Part

2: The Last 25 Years (Overall History)
1997–2021

Aiming to Become a Truly Global Company

Challenge to Create New Value

Chapter 1 Transforming Management and Launching Spin-offs

Chapter 1

1.

New Horizons for the 101st Year

1) A New Beginning

Transforming Management andLaunching Spin-offs
1997–2006

Kawasaki celebrated its 100th anniversary in 1996. This year, in which
the company achieved its highest earnings ever (on a non-consolidated
basis), was designated as the year of "New Beginnings" and marked the
beginning of a new chapter in its history for a new century.
The Japanese economy had been in a slump since the burst of the bubble
economy, and the sharp appreciation of the yen that started in 1999, inparticular, dealt a heavy blow to Japanese exporters. The Kawasaki
Group also suffered its second consecutive loss due to a prolonged
economic slump and declining investments in public works projects.
In April 2000, the company formulated a medium-term business plan,"K21: From Heavy Industry to Flexible Enterprise," with the goal of
returning to profitability. Under this plan, the company placed anemphasis on quality over quantity and aimed to shift its business modelfrom an order-driven business model that promoted quantity with an
aim to expand the market to a solutions-driven business model that
focused on responding to actual customer needs.
In 2001, Kawasaki started transforming its business structure with afocus on selection and concentration. It adopted an internal company
system to promote the independent management of each business.
Identifying the aerospace business and the consumer products andmachinery business as core businesses and the rolling stock businessand the gas turbine and machinery business as growth businesses, thecompany invested its management resources in these operations. In
order to respond flexibly to changes in the market environment,
Kawasaki spun off the shipbuilding and precision machinery businesses
in 2002, the plant business in 2005, and the environmental business in
2006.
On top of that, the company actively worked on consolidating plants,
reducing interest-bearing debt, overhauling its personnel system, andforming alliances with other companies. As a result of these efforts, infiscal 2006, the Kawasaki Group posted its highest profit figure since
fiscal 1996.

October 1996 would mark Kawasaki’s 100th anniversary and thecompany celebrated the milestone with a host of commemorative events.
The year marked a major turning point in the company's performancerecord. It posted sales of 1,043 billion yen and recurring profit of 38
billion yen, both the highest ever in its history (on a non-consolidated
basis). This was proof that the management restructuring measures that
had been implemented over the preceding ten years since 1986 had cometo fruition.
During this period, the company encountered many challenges, including
a serious shipbuilding recession, a substantial appreciation of the yen, aslump after the bubble economy burst, and the Great Hanshin-Awaji
Earthquake. However, under the strong leadership of President Hiroshi
Ohba, the company steadily rebuilt itself, aiming to build a flexible andstrong corporate structure.
Kawasaki designated 1996 the year of "New Beginnings," signaling thestart of a new chapter in its history as it looked ahead to a bright new
century. In September of the same year, it formulated a medium-termbusiness plan running from fiscal 1996 to fiscal 2001. It is outlined
below.
[Management goals](1) Qualitative goals<Corporate image and corporate structure>• Excellent company with global operations in key industries
related to land, sea, and air• Build a flexible but strong business structure designed to weather
any storm that may lie ahead<Business areas for expansion and growth>• Land, sea, and air transportation systems• Energy solutions, including power generation• Social infrastructure development, including environmental andrecycling systems• Plants and industrial machinery• Consumer products(2) Quantitative goals (FY2001)

FY2001 targets

Non-consolidated basis
Consolidated basis
Recurring
Recurring
Net sales
Net sales
profitprofit
1.2 trillion(5%)
70 billion
1.5 trillion yen
yen
60 billion yen
yen

Advertisement featuring the 100th
anniversary logo

Pamphlet promoting Kawasaki’s 100th anniversary,"Corporate Vision for the 100th Anniversary"

President Ohba pictured with former British Prime Minister
Margaret Thatcher who spoke at the 100th anniversary event[Priority Initiatives]
Re-enforce the three management action guidelines to ensure businessquality, enhance inter-division and inter-group activities, and makescience-based decisions, while pushing forward with the following
measures

The medium-term business plan explained in the company
newsletter

44

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Part 2/The Last 25 Years (Overall History)

Chapter 1 Transforming Management and Launching Spin-offs(1) Improve product and business mix(i) Focus management resources on growth areas(ii) Strengthen international cost competitiveness(2) Expand operations globally(3) Strengthen the Group's comprehensive capabilities(4) Strengthen financial health(5) Create an efficient organization and creative corporate culture
In April 1997, when the mid-term business plan was fully launched,
Ohba urged the new employees who would carry the torch into the next
century to refine their unique skills, cultivate a flexible as well as
strong mind and body, and become internationally minded people readyto work in the global arena.

2) Inauguration of Toshio Kamei as President

President Kamei (left) and Chairman Ohba (right)

In June 1997, there was a changing of the guard with the company
president, Hiroshi Ohba, being appointed chairman, and managing
director, Toshio Kamei, being appointed president.
In his inaugural address, Kamei announced key strategies for achieving
the goals of the medium-term business plan: (1) create and develop
businesses that should be at the heart of Kawasaki’s operations over the
next one hundred years; (2) transform Kawasaki into a comprehensive
systems engineering company; (3) drastically reduce costs with the aimof halving them; (4) make further inroads across the globe; (5) shift
management’s focus to consolidated accounting and return on equity(ROE); and (6) achieve a creative corporate culture.
In closing, he said, "In order to make Kawasaki a vibrant andinnovative company as we move toward the 21st century, we must
create a positive and healthy work environment where employees arefree to openly discuss issues and unleash their full potential."

In July of the same year, the General Purpose Gas Turbine Division andthe FA and Robot Division’s robot business were incorporated into theConsumer Products & Machinery Group. The FA and Robot Division’s
FA products were, however, left with the Industrial Machinery & Steel
Structure Group to be handled by its Industrial Plant Engineering
Division.
In April 1999, as a result of the reorganization of the Machinery,
Environment and Energy Group and the Industrial Machinery & Steel
Structure Group, the EPC (Engineering, Procurement, Construction)
contractor business was newly consolidated into the Plant EngineeringGroup while integrated manufacturing and sales operations and plants
were consolidated into the Machinery & Steel Structure Group. Thischange was intended to strengthen the company’s overall engineering
capabilities and expand its business.
In April 2000, in a move to restructure the shipbuilding business, theShip & Rolling Stock Group was abolished, and the Ship Division was
set up to independently operate the shipbuilding business. In addition tothat, the rolling stock business and the construction machinery business,
which are similar in both technology and production, were integrated
into the Rolling Stock & Construction Machinery Group. The Jet Engine
Division, Machinery Division, General Purpose Gas Turbine Division,and Precision Machinery Division were all reorganized and integrated
into the newly established Gas Turbine & Machinery Group. In order tofurther strengthen the company’s technological development
capabilities, the Gas Turbine Research & Development Center was
established with an eye to bringing the gas turbine development
functions of the Akashi Technical Institute, Jet Engine Division, andGeneral Purpose Gas Turbine Division all under one roof.

Ship Division

President
Corporate Planning Office

Sales OfficeSecretariat OfficeCentral Technical Office

Auditing Department
Public Relations Department
Internal Auditing OfficeSubsidiary Company Control Office

Kobe Shipyard
Sakaide Shipyard
Kobe Office
Rolling Stock & Construction Machinery Group

Legal Department

Rolling Stock Division

Finance Department

Sales Division

Accounting Department
General Administration Department
Personnel Department
Labor Department
Procurement Department
Information & Communication Systems OfficeEnvironmental Management Department
Market Development Department

Engineering Division
Manufacturing Division
Construction Machinery Division
Aerospace Group
Planning & Control Office
Aerospace Sales Division
Aerospace Division
Gas Turbine & Machinery Group

Kansai Project Research & Development Department

Planning & Control Department

International Operations Department

Gas Turbine Research & Development Center

Branch offices/Overseas offices

Gas Turbine Division

Technology Group
Planning & Control Department
Intellectual Property Department
TQM Promoting Department

Machinery Division
Precision Machinery Division
Plant Engineering Group
Marketing & Planning Office

Akashi Technical InstituteUtility & Industrial Plant Sales Division

Gifu Technical InstituteEngineering Support Center

Kanto Technical Institute

Industrial Plant Engineering Division

Production Technology Development Center
Electronic & Control Technology Development Center

Power Plant Division
Environmental Control Plant Division
Machinery & Steel Structure Group
Planning & Control Office
Steel Structure & Industrial Equipment Division
Crushing Plant Division
Consumer Products & Machinery Group
Planning OfficeMarketing & Sales Division
Research & Development Division
Manufacturing Division
Robot Division
Akashi Works General Administration Office

Organization chart (As of Apr.1, 2000)

4) Boosting the Financial Health of the Entire Group3) Restructuring and Reorganization of BusinessGroupsPresident Kamei's inaugural address in the company
newsletter46

In order to thoroughly implement the key strategies laid out in themedium-term business plan, Kawasaki undertook an organizational
restructuring from 1997 to 2000, with a focus on reorganizing its
business groups.
In June 1997, the Machinery, Environment and Energy Group wasestablished with the goal of expanding and growing energy andenvironment-related operations. The Precision Machinery Division was
merged with the CP Group to form the Consumer Products &Machinery Group.
In April 1998, the Ship and Rolling Stock Groups were integrated toform the Ship & Rolling Stock Group. The aim was to improveengineering and production capabilities as well as efficiency throughthe integrated operation of the shipbuilding and rolling stockbusinesses.

As the pace of internationalization picked up, it was becoming morecommon for companies to be evaluated on a consolidated basis in linewith global standards. In response to this trend toward consolidated
accounting, Kawasaki reviewed its basic policy on the management ofaffiliated companies to improve the competitiveness and profitability of
the Group as a whole. This included setting profit indices according to
the characteristics and actual conditions of each company, clarifying
personnel policies, and delegating certain authorities to the business
units in charge. The overall reorganization of the Kawasaki Group took
place from fiscal 1997 to fiscal 1999. It included some major changes as
described below. In overseas markets, the company continued to expand
its production bases in China and other Asian countries.
<Japan>• In order to strengthen the operational foundation of the entire
rolling stock business group, relevant affiliates were integrated andreorganized. Kawasaki Koki Co., Ltd. and Kawasaki
Transportation Service Co., Ltd. were merged to establish the new
Kawasaki Koki Co., Ltd. while Kawasaki Sanyo Co., Ltd.,
Kawasaki Railway Rolling Stock Engineering Co., Ltd., andKawasaki Hyogo Business Center Co., Ltd. were all merged toform Kawasaki Rolling Stock Engineering Co., Ltd. (October
1998)• In the construction machinery business, mergers were conductedwith the aim of further improving the efficiency of sales company
operations and boosting business activities tailored to local needs.

47

Part 2/The Last 25 Years (Overall History)

Shanghai COSCO Kawasaki Heavy Industries Steel
Structure Co. Ltd.

Kawasaki Motors Enterprise(Thailand)Co., Ltd.

Chapter 1 Transforming Management and Launching Spin-offs

Four companies, including Kawasaki Construction Machinery,
Chubu Ltd., Kawasaki Construction Machinery, Kinki Ltd., Asahi
Construction Machinery, Ltd., and Kawasaki Construction
Machinery Sales, Ltd., merged to establish Kawasaki Machine
Systems, Naka-Nihon Ltd., while Kawasaki Construction
Machinery, Kyushu Ltd. and Kawasaki Construction Machinery,
Nishi-Nihon Ltd. merged to form Kawasaki Machine Systems NishiNihon, Ltd. (July 1999)• Kobe Crystal Tower Management Co., Ltd. and KOS Co., Ltd., acompany operating under the Environmental Control Plant Division,
were integrated to form Kobe Crystal Tower Service Co., Ltd., withan eye to centrally managing and operating office services in Kobe
Crystal Tower. (October 1999)• KGM Co., Ltd. absorbed its subsidiary, Sohara Works Co., Ltd. inorder to streamline and simplify the subsidiary’s operations.
(October 1999)
After this, Kawasaki continued to work on the integration andreorganization of its affiliates whenever necessary for the purpose of
improving their competitiveness, profitability, and efficiency.
<Overseas>• In the Chinese market, where demand for steel structure products
was growing by leaps and bounds, Kawasaki merged withCOSCO-affiliated companies, such as COSCO Industry
Company, to establish the steel structure production company,
Shanghai COSCO Kawasaki Heavy Industries Steel Structure Co.
Ltd. (October 1997)• Kawasaki merged with a Thai company to create Kawasaki
Motors Enterprise (Thailand) Co., Ltd. for the production andsales of motorcycles and general-purpose engines in a move
designed to restructure the motorcycle business in Thailand.
(December 1997)• Kawasaki then founded the gas turbine sales and service
company, Kawasaki Gas Turbine Europe GmbH, in Germany asbase for making further inroads into the general-purpose gas
turbine market. (May 1998)• Looking to get a firm foothold in the Korean robotics market, thecompany launched Kawasaki Machine Systems Korea, Ltd.,
providing robots along with customer services and after-sales
service training. (June 1999)

5) Implementing Reforms and Laying theFoundation for a New Age
Comprehensive Reform of Personnel Systems● Revised personnel system for executives
In order to create the efficient organization and a creative corporate
culture that was a key focus of the medium-term business plan
(FY1996–2001), Kawasaki revised its organizational structure andpersonnel system for executives in January 1998.
The company adopted a structure that would allow for the flexible
allocation of human resources so that it could respond quickly to issues
and challenges that were becoming more complex and diverse over
time.

48

It replaced its sections with a group system. The purpose of this was to(1) enable departments to flexibly form an organizational structure andplace personnel; (2) simplify the hierarchical structure within
departments; and (3) promote the effective use of employees regardlessof what their official qualifications were. Under the group system, thetitles for section managers, such as "shukan" and "shuji,” wereabolished, and the qualification-based titles, "sanyo" and "sanji," wereadopted for staff members and specialists both internally and externally.
In April 1998, in order to shift away from a seniority-based system to an
ability and performance-based system, the company widened the gap insalaries based on personnel evaluations. Any bonuses employees now
earned were based on their current contribution to the company. An
employee’s bonus was no longer based on their salary which normallyincreased with annual pay raises. The revised system rewarded
employees on the basis of their job qualifications and personnel
evaluations (performance assessments).

● Revised personnel system for general employees
In April 1999, Kawasaki revamped its personnel system for generalemployees on the heels of the executive personnel system overhaul. In
order to appropriately treat each employee fairly in light of his or herrole, ability, and performance, the company revised the professional
qualification and wage systems.
[New professional qualifications system]
Kawasaki introduced three categories of qualifications based on theconcept of "expected roles:" G (operations), R (planning anddevelopment), and S (supervisory capacity and specialized skills).
[New wage system]
In order to fairly assess employees according to their roles in the G, R,
and S categories, the company reduced the more seniority-oriented basesalary and introduced distinct performance-based pay for each category.
It also abolished the age-based pay for the R category in order to place
more weight on the ability and performance of each employee.
Building a Foundation for Environmental Management● Formulating the First Environmental Protection
Activities Plan
Before the enactment and enforcement of Japan’s Basic Act on theEnvironment in November 1993, Kawasaki had formulated its own
environmental management regulations in April of the same year. The
company established a new environmental management system toaddress not only conventional industrial pollution, but also urban,
household, and global environmental problems as well.
It also formulated the first stage of its Environmental Protection
Activities Plan (EPAP, FY1994–1996) to actively engage in independent
initiatives aimed at promoting environmental conservation. Moving
ahead with this plan, the company focused its environmental
management activities on implementing measures aimed at reducing theenvironmental impact of its production activities, including preventing
pollution, saving energy, conserving resources, and recycling. This
included, among other things, developing products and technologies
designed to help protect the environment and supplying environmentallyfriendly products to consumers.

Explanation of the first stage of EPAP in
the company newsletter

49

Part 2/The Last 25 Years (Overall History)

Chapter 1 Transforming Management and Launching Spin-offs

Following this basic plan, business divisions formulated their own firstand annual environmental protection activities plans. This was the
beginning of Kawasaki’s new environmental management initiative toprotect the global environment.

The Precision Machinery Division became ISO 14001 certified

Environmental Charter● Becoming ISO 14001 certified
In 1997, Kawasaki began working to obtain ISO 14001 certification, anInternational Organization for Standardization (ISO) environmental
management system (EMS) standard, to facilitate its environmental
management activities. In February 1998, the Precision Machinery
Division became the first Kawasaki organization to be certified,followed by the Robot Division in October of the same year and theEnvironmental Control Plant Division I in March of the following year.
● Establishing the Environmental Management
Department and Environmental Charter
Recognizing protecting the global environment as one of its mostimportant management issues, the Kawasaki Group established theEnvironmental Management Department in April 1999. The
department’s function was to oversee the global environment-related
matters of the entire company (excluding environmental business) andplan as well as implement specific measures aimed at environmental
management for sustainability.
In August of the same year, Kawasaki established the Environmental
Charter. Outlining its basic environmental philosophy and action
guidelines for taking on the task of environmental conservation acrossthe company, the document made Kawasaki’s stance on environmental
issues clear to the entire world.
Environmental Philosophy
As a company in key industries related to land, sea and air,Kawasaki is deploying its business activities globally in pursuit ofreducing environmental impact and creating a sustainable society.
This makes us to commit ourselves to contribute to the sustainable
development of society through our environmentally conscious
business activities, technologies and products that preserve theglobal environment.
In 1999, Kawasaki published the first issue of its Environmental
Report, which highlighted the company's environmental conservation
activities. This marked a new chapter on how the company would share
information on its environmental initiatives with the public.

Environmental Report (first issue)

50

2.

Aiming to Return to a Sustainable
Growth Path
—Establishment of Spin-off Companies

1) Inauguration of Masamoto Tazaki as President
In June 2000, Kawasaki’s president, Toshio Kamei, became its
chairman, and Masamoto Tazaki, its senior managing director, becamepresident.
At the time, due to the prolonged economic stagnation and lack ofgovernment spending on public projects, Kawasaki found itself between
a rock and a hard place. It posted losses for two consecutive fiscal years,
1999 and 2000, with many of its business units beset with structuralproblems, such as slumping orders and falling prices due to fierce
competition.
Tazaki zeroed-in on achieving profitability in fiscal 2001, announcing hewould steer the company through this rocky business environment with afocus on implementing a selection and concentration strategy, making
the most of available management resources across the organization,
shifting from a quantity-first approach to a quality over quantity
approach, and cultivating a corporate culture that would be open to teamreorganization. He reassured employees that Kawasaki could evolvefrom a heavy industry company into a flexible enterprise if everyone put
their heads together and moved toward the same goal despite any
obstacles and conflicts that might arise along the way.
He impressed upon employees he was absolutely determined to make theyear 2001, the dawn of the 21st century, a new beginning for a company
poised to make a turnaround.

President Kamei and Senior Managing Director Tazaki at
a press conference

Message from the new president, Masamoto Tazaki, in thecompany newsletter

2) Formulation of the K21 Medium-Term Business
PlanUnder the new direction of Masamoto Tazaki, Kawasaki implemented
various measures to improve its financial position and ensure that it was
selective about the orders they accepted, with the goal of returning to
profitability by fiscal 2001. At the same time, the company formulated a
medium-term business plan, "K21: From Heavy Industry to Flexible
Enterprise" (FY2000–2004), with an eye to new growth in the 21st
century (see Table I).
This medium-term business plan aimed to increase enterprise value, via
the following four strategies with an emphasis on quality over quantityand an aim of achieving an ROIC* of 5% or more (after tax).
(1) Selection and concentration
Core businesses: Aerospace and Consumer Products & Machinery
Growth businesses: Rolling Stock and Gas Turbine & Machinery
Businesses to be reorganized: Shipbuilding, Plant Engineering, and Steel
Structure(2) Business model overhaul (measures to improve profitability)(i) Shift from being order-driven to solutions-driven: Increase added
value through repeated production(ii) Shift to a business model that delivers customer satisfaction overthe entire life of a product[Table I] Quantitative Targets under K21 Medium-TermBusiness Plan (FY2004)

Before-tax ROIC
After-tax ROICInterest-bearing debt
Net sales
For
Recurring profit
reference Domestic
workforce

Before-tax ROIC
After-tax ROICInterest-bearing debt
Net sales
For
Recurring profit
reference Domestic
workforce

Consolidated basis
FY20009% or more
5% or more
420 billion yen
500 billion yen
1.25 trillion yen 1.08 trillion yen
50 billion yen-16 billion yen
22,000 people

24,000 people

Non-consolidated basis
FY20009% or more
5% or more
320 billion yen
400 billion yen
1 trillion yen
870 billion yen
40 billion yen-18 billion yen
13,000 people

14,900 people*ROIC: Return on invested capital (earnings before interest expense divided
by invested capital).
An after-tax ROIC of 5% corresponds to a pre-tax ROIC of 9%.

