addition to corporate ethics that promote soundbusiness activities.
1. We have developed the Corporate Guiding Principles as rules forthe execution of business activities by ofﬁcers and employees,
and are focusing on initiatives including establishing legal
compliance and corporate ethics.

36

KYB Group Report 2019

2. We are implementing compliance education through training
sessions by job title and section.
3. We have established communication channels to management
by using the Rule of Prompt Report and Suggestion Box as asystem for the Company and all Group companies to identify
company risks in a prompt manner. We have also establishedand are operating contact points for whistleblowers.

Key Points for Compliance

5. Organizational Upgrades
We will establish committees as necessary. For example, we haveestablished the Personal Information Protection Management
Committee to encourage the proper acquisition, use, management
and storage of personal information and prevent its leakage. We
have also established the Export Control Management Committee
to ensure full compliance with export-related laws and regulations
and to prevent illegal export of our products and technologies(including services), either directly or indirectly.

1. Fostering Compliance Awareness in the KYB GroupWe will reconﬁrm employee responsibilities after reﬂecting on
issues concerning improper acts. Based on this, we will use
training and education to change the mindset of all executives
and employees.
2. Education and Training to Raise Awareness of Social
Responsibility
We will systematize repeated top-down education on corporate
ethics. We will also proactively review the content of teachingmaterials to incorporate multiple case studies that lead to change
in the awareness of all executives and employees.
3. Emphasize the Importance of Compliance Regularly
Top management of the Company will consistently emphasize theimportance of compliance within the Group. In addition, top
management will visit Company production bases and otherlocations, and Group companies in Japan and overseas, toprovide guidance on fostering compliance awareness.

6. Initiatives to Prevent Recurrence of Antitrust Violations
We are working on the following measures to prevent violationsof antitrust laws based on lessons learned from violations in the
United States.
1) Establishing an anti-monopoly compliance policy2) Securing written pledges from sales personnel that they will
not violate antitrust laws
3) Formulating rules for contact with competitors
4) Conducting educational activities related to antitrust laws5) Conducting in-person interviews with sales personnel

4. Personnel Evaluations and Related Measures
Personnel evaluations will include a system for evaluating
attitudes toward compliance initiatives, such as compliance withlaws and internal rules. In addition, we will conduct small group
activities with the theme of preventing misconduct and commend
useful activities and conduct other initiatives to support thedevelopment of executives and employees who think
independently and make improvements themselves.

7. Initiatives to Prevent Bribery-related Violations
We are working on the following measures to prevent violationsof bribery-related laws and regulations.
1) Establishing an anti-bribery policy
2) Establishing internal regulations3) Conducting educational activities related to briberyrelated laws4) Conducting in-person interviews with sales personnel

Current Internal Control System (From April 2019)
Managing Executives Organization

Independent ofManaging
Executives

Impartial Organization
Supervise

Report監査部

Special Audit Committee
on Wrongdoing Risk

Risk and compliance management(Supported by external attorneys)

EntrustChair: Outside director

KYB President Executive Ofﬁcer
Board of Executive Ofﬁcers

Risk Management Committee
Departments withhead ofﬁce functions

Chief Compliance Ofﬁcer(In the future, we will consider
expanding and transitioning to a
standing Compliance Committee)
Support asneededLegal Affairs Department

Business operations

Internal Control Department

Identiﬁcation, evaluation andmanagement of risks

Each headquarters or division
Key compliance personnel

Overall planning and coordinationof corporate governance and compliance
Enhance support
for targeted
expansion

Non-compliancerisk

Quality Control Department
ReportGroup companies
Compliance ofﬁcer

Outside Directors and Outside Membersof the Audit and Supervisory Board

Board of Directors

Audit Department
Wrongdoing risk
investigation

Request for investigation
Support as needed

External investigative
companyKYB Group Report 201937

Internal Control and Compliance

Initiatives to Prevent the Recurrence of Nonconforming Acts Associatedwith Seismic Isolation/Mitigation Oil Dampers
Establishing Compliance Management
The KYB Group will use all of its capabilities to change the Group mindset to one that places the highest
value on compliance.
Measures to Emphasize in Preventing Recurrence
We will implement the following initiatives as effective measures to encourage all executives and employees to autonomously
promote compliance.
① We will promote awareness among executives and employees through education and training based on case studies andanalysis of examples at other companies to bring attention to the adverse effects of compliance violations on society as a whole.
② We will measure how well corporate ethics have been inculcated among executives and employees.
③ We will add compliance issues to themes for improvement in each department.
The progress of measures to prevent recurrence is reported to the Company’s Board of Directors and on its website every three months.

https://www.kyb.co.jp/english/company/progress/index.html

Tighten the Subsidiary Management System
We will work to review and strengthen our management system in order to conduct integrated
management with Group companies.
Strengthen System for Sharing Information with Group Companies• Enhance meetings between the Company and Group company management. Increase the frequency of meetings, and mainly
at senior management meetings, management meetings at Group companies in Japan, and international meetings, intensify
discussions about identifying and preventing misconduct.
Review Management Systems for Group Companies• Make the Internal Control Department responsible for comprehensive planning and coordination of Group governance, andstrengthen systems that provide deeper understanding of Group companies.
• Conﬁrm the effectiveness of the Regulations on the Promotion of Group Compliance to strengthen the required systems, andstrengthen external risk audits of business execution.
• We have established the Special Audit Committee on Wrongdoing Risk, which is chaired by an outside director. It has broad
responsibility for uncovering signs of wrongdoing and conditions that give rise to it. Its purview includes quality misconduct,
as well as accounting fraud and bribery. We will consider expanding and transitioning to a standing Compliance Committee(tentative name).
• The Audit Department investigates misconduct and reports monthly to the Board of Directors and other bodies. We will use
external companies if more specialized investigation is required.

