New Mid-term Business Plan
FY2018-2020
Yorozu Spiral-up Plan 2020
May 24, 2018

© YOROZU CORPORATION. 2018 All Rights Reserved.

1

Contents

1. Mid-term Business Plan
Yorozu Spiral-up Plan 2017 review
2. New Mid-tem Business Plan

Yorozu Spiral-up Plan 2020

© YOROZU CORPORATION. 2018 All Rights Reserved.

2

1. Mid-term Business Plan
Yorozu Spiral-up Plan 2017 review
2. New Mid-tem Business Plan

Yorozu Spiral-up Plan 2020

© YOROZU CORPORATION. 2018 All Rights Reserved.

3

Mid-term Business Plan YSP2017 review

Mid-Term Business Plan: Yorozu Spiral-up Plan 2017
Robust corporate structure to outstrip the competition
FY 2017 goals as midway indicators
toward achievement of the long-term vision

Consolidated revenue of
180 billion JPY

Consolidated
operating income ratio:
6%

Key initiatives focused on enhancing corporate value(1) Business domains
Implement three pillars forachievement of sustainablegrowth.

© YOROZU CORPORATION. 2018 All Rights Reserved.

(2) Financial strategy(3) Corporate GovernanceCapital plan that considers abalance between realizing
mid- to long-term growth andcapital efficiency.

Establish internal systems that
contribute to enhanced profit
for stakeholders.

4Mid-term Business Plan YSP2017 review

Business Performance
Consolidated Revenue
Consolidated(B yen)

Revenue:

New 6 bases total

+30

180

150

171.5

• Reduced due to customers’
reduced production in
emerging countries;
Thailand, India, Indonesia,
and Brazil.

△8.5

△5

+21

(25)
2014 Forecast• Reduced due to the progressof yen appreciation against
all related currencies except
the US dollar.

(46)

(41)

2017 Target

2017 Actual

YAA added+1.7*The 6 new bases are listed below. The above numbers are an accumulation of the result of these companies, without
consolidation adjustment. For FY2017, the result of Yorozu Automotive Alabama (YAA) is included.
Wuhan YOROZU Bao Mit Automotive Co., Ltd. (W-YBM)
YOROZU JBM Automotive Tamil Nadu Pvt. Ltd. (YJAT)
PT. YOROZU Automotive Indonesia (YAI)© YOROZU CORPORATION. 2018 All Rights Reserved.

Y-Ogura Automotive (Thailand) Co., Ltd. (Y-OAT)
YOROZU Automotive Guanajuato de Mexico, S.A. de C.V. (YAGM)
YOROZU Automotiva do Brasil Ltda. (YAB)5Mid-term Business Plan YSP2017 review

Business Performance
Consolidated Operating Income Ratio
Consolidated
Operating Income Ratio

New 6 bases total

10.8
-4.8

7.6
6%

5%

• Negative impact from thedeteriorated US profitability• Exacerbated byunderperformance in Thailand,
India, Indonesia and Brazil(B yen)+3.2

Operating Income Ratio:

6.0
3.5%
-1.7

+2.5

YAA added -0.7(-0.6)

(1.9)

(0.2)

2014 Forecast

2017 Target

2017 Actual*The 6 new bases are listed below. The above numbers are an accumulation of the result of these companies, without
consolidation adjustment. For FY2017, the result of Yorozu Automotive Alabama (YAA) is included.
Wuhan YOROZU Bao Mit Automotive Co., Ltd. (W-YBM)
YOROZU JBM Automotive Tamil Nadu Pvt. Ltd. (YJAT)
PT. YOROZU Automotive Indonesia (YAI)© YOROZU CORPORATION. 2018 All Rights Reserved.