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Part 2/The Last 25 Years (Overall History)

Chapter 1 Transforming Management and Launching Spin-offs

The K21 medium-term business plan explained in thecompany newsletter(iii) Invest management resources across the organization(iv) Strengthen product and service differentiation strategies(3) Change in management style(i) Shift to an internal company system(ii) Introduce an executive officer system(iii) Restructure the headquarters organization(4) Reform of the corporate culture(i) Increase employees' sense of participation in company
management by reflecting company performance in theircompensation(ii) Develop education and personnel programs that instill the
motivation needed to be innovative and take on new
challenges(iii) Establish a personnel transfer and compensation system inorder to swiftly promote spin-offs and alliances with othercompanies(iv) Develop human resources capable of responding to changes
through active rotations involving affiliated companies

3) Introduction of Internal Company and Executive
Officer Systems
Internal Company System

Corporate Planning Department
Public Relations Department
Auditing Department

Shipbuilding Company
Former Ship Division
Rolling Stock, Construction Machinery & Crushing Plant Company

Finance & Accounting Department
Personnel & Labor Administration Department
General Administration Department
Environmental Management Department

Former Rolling Stock Division
Construction Machinery Division
Crushing Plant Division

Legal Department

Aerospace Company
Former Aerospace Division

PresidentIntellectual Property Department
Procurement Department

Gas Turbine & Machinery Company

Information & Communication Systems Department
Business Development Department

Former Gas Turbine Division
Machinery Division

Kansai Project Research & Development Department

New Business Promotion Department
Corporate Technology Division

Precision Machinery Division
Plant & Infrastructure Engineering Company

System Technology Development Center

Former Industrial Plant Engineering Division
Power Plant Division
Environmental Control Plant Division
Steel Structure & Industrial Equipment Division

Branch offices/Overseas offices

Consumer Products & Machinery Company

Planning & Control Department
Technical Institute

Former Consumer Products & Machinery Group
Organization chart (As of Apr.1, 2001)

52

In April 2001, Kawasaki introduced the internal company system,taking the previous business division and group system to new heights.
The new system would enable each internal company to make its own
decisions via delegated authorities and responsibilities and conduct its
business operations with greater agility than ever, including businessalliances and M&As with other companies. Based on the previous
business group structure, the 13 business divisions were reorganized
into six companies, i.e., the Shipbuilding Company, Rolling Stock,
Construction Machinery & Crushing Plant Company, Aerospace
Company, Gas Turbine & Machinery Company, Plant & Infrastructure
Engineering Company, and Consumer Products & Machinery
Company.
Each internal company set up its own management committee headed
by a company president to operate its business. Business centers (BCs)were also established when it was necessary to create independent
business segments for certain markets, products, etc.
The Technology Group, which served as the research and development
department for the entire company, transferred specific R&D functions
to relevant internal companies where appropriate. It integrated
laboratories to enhance its capabilities to more efficiently develop basic
technologies that could be used in common, as well as new products
and technologies.

Executive Officer System
Kawasaki introduced an executive officer system in April 2001 toeffectively conduct the diverse range of businesses it operated indifferent markets.

The new system was designed to enable professionals in respective areasof business to make the optimal decisions and execute business
operations promptly. At the same time, the number of directors was
reduced from 26 to 11 to invigorate discussions at the Board of Directors
meetings, speed up strategic decision-making on matters discussed by
the board, and enhance management oversight.

4) Strengthening Financial Health
Raising Funds through Capital Increases at Market Valueand the Issuance of Convertible Bonds
Despite everything it did to boost profitability, all Kawasaki had to show
for its efforts was a low equity ratio of 12% at the end of fiscal 1995 anda need to increase shareholders' equity as well as improve the equity
ratio. In July 1996, the company issued 30 million shares (worth
approximately 15 billion yen) at market value overseas and 40 billion
yen in convertible bonds (CB) domestically. Since the company had
been conducting annual investor relations activities in Europe and the
U.S. since the beginning of the 1990s, it took advantage of these
activities to sell shares to overseas institutional investors. This was thefirst step the company took toward raising funds with a view to global
capital markets as it was expanding its operations across the world. The
successful completion of the capital increase also reaffirmed theimportance of overseas investor relations. The 15 billion yen raised
through new shares issued at market value were immediately capitalized,
contributing to the expansion of shareholders' equity.

Issuance of Euro-yen Convertible Bonds with Stock
Acquisition Rights
As the company sought to further strengthen its financial position, amajor challenge was to meet its funding needs without increasing
interest-bearing debt. Accordingly, the company decided to issue euroyen convertible bonds in light of the overall benefits. They would enable
the company to enhance its equity ratio at an early stage while securing
immediate funds. On top of that the favorable market environment
would allow the company to issue the bonds under favorable terms.
Specifically, the company issued euro-yen denominated convertible
bonds worth a total of 25 billion yen on December 8, 2003, and again on
September 21, 2004 for a total worth 22 billion yen. As the company
progressed with restructuring, its stock price rose, and that wasconverted into equity, which greatly helped strengthen its financial
position.

5) Reforming Every Business Division with an Eye
to Spinning Them Off into Independent Entities
Following the introduction of the internal company and executive officer
systems, Kawasaki moved into the second phase of its management stylereform as it worked to restructure its business with a view to spinning off
all of its business divisions and forming alliances with other companies.

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Part 2/The Last 25 Years (Overall History)

Chapter 1 Transforming Management and Launching Spin-offs

Establishing Kawasaki Shipbuilding Corporation

Shipbuilding cranes at Kawasaki Shipbuilding

Message from the Kawasaki Shipbuilding
president in the company newsletter

Kawasaki spun off its ship division and established Kawasaki
Shipbuilding Corporation as a wholly owned subsidiary on October 1,
2002.
The company's shipbuilding division was expected to easily stay well
afloat for the foreseeable future as it focused on meeting the mounting
demand for submarines and gas carriers. On the other hand,competition in the overcrowded global construction market was
growing more intense in an ever rocky business environment where
financial performance was susceptible to exchange rate fluctuations.
Working to establish a lasting stable profit structure that could weather
any storm, Kawasaki decided to spin off its shipbuilding operations
into an independent entity. The move would enable Kawasaki totransform itself into a company that could flexibly respond to changes
in the business environment and conduct business operations in anagile and efficient manner.
The new company would concentrate more of its resources on highvalue-added products, with a focus on its submarine, LNG and LPG
carrier technologies that customers were clamoring for. At the sametime it was implementing various cost reduction measures in order tocreate the kind of lean structure that could outpace the competition andadapt to changes in the business environment.
Kawasaki’s shipbuilding business, the anchor upon which the company
was founded more than 100 years before, was readying to launch itself
into the 21st century with a big splash.
<Outline of the new company>
Name: Kawasaki Shipbuilding Corporation
Head Office: Chuo Ward, Kobe City
Capital: 10 billion yen
Operations: Design, manufacture, sale, and repair of ships, naval
vessels, marine equipment, and other transportationequipment, as well as other related businesses

Establishing Kawasaki Precision Machinery, Ltd.

Message from the Kawasaki Precision
Machinery president in the company newsletter

54

Kawasaki spun off its precision machinery division at the same time it
spun off the ship division. The division, which had grown significantlywith the addition of mechanical and electrical products as well as
control systems to its core lineup of hydraulic equipment and devices,
had put the Kawasaki hydraulics brand squarely on the map.
Unfortunately the domestic hydraulics market had been shrinking since
fiscal 1998, with no significant recovery in sight.
In order to ensure that the precision machinery division would survive
and grow steadily in this business environment, it was necessary tobolster the foundation of the division’s operations, including services,and make it a more agile organization. That’s why Kawasaki went
ahead and spun off the division.
The new company merged with Kawasaki Hydraulic Co., Ltd., a
Kawasaki subsidiary engaged in servicing hydraulic products, with theaim of strengthening and expanding its highly profitable service
business while rebuilding an integrated business structure for hydraulicproducts and services. It focused on further differentiating itself withhighly functional, high-performance products, as it took aim at
becoming the world leader in hydraulic components.

The launch of Kawasaki Precision Machinery, Ltd. on October 1, 2002
marked the first step to firmly establishing itself as a top global
company.
<Outline of the new company>
Name: Kawasaki Precision Machinery, Ltd.
Head Office: Nishi Ward, Kobe City
Capital: 3 billion yen
Operations: Design, manufacture, sale, after-sales service, andmaintenance of hydraulic components and devices,
electrical equipment, and control systems

Establishing Kawasaki Plant Systems, Ltd.
The performance of the plant business, which had been one of
Kawasaki’s core businesses since the 1960s, had been lackluster since
the latter half of the 1990s due to fierce price competition within Japanand overseas.
It was against this backdrop that the company decided to spin off thebusiness. Moving ahead with an eye to develop operations centered onstand-alone equipment and plants, Kawasaki established a wholly owned
subsidiary, Kawasaki Plant Systems, Ltd. on April 1, 2005. The newsubsidiary would provide valuable products at reasonable prices in thefields of energy, social infrastructure, and environmental conservation toestablish a unique position in the domestic and international plant
industry.
<Outline of the new company>
Name: Kawasaki Plant Systems, Ltd.
Location: Chuo Ward, Kobe City
Capital: 5 billion yen
Operations: Design, manufacture, installation, repair and sale ofvarious plants

Message from the Kawasaki Plant
Systems president in the company
newsletter

Establishing Kawasaki Environmental Engineering, Ltd.
Kawasaki had expanded its environmental business by actively
developing technologies for facilities and equipment related to thetreatment and recycling of municipal and industrial waste. In the 2000s,
however, the company faced tough times as orders fell off and thecompetition slashed prices.
On the other hand, demand for waste treatment and water treatment
facilities that are so vital to public health was expected to remain stable
over the medium-to-long-term as communities looked to revitalize theiraging infrastructure.
Therefore, the company decided to aim for further growth anddevelopment through the spin-off of its environmental business, and on
October 1, 2006, it established Kawasaki Environmental Engineering,
Ltd. as a wholly owned subsidiary.

Message from the Kawasaki
Environmental Engineering president in
the company newsletter

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Part 2/The Last 25 Years (Overall History)

Chapter 1 Transforming Management and Launching Spin-offs<Outline of the new company>
Name: Kawasaki Environmental Engineering, Ltd.
Head Office: Chuo Ward, Kobe City
Capital: 3.5 billion yen
Operations: Design, manufacture, sale, and repair of municipal
waste incineration plants, industrial waste treatment
plants, resource recycling facilities, water treatment
facilities, etc.
Subsequently, Kawasaki formulated a medium-term business plan,
Global K (FY2006–2010), laying out a policy to develop the energy
and environmental engineering business into a new pillar of group
operations. On April 1, 2007, Kawasaki Plant Systems was mergedwith Kawasaki Environmental Engineering since both of these spin-off
companies were operating businesses that could be core energy andenvironmental engineering businesses, and the surviving entity,
Kawasaki Environmental Engineering, was renamed Kawasaki Plant
Systems.
The newly launched Kawasaki Plant Systems (capitalized at 8.5 billion
yen) aimed to become a top engineering company in the fields ofenergy and global environmental conservation.

Establishing EarthTechnica Co., Ltd.

The signing ceremony for the establishment ofEarthTechnica

EarthTechnica

56

Kawasaki’s crushing equipment business had been seeing its primarymarket, the domestic construction aggregate market, continue to shrink
due to a decrease in public works projects, with little prospect for arecovery. In light of market conditions, the company formed analliance with Kobe Steel, Ltd., a leading company in the industry, andestablished EarthTechnica Co., Ltd. on April 1, 2003 to engage in thedesign and sales of crushing equipment.
Parallel to the commencement of EarthTechnica’s operations in July of
the same year, the two companies looked into fully integrating
manufacturing and sales functions and decided to transfer theircrushing equipment manufacturing divisions to EarthTechnica on April
1, 2005.
The new EarthTechnica, a 50-50 venture between Kawasaki and Kobe
Steel, hit the ground running as the industry's largest integrated crusher
sales and manufacturing company.
<Outline of the new company>
Name: EarthTechnica Co., Ltd.
Head Office: Chuo Ward, Tokyo
Capital: 1.2 billion yen
Operations: Design, manufacture, and sale of crushers, grinding
mills, separators, waste recycling equipment, and wear
and heat-resistant cast parts for crushers

Consolidation and Reorganization of Affiliates
Kawasaki reviewed the functions of affiliated companies and worked on
improving efficiency through reorganization, mergers, and businessalliances in order to strengthen the business structure and costcompetitiveness of its corporate group as a whole. Major reorganizations
and consolidations carried out between fiscal 2000 and fiscal 2004 wereas follows.

● Establishment of Kawasaki Machine Systems, Ltd.
Kawasaki Machine Systems, Naka-Nihon Ltd., Kawasaki Machine
Systems, Nishi-Nihon Ltd., Kanto Kawasaki Construction MachineryCo., Ltd., and Tohoku Kawasaki Construction Machinery Co., Ltd.,
which were sales companies related to construction machinery operating
across Japan, were all merged into one. At the same time, Kawasaki’s
sales division for general-purpose gas turbines was transferred to the
newly merged entity that, on July 1, 2000, would become Kawasaki
Machine Systems, Ltd., specializing in the sales and servicing of
construction machinery and general-purpose gas turbines.
On April 1, 2001, the new company incorporated Kawasaki's domestic
robot sales division, and absorbed Kawasaki Robotics Co., Ltd., which
provided after-sales services for robots in Japan, as well as Kawasaki
Turbine Technos Co., Ltd., which provided after-sales services forgeneral-purpose gas turbines in Japan. As a result, Kawasaki Machine
Systems became the sales company for Kawasaki’s general-purpose
products offering a wide range of services, including system engineeringsolutions, user training, and after-sales services.
<Outline of the new company (as of April 1, 2001)>
Name: Kawasaki Machine Systems, Ltd.
Head Office: Kita Ward, Osaka City
Capital: 343.8 million yen
Operations: Sale of construction equipment, general-purpose gas
turbines, robots, and related products, systems, and parts,
as well as after-sales services, on-site construction, andother related operations● Reorganization of the Steel Structure & Industrial
Equipment Division’s affiliates
On October 1, 2000, Kawasaki merged the three companies, Kawasaki
Construction Co., Ltd., Kawasaki Bridge Maintenance Co., Ltd., andKawasaki Construction Equipment Co., Ltd., into Kawasaki
Construction. Having added bridge repair and maintenance as well as
on-site equipment management functions to its Steel Structure &Industrial Equipment Division’s on-site construction work business,
Kawasaki Construction was now able to handle everything fromengineering to construction for various building projects.
At the same time, Kawaju Harima Tech Inc., Kawaju Noda Tech Inc.,
Toban Business Center Co., Ltd., and Tokatsu Business Center Co., Ltd.
were integrated into Kawaju Harima Tech Inc., which was then renamed
Kawaju Equipment Tech, Co., Ltd. (Harima-cho, Kako-gun, Hyogo
Prefecture).

Kawasaki Machine Systems

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Chapter 1 Transforming Management and Launching Spin-offs

Kawaju Equipment Tech was now equipped with the capability toprovide advanced technology and customized services in a wide rangeof areas, including maintenance of cargo handling machinery, sluicegates, and movable structures; design, fabrication, and installation offactory machinery and equipment; painting and transportation work forsteel structures; and various services such as design contracting,copying services, as well as sales and leasing of office equipment.
As a result of these reorganizations and consolidations, the Steel
Structure & Industrial Equipment Division along with its affiliatedcompanies as a whole reinforced their business foundations andexpanded operations with the capability to handle everything fromengineering to maintenance for a wide range of products.

● Comprehensive business alliance and capital tie-up
between Kawasaki Safety Service Industries, Ltd. and
Air Water Inc.
In July 2003, Kawasaki Safety Service Industries, Ltd. (KSSI), and its
parent company, Kawasaki Heavy Industries, reached a basic
agreement with Air Water Inc. to bolster their partnership with an eye
to expanding their healthcare-related businesses. KSSI possessed a
wealth of experience in medical equipment, such as medical gas
systems as well as breathing apparatuses used in firefighting andlifesaving activities, while Air Water had long been engaged in medical
equipment sales and medical services with a focus on supplying
medical and other gases.
On October 1 of the same year, Kawasaki transferred 33% of its sharesin KSSI to Air Water, after which KSSI and Air Water inked acomprehensive business alliance agreement. In August 2006, KSSI was
renamed Air Water Safety Service Inc., and in August 2007, all KSSI
shares were transferred to Air Water, making it a wholly owned
subsidiary of Air Water.
● Establishment of Kawasaki Life Corporation
Kawasaki Life Corporation was established on April 1, 2004 throughan integration and reorganization of three companies engaged inservices related to asset management and employee welfare for the
Kawasaki Group, including Kawaju Real Estate Co., Ltd. (specializing
in asset management, real estate sales, and brokering), Kawasaki
Kosan Co., Ltd. (specializing in insurance sales, leasing, and real estate
management), and Kawaju Tomakomai Kanko Kaihatsu Co., Ltd.
(specializing in golf course management).

Kawasaki Life Corporation

58<Outline of the new company>
Name: Kawasaki Life Corporation
Head Office: Chuo Ward, Kobe City
Capital: 400 million yen
Operations: Real estate sales, purchases, leasing, management andoperation, lot sales and development, contracting ofcivil engineering and construction work, design andsupervision of construction work, insurance agency
business, general leasing business, etc.

● Establishment of Benic Solution Corporation
With the rapid development of information technology, the role of theinformation systems department and the nature of its operations changed
dramatically. In response to this change, Kawasaki looked for thesmartest way to handle its information systems in the 21st century. At
the end of the day it decided it would be best to set apart the division
responsible for building and operating information systems for thecompany and group as well as the division that sold technologies andknow-how cultivated in those operations. In January 1999, the separated
divisions were merged to form the Information Systems Division at
Kawaju Techno Service Corporation.
After carefully looking into the feasibility of turning the division into abusiness, Kawasaki finally decided to make it an independent company,
and on February 9, 2001, established Benic Solution Corporation, which
opened its doors for business on April 1.
<Outline of the new company>
Name: Benic Solution Corporation
Head Office: Akashi City, Hyogo Prefecture
Capital: 50 million yen
Operations: • Construction, operation, and maintenance ofInformation processing systems and information
communication network systems• Software and hardware sales• IT solutions

Benic Solution

6) Selection and Concentration of Production
Divisions
Chiba and Noda Works Consolidated into Harima Works
Kawasaki’s Steel Structure & Industrial Equipment Division had been
hard at work building bridges and floodgates for public works projects,
LNG tanks and penstocks for public utilities such as electric power andgas companies, and building structures (mainly steel frames) for theprivate sector. However, a prolonged economic slump and changing
societal needs after the collapse of the bubble economy had created astark business environment. Price competition among manufacturers inthe boiler business across the globe was also heating up.
In order to keep its steel structure and boiler businesses from goingunder in this harsh business environment, Kawasaki would have toreorganize its production divisions in Harima, Noda, Sodegaura, andChiba so it could improve its operational foundation and get
performance back on track.
The company eventually moved forward with the relocation andconsolidation of its factories, integrated the Chiba Works’ boiler division
into the Harima Works, and transferred the Sodegaura Works’ bridge
product manufacturing operations to the Noda Works. It also relocatedthe Noda Works’ production lines for pipes, tanks, and equipment to theHarima Works.