Analyze and Monitor Business Risks at Group Companies• We will identify speciﬁc laws and regulations that apply to each subsidiary’s business and conduct risk analysis and required
education.
Reorganize Group Companies• We will consider reorganizing the Group in light of compliance management.

38

KYB Group Report 2019

Initiatives with Suppliers
Basic Policy for Procurement
KYB works to fulﬁll its corporate social responsibility (CSR)
and continues to be a company that society can rely upon.
Suppliers are important partners for us in continuously
developing our business through monozukuri (Japanesemanufacturing expertise) and contributing to realization of
an afﬂuent society.
Our basic policy for procurement is described below.

Basic Approach to Procurement① Procurement activities aimed at the coexistence and mutual
prosperity of KYB and its suppliers② Legal compliance③ Quality ﬁrst
④ Safety and health, human rights and labor⑤ Continuous cost reduction activities⑥ On-time delivery⑦ Protection of the natural environment⑧ Construction of global procurement system⑨ Risk management⑩ Classiﬁed information management⑪ Prevention of corruption▶ For details, please see the corporate website.

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

FY2018 Procurement Policy Brieﬁng
In April 2018, we invited
231 suppliers that havebeen involved in KYB
manufacturing to the KYB
Procurement Policy Brieﬁng
at the Palace Hotel in
Chiyoda-ku, Tokyo tostrengthen cooperation
with our suppliers. KYB senior management explained our
corporate policy, procurement policy and quality policy torepresentatives of our suppliers, commended excellent
suppliers who contributed greatly to QCD,* and presented
mementos. After the brieﬁng, we held a social event thatfacilitated and deepened discussion with suppliers.
* Quality, cost and delivery

Final Report Meeting of Theme Study Groups
In April 2018, six study
groups composed ofmembers from 42 suppliersbegan improvement
activities for FY2018 under
the themes of quality,
delivery, productivity andbusiness continuity plans(BCP). In March 2019, we held the FY2018 Final Report
Meeting of Theme Study Groups at Wink Aichi (Aichi
Industrial Labor Center, Aichi Prefecture) for these groups topresent their ﬁnal reports on the year’s achievements. The
comprehensive activities of these groups have resulted in safety

improvements, fewer quality defects, faster delivery times andgreater productivity among suppliers, and have led to thecreation of a BCP crisis management system. New teams arecontinuing these activities in FY2019.

Survey of Status of BCP
In preparation for the three anticipated interlocked earthquakes(Tokai-Tonankai-Nankai) in Japan, we provided an explanationof BCP at the Procurement Policy Brieﬁng and at meetings
regarding production trends at each plant.
As in FY2017, in light of the importance of understanding
the BCP status of suppliers we conducted a questionnaire forself-assessment consisting of 100 items in seven categories(actions for anticipated risks; securing personal safety andemergency evacuation; emergency measures taskforce;
conﬁrmation of employee safety; conﬁrmation of property
damage; instructions for returning home and measures forpeople who have difﬁculty returning home; and restoration
taskforce). Moreover, we surveyed the status of readinessof ﬁrst-, second- and subsequent level suppliers with regard
to a major earthquake. In this way, we have all suppliers
review the status of their BCPs and encourage them to study
issues requiring improvement and systematically implement
BCP activities.

Initiatives to Prevent Human Rights
Violations in the Supply Chain
Companies today are expected to prevent human rights
violations globally, including in their supply chains.
For example, under the Dodd–Frank Wall Street Reform andConsumer Protection Act, companies are required to perform
due diligence and identify whether their products containtantalum, tungsten, tin or gold purchased from mines in the
Democratic Republic of Congo (DRC) and nine neighboring
countries, where the extraction of such mineral resources may
be used to ﬁnance or beneﬁt armed groups that are causing
human rights violations and environmental destruction. The aimof the Dodd–Frank Act is to indirectly cut off ﬁnancial sourcesfrom these “conﬂict minerals” to prevent such human rights
violations. The EU has taken a broader approach to restricting
conﬂict minerals by requiring all companies importing mineral
resources into the EU to take similar actions.
In light of the Dodd–Frank Act, the KYB Group annuallychecks its products with the cooperation of its suppliers,
summarizes the results and reports to customers that request
such information.
In addition, according to the U.K. Modern Slavery Act 2015
we annually release a statement on KYB Group business activities
and initiatives to prevent slave labor and human trafﬁcking in our
supply chain, including the above-mentioned conﬂict mineralmeasures. We will carry on with our awareness-raising activities
on prohibiting human rights violations and slavery labor.
▶ The details are available in our Modern Slavery Act Transparency

Statement for Fiscal Year 2018 released on September 27, 2019.
https://www.kyb.co.jp/english/media/ir_20190927_02.pdf

KYB Group Report 201939

Risk Information

This section explains the major risk factors relevant to the KYB Group’s operating results and ﬁnancial
condition that may have a signiﬁcant effect on decisions by investors. Forward-looking statements inthis section represent the judgments of the KYB Group (KYB and its consolidated subsidiaries) as ofMarch 31, 2019.