Y-Ogura Automotive (Thailand) Co., Ltd. (Y-OAT)
YOROZU Automotive Guanajuato de Mexico, S.A. de C.V. (YAGM)
YOROZU Automotiva do Brasil Ltda. (YAB)6

Mid-term Business Plan YSP2017 review

Key Initiatives: (1) Business Domains
1. Further strengthen product competitiveness anddevelopment capabilities
Realized fully-automated assembly line
 Introduced fully-automated lines in Japan andaccumulated know-how. (Yorozu Oita; started
operation in July 2016) Introduced the fully-automated line to overseas
bases in the US., Mexico, and China. (USTennessee base; started operation in April 2017)

Yorozu Engineering's
expansion / enhancement

Yorozu Oita automated assembly line
5 Face Machining Center

3D Laser Beam Machine Aggregated manufacturing technology in Japan.
 Developed new press technologies utilizing latest press machines.
 Added 16 units/13 types of machining tools to realize 1400 dies to be
produced in-house annually.
 Became one of the leading tooling manufacturers in Japan with thelargest facilities in Tohoku area.
© YOROZU CORPORATION. 2018 All Rights Reserved.

1300t Servo Press

7

Mid-term Business Plan YSP2017 review

Key Initiatives: (1) Business Domains
2. Expand sales channels to major automakers worldwide
Acquired additional business from domestic
and overseas automakers
 Won new contracts for Daimler projects
 Increased business with Renault and VW
 Increased orders from Toyota Group

Making a foundation for new
business expansion in the future

Started production at new Alabama base in USA
 Realize “the world's No. 1 suspension parts production plant“ as a parts manufacturer.
 Contribute to Tennessee base’s profit improvement by advancing the start of operation
 Business opportunities from the new Mazda-Toyota joint venture factory

Started expansion of Yorozu Oita
 Expanded facilities to respond to increased orders due to automakers’ Kyushu shift.
 Introduced large-size press machine to meet automakers’ future needs for difficultto-process parts, such as integrally formed parts, multi-process production parts,
high tensile steel sheets, etc. (Operation to start in October 2018)© YOROZU CORPORATION. 2018 All Rights Reserved.

8

Mid-term Business Plan YSP2017 review

Key Initiatives: (1) Business Domains
3. Strengthen global management with respect for diversity

Efforts to cultivate human resources Promote “Work Style Reform" by Work Style Reform Committee (Smart Work Committee)
 Secure and develop human resources and contribute to the community
Academic-Industrial cooperation/
Contribution to local communities

JICA human resource development program/International cooperation in Mexico© YOROZU CORPORATION. 2018 All Rights Reserved.

9

Mid-term Business Plan YSP2017 review

Key Initiatives: (2)Financial Strategy
Direction of capital utilization
Plan

Review

FY2015-2017 Estimate

FY2015-2017 Actual

Net Profit (3-yrs)
20.6 B yen

Net Profit (3-yrs)
13.1 B yen

Depreciation (3-yrs)
33 B yenFree Cash Flow (3-yrs)
3.6 B yen
Cash and Depositat the end of FY2014

Capex (3-yrs)
60.1 B yen＜＜

Capex (3-yrs)
50 B yen

Depreciation (3-yrs)
33.3 B yen

Diff.
Net Profit
Decrease-7.5 B yen

Capex Increase-10.1 B yen
Depreciation
Increase+0.3 B yen=FCF (vs. Plan)-17.3 B yen
Free Cash Flow (3-yrs)-13.7 B yen

After YSP 2017 was announced, additional events such as opening of YAA, expansion
and enhancement of existing base, etc. led to increase in capital investment,
resulting in deterioration of free cash flow.
© YOROZU CORPORATION. 2018 All Rights Reserved.

10Mid-term Business Plan YSP2017 review

Key Initiatives: (3) Corporate GovernanceTransformed into a company with audit committee
In June 2015 at the ordinary general meeting of shareholders, amendment of thearticles of incorporation was approved by our shareholders, and our company
transformed into a company with audit and supervisory committee.
In addition, two female outside directors were appointed at the same shareholders
meeting.