Noda Works

Sodegaura Works

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Chapter 1 Transforming Management and Launching Spin-offs

In fiscal 2000, the four plants in Harima, Noda, Chiba, and Sodegaura
were consolidated into two, the Harima and Noda Works. The
following fiscal year, production management at the Harima and Noda
Works was centralized, but since capacity utilization at the Noda
Works had declined significantly, its operations were folded into theHarima Works. The Noda Works was closed in the final days of
September 2003 after its production lines were shut down at the end of
March, leaving Kawasaki with only the Harima Works.

Chiba Works

Yachiyo Works

Closure of the Yachiyo Works and Opening of the
Kakogawa Works
Kawasaki's Yachiyo Works, which had been responsible for the
manufacture of crushers, grinding mills, environment-related
equipment, etc., became the production base for EarthTechnica when
the company was established in 2003. As a result, Kawasaki ceased its
operations at the Yachiyo Works on March 31, 2005.
In April of the following year the company opened the Kakogawa
Works. Serving as a factory for the Consumer Products & Machinery
Company, which had transferred part of its production operations to theformer Kakogawa rolling stock plant in 1989, the new facility started
manufacturing crankcase materials for V-engines using its first-ever
newly installed 1,650 ton die casting machine.

7) Establishing Overseas Representative Offices

Delhi Office (2007)

Moscow Office (2011)

As the market was becoming more and more globalized, Kawasaki
started setting up overseas representative offices. Following the
restructuring of overseas operations, involving the opening two new
offices and consolidation of four locations, the company moved to a
new organizational structure in January 2007.
The two new offices included one in Delhi, India that was opened in
January and another in Moscow, Russia, that opened in March. In theSoutheast Asian market, where Kawasaki’s operating divisions had
already secured a foothold, the functions of the local offices in
Bangkok, Kuala Lumpur, and Jakarta were transferred andconsolidated into Kawasaki Heavy Industries (Singapore) Pte. Ltd., thelocal subsidiary in Singapore. In China, the Shanghai Office wasreorganized as a locally incorporated company, Kawasaki Heavy
Industries Consulting & Service (Shanghai) Company, Ltd. (capitalized
at US$250,000, and wholly owned by Kawasaki), in January 2007, toprovide services and assistance to Kawasaki's group companies
operating in China.
This shuffle was designed to strengthen the trailblazing role overseas
offices were playing in new markets. Kawasaki also aimed to build on
its regional bases as well as enhance the functions and efficiency of its
overseas operations by dividing the global market into the four
strategic blocks of America, Europe, China, and Asia.
In Russia and India, two BRIC countries that were enjoying remarkableeconomic growth, the two new offices worked on conducting market
research, cultivating business opportunities, collecting project
information, and assisting business travelers.

After restructuring its overseas operations, Kawasaki now had four
overseas offices and eight local subsidiary locations from where it could
cultivate overseas markets and boost its brand power. It was perfectly
poised to enhance management efficiency and achieve its corporate
vision of "Global Kawasaki."8) Implementing a Brand Strategy
Kawasaki overhauled its visual identity (VI) in September 2001,
employing visual elements that enabled it to communicate its corporate
image more accurately and effectively, and take its brand power to newheights. Since the need for digital data has grown with the digitization ofdesign and printing of catalogs as well as other materials, the company
also introduced a new brand name, brand logo, revised logotype for thecompany name and trademark. Aligned with the corporate VI, theelements were more distinct and easier to use than ever before.

Visual identity (new brand logo)

9) The “Big Bang” in Accounting
As corporate globalization accelerated, more and more companies
adopted internationally accepted accounting standards. Beginning in
1999, new standards were sequentially established in Japan forconsolidated accounting, tax effect accounting, financial instruments
accounting, retirement benefit accounting, and business combinationaccounting.
Since Kawasaki had long been focusing on investor relations (IR)activities overseas and had lots of opportunities to hear what was on its
investors’ minds, it had already taken proactive steps, such as opting forconsolidated business management, ahead of the internationalization of
accounting standards. In fiscal 1998, the company implemented interim
consolidated accounting and introduced tax-effect accounting. In thefollowing fiscal year, the company included all subsidiaries in the scopeof consolidation, laying the groundwork for full-fledged consolidated
business management.
In the 2000s, the entire Kawasaki Group streamlined its management
and was ready to become a corporate group that would be highly
regarded in capital markets in light of the new accounting standards.

Kawasaki Heavy Industries (Singapore) Pte. Ltd. (2013)60

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3.

Chapter 1 Transforming Management and Launching Spin-offs

Cultivating New Growth in the 21stCentury
1) Formulating the K21 Medium-Term Business
Plan
The K21 medium-term business plan formulated in 2000 laid out a planfor boosting the marginal profit rate by cutting fixed costs andtransforming business models based on the basic policies of “quality
followed by quantity” and “selectivity and concentration.” Inparticular, Kawasaki positioned the Shipbuilding and Plant &Infrastructure Engineering as businesses requiring structural reforms,
since their markets had matured in Japan and did not expect to see an
improvement in the supply-demand balance anytime soon. Kawasaki
planned various reforms, including spin-offs, alliances, andconsolidation of factories, and completed most of them. During thistime, the company worked on reducing interest-bearing debt andstrengthened its financial position.
However, a combination of significant changes in the businessenvironment, including a prolonged economic slowdown in Japan anda slump in aviation demand triggered by the terrorist attacks in the
U.S., as well as deferrals of large-scale rolling stock and other projects,
caused a two-year delay in achieving the ROIC target. Kawasaki thendecided to make fiscal 2005 the final year for the K21 and formulate a
new medium-term business plan in light of the current operating
environment.

2) Inauguration of Tadaharu Ohashi as President

President Ohashi (right) is named the new president

Message from President Ohashi in the company newsletter

In June 2005 Kawasaki president, Masamoto Tazaki, became thechairman, and Tadaharu Ohashi, the senior executive vice president,
became the president. Ohashi had built his career in the rolling stockbusiness and had abundant overseas experience. Tazaki noted that oneof the reasons for handing over the reins to Ohashi was that, as a leader
who could compete with the world's most powerful companies, he had
a wealth of overseas experience, resilience to adversity, and the ability
to adapt to changes in the environment.
In order to complete the series of structural reforms implemented by
Tazaki, Ohashi aimed to make Kawasaki a powerful earning engine
while building trust for the Kawasaki brand. He also made thecompany’s basic management policies about boosting earning powerby focusing more than ever on the profitability of businesses andproducts; giving priority to compliance in all aspects over everythingelse; and contributing to solving global environmental problems with
Kawasaki’s advanced technology and superior products.
He called on employees to start working together to create a "Global
Kawasaki" that would survive and steadily grow in the 21st century, an
era where there was full-fledged international division of labor freefrom economic borders.

3) Strengthening Compliance Management

As a result, in 1999, the Japan Fair Trade Commission (JFTC) issued acease-and-desist order under the Japanese competition law. While thefive companies appealed to the Supreme Court, it decided against themand upheld the JFTC ruling in 2009.
In fiscal 2005, a number of companies in the industry, including
Kawasaki, were brought up on charges of violating the competition law
in connection with steel bridge construction contracts and were
penalized by the JFTC. In fiscal 2006, the JFTC ordered Kawasaki to
pay a surcharge for violating the competition law in connection withtunnel ventilation and sluice gate construction.
The company pledged to make group-wide efforts to prevent any suchoccurrence from ever happening again and placed an even greater
emphasis on compliance throughout its operations. In fact, the company
made ensuring thorough compliance a bedrock corporate policy. It did
everything possible to ensure no employee would ever commit an illegal
act again, recognizing that such illicit actions could jeopardize the very
existence of the company itself. In addition to that, the company started
holding regular meetings of its Corporate Ethics Committee, chaired by
the president, and set up the Compliance Committee under the Corporate
Ethics Committee.
Compliance committees were also established at internal companies andmajor subsidiaries to build an organizational structure needed to support
the implementation of systematic internal control and compliancemeasures across the Kawasaki Group.
The company implemented a Compliance Reporting and Consultation
System (a whistle-blower system) in June 2003 that is still in place andprovides all employees with a copy of its Compliance Guidebook.
Since 2006, the Board of Directors has passed a resolution every year, at
its annual meeting held immediately after the ordinary general meetingof shareholders, stating that Kawasaki would steadfastly comply withcompetition laws and strive to build on the company's enterprise value
and worth to society.

4) Formulation of the Global K Medium-TermBusiness Plan
Following the K21 medium-term business plan, Kawasaki formulated
Global K “Global Kawasaki”—The Next Exciting Stage (FY2006–2010), This was a business plan beginning in fiscal 2006 that would
guide the company during the first five years of working toward the
Kawasaki Group’s ten-year vision. Building on the structural reforms
and business stabilization measures implemented under K21, Kawasaki
aimed to take the company to new heights with an eye to achieving its
corporate vision for the coming decade. The outline of Global K is asfollows.
[Corporate Vision]
Enriching lifestyles and helping safeguard the environment: Global
KawasakiCompliance Guidebook

Explanation of the Global K medium-term business planin the company newsletter

Kawasaki, along with four other companies, was subjected to an onsite inspection in 1998 in connection with a bid for the construction ofa municipal waste incinerator.

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Part 2/The Last 25 Years (Overall History)

Strengthen
management

10 years in the
future (FY2015)(FY2006-FY2010)
Boost profitability
Execute growth strategies

Restructure businesses with poor profitability

Become a highly
profitable, globally
recognizedenterprise
Realize
corporatevisionAll segments profitable from FY2007

Concentrate resources in highly profitable/growth fields

Accelerate global business expansion

Provide high-performance, high-quality products and services
The plan will be reviewed at its halfway point

Positioning of the Global K Medium-term Business Plan

[Quantitative Targets] (Fiscal 2010, on aconsolidated basis)
Net sales

1.56 trillion yen

Operating income

100 billion yen

Recurring profit

90 billion yen

Before-tax ROIC

14%

Ratio of recurring profit to sales

5.8%

Kawasaki aims to become a leading global enterprise that enriches
lifestyles and helps safeguard the environment through its corebusinesses, which encompass land, sea and air transportation
systems, and the energy and environmental engineering sectors.
[Basic Objectives]
The company should leap forward to become a highly profitable,
globally recognized enterprise during the period of the Global K
plan by implementing the principal management policies of “Quality
Followed by Quantity,” selectivity and concentration, and stronger
non-price competitiveness.
[Gist of the Plan](1) What Each Business Should be 10 Years in the Future:
Work toward achieving the ten-year vision for businesssegments including Rolling Stock, Aerospace, Gas Turbines &Machinery, Consumer Products & Machinery, Energy &Environmental Engineering, Industrial Robots, Shipbuilding,and Industrial Hydraulic Products.
(2) Selectivity and Concentration: Positioning of the Businesses
Four Core Businesses: Rolling Stock, Aerospace, Gas Turbines& Machinery, and Consumer Products & Machinery
Developing Business: Energy & Environmental Engineering
Self-sufficient Businesses: Industrial Robots, Shipbuilding, andIndustrial Hydraulic Products[Priority Initiatives](i) Strengthen technological capabilities(ii) Encourage market-oriented thinking and action(iii) Accelerate global business development(iv) Create and cultivate new products and businesses(v) Strengthen Group management capabilities(vi) Promote CSR
When kicking off Global K, Ohashi asserted the new medium-termbusiness plan, which picked up where the K21 medium-term businessplan launched in fiscal 2000 left off, would take the entire Group to“the Next Exciting Stage.” He assured everyone that Kawasaki was“determined to put all its might and energy into aggressively moving
forward to achieve its goals.”

In 2004, the Kawasaki Group introduced an emergency safety
confirmation system dubbed the K-Emergency Communication System.
The system allows employees and their families in disaster-stricken
areas to voluntarily report on their safety status using a personal
computer, mobile phone, public phone, etc. in the event of a large-scaledisaster. It will not only help confirm their safety but also facilitaterescue operations and business recovery.
The Kawasaki Group is strengthening its crisis management system toensure the safety of employees and their families in the event of natural
disasters and terrorist attacks not only in Japan but also overseas.

Aiding Victims and Areas Hit by Natural Disasters
The Kawasaki Group has been actively providing assistance to areas andpeople affected by large-scale natural disasters that frequently occur inJapan and overseas, including the donation of funds and Kawasaki
products to help recovery efforts (see Table II).

Month/year decision toprovide assistance was made5) Ten Years after the Great Hanshin-Awaji
Earthquake

64

Japan

Disasters and affected areas

Assistance provided

February 2004

Bam earthquake (Iran)Donated 80 portable generators

January 2005

2004 Indian Ocean earthquake and tsunami

Donated a total of approximately ¥20 million

September 2005

Hurricane
Katrina (USA)Donated US$200,000 and Kawasaki multi-purpose vehicles (equivalent to
US$100,000)

May 2006

2006 Yogyakarta earthquake (Indonesia)

Donated ¥10 million and 20 motorcycles (mopeds)

May 2008

Cyclone Nargis (Myanmar)

Donated ¥5 million

May 2008

2008 Sichuan earthquake (China)

Donated ¥20 million

January 20102010 Haiti earthquake

Donated US$50,000

October 2011

2011 Thailand floods

Donated money and Kawasaki multipurpose vehicles totaling ¥30 million

November 2013

Typhoon Haiyan (Philippines)

Donated ¥10 million and 20 Kawasaki motorcycles (equivalent to ¥3.8
million)April 2015

2015 Nepal earthquake

Donated an equivalent of ¥10 million

September 2017

Hurricanes
Harvey and Irma (USA)Donated US$100,000 and 10 Kawasaki multipurpose vehicles, plus
donations from local subsidiaries and employees

November 2004

Niigata Chuetsu earthquake

Donated ¥10 million and a piece of Kawasaki construction machinery(equivalent to ¥22 million in total) to Niigata Prefecture

November 2004

Typhoon Tokage 2004 (disaster victim
assistance and reconstruction)

Donated ¥5 million to Hyogo Prefecture

March 2011

Great East Japan Earthquake*Detailed in Chapter 2, Section 2-5

August 2014

Heavy rain in northern Hiroshima City

Donated an equivalent of ¥10 million

April 2016

Kumamoto earthquake

Donated ¥10 million

August 20172017 Northern Kyushu torrential rainfall

Donated ¥2 million

July 2018

Torrential rainfall in July 2018

Donated ¥10 million

Strengthening the Group's Crisis Management System
The Great Hanshin-Awaji Earthquake that occurred in the early hours
of January 17, 1995 took many lives, paralyzed urban functions, andcaused unprecedented damage. In the wake of the disaster, every
Kawasaki plant drafted guidelines on what to do in the event of a major
earthquake or other disasters. The guidelines cover everything fromstockpiling emergency supplies to working with local governments andneighborhood associations on various projects, so that Kawasaki plants
can play a positive role in the local communities they are a part of.

K-Emergency Communication System safety confirmation app[Table II] Aid to Victims and Areas Hit by Natural Disasters

Overseas(FY2000-FY2006)

Chapter 1 Transforming Management and Launching Spin-offs

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6) Contributing to Local Communities
Corporate Museum, Kawasaki Good Times World, Opens

PR magazine announcing the opening of Kawasaki Good
Times WorldOn May 17, 2006, Kawasaki opened the Kawasaki Good Times Worldin the Kobe Maritime Museum (Chuo Ward, Kobe City). This
interactive museum allows visitors to experience the wonders oftechnology and the importance of craftsmanship while interacting with
Kawasaki products in fun and informative ways.
The museum is divided into the History Area, outlining the history of
the Kawasaki Group; the Motorcycle Gallery showcasing lines ofKawasaki motorbikes, both old and new; the Sea Zone, where visitors
can watch how ships are built and launched at the Kobe Works on a
triple-screen audiovisual system; the Land Zone, featuring an actual
Shinkansen cab; and the Air Zone, where an actual model of a large
twin-engine helicopter that can hold up to 27 people is displayed. Also
on display are Kawasaki's high-performance small industrial robots
that are widely used in factories These continue to be a magnet of
attraction for kids.
In October 2015, nine years after its opening, the museum welcomed
its two millionth visitor and presented them with a certificate ofrecognition, a bouquet of flowers, and memorabilia to mark theoccasion. The total number of visitors reached three million in
September 2020.
The Kawasaki Good Times World changes exhibits from time to timeand underwent a major overhaul in 2016 and 2018.

Promoting Strategic Industry-University Collaboration
Kawasaki Good Times World opening ceremony

66

On October 23, 2006, Kawasaki and Kobe University signed anagreement on industrial-academic cooperation.
Under the agreement, the two parties were to build a strategic industryacademia partnership leveraging each other’s wealth of research andtechnological expertise in pursuit of mutually beneficial ends. It was
based on a shared philosophy of contributing to society by creating
new value and business opportunities through Kobe University's
knowledge and Kawasaki’s manufacturing.
The partnership would enable Kobe University to further its basic
research and enhance the education of students, through internships
and more. It would allow Kawasaki to complement and reinforce awide range of technologies and knowledge, strengthen its coretechnologies and basic technological capabilities necessary for new
product development, and promote the development of newtechnologies and businesses in the areas of energy and theenvironment.
Through these activities, Kobe University and Kawasaki aimed toreinforce priority areas, strengthen basic and elemental technology
capabilities, explore new business areas to accelerate and streamline
research and development, and create new value and businesses, withan eye to making the world a better place.

7) Structural Reform of the Personnel System
As part of the structural reforms aimed at achieving the goals set in theK21 medium-term business plan (FY2000–2006), Kawasaki initiated adrastic overhaul of its personnel system in fiscal 2002.

Introduction of Term-end Allowance Linked to the
Performance of Internal Companies
Moving in line with the introduction of the internal company system,
Kawasaki introduced a performance linked system in fiscal 2003 thatbased year-end bonuses on how well each internal company performed
financially. The company designed this system to be the driving force
that would propel performance at internal companies. Kawasaki believed
it would foster a sense of ownership as well as a sense of unity among
employees at each internal company, all with an aim of firmly
establishing the internal company system and strengthening the entire
business foundation.

New Executive Compensation Plan
In fiscal 2002, Kawasaki introduced a new executive compensation plan.
It introduced an annual salary, abolished automatic pay increases (theregular pay raise), and implemented a system linking internal company
performance to year-end bonus amounts while adding greater weight toindividual performance when determining bonuses. Under the new plan,
the annual income of individual executives was determined on the basisof their ability and performance.
This revision to the executive compensation plan was a precursor to thestructural reform of the personnel system (TAR-GET), which is outlined
below.

Pamphlet on the new executive compensation plan

Implementation of Seven TAR-GET Initiatives
Moving forward with the reform of the personnel system, which had
been ongoing since fiscal 2000, Kawasaki implemented the second phaseof the structural reform dubbed TAR-GET. It was an acronym for "Total
and Aggressive Reformation for Gaining Excellent Tomorrow," whichmeant making drastic and ambitious changes that would pave the way toa bright new future. In order to overcome the hurdles facing thecompany, it was necessary to comprehensively and aggressively change
the personnel system, with a focus on performance, actual costs, andself-help efforts.
Seven initiatives were implemented under TAR-GET starting in April
2004 (see Table III).

Extension of the Retirement Age (for General Employees)
and Introduction of the Re-employment System
In the early 2000s, Kawasaki was saddled with a major labor challenge
as a large number of skilled workers reached retirement age.

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Moreover, since Kawasaki was expecting a steady flow of large orders,
it became a company-wide challenge to fulfill them without a hitch.
The real trick was using a skilled labor force to maintain and improve
quality while seamlessly passing on the technology and skills it
possessed to the next generation that would take the torch and bear it
into the future. In a greying Japanese society, the prolonged pension
gap resulting from the reform of the public pension system had also
become a major social problem.
Anticipating the social problems looming on the horizon, Kawasaki
revised its mandatory retirement age with an eye to ensuring job
security. Stabilizing employment was one of the principles of TARGET, which would relieve employees' concerns about retirement andrevitalize the workplace. Under the new system, the mandatory
retirement age for general employees was gradually raised from 61 to
63 between fiscal 2005 and 2007. In fiscal 2006, the company made it
possible for general employees and executives who reached the
mandatory retirement age to be rehired and continue working until theyreached the age of 65.
Subsequently, due to the need to secure and utilize an even older
workforce, the retirement age for general employees and partners wasraised to 65 in fiscal 2019.