Economic Risks
Economic Conditions
The KYB Group’s consolidated net sales primarily derive from the
supply of components to automobile manufacturers, construction
machinery manufacturers, commercial vehicle manufacturers andother customers. Component manufacturers have accelerated
overseas operations to address the increase in the overseas
production bases of customers. The Group also has production
bases in the Americas, Europe and Asia, and supplies products tocustomers in each of these regions. Overseas production bases
have a signiﬁcant impact on the Group’s operating results andﬁnancial condition, and are subject to the inﬂuence of changes incustomer production volume resulting from factors includingchanges in regional economic conditions.

Fluctuations in Exchange Rates and Interest
Rate Increases
With an overseas sales ratio of 55.2%, the KYB Group relies
heavily on markets outside of Japan. As a result, ﬂuctuations inforeign exchange rates have a signiﬁcant impact on the Group’s
exports from Japan and the performance of Group companies inother countries. An increase in interest rates in Japan or othercountries could have a signiﬁcant impact on the KYB Group’s
operating results.

Risks in Business Operations
Demand Trends

Procurement of Materials and Components

Sales of the KYB Group’s Automotive Components andHydraulic Components Operations segments depend greatly on
the global production volume of automobiles and construction
machinery. A decline in demand for these products caused by aglobal economic downturn could have a signiﬁcant impact on
operating results. The KYB Group sells most of its systemproducts, aircraft components, special-purpose vehicles andelectronics components in Japan. In particular, demand for theKYB Group’s special-purpose vehicles, which are primarily
concrete mixer trucks, can ﬂuctuate signiﬁcantly due to changes
in the amount of construction activity, which is closely correlatedwith the economic outlook.

The KYB Group purchases materials and components from a large
number of suppliers. Prices of these items are closely linked toprices on international commodity markets. The KYB Group may
not be able to fully reﬂect an increase in the cost of materials orcomponents in its selling prices, or to reduce prices of materials
and components sufﬁciently to reﬂect a reduction in selling prices,which could have a signiﬁcant impact on operating results.

Prices and Quality
The KYB Group’s products are subject to intense price-based
competition in both domestic and international markets.
Customers regularly request cost cuts and lower prices. Quality
is also critical. The Group supplies vital automotive components,
such as shock absorbers that maintain vehicle stability and power
steering systems. For construction machinery and commercial
vehicles, the Group supplies key functional components suchas motors and hydraulic cylinders that drive the main unit.
Consequently, the Group may incur substantial expenses,
including the payment of damages demanded by customers,
if it supplies defective products. Furthermore, sales volume andprices for aftermarket automotive shock absorbers are subject
to the impact of regional economic conditions and competition.
40

KYB Group Report 2019

Funding
The KYB Group obtains loans mainly from ﬁnancial institutions inJapan and other countries to fund capital expenditures and tosecure working capital. The Group obtains these loans while
carefully monitoring ﬁnancial markets. However, it may be unable
to procure funds when needed at favorable terms due to events
including a broad decline in the prices of the Group’s products, aneconomic recession, a credit crunch, or a decline in the Group’s
credit rating, which could affect the Group’s ﬁnancial conditionand operating results.

Business Downturn
Bankruptcy at KYB Group overseas production or sales bases
caused by factors including a decline in orders or proﬁtability
could signiﬁcantly impact the Group’s operating results.

Counterparty Credit Risk
The KYB Group sells its products to automobile and construction
machinery manufacturers and many other customers. An
unexpected problem involving customer credit risk could affect
the Group’s operating results.