Company with audit and supervisory committee
Appointment/
Removal

Accounting
Auditor

General shareholders meeting
State an opinion on
appointment/compensation ofother board members

Appointment/Removal

Appointment/
RemovalBoard Meeting

Audit and supervisory committee
Decide proposal
contents for generalshareholders
meeting
Accounting Audit© YOROZU CORPORATION. 2018 All Rights Reserved.

Directors in committee(incl. 2 externals)
Audit

Other board members
Supervise

Business executors
11Mid-term Business Plan YSP2017 review

Mid-term Business Plan YSP2017 Summary
Business Performance
Revenue: Target not achieved due to the yen’s appreciation, and modest
increase of sales at newly established bases
Operating profit: Target not achieved due to deteriorated US profits, modest
increase at newly established bases

Key Initiatives
Business domain: Started fully-automated unattended line, expanded sales
channels / increased production capacity, cultivated human resources
Financial strategy: Deterioration of cash flow due to decreased profits andincreased capital investment
Corporate governance: Transformed into a company with audit and supervisorycommittee, and appointed two female external directors

Direction for the next mid-term plan
Enhance profitability while promoting activities for the future© YOROZU CORPORATION. 2018 All Rights Reserved.

121. Mid-term Business Plan
Yorozu Spiral-up Plan 2017 review
2. New Mid-tem Business Plan

Yorozu Spiral-up Plan 2020

© YOROZU CORPORATION. 2018 All Rights Reserved.

13

New Mid-term Business Plan YSP2020

New Mid-term Business Plan Yorozu Spiral-up Plan 2020
Establish robust corporate structure to win the competitions
Set FY 2020 goals as midway indicators
toward achievement of the Long-Term vision

Consolidated Revenue
180 billion JPY(FY2017 actual: 171.5 B JPY)

Consolidated
Operating Income Ratio
5%(FY 2017 actual: 3.5%)

Key initiatives to strengthen profitability and lead to future growth(1) Enhance
Profitability(2) Improve Product competitiveness (3) Enhance Corporate/ Development Capabilities
Capabilities• Strengthen free cash
flow management• Improve competitiveness of suspension
parts• Approach new products utilizing ourunique technologies• Engage in proactive sales expansion in
3 axes (customers, products, regions)• Strengthen project
revenue management• Innovate “monozukuri”
operation© YOROZU CORPORATION. 2018 All Rights Reserved.

• Human resource
development• Organization review• ESG management

14New Mid-term Business Plan YSP2020

New Mid-term Business Plan Yorozu Spiral-up Plan 2020
Consolidated Revenue / Operating Income Ratio
Consolidated Revenue (B yen)

171.5

171

Operating Income Ratio (%)

180
5.0

3.7

3.5

2017 Actual2018 Forecast© YOROZU CORPORATION. 2018 All Rights Reserved.

2020 Target
15

New Mid-term Business Plan
Yorozu Spiral-up Plan 2020
Key Initiatives:(1) Profitability Enhancement© YOROZU CORPORATION. 2018 All Rights Reserved.

16

New Mid-term Business Plan YSP2020

Key Initiatives: (1) Enhance Profitability
Cash flow management
YSP2017

YSP2020

ActualForecast

Net Profit (3-yrs)
13.1 B yen

Net Profit (3-yrs)

Depreciation (3-yrs)
33.3 B yen

Depreciation (3-yrs)
38.8 B yen

Free Cash Flow (3-yrs)-13.7 B yen＜

Capex (3-yrs)
44.7 B yen＜

Capex (3-yrs)
60.1 B yen

Free Cash Flow (3-yrs)
Cash and Depositat the end of FY2017• By reducing further investment in new model facilities and strengthening
evaluation and management of return on investment, free cash flow is
expected to turn positive (improve).
• Keep the target dividend payout ratio at 35%.
© YOROZU CORPORATION. 2018 All Rights Reserved.