Japan adopted the Kyoto Protocol Target Achievement Plan.
The plan outlined a multipronged environmental and economic strategy
for reaching Japan’s 6% CO2 reduction commitment that included
promoting technological innovation; ensuring participation andcollaboration by all stakeholders (national and local governments,
businesses, etc.), transparency and information sharing; utilizing various
policy measures; and ensuring international collaboration.
Against the backdrop of growing awareness of all the environmental
problems affecting the planet, the Kawasaki Group developed
environmentally friendly products (a.k.a. eco products) and introduced
them to the global market in order to achieve its 2010 Environmental
Vision (see Table IV).

Achieving Zero Emissions at All Plants
The third stage of EPAP (FY2000–2002) set a goal of achieving zerowaste emissions and a recycling rate of 100% at all plants by the end of
fiscal 2004.
[Table IV] Environmentally Conscious Products and Environmental Protection Products and Technologies
Environmentally Conscious Products

8) Environmental Management for Sustainability
Promoting Environmental Management for Sustainability
Promoting the 2nd three-year stage of EPAP
the 3rd stage of EPAP
(FY2000–2002)
Public Relations, ecoEducation, Social Activities• Disseminate the environmental
information to all Kawasaki
employees, stakeholders andsociety.
• Planning environmental training for
all Kawasaki employees.

Promoting Resource Recycling• Setting numerical targets forrecycling.
Reducing CO2 emissions• Promoting Energy Conservation
activities.
• Setting numerical targets for
reducing emissions.

Environmental
Charterthe 2nd stage of EPAP
(FY1997–1999)• Research and develop
new technologies andproducts for positiveenvironmental impacts.
• Observe environmental
laws/regulations.
• Pursue the creation ofa recycling-oriented
society.
• Implementation ofEnvironmental
Management System(EMS) and gain
ISO14001 certification.

Preventing Public Nuisance

Establishment of recycleoriented management
Environmental Contributions throughTechnologies and Products• Energy conservation.
• Air, water and groundenvironmental improvement.
• Waste disposal and recycling.
• Countermeasure of CO2
emissions.

Reducing Industrial Waste• Setting numerical targets forrecycling.
Energy Conservation• Reducing consumption in electricity, fueland water for production.
• Setting numerical targets for reduction.

Establishing EMS based on
ISO14001• Compliance with environmental
legislation.
• Zero instruction by government,
zero complaint from residents.

• Implementation of EMS in all divisions.
• Making foundation to gain ISO14001
certification.

the 1st stage of EPAP
(FY1994–1996)

Promoting the 2nd three-year stage of EPAP

In the first stage of the Environmental Protection Activities Plan
(EPAP), which started in fiscal 1994, Kawasaki invested in equipment
to prevent pollution and concentrated on the purification of factoryexhaust and wastewater. In the second stage (FY1997–1999), thecompany tackled various environmental issues such as energy andresource conservation as well as waste reduction, with the aim ofbuilding an ISO 14001-based environmental management system. In
the third stage (FY2000–2002), efforts were made to enhance
information disclosure by introducing green procurement, life cycle
assessment (LCA), product assessment (environmentally conscious
design), and environmental accounting.
Since many Kawasaki products are energy-intensive, the company
focused on saving energy and resources as well as recycling, not onlyat the manufacturing stage but also at the operation and disposal stagesof these products. This was done in order to contribute to achieving a
recycling-based sustainable society.
In 2003, the company formulated its Environmental Vision 2010:"What Kawasaki Should Be in the Year 2010," to step up efforts onenvironmental management.

Employing Green Manufacturing Technologies
In February 2005, the Kyoto Protocol, mandating that developed
countries cut carbon dioxide (CO2) and other greenhouse gas
emissions, went into effect.

Aircraft

Products and technologies that protect the environment

Boeing 787, a next-generation environmentally friendly
aircraft

Winning ACEJ Chairman's Award

Fitted with a lighter fuselage, the Boeing 787 is expected to save a hugeCo., Ltd. was highly rated by the Advanced Cogeneration and Energy

amount fuel. Kawasaki worked on the development and manufacture of the

Utilization Center Japan (ACEJ) for its energy saving, environmentally

forward fuselage and other components, utilizing its carbon fiber composite

friendly, and innovative features, earning it the Chairman's Award, which isprocessing technology.

given to only the most outstanding equipment.

Trent 1000, eco-friendly jet engine

Combined cycle power plant (CCPP)

Kawasaki’s cogeneration system delivered to Fuji Electric Device Technology

Kawasaki also participated in the development of a new eco-friendly jet

Ships

Kawasaki employs its high-efficiency L20A gas turbine for combined cycle

engine from the British manufacturer, Rolls-Royce. It featured improved fuel

Energy facilities power plants (CCPPs) that use both gas and steam turbines. The turbine

efficiency contributing to a significant reduction of CO2 and NOx emissions.

improves energy efficiency and cut CO2 emissions at power generation

The completed engine was used to power the Boeing 787.

facilities where they are employed.

Environmentally conscious large oil tanker (Katsuragisan)
The vessel’s fuel oil tank has a double-hull structure similar to that of a cargo

Woody biomass power generation system (fixed bed
gasification/gas engine system)tanker to prevent polluting the water in the event of an accident. It’s equipped

This system gasifies lumber residue, timber from forest thinning, clippings,

with an energy saving device called the RBS-F* to reduce energy

etc., and generates electricity via a gas engine. These wood resources are

consumption. *RBS-F: Rudder Bulb System with Fins

called woody biomass, and since they grow by absorbing atmospheric CO 2,

Environmentally friendly electronically controlled marine
diesel engine

they can be said to be renewable energy sources that do not increase CO2.

Low NOx gas turbine power generation systems

Electronically controlled diesel engines improve fuel efficiency, lower

Improvement ofcylinder lubricant consumption, and reduce NOx and dust emissions.

the air quality

Environmental measures for China’s EMU* (adoption ofheavy metal-free paints)

The advanced stoker system, which dramatically improves the performance ofstoker incinerators, achieves high-efficiency power generation and reduced

paints that do not contain these substances as an environmental measure andTransfer Register (PRTR). *EMU: Electric multiple unit (trains)

Energy conservation via friction spot joining (FSJ) robots
Plant andindustrial
machinery

environmental impact. In addition to this, ash is made into slag in a smelter andWaste treatment

can be used in asphalt and concrete products.

and recycling

Soda recovery boiler
A soda recovery boiler uses waste liquor (black liquor) generated during pulp

An FSJ robot performs spot welding of light alloys such as aluminum andproduction in paper mills as fuel. It recovers soda used as a solvent whilemagnesium. It uses frictional heat to soften and fuse the sections ofutilizing the heat from burning the pulp residue in the black liquor all with anworkpieces to be joined. The FSJ process consumes a 20th or less of theeye to conserving the environment.

power consumed by conventional resistance spot welding, in which

Landfill leachate treatment system (Sado)

workpieces are melted and joined using a high current.

Effective use of resources by reusing built-in parts on shieldmachines
SocialKawasaki worked with Araigumi to develop the DSR technique that allows

infrastructure

for extracting the internal shell of a shield machine, most of which had beenamount is less than a tenth of the emissions (2.5 ppm or less) from

Waste incinerators (stoker incinerators)

chromium and lead, but Kawasaki is promoting the use of heavy metal-free
has also reduced the number of substances listed on the Pollutant Release andturbine cogeneration systems, which already feature low NOx emissions. The
conventional gas turbine cogeneration systems.

Paints for rolling stock used to contain heavy metals such as hexavalent
Rolling stock

The use of catalytic combustion further reduces NOx emissions from gas

Improvement of

The leachate treatment system removes organic substances and heavy metals

water and soil

from landfill leachates. Its stable treatment capacity and outstanding water
purification performance help protect the environment.

buried underground after construction, and reusing approximately 90% of theparts. This achieved a better use of resources.

68

69

Part 2/The Last 25 Years (Overall History)

Chapter 1 Transforming Management and Launching Spin-offs

In December 2000, the Harima Works began full-scale efforts towardachieving zero waste emissions. After identifying challenges lying
ahead and exploring ways to recycle waste, it achieved zero emissions
in September 2001. The factory achieved a recycling rate of 100% forwaste it generated annually while successfully slashing waste
management costs.
Subsequently all Kawasaki plants worked on zero waste initiatives andachieved a zero emissions status in March 2005 as initially planned,
with the Gifu Works, Nagoya Works 1, Nagoya Works 2, and YachiyoWorks all reaching their zero emission targets.
In 2011, Kawasaki redefined zero emissions as a final disposal rate of
1% or less in light of prevailing trends, and has maintained a zero
emission status since then.

Shuttering In-house Industrial Waste Treatment Facilities

Solar power plant at the former landfill site

[Table VI] ISO 14001-certified Kawasaki Locations
Month/year
certifiedInternal companies andbusiness centers
Precision Machinery
February 1998
Business Center
October 1998

Robot Business Center

March 1999

Environmental BusinessCenterNovember
1999

Steel Business CenterFebruary 2000
March 2000
May 2000
July 2000
August 2000
August 2000

Group companies, etc.

Consumer Products &Machinery Company
Jet Engine Division, Gas
Turbine Business Center
Construction Machinery
Business CenterIndustrial Machinery
Business Center
Crushing Plant BusinessCenter
Shipbuilding Company(Sakaide Works)

November
2000

Machinery Business Center

March 2001

Power Plant Business CenterMay 2001

Gas Turbine Business Center& Gas Turbine Research &Development Center

Kawaju Gifu Service Co.,
Ltd., Kawaju Gifu
Engineering Co., Ltd.,
Kawasaki Helicopter System
Co., Ltd., and KGM Co., Ltd.
Kawasaki Rolling Stock
Rolling Stock, Construction
Engineering Co., Ltd.
February 2002 Machinery & Crushing Plant(Kawasaki Heavy Industries
Company (Hyogo Works)
Hyogo Works)
Shipbuilding Company
August 2002
(Kobe Works)
February 2002 Aerospace Company

The Japanese government mandated that companies take responsibility
for disposing of their own industrial waste due to the shortage of public
landfill sites. Kawasaki turned its eye to Iwaoka, a town located in
Tarumi Ward, Kobe City, Hyogo Prefecture (now Iwaoka, Nishi Ward,Kobe). It’s there that it established a landfill site in 1973 and then the
Industrial Waste Disposal Center (IWDC) in 1979, which was designed
to reduce the volume of waste through incineration. In response to thegovernment mandate, the company ceased operation of the IWDC’s
incineration facility in 2001 (which was followed by its demolition anddismantlement in 2003, and the closing of the IWDC in 2007). It
ceased operations at the landfill site in 2003 (and shut it down
permanently in 2005). After serving their purpose, there was no room
for these facilities in a future where recycling and zero waste emissions
were the order of the day. The site is currently being used effectively as
an in-house distribution warehouse (completed in 2012) and a 1,500
kW solar power plant (opened in 2014).

Establishment of Environmental Management System(EMS)
Kawasaki is working to acquire ISO 14001 certification at all its
locations. The Shipbuilding Company’s Kobe Works acquired
certification in August 2002, making all six internal companies ISO
14001-certified (see Table VI).

9) Celebrating the 110th Anniversary
On October 12, 2006, Kawasaki held its 110th anniversary celebration
at Kobe Meriken Park Oriental Hotel’s Zuiten no Ma banquet hall. The
event was attended by Kawasaki executives, former executives,presidents of major domestic affiliates, labor union officials andmembers of Hyogo prefecture and Kobe city assemblies (who wereformer Kawasaki employees). A reception was held following acommemorative lecture entitled "The Milestones Made by the
Cosmopolitan Kojiro Matsukata," given by Masanori Aoyagi, Directorof the National Museum of Western Art.
The Kawasaki Group had been enjoying steady financial progress as itreached this milestone moment. It had seen sales and profits increase
for the three consecutive fiscal years from 2004 to 2006, and was about
to kick off fiscal 2007 with a bang.

*Company and division names are as of 2002.

70

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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

Chapter 2

1.
Toward "Global Kawasaki"—Living in Harmony with People, Society, and thePlanet2007–2013

In 2007, the Kawasaki Group drafted a mission statement, "Kawasaki,
working as one for the good of the planet," to guide the entire Group in
making the leap forward to become a global leader in the 21st century.
Following fiscal 2006, the company posted record profits in fiscal 2007,
but due to the global economic recession and slowdown caused by the
Lehman Brothers collapse, sales and profits declined for the first time infive years in fiscal 2008.
In April 2010, it formulated the Kawasaki Business Vision 2020 andMedium-term Business Plan (MTBP) 2010 (FY2010–2012). In Octoberof the same year, Kawasaki Heavy Industries, Ltd., Kawasaki
Shipbuilding Corporation, Kawasaki Precision Machinery, Ltd., andKawasaki Plant Systems, Ltd., were reintegrated to efficiently andrapidly consolidate and utilize group-wide intellectual assets. The new
Kawasaki Heavy Industries, consisting of seven internal companies thatemerged from this reintegration then decided to strengthen its solutions
business and focus on the development of its environmental and energy
systems business. In moving toward the coming low-carbon society andhydrogen society, the company also started to work on demonstrating its
CO2-free hydrogen supply chain technology while building acooperative consortium.
Overseas, the company opened production bases for ships, plants, andprecision machinery in China, which was experiencing rapid economic
development, and successively opened production and sales bases formotorcycles in the emerging economies of Southeast Asia, Brazil, andIndia.

Reaching New Heights

1) Establishment of the Kawasaki Group Mission
Statement
The Kawasaki Group celebrated its 110th anniversary in October 2006.
In September of the same year, the company formulated its mediumterm business plan, Global K, aiming to “become a leading global
enterprise that enriches lifestyles and helps safeguard the environment
through its core businesses” in ten years. In May 2007, the company
drafted the Kawasaki Group Mission Statement which underscored its
vision for the next decade that was outlined in the Global K mediumterm business plan. This mission statement would help the entire Groupnavigate through the rapidly changing social and business environment
as it made the most of its comprehensive technological capabilities inmaking the leap toward becoming a global leader in the 21st century.
Kawasaki had established its Management Principles in 1966 to spell out
the corporate culture and management standards it stood for. The new
mission statement incorporated all the good that came from thoseprinciples over the years and recast them in the light of a new era.
The mission statement incorporates the Kawasaki Group's social mission
and the values that underlie the Kawasaki brand, as well as the GroupManagement Principles and Group Action Guidelines.
In January 2012 and April 2016, the mission statement was revised tomake it easier to understand and more concise without compromising
any of the meaning behind the original wording.

Positioning of the Mission Statement in Management

Mission Statement

Kawasaki Group Mission Statement
Group Mission
Kawasaki, working as one for the good of the planet- We are the Kawasaki Group, a global technology leader withdiverse integrated strengths.
- We create new value—for a better environment and a brighter futurefor generations to come.
The Kawasaki Group Core Values
Value Creation: We are globally driven to create new value—bothfor our customers and for the benefit of society as awhole
Originality:
We thrive on originality, innovation and leadership
Excellence:
What we produce is of exceptionally high quality
and functionality, as we constantly strive to be at the
global cutting edge
Mission Statement card distributed to employees

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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

The Kawasaki Group Management Principles(i) Trust: As an integrated technology leader, the Kawasaki Group iscommitted to providing high-performance products and servicesof superior safety and quality. By doing so, we will win the trustof our customers and the community.
(ii) Harmonious coexistence: The importance of corporate social
responsibility (CSR) permeates all aspects of our business. This
stance reflects the Kawasaki Group's corporate ideal of
harmonious coexistence with the environment, society as awhole, local communities and individuals.
(iii) People: The Kawasaki Group's corporate culture is built on
integrity, vitality, organizational strength and mutual respect forpeople through all levels of the Group. We nurture a global teamfor a global era.
(iv) Strategy: The Kawasaki Group pursues continuous enhancementof profitability and enterprise value based on three guiding
principles—selectively focusing resources on strategic
businesses; emphasizing quality over quantity; and employing
prudent risk management.
The Kawasaki Group Code of Conduct(i) Always look at the bigger picture. Think and act from a longterm, global perspective.
(ii) Meet difficult challenges head-on. Aim high and never be afraid
to try something new.
(iii) Be driven by your aspirations and goals. Work toward success byalways dedicating yourself to your tasks.
(iv) Earn the trust of the community through high ethical standards
and the example you set for others.
(v) Keep striving for self-improvement. Act on your own initiative
as a confident professional.
(vi) Be a part of Team Kawasaki. Share your pride and sense offulfillment in a job well done.

2) Weathering the Global Financial Storm andEconomic Slowdown
Kawasaki's consolidated net sales in fiscal 2007 reached 1,501 billion
yen (up 4.3% year on year) mainly due to an uptick in sales for the
shipbuilding, consumer products, and machinery businesses. A
turnaround in the shipbuilding as well as plant and infrastructurebusinesses pumped up profits. Operating income hit 76.9 billion yen(up 11.2% year on year) and recurring profit 63.9 billion yen (up30.4% year on year), while both net sales and profit figures hit record
highs.
In fiscal 2008, the global economic slowdown triggered by the collapseof Lehman Brothers took a significant toll. Consolidated net sales fell
to 1,338.5 billion yen (down 10.8% year on year) as operating income
and recurring profit both dropped sharply, to total 28.7 billion yen(down 62.6% year on year) and 38.7 billion yen (down 39.4% year onyear) respectively. Sales and profits declined for the first time in five
years.
The bleak business environment cast a dark shadow over the horizon
and left no hope that Kawasaki’s performance would bounce back in
fiscal 2009. Among its produce-to-order businesses, Kawasaki had anabundance of backorders for the rolling stock, gas turbine andmachinery, and shipbuilding businesses, which gave it enough work forthe foreseeable future. However, new orders for the shipbuilding andother businesses were drying up.

74

The aerospace business was also in rough shape due to delays in both thedevelopment of the next-generation C-X transport aircraft as well as themass production of the Boeing 787.
Meanwhile, among the mass-production businesses, the consumer
products and machinery business, which had been a cash cow for theentire company, was hit hard by lagging performance in developed
countries that were its key markets. It was the same story for the
precision machinery, robot, and construction machinery businesses
where production also declined rapidly. On top of that, the yen's
appreciation against all currencies in the foreign exchange market had an
inevitable impact on earnings.
The consumer products and machinery business as well as the robot
business, in particular, suffered significant sales declines. Theiremployees were reassigned or seconded to further reduce fixed costs.
Production workers in the consumer products and machinery businesswent to other companies to assist with their operations.

3) Building a Solid Revenue Base for Sustainable
GrowthContinuing Reforms to Cultivate a Sustainable Growth
Cycle
The Kawasaki Group decided to firm up its business foundation in order
to withstand the worsening recession caused by the global economic
downturn. President Tadaharu Ohashi noted that it was a critical time for
the Group, and that they would work hard to rebuild the revenue baseand return to a sustainable growth path. He laid out an urgent business
management strategy focusing on: (1) ensuring quality over quantity andstrict risk management; (2) bolstering the business foundation; (3)investing in growth; and (4) getting business back on a growth trajectory.
He emphasized that Kawasaki should closely monitor changes in themarket environment, be selective about what orders it accepted andmake discerning investments based on thorough risk assessments ofbusinesses that were likely to experience a decline in demand, and all thewhile focus on reducing the break-even point, improving cash flow, andstreamlining the balance sheet. He decided to invest resources in growthareas such as energy and the environment as well as research anddevelopment vital to building the Group’s future technologicalfoundation as planned. He also planned to continue strategicallyinvesting in key markets with a keen eye to selecting the right targets,the amount and speed of resource input needed, etc.
In addition to that, he compiled a list of tasks to be done for massproduction businesses, including quickly optimizing inventory levels,
bringing fixed costs down to where they were commensurate with themarket size, and improving marginal profit ratios. When it came to
produce-to-order businesses, the focus was placed on enhancing the
profitability of large mass-production projects and promptly responding
to foreseeable loss risks.
Ohashi said, "We will temporarily hold back on investing in businesses
and products that are in jeopardy as we strive to maintain a stable
operating foundation upon which the Group as a whole can move ahead
with preparations for our leap forward into a bright new future."