Nonconforming Acts in the Inspection
Process for Seismic Isolation/Mitigation Oil
Dampers
The Company and its subsidiary Kayaba System Machinery Co.,
Ltd. manufacture and sell seismic isolation/mitigation oil dampers
for buildings. We recently determined that some of the seismic
isolation/mitigation oil dampers (“Nonconforming Products”)
shipped and installed in buildings (“Target Properties”) did notconform to performance evaluation standards certiﬁed by the
Minister of Land, Infrastructure, Transport and Tourism (the“Minister”),* or to the standards of customers, because offalsiﬁcation of performance inspection record data (the“Incident”). We reported the Incident to the Ministry of Land,
Infrastructure, Transport and Tourism (MLIT) and announced
the status of our response on October 16, 2018.
On November 15, 2018, we uncovered additional mattersthat we should conﬁrm. On December 19, 2018, we announced
that in addition to the falsiﬁcation of performance record data,
the inspection measurement results submitted for damping
force had been changed by moving the median damping force
on extension and compression in the direction of the origin. At
the same time, we presented the results of our investigation. In
addition, as a result of ongoing analysis of data remaining in theinspection machines, on March 15, 2019 we revised the numberof Target Properties and products that we had announced on
December 19, 2018.
The Company’s basic policy is to promptly ensure conformity of
products that do not conform to the Minister’s certiﬁed standards
and products for which conformity is uncertain. For items that
conform to the Minister’s certiﬁed standards but not to customer
standards, we will take appropriate measures according to thewishes of property owners, residents and other stakeholders. Our
management priority is to eliminate worries and concerns, so wewill carefully explain matters to owners and other stakeholders.
Considering the gravity of the Incident, we established an
independent external investigative committee chaired by Koichi
Namba, a lawyer from Mori Hamada & Matsumoto legal ofﬁce
and former Chief Judge at the Tokyo High Court, to review thefacts of the Incident, analyze its causes, and recommend
measures to prevent recurrence. On February 4, 2019, we
received the committee’s report on the results of the investigation,
and accepted its ﬁndings and proposed preventive measures.
Based on these recommendations, we will take appropriate steps,
further strengthen corporate governance and the internal control
system, thoroughly implement measures to prevent recurrence,and take action to restore trust.
The Company provides for product warranties for seismic
isolation/mitigation oil dampers using information and facts
currently available and considered reliable. Provisions have beenrecorded in our accounts for costs to produce seismic isolation/
mitigation oil dampers, to replace seismic isolation oil dampers, tomake structural modiﬁcations, and to cover expenses incurred byrelevant headquarters and divisions. Therefore, future expenses
associated with the Incident, including compensatory damages,
could signiﬁcantly impact the Group’s operating results.
*There is no Minister’s certiﬁcation system for seismic mitigation oil dampers.

Impact of Improper Claims to the Ministryof Defense
The Company has recorded a provision in its accounts for loss
related to repayment and other expenses associated withimproper claims regarding working hours that were found tohave been made to the Ministry of Defense in connection with adefense equipment contract. The Ministry of Defense has been
conducting a special investigation since March 14, 2019, and weare cooperating fully. This provision is a reasonable estimate of
expenses at this time, and may change depending on the
progress of the special investigation.

Risks Associated with Signiﬁcant Lawsuits or Other Legal Action
If the KYB Group is the defendant in a lawsuit and the outcome
is unfavorable, the resulting payment and other demands may

have a signiﬁcant impact on the Group’s operating results.

Risks Associated with Fires, Accidents and Natural Disasters
Many plants of the KYB Group produce hydraulic products thatutilize the properties of oil. In addition, some plants have coating
equipment that uses organic solvents, and storage tanks forhydraulic oil, chemicals and other substances. A ﬁre or hazardous
substance leak could temporarily shut down manufacturing
activity. In Japan, many plants of the KYB Group and many of its
suppliers are located in the Chubu area. A major earthquake orother event in this area that prevents these plants from operating
could cause a substantial decline in the Group’s production
capacity. In addition, an earthquake, ﬁre, conﬂict, act of terrorism
or other event in an area outside of Japan where the KYB Group
has a plant could cause a substantial decline in the Group’s
production capacity.
KYB Group Report 201941

Management Team(As of August 1, 2019)

Directors
Yasusuke Nakajima1

Masao Ono1

Director, Chairman

Representative Director, President Executive Officer

1979 Joined the Company
2005 Member of the Board of Directors; General Manager,
Hydraulics Sales & Marketing Headquarters, HydraulicComponents Operations
2007 Member of the Board of Directors; General Manager,
Hydraulics Sales Headquarters, Hydraulic Components
Operations
2009 Managing Member of the Board of Directors; General
Manager, Hydraulic Components Operations
2010 Senior Managing Member of the Board of Directors
2011 Member of the Board of Directors, Senior Managing
Executive Ofﬁcer
2015 Representative Director, President Executive Ofﬁcer
2018 Representative Director, Chairman, President
Executive Ofﬁcer
2019 Representative Director, Chairman
2019 Director, Chairman (current position)

1979 Joined the Company
2005 General Manager, Operations Planning Department,
Automotive Components Operations
2006 General Manager, Purchasing Department
2008 General Manager, Purchasing Division2012 Executive Ofﬁcer; General Manager, Purchasing Division.
2014 Managing Executive Ofﬁcer; General Manager,
Purchasing Division2016 Senior Managing Executive Ofﬁcer
2017 Member of the Board of Directors, Senior Managing
Executive Ofﬁcer
2018 Member of the Board of Directors, Executive Vice President
Executive Ofﬁcer
Representative Director, President Executive Ofﬁcer(current position)

Takaaki Kato1

Keisuke Saito1

Representative Director, Executive Vice President Executive Officer

Member of the Board of Directors, Executive Vice President
Executive Officer

1980 Joined The Fuji Bank, Limited (present Mizuho Bank, Ltd.)2005 General Manager, Hong Kong Branch, Mizuho Corporate
Bank, Ltd. (present Mizuho Bank, Ltd.)
2008 Executive Ofﬁcer, Mizuho Securities Co., Ltd.
2009 Managing Executive Ofﬁcer, Mizuho Securities Co., Ltd.
2011 Managing Executive Ofﬁcer, Mizuho Securities Co., Ltd.
and Chairman, Mizuho Securities Asia Limited
2013 Joined the Company; Managing Executive Ofﬁcer
2015 Senior Managing Executive Ofﬁcer
2015 Member of the Board of Directors, Senior Managing
Executive Ofﬁcer
2017 Representative Director, Executive Vice President Executive
Ofﬁcer (current position)