Note:
Figures are forillustrative
purposes onlyand does not
represent actual
figures17

New Mid-term Business Plan YSP2020

Key Initiatives: (1) Enhance Profitability
Enhance project profit management
Advancedevelopment

Product
development

Monozukuri
AdvancefunctionsControlfunctions
Production base
Aim to achieve the target profit
by advancing profit management
and expanding cooperation

Production
preparation

SOP～EOP

Profit Management
Expandcooperation(amount)

NPV(years)

Evaluation of return on investment
by NPV at each milestone
NPV＝Net Present Value© YOROZU CORPORATION. 2018 All Rights Reserved.

18

New Mid-term Business Plan YSP2020

Key Initiatives: (1) Enhance Profitability
Monozukuri Innovation:
Realize “World's No. 1 suspension parts production plant” as an auto parts maker.

New US Alabama Base

Unmanned Logistics- AGV- Automated painthangers

Innovative press line
・1200t BL press
・3500t TF Servo press
Efforts toward full automation (unmanning)
Alabama new base

YSP2017© YOROZU CORPORATION. 2018 All Rights Reserved.

IoT system /Equipment management network

Expand fully-automated production line /Horizontal expansion

YSP2020
19

New Mid-term Business Plan YSP2020

Key Initiatives: (1) Enhance Profitability
Monozukuri Innovation:
Planned development of multi-skilled and highly competent human resources

Monozukuri is aboutdeveloping people

Technic & Skills

Automatedequipment

Unattended
facility

Train engineers tohandle multiple
processes

Handing
down thebasic skills

AI Robot

Robot
application

Composite
process

Further
evolution of theskills built on
tradition

Operator with the skills tomanage new technology,
unmanned facilities
Meister system

Die maintenance skills
Basic welding skills

YSP2017© YOROZU CORPORATION. 2018 All Rights Reserved.

YSP2020
20

New Mid-term Business Plan YSP2020

Key Initiatives: (1) Enhance Profitability
Monozukuri Innovation: Reduce capital investment
Make an all-out effort insimultaneous engineering

Assembly line process reduction image

Component parts reduction, parts integration, etc.

Better yield with arc tailored blanks
Before15 processes

After 9 processes

Reduce capital investment
Capital investment
index▲50％ challenge
100

Actual© YOROZU CORPORATION. 2018 All Rights Reserved.

 Step up efforts toward simultaneous
engineering in drawings
 Introduce new technologies / new
manufacturing methods
 Introduce new concept lines Design waste-free facilities

50

Target21

New Mid-term Business Plan
Yorozu Spiral-up Plan 2020
Key Initiatives:(2) Improve Product Competitiveness/
Development Capabilities© YOROZU CORPORATION. 2018 All Rights Reserved.

22

New Mid-term Business Plan YSP2020

Key Initiatives:(2) Improve Product Competitiveness / Development Capabilities
Environment surrounding the automotive industry

Environment
CO2 reduction(Low fuelconsumption)
Hybrid and EV
system installed

Market requirements for
suspension parts

SafetyVehicle weightincrease

Collision safetyandpassive safety
Automatic brakeandlane keep assist
system installed

Lighter: Lightweight solutions
Stronger: Stiffness of the structure

Lower cost: Low cost development
Quicker: Shorter development period

ComfortAutomated drive & advanced
passenger space comfort
Autonomous driving and newvalue-added system installed© YOROZU CORPORATION. 2018 All Rights Reserved.

23

New Mid-term Business Plan YSP2020

Key Initiatives:(2) Improve Product Competitiveness / Development Capabilities
Development of light weight product; plan in 2018 to 2020～20172018～2020

2021～

Innovative evolution of our productsLight weight / High stiffness / Low costby applying new structure / new manufacturing methods / new materials~ 2017
Reduced 15% of the weight of
RR AXLE BEAM in FY 2017
→ Planned for commercialization2018 to 2020
New structure &super high-tensile steel

Reduce weight -15%

New structure & super high-tensile steel& multi-material (resin, aluminum)
Reduce weight - 30%
Evolution through development of new manufacturing methods(for joining, forming, rust prevention)
Development of new products for the future / Suspension system development= Increase added-value© YOROZU CORPORATION. 2018 All Rights Reserved.