President Ohashi's 2009 New Year's
address in the company newsletter
describing his business management
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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

Measures Taken by Business Divisions

Through the implementation of the above measures, the Kawasaki
Group aimed to enhance profitability in all aspects of its business,increase enterprise value by ensuring compliance, and build a trusted
brand.

76

Consolidation of Affiliates[Table I] Changes in the Number of Affiliates
Japan

Overseas

Total

January 1, 2007

86

50

136

Change● Aim of consolidation
Kawasaki worked to clearly define the boundaries of its businessdomains, thoroughly implement the selectivity and concentration
strategy, and focus on strengthening Group management capabilities, thepriority measures outlined in the Global K medium-term business plan
which went into effect in fiscal 2006.
As part of these efforts, the company identified where its affiliates andtheir businesses fall in its Group operations as well as the direction theyshould be headed, and started implementing action plans in 2007 toachieve goals set in Global K.
Specifically, the company determined the future direction of its affiliates'
businesses in terms of synergies they would generate within the Group,
their future profitability and strategic value, and in light of the originalnature of these businesses. The company also looked at consolidatingcompanies that didn’t fall squarely under the business domains listed in
the medium-term business plan as well as businesses (affiliates) withoverlapping functions.
The purpose of consolidating affiliates was threefold.
(i) Reduce indirect costs through the integration of affiliates andeffectively use management resources, such as people, goods, andmoney, to enhance synergies and improve management efficiency
and quality.
(ii) Increase the number of affiliates above a certain size throughconsolidation so they could also be used as centers of strategic
human resources development for the future of the Kawasaki
Group.
(iii) Further enhance group-wide legal compliance and strengtheninternal control functions by reorganizing and consolidating
affiliates.
The combined effect of the above reasons would enhance the overall
quality of management and further strengthen the Group's earning power
through centralized organizational management, faster business
operations, etc.
● Changes in the number of affiliates after consolidation
As of January 1, 2007, Kawasaki had 136 affiliates (86 in Japan and 50
overseas). After looking at their status with an eye to consolidating
affiliates operating under the same business division, eliminating
overlapping businesses, and ensuring profitability and a competitive
advantage in comparison with other specialized companies, Kawasaki
worked on consolidating them as necessary until the end of fiscal 2008.
The company continued to review the operations of its affiliates beyond
fiscal 2009, and as of the end of March 2014, the number of affiliates
totaled 127 (64 in Japan and 63 overseas). The number of affiliates inJapan had been whittled down by a total of 22 (after cutting 32 andadding 10). The number of overseas affiliates, on the other hand, grewby 13 (after cutting 7 and adding 20) due to the expansion of global
operations (see Table I).

-32

-7

-39

Decrease
Increase

10

20

30

Total

-22

13

-9

March 31, 2014

64

63

127

[Table II] Changes in the Number of Affiliates That Are
Consolidated Subsidiaries
Japan

Overseas

January 1, 2007

58

Change

The following measures were implemented by individual businesses sothey could boost their bottom line amid the global economic downturn.
[Rolling Stock]
Strengthen business operations in the three major markets of Japan,
North America, and the rest of Asia, with the huge backlog of orders
for projects in North America and elsewhere[Aerospace]
Move ahead with large-scale projects, such as moving into the mass
production of next-generation fixed-wing maritime patrol aircraft,completing the development of the next-generation transport aircraft,
and meeting mass production requirements to supply components
for the Boeing 787[Gas Turbine & Machinery]
Proceed with the development of new jet engines for commercial
aircraft, work on developing new products and models for industrial
gas turbines, high-efficiency gas engines, etc. to strengthen
Kawasaki’s position in the energy and environmental engineeringbusiness, and boost overall productivity to gain a bigger competitiveedge[Consumer Products & Machinery]
Increase the profitability of motorcycles sold in developed countries,
which constitutes Kawasaki’s top priority business, despite theglobal recession Strengthen development and production systems on
a global basis with the aim of making Kawasaki products morecompetitive[Robots]
Strengthen development capabilities and expand customer base[Construction Machinery]
Improve development and sales capabilities through alliances with
Hitachi Construction Machinery and TCM[Shipbuilding]
Step up efforts to optimize Kawasaki Shipbuilding Group
production systems, including its China operations, to pave the way
for better earnings in anticipation of new orders in the future[Plant & Infrastructure]
Accelerate the development of the energy and environmental
engineering business as set forth in the Global K medium-termbusiness plan, under the leadership of Kawasaki Plant Systems[Precision Machinery]
Make strategic investments of corporate resources while lowering
the breakeven point, and strengthen global operations covering thefive key markets (Japan, U.S., Europe, China, and South Korea)

Decrease
Increase

Total
36

94

-21

-3

-24

7

15

22

Total

-14

12

-2

March 31, 2014

44

48

92

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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

The number of affiliates that were consolidated subsidiaries totaled 94(58 in Japan and 36 overseas) as of January 1, 2007, then 92 (44 in
Japan and 48 overseas) as of March 31, 2014, with a decrease of 14(after cutting 21 and adding 7) in Japan and an increase of 12 (after
cutting 3 and adding15) overseas(see Tables II and III).
[Table III] Among Affiliated Companies as of January 1, 2007, Consolidated Subsidiaries That Were Eliminated or Added by March 31, 2014 (Excluding Spinoffs, Mergers, and Waste Treatment Facility Operation and Maintenance Companies)• Eliminated companies (21 in Japan and 3 overseas)

Overseas

Japan

Company Name

Month/Year

Description

Kawasaki Helicopter System, Ltd.

March 2007

Partial share transfer

Fukae Powtec Co., Ltd.

March 2007

Transfer of shares to EarthTechnica Co., Ltd.

Technica Corp.

October 2007

Merged into Shinko Die Casting Co., Ltd. (the trade name remained Technica Corp.)

Kawasaki Construction Co., Ltd.

January 2008

Merged into Kawasaki Heavy Industries

KRT Co., Ltd.

April 2008

Merged into Kawasaki Rolling Stock Component Co., Ltd.

Sakaide Ace Co., Ltd.

April 2008

Merged into Kawajyu Sakaide Service Co., Ltd. (which was renamed Kawasaki Techno Wave Co., Ltd. on January 1, 2009)

K-Point Co., Ltd.

July 2008

Merged into Kawasaki Motors Corporation JapanKAA Co., Ltd.

January 2009

Merged into K-TEC Corp.

Kawajyu Hyogo Service Co., Ltd.

April 2009

Merged into Kawasaki Rolling Stock Component Co., Ltd.

Nisseki Service Consultant Co., Ltd.

April 2009

Merged into Nichijo Manufacturing Co., Ltd.

Enetec Co., Ltd.

April 2009

Merged into Kawasaki Engineering Co., Ltd.

Kawasaki Oita Manufacturing Co., Ltd.

August 2010

Kawasaki Gas Turbine Research Center Ltd.

August 2010

Akashi Ship Model Basin Co., Ltd.

April 2011

Liquidation completed on August 18 following the approval of dissolution on March 31
Operations ceased at the end of March 2009, and liquidation completed on August 23, 2010 following the approval of dissolution
on December 31, 2009
Merged into Kawasaki Marine Engineering Co., Ltd.

Ship Partners Limited
Kawajyu Steel Works & Engineering Co.,Ltd.
Fukae Powtec Co., Ltd.

April 2011

Merged into Kawasaki Marine Engineering Co., Ltd.

October 2011

Merged into Kawaju Facilitech Co., Ltd.

April 2012

Merged into EarthTechnica Co., Ltd.

Kawasaki Shipbuilding Inspection Co., Ltd.

July 2012

Merged into Kawajyu Kobe Support Co., Ltd.

Kawaju Tokyo Service Corporation

July 2012

Merged into Kawasaki Life Corporation

Kawasaki Metal Industries, Ltd.

July 2012

Liquidation completed on July 6, 2012 following the approval of dissolution on December 31, 2011

K-GES Co., Ltd.
Kawasaki Aeronautica do Brasil Industria
Ltda.
KHI Europe Finance B.V.

April 2013

Merged into Kawasaki Motors Corporation Japan

March 2007

Liquidation completed on March 20

March 2009

Liquidation completed on March 31, 2009 following the approval of dissolution on December 8, 2008

Kawasaki Motors Racing B.V.

April 2010

Merged into Kawasaki Motors Europe N.V.

• Added companies (* indicates companies that became consolidated subsidiaries due to changes in stock holdings) (7 in Japan and 15 overseas)

Japan

Company Name

Month/Year
April 2008

Made into a wholly owned subsidiary through stock purchase*EarthTechnica M&S Co., Ltd.

April 2008

In connection with EarthTechnica becoming a wholly owned subsidiary*Fukae Powtec Co., Ltd.

April 2008

KCM Corporation

January 2009

Kawasaki Motors Racing B.V.

In connection with EarthTechnica becoming a wholly owned subsidiary
Established to take over the operations of the Construction Machinery Business Center (Kawasaki’s construction machinery
division was spun off and transferred to KCM Corporation on April 1.)
Established to take over the construction machinery division operations of Kawasaki Machine Systems, Ltd. (KMS)
January 2009
(KMS’s construction machinery division was spun off and transferred to KCMJ Corporation on April 1.)
Established to take over the robot division operations of Kawasaki Machine Systems, Ltd. (KMS)
January 2012
(KMS’s robot division was spun off and transferred to Kawasaki Robot Service, Ltd. on April 1.)
Special-purpose subsidiary for the employment of persons with disabilities
September 2013Engaged in contracting employees who perform general clerical work, real estate maintenance, management and cleaning, etc.
March 2007
Engaged in the operation of MotoGP races, acquisition and storage of operational equipment, and administrative work

KCM Receivables Funding LLC

September 2007 Engaged in the acquisition, holding, and sale of KCM dealer receivables for the purpose of securitization of receivables

KCMJ Corporation
Kawasaki Robot Service, Ltd.
Kawaju Heartfelt Service Co., Ltd.

Kawasaki Motores do Brasil Ltda.
October 2007
Kawasaki Heavy Industries Middle East FZEJuly 2008(United Arab Emirates)

Overseas

Description*EarthTechnica Co., Ltd.

*KHITKAN, Co., Ltd.

February 2009

Kawasaki Trading do Brasil Ltda.

April 2009

Kawasaki Chunhui Precision Machinery(Zhejiang) Ltd.
Kawasaki Precision Machinery Trading(Shanghai) Co., Ltd.

August 2009
February 2010

Kawasaki Trading (Shanghai) Ltd.

April 2010

India Kawasaki Motors Private Limited

July 2010Engaged in the production and sales of motorcycles, ATVs, PWCs, and related businesses in Brazil
Engaged in the marketing and sales of Kawasaki products and providing related support in the Middle East and North Africa● Consolidation and integration of service divisions in
the Kansai Region
In October 2008, service operations and functions of service companies
in Hyogo Prefecture, including Kawaju Kobe Support Co., Ltd.,
Kawajyu Hyogo Service Co., Ltd., Kawaju Akashi Service Co., Ltd.,
Kawaju Facilitech Co., Ltd., and Kawasaki Life Corporation (Office
Support Division), were consolidated and integrated into Kawaju Service
Co., Ltd. (renamed Kawaju Akashi Service Co., Ltd.) to enhance andstreamline management.
● Withdrawal from the bridge and floodgate business
Kawasaki had been carrying out structural reforms of its businesses since
2000, including spinning off its shipbuilding, precision machinery, andplant businesses, and forming a joint venture for its crusher business. As
part of this process, the company was also looking into spinning off its
bridge business. With little hope left for maintaining and expanding thebusiness in light of diminishing public investment in Japan, its primarymarket, Kawasaki finally decided to withdraw from the bridge andfloodgate business altogether in June 2007.
● Restructuring of the construction machinery businessIn the construction equipment industry, where global cooperative
relationships were beginning to blossom, competing companies were
ramping up the scale of production while aggressively making inroads
into overseas markets and strengthening their IT capabilities in theservice sector. While Kawasaki’s Construction Machinery BusinessCenter also looked to expand its operations, a lack of management
resources made it difficult to do in the rocky business environment. As asolution Kawasaki sought partnerships with other companies and signed
a tripartite business alliance agreement in the wheel loader business with
Hitachi Construction Machinery Co., Ltd. and TCM Corporation(currently Mitsubishi Logisnext Co., Ltd) in October 2008.
In April 2009, Kawasaki spun off its construction machinery division
into KCM Corporation specializing in construction machinery design,
manufacture, sales, and repair. In the same month, the domestic
construction machinery sales and service division and other operationsof Kawasaki Machine Systems, Kawasaki’s wholly owned subsidiary,
were spun off and transferred to KCMJ Corporation, Kawasaki’s otherwholly owned subsidiary established in January 2009.
In June 2010, Hitachi Construction Machinery took a stake in KCM in
the form of a third-party allocation of new shares, bringing KCM's
shareholder composition to 66% for Kawasaki and 34% for Hitachi
Construction Machinery. Kawasaki subsequently transferred all its
shares in KCM to Hitachi Construction Machinery in October 2015.
KCMJ, a subsidiary of KCM, was transferred to Hitachi Construction
Machinery Japan Co., Ltd. on the same day.

Kawaju Service Co., Ltd. head office building

Became Kawasaki’s wholly owned subsidiary after Kawasaki Motors Enterprise (Thailand) Co., Ltd.
acquired all shares in the company
Engaged in the sales of steelmaking, power generation, marine, hydraulic, transport, and other related equipment in the Brazilian
market(wholly owned by Kawasaki Trading Co., Ltd.)Engaged in the manufacture and sale of hydraulic pumps for construction machinery
Engaged in the sales of Kawasaki Precision Machinery, Ltd. products (including products made by joint ventures) as well as
customer service and customer satisfaction management activities in China
Engaged in the sales of power generation equipment as well as steel-related, marine, hydraulic, and civil engineering machineryplus other related equipment in the Chinese market (wholly owned by Kawasaki Trading Co., Ltd.)Engaged in the production and sales of Motorcycle & Engine Company products and related operations

Kawasaki Componentes da Amazonia Ltda. November 2011 Engaged in the production and sales of motorcycle, ATV, PWC, small engine parts and engines (wholly owned by KMB)
Wipro Kawasaki Precision Machinery Private
February 2012 Engaged in the manufacture, sale, and servicing of hydraulic pumps for construction machinery (74% owned by Kawasaki)
LimitedKawasaki Hydrogen Engineering Australia
August 2012Engaged in design work for the CO2-free hydrogen energy supply chain project
Pty Ltd
Kawasaki Robotics (Kunshan) Co., Ltd.
January 2013Engaged in the procurement of industrial robot parts and peripheral equipment
PT.Kawasaki Motor Sales Indonesia

78

February 2014Engaged in the import and sale of finished motorcycles and parts (99.90% owned by KMI)

79

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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

4) Crane Accident at Kawasaki Shipbuilding's Kobe
Works and Kawasaki’s Commitment to Safety
On August 25, 2007, at the Kobe Works of Kawasaki’s subsidiary,
Kawasaki Shipbuilding, a 30-meter-long arm of a shipbuilding crane(elevated approximately 50 meters high and weighing about 800 tons)
collapsed, killing three of nine workers who were repairing the crane,
and injuring four others.
Kawasaki Shipbuilding set up an emergency headquarters toinvestigate the collapse of the crane that occurred at its Kobe Works
No. 4 Building Berth. Under the president’s direction, the company
worked to uncover the facts, determine the cause of the accident, andimplement measures to prevent a recurrence. The company promptly
cut the amount of compensation paid to all full-time directors as ameasure of accountability for the terrible accident and harm it caused
to all involved.
Working to strengthen its management structure, Kawasaki
Shipbuilding created a new position of chairman and, to fill it,
appointed Masatoshi Terasaki, senior executive vice president of its
parent company, Kawasaki Heavy Industries, in December 2007.
In response to this accident, Kawasaki president, Tadaharu Ohashi, in
his 2008 New Year's address, assured all employees that he would
strengthen the safety management system of the entire Kawasaki
Group. He pledged to put safety first for all employees, products, andequipment, with an aim to eradicate serious accidents, and prevent suchan incident from ever occurring again.

2.

Achieving the Group Mission andConsolidating Four Companies

1) Inauguration of Satoshi Hasegawa as President
In June 2009, Kawasaki president, Tadaharu Ohashi, became thechairman, and Satoshi Hasegawa, the senior executive vice president,
became the president. Hasegawa took over the helm in the midst of a
global recession the likes of which they say could only occur once in 100
years. He made clear exactly where he stood on management policy rightfrom the beginning, saying, "Kawasaki operates a wide range ofbusinesses that support the development of public infrastructure aroundthe world. As a company living in the 21st century, we should operatewith a broad awareness of our corporate social responsibility, focusing
not only on environmental issues with our products and manufacturing
processes, but also on our relationships with all our stakeholders,
including shareholders, customers, employees, and local communities.”

2) Formulation of the Medium-Term Business Plan
2010 and Kawasaki Business Vision 2020
Kawasaki worked on expanding operations in North America, Asia, andother overseas markets as well as improving its financial position under
the Global K medium-term business plan (FY2006–2010), which waslaunched in fiscal 2006, and achieved significant results, including
record profits for two consecutive years in fiscal 2006 and 2007.
However, the global economic recession that began in the fall of 2008
forced the company to revise this plan. Then, in April 2010, it
formulated the Kawasaki Business Vision 2020 and the Medium-TermBusiness Plan (MTBP) 2010 (FY2010–2012), outlining the Group's
vision for 2020 and a roadmap for achieving that vision. In an attempt toadapt quickly and flexibly to the changing business environment, themedium-term management plan was shortened from the conventional
period of five years to three. The summary of the Kawasaki Business
Vision 2020 and MTBP 2010 is as follows.

<Kawasaki Business Vision 2020>[Business Vision]
Aiming to achieve the Group Mission, we will move toward becoming acompany that provides products and services designed to meet thediverse needs of people around the world by leveraging our advanced
technological capabilities in three principal business sectors: transportsystems, energy and environmental engineering, and industrial
equipment.
[Basic Strategy](1) Strengthening of the business base
• Classify each business as a “developing business,” a “core profitmaking business,” or a “business requiring review” and concentrate
management resources on developing businesses and core profitmaking businesses. On the basis of careful examination of market
trends, implement structural reform or downsize or withdraw frombusinesses requiring review.

80

Chairman Ohashi (left) and President Hasegawa (right)

Formulate new product andnew business concepts

Medium-Term Business Plan
(FY2010-2012)

Kawasaki Business
Vision 2020

Anticipate societal needs
until 2030

—Strategic Moves
toward the Future—
Action plan

FY2010FY2012• Return to a growth path
• Strengthen business foundations in
preparation for future growth

FY2020

FY2030• Sustain a growth path
• Achievement of the Group mission

The Relationship between the Kawasaki Business
Vision 2020 and the Medium-Term Business Plan

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Part 2/The Last 25 Years (Overall History)

Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet[Quantitative Vision of Consolidated
Performance] (FY2020)
Net sales

2 trillion yen

Recurringprofit

100 billion yen or higher(Ratio of recurring profit to sales:
5.0% or higher)• In the existing businesses that constitute the Group’s earnings
structure, maintain and increase competitiveness as well as create
stable earnings and cash flow. Furthermore, actively pursue
expansion into new products and new markets to develop an
earnings structure for the future.
(2) Reinforcement of development and technological capabilities andmonozukuri (manufacturing) capabilities• Anticipate developments in society until around 2030 and
identify business sectors where needs will increase in the medium
term to long term. On that basis, utilize the Group’s intellectual
assets to nurture and reinforce competitive new products andbusinesses.
• Position the Group’s plants in Japan as development andproduction bases that integrate advanced technologicalcapabilities and reinforce development and technologicalcapabilities and monozukuri capabilities.
(3) Global business development in overseas markets• In overseas markets that offer prospects for expansion,
principally developing countries, formulate regional market entry
strategies based on existing products and technologies while
simultaneously pursuing market development through productdevelopment adapted to regional needs.
(4) CSR and environmental response• Enrich lifestyles and improve the global environment throughproducts that incorporate the ultimate in energy-saving, lowenvironmental impact technologies.
• Establish the Environmental Vision 2020 and engage inenvironment-friendly business operation. Be conscious ofcorporate social responsibility in all business activities andsteadily implement CSR activities.
(5) Implementation of personnel policies• Develop and improve such systems as personnel and educationand create a corporate climate in which employees strive toimprove their skills and can take maximum advantage of theirabilities.
• Build a safe, worker-friendly work environment that reflectsconsideration of work-life balance and diversity.