1983 Joined the Ministry of International Trade and Industry(present Ministry of Economy, Trade and Industry)
2002 General Manager, Beijing Ofﬁce, Japan-China Economic
Association2005 Director, Industrial Revitalization Division, Economic andIndustrial Policy Bureau, Ministry of Economy, Trade andIndustry
2007 Director, Industrial Science and Technology Policy Division,
Industrial Science and Technology Policy and Environment
Bureau, Ministry of Economy, Trade and Industry
2008 Director, Finance Division, Minister’s Secretariat, Ministry of
Economy, Trade and Industry
2009 Director-General for Energy Conservation and Renewable
Energy Department, Agency for Natural Resources andEnergy, Ministry of Economy, Trade and Industry
2010 Special Adviser of the Company
2011 Member of the Board of Directors, Senior Managing
Executive Ofﬁcer
2019 Member of the Board of Directors, Executive Vice President
Executive Ofﬁcer (current position)

Rokurou Tsuruta1,3Shuhei Shiozawa1,3

Member of the Board of Directors (Outside)

Member of the Board of Directors (Outside)1970 Prosecutor, Tokyo District Public Prosecutors Ofﬁce2005 Superintending Prosecutor, Nagoya High Public Prosecutors
Ofﬁce
2006 Registered as an attorney (Daini Tokyo Bar Association)2007 Outside Director, TEIKOKU PISTON RING CO., LTD. (present
TPR Co., Ltd.) (current position)2007 Outside Audit & Supervisory Board Member, J. FRONTRETAILING Co., Ltd.
2012 Outside Corporate Auditor, Sumitomo Mitsui Financial
Group, Inc.
2012 Attorney and Representative, Tsuruta Rokurou Law Ofﬁce(current position)2015 Member of the Board of Directors (Outside) of theCompany (current position)2017 Outside Director, J. FRONT RETAILING Co., Ltd.
2017 Outside Corporate Auditor, Sumitomo Mitsui Banking
Corporation (current position)

1981
1987
1994
2001
2005
2012
2016
2017
2019
2019

Assistant, Faculty of Economics, Keio University
Associate Professor, Faculty of Economics, Keio University
Professor, Faculty of Economics, Keio University
Director for International Economic Affairs, Cabinet Ofﬁce
Dean, Faculty of Economics, Keio University
Member of the Board of Directors (Outside), Kenedix, Inc.
(current position)
Member of the Board of Directors (Outside) of theCompany (current position)
Independent Director (Audit & Supervisory Committee
member), Ahresty Corporation (current position)
Professor Emeritus, Keio University (current position)
President, Tokyo International University (current position)

Notes: 1. Term of ofﬁce: One year from the conclusion of the Ordinary General Meeting of Shareholders held on June 25, 2019.
2. Term of ofﬁce: Four years from the conclusion of the Ordinary General Meeting of Shareholders held on June 24, 2016.
Full-time Audit & Supervisory Board Member (Outside) Takashi Saito has taken over the term of ofﬁce from the previous Audit & Supervisory Board Member, with a term ofofﬁce of two years from the conclusion of the Ordinary General Meeting of Shareholders held on June 22, 2018.
In addition, full-time Audit & Supervisory Board Member (Outside) Junichi Tanaka has taken over the term of ofﬁce from the previous Audit & Supervisory Board Member,with a term of ofﬁce of one year from the conclusion of the Ordinary General Meeting of Shareholders held on June 25, 2019.
3. Members of the Board of Directors (Outside) Rokurou Tsuruta and Shuhei Shiozawa and full-time Audit & Supervisory Board Member Junichi Tanaka (Outside) are
independent ofﬁcers as prescribed in Rule 436-2 of the Securities Listing Regulations of the Tokyo Stock Exchange.

42

KYB Group Report 2019

Audit & Supervisory Board Members
Tomoo Akai2

Motoo Yamamoto2

Audit & Supervisory Board Member (Full Time)

Audit & Supervisory Board Member (Full Time)

1979
2004
2005
2006

Joined the Company
General Manager, Legal & Auditing Department
General Manager, Legal Affairs Department
General Manager, General Affairs & Personnel
Administration Department
2008 General Manager, Human Resources Division2009 General Manager, Audit Department
2011 Audit & Supervisory Board Member of the Company (Fulltime) (current position)

1977 Joined the Company
2004 Deputy Executive Ofﬁcer, Corporate Planning Department
2005 General Manager, Operations Planning Department,
Related Business Operations
2007 Member of the Board of Directors and General Manager,
Administration Department, Kayaba System MachineryCo., Ltd.
2009 Managing Member of the Board of Directors and General
Manager, Administration Department, Kayaba System
Machinery Co., Ltd.
2012 Member of the Board of Directors and Executive Vice
President, KYB Trondule Co., Ltd.
2015 Audit & Supervisory Board Member of the Company (Fulltime) (current position)

Takashi Saito2

Junichi Tanaka2,3

Audit & Supervisory Board Member (Full Time) (Outside)

Audit & Supervisory Board Member (Full Time) (Outside)