24

New Mid-term Business Plan YSP2020

Key Initiatives:(2) Improve Product Competitiveness / Development Capabilities
Development of new products and technologies for the future
Meeting the requirements for electric vehicles and autonomous driving

Vehicle becomes heavier fromthe additional equipment forelectrification, autonomous
operation & battery, etc.

Propose lighter products for battery
related parts, etc. using the company’s
stamping and welding technology

Build the required new technologies
Aluminum
Technology

Aluminum
Forging
Technology© YOROZU CORPORATION. 2018 All Rights Reserved.

Technology to
Combine Different
Materials

Deepen existing technologies
Press Forming
Technology

Welding
Technology
25

New Mid-term Business Plan YSP2020

Key Initiatives:(2) Improve Product Competitiveness / Development Capabilities
Strengthen worldwide consistent quality and cost competitivenessYorozu Engineering

Asia

Japan

AmericasRealize globally consistent quality and cost competitiveness, throughsimultaneous engineering by the Monozukuri functions and throughstrengthening Yorozu Engineering. Deliver to global manufacturingbases from Japan.
© YOROZU CORPORATION. 2018 All Rights Reserved.

26

New Mid-term Business Plan YSP2020

Key Initiatives:(2) Improve Product Competitiveness / Development Capabilities
Proactive sales expansion through activities under the 3 axes
(customer, product, region)

Large shift in the automotive industry
Accelerated autonomous drive / EV ⇒ Large-scale investment
 Intensified competition among automakers
Supply chain also to be changed dramatically Competition among suppliers also intensified

Customer axis
• Renault, Nissan,
Mitsubishi Alliance• Honda, Toyota• Daimler, VW, etc.

Product axis

Region axis

• Focus on suspension
parts• Expand business to new
products for EVs• Expansion in large
markets; Japan, US
and China• Expansion at Asianbases

Consistently maintain existing business,
27
while proactively acquiring new
businesses© YOROZU CORPORATION. 2018 All Rights Reserved.

27

New Mid-term Business Plan
Yorozu Spiral-up Plan 2020
Key Initiatives:(3) Enhance Corporate Capabilities© YOROZU CORPORATION. 2018 All Rights Reserved.

28

New Mid-term Business Plan YSP2020

Key Initiatives: (3) Enhance Corporate Capabilities
Human resource development
 Work Style Reform and Diversity
 Work Style Reform; create a “healthy and engaging” workplace Recruitment and promotion with respect to diversity,
establish new “Diversity Promotion Group”
 Continuation of industry-academia collaboration

 Human resource development
 Optimal education and training based on Yorozu general educational
programs and professional development programs by function
 Talent localization and nurturing of global human resources© YOROZU CORPORATION. 2018 All Rights Reserved.

29

New Mid-term Business Plan YSP2020

Key Initiatives: (3) Enhance Corporate Capabilities
Organization review
 Manufacturing functions: Enhance “Total Production System”
 Created the position of Chief of Yorozu Global Technical Center (YGTC)
to enable quicker decision-making of manufacturing functions

Chief ofYorozu Global Technical Center (YGTC)YGTCMother plant（Yorozu Tochigi）© YOROZU CORPORATION. 2018 All Rights Reserved.

YPW
Mfg. Eng.
Prod. Control

R&D
QA
Purchasing

30

New Mid-term Business Plan YSP2020

Key Initiatives: (3) Enhance Corporate Capabilities
Organization review
 Strengthening advanced development
 Elevate Advanced Development Gr. to new Research & Development
Dept., with the aim of stepping up research and development of new
manufacturing methods and new structural parts
One Management
Collaborate

Manufacturing Eng. Dept.