<MTBP 2010>[Basic Objectives](1) Return to a growth path
• Rebuild the earnings structure during the term of the MediumTerm Business Plan and return to a growth path in preparation forachievement of the Kawasaki Business Vision 2020.
(2) Reinforce overall Group profitability• Pursue radical cost reduction and productivity improvement in all
development, design, procurement, and monozukuri processes
and reinforce overall Group profitability by implementing bold
structural reform of businesses experiencing or expected toexperience demand shortages.

82(3) Strengthen business foundations in preparation for future growth• Steadily nurture new products and new businesses in preparation
for achievement of the Kawasaki Business Vision 2020 and engage
in business overseas, focusing on developing countries.
(4) Reinforce the Group’s collective strength• Reorganize the business structure through the re-merger of Group
companies and establish an internal company system withcompanies to operate in seven business segments: Shipbuilding,Rolling Stock, Aerospace, Gas Turbines & Machinery, Plant &Infrastructure, Motorcycle & Engine, and Precision Machinery. In
this way, accelerate the upgrading of existing products and productdevelopment in new business sectors. In particular, maximize thebenefits of establishing a Plant & Infrastructure Company.
• Reinforce the Group’s collective strength by promoting the sharing
and utilization of intellectual assets within the Group related totechnology, marketing, and human resources.
(5) Achieve a worker-friendly work environment• Develop such systems as personnel and education that place
importance on work-life balance and diversity.
[Key Strategies for Returning to a Growth Path](i) Reinforce the capability to respond to changes in the businessenvironment by lowering the break-even point for mass-production
businesses through means including fixed cost reductions andoptimize inventory levels. Make putting the motorcycle business inthe black an especially important priority.
(ii) For businesses that produce custom-built products based on
individual orders, emphasize profitability, increase costcompetitiveness by implementing rigorous risk management inbusiness operation, and achieve the profit target.
(iii) Improve the financial position through cash flow improvement andreduction of interest-bearing debt.

[Consolidated Quantitative Targets] (FY2012)
Net sales
Operating income

Recurring profit
Before-tax ROICInterest-bearing debt

1.4 trillion yen
52 billion yen(Ratio of operating income
to sales: 3.7%)
56 billion yen(Ratio of recurring profit tosales: 4.0%)
8.5%
430 billion yen(FY2012 year-end balance)[Key Policies and Measures](i) Reinforce and nurture businesses that will constitute the future
earnings structure(ii) Accelerate global business development(iii) Share and utilize intellectual assets across the Group(iv) Strengthen technological capabilities(v) Strengthen product development and monozukuri capabilities(vi) Promote effective use of plants and business sites(vii) Develop human resources, personnel systems, and the workplaceenvironment(viii) Implement environmental management(ix) Develop IT strategy and systems(x) Implement group-wide risk management

83Part 2/The Last 25 Years (Overall History)

Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet(xi) Improve the quality of headquarters departments

3) Integrating Four Group Companies toConsolidate Technologies and Know-how andCultivate New Businesses

Firm handshake to mark the merger of the four Group companies

Kawasaki worked on transforming itself from a heavy industry
company into a flexible enterprise and strengthened its businessfoundation by implementing the principal management policies ofquality over quantity, selectivity and concentration, and increased
autonomy for business divisions, as set out in the medium termbusiness plan formulated in 2000. In following through on thesepolicies, Kawasaki spun off its shipbuilding and precision machinery
divisions on October 1, 2002, and the plant engineering division on
April 1, 2005, making them its wholly-owned subsidiaries. After the
spin-off, the three subsidiaries strived to strengthen theircompetitiveness with an eye to becoming independent and achieving
profitability.
As a result, the Kawasaki Group was able to achieve its original goalof transforming its corporate structure and strengthening its businessfoundation.
Guided by its mission statement adopted in 2007, Kawasaki had
worked to create new value for a better environment and brighter
future by leveraging its advanced technological capability across a
broad range of fields. Creating new value involves making existingproducts smarter through innovation and developing new products intotally new fields. To do this Kawasaki had to work quickly toefficiently integrate operations and make the most of the entire
Kawasaki Group’s intellectual assets.
That’s why, in October 2010, Kawasaki decided to remerge Kawasaki
Shipbuilding, Kawasaki Precision Machinery, and Kawasaki Plant
Systems and achieve maximum efficiency by leveraging the Group’s
technological assets and human resources, while removing any of thelimitations caused by being subsidiaries.
The new Kawasaki born as a result of this re-merger was now poised
to use this opportunity as a springboard toward reaching the goalproclaimed in its mission statement to be a profitable global corporategroup working as one for the good of the planet.

4) Reorganizing Corporate Divisions and Internal
Company Operations
Corporate Divisions
In fiscal 2010, when the four group companies were integrated,
Kawasaki also reorganized its corporate divisions. The Corporate
Technology Division established a company-wide system fordeveloping new businesses. It focused on the early involvement ofinternal companies and budgeting part of the costs at the head office,while conducting research on hydrogen-related and other futurebusinesses.

84

The office functions of the plant complexes were incorporated into thehead office which would carry out overall plant operations with a longterm perspective. It was an independent corporate organization that acted
as an external representative of all plants and performed operations
common to all plants.
The Procurement Division was newly established with an eye tostrengthening the Kawasaki Group's procurement capabilities. It
established a centralized purchasing system in order to share information
about domestic and overseas procurement across the organization anddeliver advantageous purchasing terms based on the company-wideorder volume. In addition to that, the Infrastructure Strategy Office was
newly created to share information across the company that would
contribute to management decisions regarding the infrastructure market.
It focused on next-generation energy and provided relevant divisions
with specific information that would help them identify opportunities
and cultivate new businesses. The new division would facilitate
Kawasaki’s efforts to build stronger ties with the public and academic
sectors, gather information on the market as well as related internal
departments, and expand its business in the promising infrastructure
market.
In November 2012, after leasing the entire TIS Takeshiba Building
located at Kaigan 1-chome, Minato Ward, Tokyo, the company moved
its Tokyo head office there (which was tentatively named theHamamatsucho Building) from the World Trade Center Building at
Hamamatsucho 2-chome, Minato Ward, Tokyo. At the same time, it
merged the Tokyo Office (plant and infrastructure business operations)in Minamisuna, Koto Ward into the new head office location. The
Marketing Division, which was established in April of the same year,
seized this opportunity to spearhead the sharing of intellectual assets
within the company. In gearing up its comprehensive efforts aimed atcreating markets in Japan as well as overseas, it went a long way tohelping the Kawasaki Group create further value.

Ship & Offshore Structure Company
The prolonged slump in the shipping market since the collapse of
Lehman Brothers had resulted in a decline in demand for new vessels.
On top of that, the ultra-strong yen and weak won blunted Japanese
shipyards’ competitive ability and pulled the plug on new shipbuilding
orders. Kawasaki’s Ship & Offshore Structure Company had also seen asignificant decline in merchant shipbuilding volume since the second
half of fiscal 2012. As a result, the company decided to downsize theworkforce at its Sakaide Works. It then laid out strategic business
management plans for the plant with a focus on: (1) maintaining its
operational foundation for years to come since it serves as the key
factory; (2) developing the LPG-fueled vessel and offshore development
businesses into future profit engines, with the aim of building two LNG
carriers and one LPG carrier every year; and (3) minimizing losses after
the second half of fiscal 2012, when the utilization rate would inevitably
take a precipitous dive.
As part of this strategy, the production staff at the Sakaide Works weretransferred to other internal companies, with some assigned to the
Machinery Business Center in December 2012, and others to the
Aerospace and Precision Machinery Companies in May and June of2013.

President

Corporate Planning DivisionCorporate Planning Department
Corporate Business Planning Department
Subsidiaries & Affiliates Control Department
Information Planning Department
Public Relations Department
Finance & Accounting Division
Finance Department
Accounting Department
CSR Division
CSR Department
Legal Department
Environmental Affairs Department
Personnel & Labor Administration Division
Personnel Department
Human Capital Development Department
Labor Administration Department
Safety & Health Management Department
Kobe Works Office
Akashi Works Office
Harima Works Office
Procurement Division
Planning & Control Department
Material Procurement Department
Indirect Material Procurement Department
General Administration Division
General Administration Department
Secretarial Department
Property Administration Department
Construction Control Department
Corporate Business Development Division
Administration Department
Marketing Department
Overseas Administration Department
International Business Department
China Department
Branch office
Infrastructure Strategy Office
Corporate Technology DivisionCorporate Technology Planning Center
Technical Institute
System Technology Development Center
Intellectual Property Department
Manufacturing Improvement Department

Organization chart (As of Oct.1, 2010)

Hamamatsucho Building where the Tokyo
head office was relocated85Part 2/The Last 25 Years (Overall History)

Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

Clerical and engineering personnel were transferred to the head officeand other internal companies between October 2012 and March 2014.

Plant & Infrastructure Company
In 2011, Kawasaki decided to strengthen organizational functions andimprove efficiency at the Plant & Infrastructure Company. It would dothat by consolidating its engineering and common back-office
functions, which were dispersed throughout the Kobe and Harima
Works, into a new administrative office at the Kobe Works, andtransferred Harima Works employees to the Kobe Works in Septemberof the same year.
As a result, the manufacturing division of the Harima Works was
positioned as a common production base for all business units (BUs)of the Plant & Infrastructure Company, and all BUs were poised tojoin hands in better utilizing the plant.

Precision Machinery Company (Robot Division)
In April 2012, the Robot Division incorporated the sales division of
the Kawasaki Machine Systems (KMS) robot business to establish anorganizational structure that would enable it to work closely with thedevelopment, design, and engineering divisions in developing
strategies and quickly delivering solutions that would fulfill customer
needs via better product development and improvement. In April 2012,
the service division was transferred to Kawasaki Robot Service, Ltd.,
which was established in January of the same year by spinning off
KMS’s robot division. The move would enable the division tosupervise and engage in overall service operations across the globe.
KMS continued to sell and service gas turbine power generation
systems.

5) The Great East Japan Earthquake and Helping
Build Back
Aiding Disaster Areas and Victims

D-Tracker X and D-Tracker 125 motorcycles donated to
Iwate Prefecture

At 2:46 p.m. on March 11, 2011, a massive earthquake with amagnitude of 9.0 struck off the northeast coast of Japan. The quake
triggered a towering tsunami measuring more than nine meters that hit
the Pacific coast of Japan’s Tohoku and Kanto regions, leaving a trail
of death and destruction in its wake. Although the Kawasaki Group did
not suffer any human casualties, some of its sales and service bases in
the Tohoku region were severely damaged, where the head office andvarious other divisions came together to help with reconstruction
work.
Meanwhile, the Group donated a total of 100 million yen spread acrossthree prefectures and one municipality as well as the Japanese Red
Cross Society to support the disaster areas and victims.

As part of its efforts to be a good corporate citizen, Kawasaki reached
out to numerous local government officials and other relevant parties tofind out exactly what kind of equipment they needed. It donated 30 of its
motorcycles to help responders in the disaster areas get around moreeasily and efficiently transporting goods to those in need. In addition to
the motorcycles, Kawasaki also donated five KCM wheel loaders and an
EarthTechnica crusher for use in debris disposal. Beside the vehicles,
whose sum total value added up to 100 million yen, the company also
provided a helicopter, which became the community’s eye in the sky, at
no cost. Kawasaki’s domestic and overseas group companies also
provided a total of 38 million yen to assist in relief efforts. In 2013 and2014, the company donated two of its Jet Ski® watercraft.

Revising Business Continuity Plan
The Kawasaki Group had developed disaster prevention measures basedon the lessons learned from the January 1995 Great Hanshin-Awaji
Earthquake and had worked on business continuity planning (BCP) since
the outbreak of a new influenza virus in 2009. Following on the heels of
the Great East Japan Earthquake, Kawasaki revised its business
continuity plan for large-scale earthquakes and set forth a basic corporate
policy to clarify courses of action to take in the event of an emergency.

EarthTechnica crusher<Basic Corporate Policy>● Ensure the safety and health of employees and theirfamilies.
● Ensure services and products that are essential to thefulfillment of corporate responsibility go on without
interruption.
● Get Group operations back to normal.
● Acknowledge responsibility to local communities andcontribute to each region.
Working with this basic corporate policy in mind, Kawasaki was to: (1)designate functions to be maintained at the head office and internal
companies in the event of disaster; (2) consider the appropriate actions totake in the wake of a disaster and prepare for the eventuality of such
events during normal times; and (3) conduct drills regularly and revise
the BCP based on the outcome of the drills.
In order to respond quickly and flexibly to emergency situations, theCorporate Command Center, Integrated Plant Command Center,
Company Command Center, and Local Command Center were alsoestablished as the Group’s crisis management system.

6) Overseas Production and Sales
Overseas Sales Exceeds 50% of Overall Group Sales
Since the 1960s, the Kawasaki Group has been aggressively expanding
its business overseas. In 2010, its overseas sales ratio reached 55%, andemployees working overseas accounted for 25% of the total workforce.

86

Wheel loader used for debris disposal and land leveling

Section of CSR Report 2012 on therevised BCP

Crisis Management System
Location
Office that has notsustained any
damageIn principle, either
the Kobe Head
Office or the
Tokyo Head
OfficeIntegrated Plant Determines issues related to all plants; Plant facilities ofCommandcoordinates with internal companies. several internal
Centercompanies
Company
Provides internal company support in Appropriate
Commandareas devastated by the disaster;
location at eachCenterdetermined responses to affectedinternal company
suppliers and customers.
Local
Determines responses for business
Office that
Commandsegments and business offices.
sustained damage
CenterCorporate
CommandCenter

Key Role
Set up in the event of a crisis that
requires a companywide response;
determines measures to be
implemented throughout the Groupand basic policy on action plans.

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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

Overseas Sales, Sales Ratio, and Number of AffiliatedCompanies

Overseas sales
Overseas sales
ratio
Number ofoverseas
affiliatedcompanies

1990

2000

2010

223 billion
yen

432 billion
yen

669 billion
yen

25%

41%

55%

13

29

46

Kawasaki used the lessons learned from motorcycle production in the
United States that had begun in 1975 to expand the operations of otherbusinesses overseas. As a result, the company now boasts full-scale
overseas production facilities for everything from rolling stock toconstruction machinery, precision machinery, general-purpose
gasoline engines, ships, and marine machinery, while also supplying
high-quality products all around the world.
From around 2007 to 2013, the company sought to make further
market inroads encompassing a wide range of businesses, including
shipbuilding, plants, and precision machinery, in China, which was
experiencing rapid economic growth at the time. In emerging
economies such as Southeast Asian countries, Brazil, and India, thecompany’s motorcycle business grew by leaps and bounds.

Growth of Kawasaki Operations in China

Nantong COSCO KHI Ship Engineering Co., Ltd. (NACKS)

Wuhan Kawasaki Marine Machinery Co., Ltd. (WKM)[Shipbuilding]In 1995, Kawasaki and China Ocean Shipping (Group) Company(COSCO) signed an agreement to establish a joint venture company
that would serve as a production base for the shipbuilding business in
China, and in January 1999, incorporated Nantong COSCO KHI ShipEngineering Co., Ltd. (NACKS) in Nantong City, Jiangsu Province,
China. In 2008, it became one of the top shipbuilding companies in
China with the completion of its second dock (measuring 500 meters
long, 80 meters wide, and 12.8 meters deep and equipped with 5
cranes) in addition to its first dock (measuring 350 meters long, 68
meters wide, 12.8 meters deep and equipped with 5 cranes) which was
already in operation.
At the same time, NACKS established a joint venture with Wuhan
Marine Machinery Plant Co., Ltd., Wuhan Kawasaki Marine
Machinery Co., Ltd. (WKM), in Wuhan, Hubei Province to produceside thrusters.*2 Production increased nearly threefold in the five years
from 2002, reaching a total of 1,000 units in June 2006.
In 2007, Dalian COSCO Shipbuilding Industry Co., Ltd. (DACOS)
was established in Dalian City through joint investment from NACKS
and COSCO Shipbuilding Industry Company (COSIC). Production
facilities such as the first and second docks as well as the fabrication,
block assembly and block paint shops were built on the newcompany’s vast site measuring about 1.9 million square meters.
Since then, the Kawasaki Group has been conducting shipbuilding
operations at four different locations, including the Kobe Works,
Sakaide Works, NACKS, and DACOS.*3
*1
*2

*3

Nantong COSCO KHI Ship Engineering Co., Ltd. changed its Chinese tradename slightly in 2018.
A side thruster is a propulsion device (generally a screw propeller) installed
within a tunnel built into the bow or stern of a ship below the waterline. It
enables a vessel to turn or move sideways when maneuvering in port.
DACOS was renamed Dalian COSCO KHI Ship Engineering Co., Ltd. in2012 and its Chinese trade name was changed slightly in 2018.

[Plant Engineering]
Dalian COSCO KHI Ship Engineering Co., Ltd. (DACKS)

Kawasaki joined hands with the Anhui Conch Group, the parent
company of Asia’s largest cement company, Anhui Conch Cement Co.,
Ltd., to establish two joint ventures in Wuhu, Anhui Province, Anhui
Conch Kawasaki Engineering Co., Ltd. (ACK) in 2006, and Anhui
Conch Kawasaki Energy Conservation Equipment Manufacturing Co.,
Ltd. (CKM) in 2007. ACK designed, procured, and sold waste heatrecovery power generation systems for cement plants, and CKM
manufactured PH boilers for waste heat recovery power generation
systems needed to fill orders ACK received.
ACK steadily gained orders in China after combining the advanced
technical capabilities of Kawasaki Plant Systems with the sales force andreliability of the CONCH Group and its expertise in local procurement
and operations. Its products earned a good reputation among users andhelped establish awareness of energy conservation and environmental
protection among the Chinese public as a whole.
In July 2007, CKM started manufacturing PH boilers for waste heatrecovery power generation systems at its 27,000-square-meter Plant 1. In
2008, CKM’s second plant (measuring 18,000 m2) and third plant(measuring 27,000 m2) were completed to respectively produce highly
efficient vertical cement mills and AQC boilers for waste heat recovery
power generation systems and waste treatment facilities that can be
added to existing cement plants.
[Precision Machinery]In the 2000s, the Chinese market for hydraulic excavators became thelargest in the global construction machinery industry with further growth
on appearing on its horizon.
Operating against this backdrop, in December 2005, Kawasaki
established Kawasaki Precision Machinery (Suzhou) Ltd. (KPM
Suzhou), as a wholly owned subsidiary located in Suzhou, Jiangsu
Province, to produce hydraulic components for construction machinery
in China. The company kicked off full-scale production in 2011 with thecompletion of a new plant (with a total area of 13,500 m2) fitted withproduction lines transferred from the old plant and additional new
facilities for increased production capacity. The new plant had an annual
production capacity of approximately 110,000 units, including 60,000
hydraulic pumps and 50,000 hydraulic motors, double that of the oldplant.
In August 2009, Kawasaki and China’s Zhejiang Chunhui Group Co.,
Ltd. jointly established Kawasaki Chunhui Precision Machinery(Zhejiang) Ltd. (KCPM) in the Zhejiang Shangyu Economic
Development Zone as a new production base for hydraulic components.
By 2012, the company was producing 40,000 hydraulic pumps annually.
In March 2011, Kawasaki Precision Machinery Trading (Shanghai) Co.,
Ltd. (KPM Shanghai) opened the CS Center in China to provide services
for hydraulic construction machinery components, including products
made by both companies. In China, where sales of hydraulic excavators
increased sharply in 2010, from about 100,000 the previous year to about
170,000, Kawasaki’s hydraulic components enjoyed the lion’s share of
the market.