1984 Joined The Fuji Bank, Limited (present Mizuho Bank, Ltd.)
2011 General Manager, International Fund Department, The Fuji
Bank, Limited (present Mizuho Bank, Ltd.)2012 Executive Ofﬁcer, General Manager, International Fund
Department, The Fuji Bank, Limited (present Mizuho
Bank, Ltd.)2013 Executive Ofﬁcer, General Manager, Derivatives Sales
Department, The Fuji Bank, Limited (present Mizuho
Bank, Ltd.)2016 Managing Executive Ofﬁcer, Deputy Head of Global
Markets Company, Mizuho Financial Group, Inc.
2016 Managing Executive Ofﬁcer, Co-General Manager, Global
Markets Division, Mizuho Bank, Ltd.
2017 Advisor, Mizuho Human Services K.K.
2017 Representative Director and President, Mizuho Human
Services K.K.
2018 Audit & Supervisory Board Member of the Company (Fulltime) (Outside) (current position)

1984 Joined The Yasuda Fire and Marine Insurance Co., Ltd.
(present Sompo Japan Nipponkoa Insurance Inc.)
2014 Senior Vice President, General Manager, Global Business
Planning Department, Sompo Japan Nipponkoa Insurance Inc.
Senior Vice President, General Manager, Global Business
Planning Department, Sompo Japan Nipponkoa Holdings,
Inc. (present Sompo Holdings, Inc.)
2016 Executive Vice President, General Manager, Europe &South America, Regional Headquarters, Sompo Japan
Nipponkoa Insurance Inc.
Executive Vice President, General Manager, Europe &South America, Regional Headquarters, Sompo Japan
Nipponkoa Holdings, Inc.
2016 Executive Vice President, General Manager, Europe & SouthAmerica, Regional Headquarters, Sompo Holdings, Inc.
2017 Executive Vice President, Sompo Japan Nipponkoa
Insurance Inc.
Executive Vice President, Sompo Holdings, Inc.
2018 CEO of Overseas Insurance Business, Executive Vice
President, Sompo Holdings, Inc.
2018 CEO of Overseas Insurance Business, Director, Executive
Vice President, Sompo Holdings, Inc.
2019 Audit and Supervisory Board Member (Full Time) (Outside)of the Company

Executive Ofﬁcers
Representative
Director, President
Executive Officer
Executive Vice
President Executive
Officers
Senior Managing
Executive Officers

Masao Ono

Takaaki Kato
Keisuke Saito
Hiroshi Ogawa
ToshihikoHatakeyama
Hitoshi Nitta

Managing
Executive Officers

Eiji Hisada
Kenji Yamanouchi
Hideki Nonoyama
Osamu Kunihara
Ikuo Inagaki
Hajime Sato
Kazuaki Shoji
Masahiro Kawase
Masaru Tsuboi

Executive Officers
In charge of Global Corporate Finances
General Manager, Seismic Isolation/Mitigation
Correspondence Operations
In charge of European Operations; President,
KYB Europe GmbHIn charge of North, Central & South American Operations(Automotive Components Operations Relations)
General Manager, Automotive Components Operations
In charge of Quality and Cost Planning; General
Manager, Production Division; Deputy General Manager,
Seismic Isolation/Mitigation Correspondence Operations
In charge of auditing; General Manager, President Ofﬁce
President, KYB Americas Corporation
In charge of Purchasing; Deputy General Manager,
Seismic Isolation/Mitigation Correspondence Operations
General Manager, Finance & Accounting Division
General Manager, Hydraulic Components Operations
Deputy General Manager, Automotive Components
Operations and General Manager, Motorcycle
Headquarters
In charge of Special Purpose Vehicle Division and Aircraft
Components Division; General Manager, Human
Resources Division
General Manager, Steering Headquarters, Automotive
Components Operations
General Manager, CSR & Safety Control Division andGeneral Manager, Legal Affairs Department

Tomoyuki Nagata
Koji Yamamoto
Hiroshi Kurotaki
Takashi Kondo
Kimiro Sudo
Takashi Tezuka
Ryuji Uda

Minoru Ishikawa
Tomoki Takaoka
Ukuru Tsuchida
Ichio Nemoto

Minoru Tamai
Shozo Amano

Deputy General Manager, Seismic Isolation/Mitigation
Correspondence Operations and General Manager,
Customer Correspondence Headquarters
General Manager, Quality Division
Assistant of Aircraft Components Division
Deputy General Manager, Seismic Isolation/Mitigation
Correspondence Operations and Deputy General
Manager, Customer Correspondence Headquarters
Assistant of Hubei Henglong & KYB Automotive ElectricSteering System CO., LTD.
General Manager, Engineering Division; General
Manager, Engineering Planning Department
Global Production (Automotive Components Operations
Relations)
General Manager, Suspension Headquarters, Automotive
Components Operations
Deputy General Manager, Seismic Isolation/Mitigation
Correspondence Operations; General Manager,
Promotion Headquarters
General Manager, Purchasing Division
General Manager, Special Purpose Vehicles Division
In charge of Global Corporate Planning and Domestic
Afﬁliated Companies; General Manager, Corporate
Planning Division; General Manager, Corporate Planning
Department and IT Planning Department
General Manager, Gifu South Plant, HydraulicComponents Operations
General Manager, Sagami Plant, Hydraulic Components
Operations