Mfg. Eng. Dept.
Advanced Development
KaizenR&D Dept.
Development& TestSuper high tensile
steel forming
Aluminum forming

Research & Development Dept.
Advanced
Development Gr.
Integrate
whole
process

Previous
Organization© YOROZU CORPORATION. 2018 All Rights Reserved.

Multi materials

Collaborate

Development& Test Gr.

Kaizen Gr.

Product Engineering Dept.

Parts integration

Light-weightsuspension
Electrified
suspension

Collaborate
31

New Mid-term Business Plan YSP2020

Key Initiatives: (3) Enhance Corporate Capabilities
Organization review
 Enhance project profit management

Strengthen under thecurrent organization

Strengthen project
management system

Strengthen“Cost Planning Group”•Cross-functional
progress management•Centralized managementof new model budgets•Problem solving activities

Strengthen project
profitability
evaluation (NPV)
Enhance crossfunctional profit
management process

YSP2017© YOROZU CORPORATION. 2018 All Rights Reserved.

YSP2020
32

New Mid-term Business Plan YSP2020

Key Initiatives: (3) Enhance Corporate Capabilities
Organization review
 Established new Diversity Promotion Group Bring together and shape the ideas from the Smart Work
Committee and the proposals from departments

Nationality

Age

Gender
Challenged

Race

Culture© YOROZU CORPORATION. 2018 All Rights Reserved.

Value

Lifestyle33

New Mid-term Business Plan YSP2020

Key Initiatives: (3) Enhance Corporate Capabilities

Environment

ESG management
Environment
Reduction ofenvironmental burden

SocialGovernanceWork style reform
Promoting diversity

Enhance
corporate governanceMonozukuri innovation
Environment friendly production process

Cultivate new products &technologies for the future
Preventing global warming during
product usage

SocialGovernance

Promote work style reformand diversity

Enhancement of governanceCreate a “healthy and engaging”
workplaceFostering organizations that accept
diversity© YOROZU CORPORATION. 2018 All Rights Reserved.

Review member composition of theBoard of Directors
Furtherance of complianceEnrich dialogue with shareholders

34

Financial Strategies: Enhance return to shareholders(Yen/share)
100

80

Increased dividend for
9 consecutive years

51.6%

58 yen40

17 yen20 yen18 yen 19 yen

20.1%

19

30
40

20%

16

5

20

10

34

11

8

9

9

10

8

8

9

9

10

10

11

2008

2009

2010

2011

2012

2013

2014

InterimInterim
中間配当

Year-end
期末配当

40%

30%

18

40

16 yen035.1% 35% 35%

51 yen 53 yen
26 yen50%

59 yen 59 yen

35.5% 35.4%
60

Incl. commemorative
dividend

25

18

10%

29

0%
2015

Commem記念配当
orative

2016

2017

Payout

配当性向
ratio

2018

2019

2020

Est.

Est.

Est.

FY2017 dividend was 59 yen/share. (Annual 41 yen + Commemorative 18 yen)
Continue 35% as the target payout ratio in FY2018 onward© YOROZU CORPORATION. 2018 All Rights Reserved.

35

Disclaimer and Copyright
The financial forecasts, future forecasts, strategies and other statementsin this material are established based on judgments made within areasonable forecasts, according to the information available to thecompany at the time this material was prepared. However, there arerisks and uncertainties in these forecasts, which could be caused by any
special circumstances and situations that cannot be foreseen.
Therefore, actual results may differ substantially from these forecasts.
Our company is fully committed to disclosing all information that we
believe important to investors. However, investors are requested torefrain from making decisions based solely on these forecasts andstatements contained within this material.
It is strictly prohibited to reproduce any part of this material in any
form, including photocopying or forwarding, for any purpose without theprior consent of the company.

© YOROZU CORPORATION. 2018 All Rights Reserved.

36