The office where Anhui Conch Kawasaki Engineering Co.,
Ltd. (ACK) originally operated

Anhui Conch Kawasaki Energy Conservation Equipment
Manufacturing Co., Ltd. (CKM) plant buildings

Kawasaki Precision Machinery (Suzhou) Ltd. (KPM
Suzhou) when it was first launched

Kawasaki Chunhui Precision Machinery (Zhejiang) Ltd.
(KCPM)

Overhauling hydraulic equipment at Kawasaki
Precision Machinery Trading (Shanghai) Co., Ltd. CS

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Paving Inroads into Motorcycle Markets in Brazil, India,
and China

Kawasaki Motores do Brasil Ltda.(KMB)

India Kawasaki Motors Pvt. Ltd.(IKM)

Motorcycle dealer in China (Xi'an)

Kawasaki started selling its motorcycles in Indonesia, Thailand,
Malaysia, and other Southeast Asian countries in the 1960s and1970s. Sales of medium- and large-size motorcycles, which are
Kawasaki’s specialty, increased as the economies of these countries
grew.
Later the company turned an eye to Brazil, India, and China as newmarkets for its motorcycles. In October 2007, it set up Kawasaki
Motors do Brasil Ltda. (KMB) in Sao Paulo, Brazil and in October ofthe following year, began selling motorcycles that were imported
from factories abroad. A Brazilian factory was built in Manaus in
October 2009 and started knockdown production of Kawasaki’s
major medium and large size models, such as Ninja and Z series.
In India, India Kawasaki Motors Pvt. Ltd. (IKM) was established inJuly 2010 to import and sell motorcycles. The company
commissioned Bajaj, a major local motorcycle manufacturer, toproduce and sell the Ninja 250R. In February 2013, it established its
own factory to begin full-scale production of the Ninja 300 as well as
the Ninja 650. It then opened a dealership in September.
In China, Kawasaki started selling medium and large size models,
including the Ninja ZX-14R, Ninja 650, Ninja 250, and Z250,
through Kawasaki Heavy Industries Management (Shanghai), Ltd. inAugust 2013. In September 2016, it established Kawasaki Motors(Shanghai), Ltd. (KMSH) to independently operate the motorcycle
business there. The company went on to open stores in major cities
such as Shanghai, Beijing, and Chengdu.
Kawasaki aimed to put the motorcycle business in high gear byboosting sales in the maturing markets of Southeast Asia andcultivating the promising markets of Brazil, India and China.

3.

Corporate Social Responsibility andEnvironmental Management

1) Formulation of MTBP 2013
After looking back on the initiatives implemented under MTBP 2010
(FY2010–2012), Kawasaki formulated the medium-term business plan,
MTBP 2013 (FY2013–2015), in April 2013 in light of the subsequentchanges in the market. Since fiscal 2015, the final year of the plan,
marked the halfway point of Kawasaki Business Vision 2020, the work
to be done under the medium-term business plan was key to achieving
the Group’s vision.
MTBP 2013 focused on forging a foundation for the future and building
a business structure designed to bend with any winds of change ahead,
while steadily building on the progress made under MTBP 2010.
[Basic Objectives](1) Ensure efficient business management to survive the severebusiness environment(2) Implement measures to reflect changing business environments(3) Implement specific measures to achieve the Vision(4) Promote earlier commercialization of new products andbusinesses(5) Aim to be a corporate group that enjoys sustainable growth, while
contributing to the growth of society[Key Policies and Measures]—Efforts to expand business foundations—(i) Provide solutions(ii) Expand the range of existing businesses(iii) Accelerate global business development aimed at growth markets(iv) Encourage early commercialization of new products andbusinesses(v) Enhance the competitiveness of existing businesses—Efforts to secure future revenue basis—(i) Promote R&D efforts and capital investments on a continuous
basis(ii) Promote the sharing of intellectual properties and education todevelop globally minded personnel, etc.
—Efforts to solidify the management system—(i) Reinforce the financial structure(ii) Increase the efficiency of the execution of common duties

FY2015 Halfway Point

MTBP 2010(FY2010-FY2012)
FY2010•Return to a growth path•
Strengthen businessfoundations in preparation
for future growth

MTBP 2013(FY2013-FY2015)
FY2013•

The Group mission to be achieved
KawasakiBusiness
Vision 2020

Actionplan

FY2020FY2016

Lay out a course to realize theKawasaki Business Vision
2020•

Sustainable growth

The Position of the FY2013-2015 Medium Term Business
Plan “MTBP 2013”[Quantitative Targets] (FY2015)
Net sales

1.6 trillion yen

Operating income

90 billion yen(Ratio of operating income tosales: 5.6%)

Recurring profit

85 billion yen(Ratio of recurring profit tosales: 5.3%)

Before-tax ROIC

11.0%

2 Building a Stronger Kawasaki Brand
Strengthening the Kawasaki brand was one of the keys to achieving the
Kawasaki Business Vision 2020. It entailed building up the Kawasaki
Group’s brand and communicating the value and mission of the brandboth internally and externally in an easy-to-understand way, with an aimof building stronger ties with existing customers and expanding thecustomer base across the globe.

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The Kawasaki Group faced several problems in implementing brandstrategies, including: (1) lost opportunities with the target audience due
to a low brand recognition and awareness in domestic and overseas
markets (particularly in emerging markets); (2) lack of a common
understanding of the value and intent of the Kawasaki brand within thecompany; (3) the need to develop a shared awareness of the Kawasaki
brand among employees in order to offer comprehensive solutions thatleveraged the collective know-how of all internal companies; and (4)lack of clear standards for unifying and distinguishing product brandsof the motorcycle business and corporate brands. To solve these
problems, it was necessary to develop a brand messaging system andtools.
Kawasaki adopted "Powering Your Potential"* as the group tagline in
April 2013. It was a powerful phrase that clearly differentiated the
Kawasaki brand from others in a way that was relevant to its target
audience, conveying where the company was headed both internallyand externally with integrity. The tagline embodied Kawasaki’s
aspiration to be the power that opens up new possibilities for customers
and communities as it works to achieve its Group mission.
*

Powering: Empowering and fueling
Your: Customers, society, and employees
Potential: Possibilities, capabilities, and prospects for growthGroup tagline

Environmental Philosophy
Kawasaki pursues business activities globally in key industries related
to land, sea, and air, guided by the desire to contribute to thedevelopment of society and nations through monozukuri
manufacturing. In this effort, we emphasize the “achievement of alow-carbon society,” “achievement of a recycling-oriented society,”and “achievement of a society coexisting with nature” to help solve
global environmental issues, and we strive to help build a sustainable
society through environmentally harmonious business activities andKawasaki-brand products and technologies that help improve theglobal environment.

Climate Change Mitigation
In fiscal 2010, which was the last year of the 6th Environmental
Management Activities Plan (FY2008–2010), Kawasaki launched the
7th Environmental Management Activities Plan (FY2010–2012) aheadof schedule to coordinate it with the formulation of a new businessplan.
The 7th plan also marked the beginning of the company's trial and error
efforts to accelerate measures against global warming in line with the
Kyoto Protocol that came into force in 2005.

Revising the Environmental Charter● Utilizing the domestic carbon credit system
In 2010, the Kawasaki Group participated in Hyogo Prefecture’s
partnership program aimed at reducing carbon dioxide (CO 2)
emissions. Kawasaki was the first to work on a carbon reduction
project under this program that made use of Japan’s carbon credit
system (currently the J-Credit Scheme). The Kawasaki initiative
replaced the heavy oil-fired boiler used at the Kobe Medical
Cooperative Association’s Akashi plant with its natural gas-fired boiler.
The project cut CO2 emissions by approximately 2,600 tons over four
years, which Kawasaki was able to credit as a reduction for all its
facilities throughout Hyogo.
● Buying a green power certificate
In 2011, Kawasaki purchased a green power certificate (worth 18,300
kWh) and used the green power generated by a photovoltaic power
generation system installed at the Kobe Municipal Resource Recycling
Center’s power plant to offset some of the electricity used at the Kobe
Head Office.

In 2010, Kawasaki revised the environmental philosophy stated in its
Environmental Charter to align it with its Environmental Vision 2020.

Bringing a Low-carbon, Recycling-oriented Society
Coexisting with Nature to Life

3) Environmental Management Initiatives
Formulating Environmental Vision 2020
Kawasaki incorporated the Group's environmental management policy
into the Kawasaki Group Mission Statement in 2007, and in 2010,
established the Environmental Vision 2020 (What Kawasaki Should Be
in the Year 2020). It was the company’s medium- to long-term
environmental vision that picked up where its Environmental Vision(What Kawasaki Should Be in the Year 2010), drafted in 2003, left off.
After looking at the environmental trends in Japan and overseas,
Kawasaki rooted its Environmental Vision 2020 in four basic
objectives: achieving a low-carbon society, a recycling-oriented
society, and a society coexisting with nature, while establishingenvironmental management systems that would serve as the springboards for reaching these three goals.

● Product development leveraging the Kawasaki
Group’s collective capabilities
Gigacell: Achieving high energy efficiency
The Gigacell is a high-capacity storage battery developed by Kawasaki
in 2005. Featuring quick charging and discharging capabilities, it canlevel the gap between the electricity generated from renewable energy
and the electricity consumed in distributed power generation systems
over a wide range of durations, from a few hundredths of a second toseveral hours.

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Chapter 2 Toward "Global Kawasaki"—Living in Harmony with People, Society, and the Planet

Green binary turbine

Kawasaki Green Gas Engine● Green binary turbine: Effective use of low-temperature
waste heat
Most of the low-temperature waste heat (such as hot wastewater andexhaust gas) generated in factories, waste incinerators, sewage
treatment plants, and power plants is discharged without being utilized.
Kawasaki’s green binary turbine released in June 2010 is a nice, neat,compact system that’s designed to recover this low-temperature waste
heat for generating electricity. In effectively utilizing the previously
unused low-temperature waste heat to generate electricity, the systemcuts CO2 emissions dramatically.
● Kawasaki Green Gas Engine: #1 in power generation
efficiency
The Gas Turbine & Machinery Company’s gas engine project teamand the Corporate Technology Division’s Technical Institute worked
together to develop the Kawasaki Green Gas Engine, incorporating
Kawasaki’s fluid analysis technology and more. The use of clean
natural gas as a fuel as well as the engine’s optimal combustion
chamber design, leaner burn, and optimized control systemsignificantly reduces the environmental impact. In July 2007, itachieved a world record-breaking power generation efficiency of
48.5% along with the world's highest level of environmental
performance that boasted all-time low NOx emissions.

4) CSR Initiatives
Establishment of the CSR Committee and CSR
Department
In October 2006, Kawasaki established its CSR Committee, chaired by
the president. It is the Kawasaki Group’s top decision-making body forinternal control and compliance. The committee makes sure thecompany toes the line in adhering to the basic principles of corporate
ethics stipulated in the Kawasaki Heavy Industries Corporate Ethics
Rules. Working to ensure internal control and compliance as well as
appropriate financial reporting in light of the internal control reporting
system to be adopted in fiscal 2008 under the Financial Instruments
and Exchange Act, the company also established the CSR Department,a specialized organization overseeing the entire Group’s effort toestablish a system of internal controls.

94

The Kawasaki Group's Fundamental Approach to CSR
One of the goals set forth in the Kawasaki Business Vision 2020
formulated in April 2010 was to become “a company that places
importance on CSR and is trusted wherever it does business aroundthe world.”
That same year, as Kawasaki moved forward to meet the needs ofcustomers and “people everywhere today and tomorrow,” it adopted
the Kawasaki Group’s Fundamental Approach to CSR along with thefive themes, outlining the various goals it wanted to reach across theorganization.
In April of the same year, and in the same vein as the organizational
reforms involving CSR activities, internal controls, and internal
audits, the CSR Committee was renamed the Corporate CSR
Committee. The committee would discuss and decide on major CSR
policies as well as other important matters with an eye to making
Kawasaki’s commitment to fulfilling its corporate social
responsibility clear to all. The Compliance Committee was renamed
the Company CSR Committee to reflect the expanded scope of its
agenda, covering not only compliance but also overall CSR
activities.
<Fundamental Approach to CSR>
The Kawasaki Group’s CSR is reflected in our combined efforts toachieve the Group Mission on an even higher level.
We consider the future of human society and the global environment
to be an extension of the increase in value of the Kawasaki brand,
and promote the following five themes accordingly.
<Five Themes>(1) We will use our integrated technological expertise to create
values that point the way to the future.
(2) We will always act with integrity and good faith to merit
society’s trust.
(3) We will all create a workplace where everyone wants tocontinue working.
(4) We will pursue “manufacturing that makes the Earth smile.”(5) We will expand the circle of contribution that links us to society
and the future.

Kawasaki Named to DJSI for the First TimeIn September 2013, Kawasaki was listed on the Dow Jones
Sustainability Asia Pacific Index for the first time. The Dow Jones
Sustainability Indices (DJSI) are leading benchmarks for ESG
investing.* The U.S.-based S&P Global evaluates and selects
companies for the DJSI on the basis of their corporate sustainability
in economic, environmental, and social aspects. The DJSI is one of
the most important investment criteria for investors around the world
who are interested in companies' ESG initiatives.

Special feature on CSR in the company newsletter

CSR Committee Organization

Corporate CSR Committee Chair: President

SWIMO low floor, battery-powered tram

In August 2006, a test run of the SWIMO low floor, battery-poweredtram equipped with the Gigacell was conducted at Kawasaki’s HyogoWorks. The SWIMO is a ground breaking train that can run without
the use of overhead wires.
In 2009, Kawasaki received the 2009 Minister of the Environment's
Award for Outstanding Achievement in the Fight against Global
Warming (technological development and commercialization category)for the superior energy efficiency of its Gigacell. The following year,
Kawasaki won the Grand Prize in the 19th Global Environment Award(hosted by the Fujisankei Communications Group) for developing the
SWIMO.

Company CSR Committees

Departments

Chair: President of each company

Affiliatedcompanies

Head Office CSR Committee
Chair: Vice President

Departments
Affiliatedcompanies

CSR Liaison Conference
Secretariats of each Company CSR Committee
Compliance Managers Conference
Compliance manager of each company
Head Office CSR Planning Working Group
Corporate Planning Department, Public Relations Department,
Finance Department, Procurement Division, Personnel & Labor
Administration Division, General Administration Department,
Corporate Business Development Division, Corporate Technology
Division, Environmental Affairs Department, CSR Department

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As of 2021, Kawasaki has been listed on the DJSI Asia Pacific Index,
covering companies in the Asia and Oceania region, for nineconsecutive years.
*

ESG investing encompasses not only traditional financial analysis but also
looks at a company’s environmental, social, and governance initiatives inorder to analyze hidden risks and opportunities from a more in-depth
perspective.

5) Aiming to Commercialize CO2-free Hydrogen
Energy Supply Chain

Hydrogen liquefaction plant demonstration facility built at
Harima Works

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Following the announcement of its CO2-free hydrogen energy supply
chain project in the MTBP 2010 (FY2010–2012), Kawasaki
conducted research and development toward its achievement andworked on demonstrating the technology as well as building acooperative consortium with the aim of commercialization. The use ofhydrogen, one of the cleanest energy sources that can be produced
from fossil fuels, has been gaining momentum around the world.
Under the CO2-free hydrogen energy supply chain project, Kawasaki
positioned hydrogen as an important energy option along withrenewable energy. The project included plans to liquefy hydrogen,which was produced by gasifying and refining brown coal (an unused
resource that is abundant in Australia), and transport it to Japan via
liquefied hydrogen carrier. In order to achieve a CO 2-free hydrogenenergy supply chain, Kawasaki needed to make core technologies andproducts for producing, transporting, storing, and using hydrogenseamlessly available throughout the supply chain from upstream todownstream.
In 2011, the company launched the Harima Project, in which it built a
prototype liquefaction system (5 tons/day) and a demonstration plantat its Harima Works to test the technology in house. After repeateddemonstration tests, the first Japan-made industrial hydrogenliquefaction system was successfully developed in September 2014.
The company went on to conduct continuous operation and various
functional tests using an improved liquefaction system to demonstrate
its performance and reliability before completing the development
process. In June 2020, it began selling the first hydrogen liquefier
produced by a Japanese manufacturer.

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Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

1.

Reforming the Management Structure

Chapter 31) Inauguration of Shigeru Murayama as President

Using Cutting-edge Technology to
Build a Brighter Future
2013–2018

In the year preceding the start of its MTBP 2013 medium-term businessplan, Kawasaki saw orders increase across the board, with both net sales
and profits in fiscal 2013 and 2014 growing substantially year on year.
However, as orders increased, so did interest-bearing debt, while free
cash flow dropped significantly. Kawasaki, then turned to KawasakiROIC Management to save the day by boosting ROIC and corecompetencies at the business unit level. As a result, ROIC jumped to
10.4% in fiscal 2014, and both sales and profits reached record highs infiscal 2015.
In April 2016, Kawasaki launched its MTBP 2016 (FY2016–2018)
amid a slump in the Japanese economy triggered by declining foreign
demand and sluggish consumer spending. The company allocatedmanagement resources primarily to the aerospace system, energy, robot,
and other businesses that were expected to grow significantly in themedium to long term. In 2018, it reorganized three internal companies
operating aerospace and energy-related businesses into two in order togenerate greater synergy through the integration of their technologies. It
also bridged the boundaries of internal companies to pioneer new
product technology.
In the 2010s, companies were feeling the pressure to address energy andenvironmental issues, strengthen governance, promote diversity,transform the way employees worked, and more. The Kawasaki Group
promoted environmental management aimed at achieving a sustainable
society, invited in outside directors, and instituted work style reforms
with the input of all employees.

98

At its extraordinary meeting held on June 13, 2013, the Board of
Directors unanimously passed a resolution to dismiss three directors
from the positions of president, senior executive vice president, andsenior vice president respectively and reappoint them as directors under
the supervision of the president. The Board determined that these three
persons were not qualified to play a central role in the management of
the company. It believed their arbitrary management decisions
neglected the majority view of the Board and were in misalignment
with what the Board considered good corporate governance. During thesame meeting, the Board also passed resolutions to terminate
negotiations regarding a merger with Mitsui Engineering andShipbuilding Co., Ltd. as well as to revamp the management structure.
It was then that Shigeru Murayama, Senior Vice President, wasappointed as the new president.
At a meeting of the Board of Directors held after the annual general
meeting of shareholders on June 26, Murayama, who was re-electedpresident, urged employees to embrace a free and open corporate
culture. He said, "As companies become increasingly globalized, thepublic is making greater demands on them in terms of corporate social
responsibility and compliance. It is vital that we continue to question
what enterprise value means from these perspectives as well, as wemove forward to further enhance our Group's enterprise value."Message from President Murayama in thecompany newsletter

2) Appointing Outside Directors
Kawasaki appointed its first outside director in 2013. Since then it has
worked to bolster the external supervisory function of outside directors,
who have no vested interest in the company, with the aim of enhancing
management transparency and objectivity. Outside directors fromvarious backgrounds attend Board of Directors meetings and provide
opinions and advice on the Kawasaki Group’s business operations froman independent standpoint, thereby strengthening its supervisory
function. They also actively participate in and provide advice on thecompany’s management by chairing the Nomination Advisory
Committee and the Compensation Advisory Committee, which will be
discussed later.
The first person to be appointed outside director in June 2013 was
Yoshihiko Morita. Having served as the president of the Japan Institutefor Overseas Investment, a corporate auditor of Tokyo Gas Co., Ltd.,and an advisor at Sumitomo Mitsui Banking Corporation, Morita
provided input drawn from his wealth of international experience andfinancial expertise.
After that, Kawasaki decided to appoint two outside directors in June
2015, and later increased the number of outside directors to three inJune 2018.