KYB Group Report 201943

Financial Highlights
KYB Corporation and Consolidated Subsidiaries

FY

2008

2009

2010

2011

Accounting standards applied

JGAAP

JGAAP

JGAAP

JGAAP

Net sales

329,262

252,020

320,082

337,158

Segment proﬁt 1

—

—

—

—

Operating proﬁt

50

3,896

24,152

21,538Proﬁt before tax[Income (loss) before income taxes andminority interests](4,300)1,671

24,44021,760Proﬁt (loss) attributable to owners of the parent[Net income (loss)](5,230)661

17,014

13,898

Capital expenditures

24,96810,082

8,916

27,173

Depreciation and amortization

16,552

15,31813,427

13,508R&D expenses

3,268

2,817

3,218

4,035

Cash ﬂows from operating activities

8,499

22,65535,433

17,399Cash ﬂows from investing activities(26,505)(12,828)(7,233)(20,000)

Cash ﬂows from ﬁnancing activities

32,200(6,646)(16,968)(3,455)

Cash and cash equivalents at end of period

34,272

37,664

48,12342,010Total assets

269,655

269,361

285,134

301,349

Interest-bearing debt 2

104,782

98,14581,64180,518

Total equity [Total net assets]

76,451

78,48989,964

102,762

Basic earnings per share [Net income (loss) per share] 3 (Yen)(23.62)

3.03

77.54

62.87

Cash dividends per share applicable to the year 3 (Yen)

3.50

2.50

8.00

9.00

Return on equity attributable to owners of the parent[Return on equity] (ROE; %)

—

0.9

21.1

14.8

Ratio of equity attributable to owners of the parent[Equity ratio] (%)

26.6

27.3

30.6

33.2

—

113.9

8.6

8.0

P/E ratio (Times)

Notes: 1. Segment proﬁt is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.
2. Interest-bearing debt = Short-term borrowings + Current portion of long-term borrowings + Current lease obligations + Long-term debt + Non-current lease obligations +Guarantee deposits received
3. The Company carried out a 1-for-10 reverse stock split effective October 1, 2017.
Note: Items in brackets are Japanese Generally Accepted Accounting Principles (JGAAP) line item names applied prior to the year ended March 31, 2015 (FY2014).
*JGAAP44

KYB Group Report 2019

(Millions of yen)

2012

2013

2014

2015

2016

2017

2018

JGAAP

JGAAP

IFRS

IFRS

IFRS

IFRS

IFRS

305,752

352,710370,327355,320355,316

393,743

412,214——

15,506

17,58818,62422,94922,01010,473

18,17014,461

4,327

19,247

20,885(28,496)

12,994

21,032

14,892

2,825

18,852

20,881(29,510)

7,789

12,761

8,036(3,161)

14,544

15,202(24,757)

39,21529,90830,087

21,30020,578

20,95625,345

14,554

17,294

15,191

17,075

15,922

16,98817,581

5,468

6,917

8,910*

7,760

7,621

8,102

6,750

18,98428,78822,335

19,95831,15329,252

17,047(36,125)(36,078)(30,658)(20,320)(21,337)(16,386)(13,616)

8,529

5,709

(555)

(3,395)(969)(4,482)

10,41835,215

38,13230,51025,29633,98842,70256,092327,912361,083

387,877

359,002381,326

412,493441,074

95,33888,81392,44891,68593,563

94,641

108,634

116,435

153,997

175,256

153,381

169,771

186,651

155,643

35.24

55.25

31.45

(12.37)56.93

595.09(969.18)

8.00

9.00

12.00

11.00

12.00

150.00

0.00

7.3

9.7

5.1

(2.0)

9.3

8.8

(15.0)

34.5

41.2

43.6

41.3

43.1

43.7

33.9

13.1

7.9

14.0

—

10.2

8.5

—

KYB Group Report 201945

Global Network(As of September 1, 2019)★ Regional Headquarters ● Production Base ◆ R&D Base ■ Sales Base/Other Services

JAPAN
KYB Corporation★ KYB Head ofﬁce● KYB Trondule Co., Ltd.

● Kumagaya Plant● KYB-YS Co., Ltd.

● Sagami Plant● KYB Kanayama Co., Ltd.

● Aikawa Plant● KYB Motorcycle Suspension Co., Ltd.

● Gifu North Plant● Kayaba System Machinery Co., Ltd.

● Gifu South Plant● Gifu East Plant● KYB Stage Engineering Co., Ltd.
● Takako Industries, Inc.

◆ Basic Technology R&D Center■ KYB Engineering and Service Co., Ltd.

◆ Production Technology R&D Center■ Kensiyuu Co., Ltd.

◆ Machine Tools Center■ Japan Analysts Co., Ltd.

◆ Developmental Experiment Center■ KYB Logistics Co., Ltd.

■ Hamamatsu■ Nagoya■ KYB Systemerit Co., Ltd.
■ Chikuyo Seiki Kogyo Co., Ltd.

■ Osaka■ Hiroshima■ Fukuoka

EUROPEASIA★ ◆ KYB Europe GmbH★ KYB (China) Investment Co., Ltd.

● PT. Kayaba Indonesia● KYB Industrial Machinery(Zhenjiang) Ltd.
■ KYB Industrial Machinery(Zhenjiang) Ltd.
(Shanghai Branch)● PT. Chita Indonesia● ■ Wuxi KYB Top AbsorberCo., Ltd.

■ KYB Asian Paciﬁc Corp. Ltd.

★ KYB Europe GmbH
(Navarra Branch)■ KYB Europe GmbH
(Düsseldorf Branch)■ KYB France■ KYB Iberia■ KYB Italy■ KYB Poland■ KYB Romania■ KYB Turkey■ KYB UK■ KYB Ukraine● KYB Suspensions Europe, S.A.U.
● KYB Steering Spain, S.A.U.
● KYB Advanced Manufacturing
Spain, S.A.U.
● KYB Manufacturing Czech, s.r.o.
● KYB CHITA Manufacturing
Europe s.r.o.
■ LLC KYB Eurasia■ KYB Eurasia Vladivostok■ KYB Middle East FZE46

KYB Group Report 2019

● Changzhou KYB Leadrun Vibration
Reduction Technology Co., Ltd.
● Hubei Henglong & KYB
Automobile Electric Steering
System Co., Ltd.
● CHITA KYB Manufacturing(Zhenjiang) Co., Ltd.
● KYB Manufacturing Taiwan Co., Ltd.
● KYB Steering (Thailand) Co., Ltd.
● KYB (Thailand) Co., Ltd.
● KYB Manufacturing Vietnam
Co., Ltd.
● Takako Vietnam Co., Ltd.
● PT. KYB Hydraulics Manufacturing
Indonesia

AMERICAS● KYB-UMW Malaysia Sdn. Bhd.
● KYB Motorcycle Suspension India
Pvt. Ltd.
● KYB-Conmat Pvt. Ltd.
■ KYB Asian Paciﬁc Corp. Ltd.
(Amata Nakorn Branch)■ Kayaba System MachineryCo., Ltd. Taiwan Ofﬁce■ KYB Corporation
Chennai Branch★ ● KYB Americas
Corporation (Indiana)■ KYB Americas
Corporation (Chicago)■ KYB Americas
Corporation (Detroit Branch)■ KYB Americas
Corporation (Greenwood)● Takako America Co., Inc.
● KYB Mexico S.A. de C.V.
● KYB Manufacturing do Brasil
Fabricante de Autopeças S.A.
■ KYB International America, Inc.
■ KYB Latinoamerica, S.A. de C.V.
■ Comercial de Autopeças KYB do
Brasil Ltda.

Corporate Information/Shareholder Information(As of March 31, 2019)

Corporate Information
Company NameKYB Corporation

Date of Establishment

March 10, 1935

Head Ofﬁce

World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6111, Japan
TEL: +81-3-3435-3511
FAX: +81-3-3436-6759
URL: https://www.kyb.co.jp/english/

Fiscal Year

April 1 to March 31

Paid-in Capital¥27,647.6 million

Number of Employees

15,427 (Consolidated basis)

Securities Traded

Tokyo Stock Exchange (First Section)

Shareholder Information
Major Shareholders

Common Stock Issued

25,748,431

Number of
Shareholders

16,693

Transfer Agent andRegistrar

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan

Name

Composition of Shareholders
Financial institutions
8,083 thousand (31%)

Treasury shares
204 thousand (1%)
Foreign companies
5,395 thousand (21%)

Other domestic companies
5,682 thousand (22%)

Individuals and others
6,384 thousand (25%)

Shareholdings Percent of Total(Thousands) Shares Issued (%)

Toyota Motor Corporation

1,965

7.7

The Master Trust Bank of Japan, Ltd.
(Trust Account)

1,324

5.2

Meiji Yasuda Life Insurance Company

1,005

3.9

Hitachi Construction Machinery Co., Ltd.

892

3.5

KYB suppliers’ stock ownership

784

3.1

Trust & Custody Services Bank, Ltd. as
trustee for Mizuho Bank, Ltd.
Retirement Beneﬁt Trust Accountre-entrusted by Mizuho Trust andBanking Co., Ltd.

612

2.4

Ogaki Kyoritsu Bank, Ltd.

591

2.3

Mizuho Bank, Ltd.

491

1.9

Japan Trustee Services Bank, Ltd.
(Trust Account 9)

419

1.6

Japan Trustee Services Bank, Ltd.
(Trust Account 5)

408

1.6

Note: Shareholding ratio is calculated after the deduction of own shares (204,834 shares)

Monthly Stock Price Range (Tokyo Stock Exchange)
Stock price (¥)

Stock price (Left scale)

Trading volume (Shares)■ Trading volume (Right scale)

8,000

800,000,000

6,000

600,000,000

4,000

400,000,000

2,000

200,000,000

00FY2014FY2015FY2016FY2017FY2018High (¥)

5,230

4,710

6,460

7,380

5,660

Low (¥)

3,800

2,630

2,980

4,705

2,312

At year-end (¥)

4,400

3,330

5,800

5,050

2,718

Note: The Company carried out 1-for-10 reverse stock split on the effective date of October 1, 2017. Numbers for the prior ﬁscal years are as recorded after the reverse stock split.

KYB Group Report 201947

Contact

General Affairs Headquarters, CSR & Safety Control Div.
World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6111, Japan
TEL: +81-3-3435-3545
FAX: +81-3-3436-6759