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Chapter 3 Using Cutting-edge Technology to Build a Brighter Future3) Introducing the Position of Fellow
In April 2014, Kawasaki created the position of fellow. It is the highest
professional rank one can achieve. Employees with outstandingknowledge and expertise, mainly in a technical field, who havecontributed to improving the company's business performance andenterprise value are appointed fellows and accorded the same treatment
as an executive officer.
The introduction of this position was designed to boost employee
morale as well as instill a desire to become a fellow that would serve asa shining star for all to follow. It would be the foundation for taking
professionalism to new heights.

4) Strengthening the Energy and Environmental
Engineering Business
Kawasaki’s energy plant business started to see the entire business
unit’s product profit margin tank in fiscal 2012 and go on to suffer arecurring loss in fiscal 2013. In order to improve its performance,
Kawasaki consolidated the business unit and transferred common backoffice operations being conducted at the Tokyo head office to Kobe in amove to strengthen and streamline the organizational functions of thecompany. This major organizational shift was the culmination of aseries of reform initiatives, focusing on four areas (awareness,
operations, organization, and products), that had been ongoing since thespin-off in 2005.
Kawasaki needed to strengthen the energy plant business in order tobuild a stronger foundation in the energy and environmental
engineering sector, which was designated as a focus area in the GroupManagement Model 2018 formulated in October 2014. That meant
integrating it into other Plant & Infrastructure Company divisions in
Kobe.
Out of 369 employees at the Tokyo Head Office, a total of 239,
including 123 senior executives and 116 general employees, weretransferred to the Kobe Works in April 2015.

The shareholder claimed that the defendants were negligent in either
knowingly breaking the law, overlooking any misconduct, or tacitly
condoning a violation of the law. The plaintiff demanded damages in
the amount of 4,628 million yen in total for the loss caused by theinvalidation of the contract, etc. resulting from the criminal
investigation.
Having determined that the defendants were not derelict in their duty as
alleged by the plaintiff, Kawasaki decided to join the defendants in thislawsuit to assist them in clarifying, among other things, that there were
no deficiencies in the company’s management.
The lawsuit was concluded at the Kobe District Court in October 2019,with a ruling against the plaintiff. The plaintiff lost his rights as ashareholder and the lawsuit was dismissed, effectively handing a
victory to the two defendants.

5) Behind the Shareholder Derivative Suit
In September 2012, the Tokyo District Public Prosecutors Officeconducted an investigation into a violation of the Act on Elimination
and Prevention of Involvement in Bid Rigging, etc. and Punishments
for Acts by Employees that Harm Fairness of Bidding, etc. inconnection with the development of a new multi-purpose helicopter(UH-X) for which Kawasaki won a contract from the Ministry of
Defense in March 2012. In the end no charges were filed against
Kawasaki and its associates. However, the company was suspended by
the Ministry of Defense for two months from July 31, 2013 forinappropriate conduct during the bidding process.
In connection to this matter, one of Kawasaki’s shareholders filed ashareholder derivative suit against a director and a former director of
Kawasaki in July 2014, demanding compensation for damages.

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2.

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

To Become a Truly Global Company
1) Formulation of MTBP 2016

Explanation of the MTBP 2016 in the company newsletter

In fiscal 2015, the final year of the MTBP 2013 medium-term businessplan, the Kawasaki Group earned 1,541 billion yen in net sales, 95.9
billion yen in operating income, and 93.2 billion yen in recurring
profit, with all figures hitting record highs. Although sales and beforetax ROIC fell slightly short of the targets set in the medium-termbusiness plan, operating income and recurring profit both exceeded theset targets.
Following this achievement, Kawasaki launched the MTBP 2016
medium-term business plan in April 2016. The company reaffirmed thegoals spelled out in the Group Mission and Group Vision statements,and set specific strategies and quantitative targets for the next three
years while painting a picture of how the business should look ten
years down the road.
[Basic Policy](1) Further progress on Kawasaki-ROIC Management• All employees engaged in Kawasaki-ROIC Management: Set
KPIs* that contribute to improving enterprise value based on thecharacteristics of each business segment.
• Enhance risk management position: Ensure risk management at
each phase of the project in order to take the next step as quickly
as possible.
* *Key performance indicators (KPIs) are quantitative metrics used toevaluate progress in reaching business goals.

[Quantitative Targets] (FY2018)
Net sales
Operating income

Recurring profit
Before-tax ROIC

102

1.74 trillion yen
100 billion yen(Ratio of operating
income to sales: 5.7%)
97 billion yen(Ratio of recurring
profit to sales: 5.5%)
11.0%(2) Investments targeting medium- to long-term growth
Continue to aggressively make capital investments and conduct
R&D for medium- to long-term growth, as done under the previous
mid-term plan.
(3) Business realignment• Ship & Offshore Structure Business: (1) Maximize profits
through integrated operation of Sakaide Works and
NACKS/DACKS; (2) Achieve stable business activities at Kobe
Works by focusing on submarine-related operations; (3) Shrink
the offshore service vessels business• Hydraulic Machinery Business: (1) Make Kawasaki the top
brand in the hydraulic market; (2) Develop business beyond
excavators, to construction and agricultural machinery; (3) Seek
synergies and enhanced efficiency through integrated operations
with the Robot Division[Financial Strategy]
Increase operating cash flow to aggressively make investments for
future growth, return profits to shareholders, and strengthen thecompany’s financial position all with an aim for medium- to longterm growth.

2) Inauguration of Yoshinori Kanehana as
President
In June 2016, Kawasaki’s president, Shigeru Murayama, became its
chairman, and Yoshinori Kanehana, its senior executive vicepresident, became president. In his inaugural address, Kanehana,
who took over the reins on the occasion of Kawasaki's 120th
anniversary, said, "I believe it is my mission to ensure thesustainable growth of our Group so that we can continue to be acompany that inspires our employees and makes them proud. I will
carry the torch that has been handed to me by President Murayama
and pass it on to the next generation in an unbroken chain that over
the years has linked us to the philosophy espoused by our founder,
Shozo Kawasaki, of ‘contributing to the nation—to society—throughexpertise.’" The new leader pledged to steadily implement various
measures that would enable the Kawasaki Group to continue to growin the years following its 120th anniversary.

Chairman Murayama (left) and President Kanehana (right)

3) Taking Kawasaki-ROIC Management to New
Heights
The Kawasaki Group has been promoting its own ROIC
management since fiscal 2000, with a focus on striking the optimalbalance between enterprise value, employee value, and customer
value, while making the most of the various types of technology andintellectual strengths it has cultivated through its wide-ranging
businesses encompassing land, sea and air transportation systems,
energy and environmental engineering, and industrial equipment.
As a result, the company's operations have remained strong, and thetotal free cash flow (operating cash flow + investing cash flow)
increased by 140 billion yen from fiscal 2001 to fiscal 2007, whileinterest-bearing debt of 420 billion yen was reduced to 280 billion
yen. The company began to see its ROIC management efforts bear
fruit around 2006 as the financial performance of each businesssegment started to recover and grow.
Subsequently, however, due in part to growing economic bubbles inemerging markets triggered by monetary easing measures
implemented in the wake of the Lehman Brothers collapse, thecompany changed its management course toward expanding
operations. This shift was accompanied by a renewed increase ininterest-bearing debt resulting in a significant deterioration of free
cash flow by the end of fiscal 2012. In response, the company
decided to focus on ROIC management from June 2013 onward. It
aimed at improving ROIC and core competencies (competitive
advantages) at the business unit (BU) level, in order to enhance its
enterprise value. Emphasis was placed on strictly applying a hurdle
rate of 8%, enhancing risk management, and using KPIs.
The objectives of ROIC management were to leverage Kawasaki’s
advantages as a conglomerate and ensure stable operations via BU
portfolio management, focus on capital cost management by
thorough control of the balance sheets of each BU, and enhance corecompetencies while fostering growth-inducing synergy.
The company allocated more business resources to BUs with higher
investment efficiency. In addition to that, it identified hurdles andissues facing each BU in their markets, growth potential, corecompetencies, etc. as well as their financial challenges and enlisted
the support of the entire company to achieve its targets.

President Kanehana's 2017 New Year's
address in the company newsletter

Explanation of Kawasaki-ROIC
Management in the company newsletter

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Part 2/The Last 25 Years (Overall History)

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

The company also sought to enhance enterprise value by leveraging thesynergy created from combining businesses across internal company
boundaries.
As a result, free cash flow improved significantly, and before-tax
ROIC, which was 8.1% in fiscal 2013, increased to 10.4% in fiscal
2014. Furthermore, the company achieved the goal of reaching a net
debt-to-equity (D/E) ratio* of 100% by fiscal 2015 in fiscal 2014, a
year ahead of schedule. Under the MTBP 2016 medium-term businessplan, the company set fiscal 2018 quantitative targets of a before-tax
ROIC of 11% and operating income of 100 billion yen.
*Net D/E Ratio = (Interest-bearing liabilities as of previous fiscal year-end - Cashand cash equivalents as of previous fiscal year-end)/Equity as of the previous fiscal
year-end × 100

4) Kawasaki Celebrates Its 120th Anniversary

120th anniversary logo

Restored Hien fighter aircraft on display at the Kawasaki
Heavy Industries 120th Anniversary Exhibition

Kawasaki marked its 120th anniversary on October 15, 2016 withvarious commemorative events.
In January of the same year, the company unveiled a 120th anniversarylogo. Combining the kanji character for “kawa” and the number 120 in
the base colors of gold and silver, the logo design visualized a symbolof trust backed by history and tradition. The logo was used for public
relations activities to further enhance Kawasaki’s corporate brandvalue as well as to express gratitude to its stakeholders.
On October 14, 2016, Kawasaki hosted its 120th anniversarycelebration at the Kobe Portopia Hotel. The event was attended by
Kawasaki executives, directors, former executives, presidents ofdomestic affiliates, representatives of the Kawasaki labor union (headoffice and branch office executive committee members), and membersof the prefectural and city assemblies (who were former Kawasaki
employees).
On the following day of October 15, “Kawasaki Heavy Industries
120th Anniversary Exhibition: Passion and Pride for Being the Fastest
in the World” opened at Kobe Port Terminal Hall. The exhibition
featured photo panels of Kawasaki products that had been behind thedevelopment of modern industries in Japan over the last 120 years. It
also showcased a restored model of the Hien, a fighter aircraft
developed and manufactured by Kawasaki Aircraft Co., Ltd. for the
Imperial Japanese Army during World War II. Over 44,000 people
attended the exhibition, which ended on a high note on November 3.
From September 17 to November 27, the Kobe City Museum held the"Matsukata Collection Exhibition—Tracing the Dream of Kojiro
Matsukata," bringing together a large collection of ukiyoe and Western
art that Kawasaki's first president, Kojiro Matsukata, had collected at
his own personal expense.

5) Establishing a Companywide Quality Control
Committee
On December 11, 2017, a crack was found in the bogie frame of theseries N700 Shinkansen train manufactured by Kawasaki at Nagoya
Station on the Tokaido Shinkansen line. This was the first serious
incident of its kind involving the Shinkansen.

104This bogie frame was manufactured at the Kawasaki Rolling Stock
Company’s Hyogo Works in February 2007. The investigation resultsfond that the crack was caused by manufacturing defects.
In April 2018, Kawasaki established the Companywide Quality Control
Committee with outside experts to investigate the causes of the
manufacturing defects and discuss measures to prevent their recurrence.
The company also put together an investigative team consisting ofinternal and external experts that answered to the committee.
Based on the findings of the investigative team, the Companywide
Quality Control Committee identified the problems and hammered out
the corrective measures to take. The implementation of corrective
measures at the Rolling Stock Company was regularly monitored by theManagement Committee and supervised by the Board of Directors.
The results of the investigation conducted by the Companywide Quality
Control Committee revealed that manufacturing defects were due tovulnerabilities in quality control and management. There was too muchreliance on the manufacturing lines and not enough risk management toprevent defects.
Kawasaki took the investigation results seriously, and in September
2018, announced that it would (1) review work processes, (2) tighten
risk management, (3) promote close cooperation and communication
between related departments, and (4) review the internal education andtraining curriculum as corrective measures to enhance quality
management and prevent any recurrence. In order to make sure these
efforts took root throughout the company, Kawasaki decided to
introduce total quality management (TQM) and set up the Companywide Quality Committee to implement it.

Board of Directors
Present
President
Establish

ReportCompanywide Quality Control Committee(Established on April 6, 2018)● Identify the root causes of the defects during manufacturing process ofseries N700 Shinkansen bogie frames, and examine and review theappropriateness of the corrective measures developed by the Rolling Stock
Company● Comprehensively audit the entire quality management system in all
business units

ReportDevelop corrective
measures

Examine and review thecorrective measures

Investigation
team

Quality Control Committeeof Rolling Stock Company● Investigate in detailthe actual situation
regarding the quality
management system

Chairperson: President● Investigate the root causes of the defects
during manufacturing process of series N700
Shinkansen bogie frames.
● Develop corrective measures(Established on March 1.2018)

Functions and Relationship of Committees

6) Reorganizing Internal Companies
Priority Allocation of Company Resources and Promotionof Synergies
In following the Business Portfolio Strategy outlined in the MTBP 2016
medium-term business plan, Kawasaki allocated extensive management
resources to businesses that displayed significant growth potential in themedium to long term, such as aerospace systems, energy solutions, androbots. The company also worked on maximizing synergy andaccelerating growth through integrated operations of the aircraft fuselage
and jet engine businesses as well as various energy-related businesses.
In fiscal 2017, the Kawasaki Group's sales reached a new record highdue to increases in sales in the precision machinery, gas turbine andmachinery, and motorcycle and engine businesses. The ROIC, however,hit 3.9% due to the impact of an extraordinary loss caused by thetermination of a shipbuilding contract for a Norwegian offshore service
vessel, falling below the Group’s hurdle rate of 8% for the next twoconsecutive years of fiscal 2016 and 2017.
Kawasaki responded to these changes in the business environment inApril 2018 with the introduction of Kawasaki-ROIC Management andthe reorganization of three internal companies, in the growth areas ofaerospace and energy, into two.

Priority allocation of company
resources• Into the businesses which big
growth can be expected in
mid-long term, such as the
Aerospace Systems, Energy
and Robots.

Four business sectors
Aerospace System

Aerospace

Pursuing group synergy
Jet Engine• Maximize the synergy andaccelerate growth byperforming integral
administration in
Aerospace/Jet engine and avariety of energy- related
businesses.
Reorganization• Partial reorganizationaccording to business sectors
is under consideration with an
April 2018 target.

Precision
Machinery/Robot

Energy/Environment Plant

Plant & Infrastructure
Gas Turbine &MachineryTransportation

Hydraulic Component

Ship & Offshore
Structure

Robot

Motorcycle & Engine

Rolling StockBusiness Portfolio Strategy

105Part 2/The Last 25 Years (Overall History)

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

Establishing the Aerospace Systems Company
Aerospace Company
Gas Turbine & Machinery
Company Jet Engine Business
Gas Turbine & Machinery
Company Energy Business
Plant & Infrastructure Company

Integrated in April 2018
Aerospace Systems
Company

Integrated in April 2018
Energy System &Plant Engineering
Company

Reorganizing three internal companies into two

In the area of aerospace, Kawasaki merged the Aerospace Company
and the Gas Turbine & Machinery Company’s jet engine business into
the Aerospace Systems Company. In streamlining the organization, thecompany aimed to strengthen its global cost competitiveness andcreate new businesses through the integration of technologies. It also
stipulated operational rules for production and quality control systems,
which previously existed in both companies, to facilitate
manufacturing operations.

Establishing the Energy System & Plant Engineering
Company
In the area of energy, Kawasaki integrated the Gas Turbine &Machinery Company’s energy business and the Plant & Infrastructure
Company into the Energy System & Plant Engineering Company. The
establishment of the new internal company was designed toincorporate energy-related products and technologies into optimum
energy systems that could meet a world of customers' needs.

Precision Machinery Company Renamed Precision
Machinery & Robot Company
In the robot business, the Precision Machinery Company was renamed
the Precision Machinery & Robot Company with an aim to expand
operations even further.
The robot business, which was poised to take off, needed more design
and production space. While Kawasaki had a showroom at its NishiKobe Works, it used the Akashi Works for pre-delivery inspections bycustomers.
The solution to these problems that Kawasaki came up with included
transferring the factory automation and clean robot divisions of the
Akashi Works to the Nishi-Kobe Works between fiscal 2016 and 2017.
Of the 456 employees at the Akashi Works, 92 employees, including
senior executives, were transferred to the Nishi-Kobe Works in
October 2016, and 40 employees, including senior executives, weretransferred in October 2017.

7) Trends at Overseas Locations
KMM Begins Aircraft Parts Production

Kawasaki Motors Manufacturing Corp., U.S.A.(KMM)
Lincoln Plant rolling stock production line

In 1975, KMC began mass production of motorcycles at its Lincoln
Plant in the U.S. Kawasaki Motors Manufacturing Corp., U.S.A.
(KMM), which was split off from KMC in December 1981, opened arolling stock factory at its Lincoln Plant in 2001. It is the Kawasaki
Group’s only overseas production base that manufactures products for
multiple internal companies.

In May 2017, KMM completed a production line for the cargo doorsof the Boeing 777X, Boeing's newest commercial airliner. It was thefirst aircraft parts production line operated by a Japanesemanufacturer in the United States, and full-scale operation kicked off
in autumn of the same year. Kawasaki seized this opportunity toposition the Lincoln Plant as a major production base for aircraft
parts in the United States and has been working to expand its
commercial aircraft business ever since.

Boosting Motorcycle Sales in Southeast Asia
and Establishing a Sales Company in Vietnam
Kawasaki's motorcycle sales are growing year by year in countries
throughout Southeast Asia.
Annual motorcycle production at Kawasaki Motors (Phils.)
Corporation (KMPC) in the Philippines skyrocketed in just three
years as it jumped from 170,000 in 2017 to 250,000 in 2020. This
includes the BARAKO II, an overwhelmingly popular model used as
the motorized element of the tricycle (a three-wheeled taxi consistingof a small motorcycle and a sidecar). This was the highest production
volume of any factory operated by the Motorcycle & Engine
Company in the world.
The motorcycle market in Vietnam is expected to keep pace with thecountry’s economic growth. Sales exceeded 3.3 million units in
2018, trailing just behind China, India, and Indonesia. In January
2019, Kawasaki established Kawasaki Motors Vietnam Co., Ltd.
(KMV) to import and sell motorcycles. The company is Kawasaki's
twelfth overseas motorcycle sales subsidiary.

Accelerating Global Expansion of Robot BusinessIn the 2000s, China's robot market expanded quickly in step with thecountry’s rapid economic growth. In 2006, the Kawasaki Groupestablished Kawasaki Robotics (Tianjin) Co., Ltd. (KRCT) in
Tianjin. Kawasaki’s first robot business location in China, KRCT
built and delivered robots to major Japanese automaker’s factories in
China. In 2013, Kawasaki Robotics (Kunshan) Co., Ltd. wasestablished to promote local production and consumption. In 2015,
Kawasaki Precision Machinery (Suzhou) Ltd. (KPM Suzhou) began
manufacturing robots. The company worked to improve production
efficiency based on the concept of robots making robots.

Aircraft parts production line at Lincoln Plant

Production line at Kawasaki Motors (Phils.) Corporation(KMPC)

Kawasaki Motors Vietnam Co., Ltd.
(KMV) office building

Exterior view of Kawasaki Robotics (Tianjin) Co., Ltd.
(KRCT) when it first opened

106

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Part 2/The Last 25 Years (Overall History)

Opening ceremony of Kawasaki Robotics (Tianjin) Co., Ltd.
(KRCT) Kunshan Branch [currently
Kawasaki Robotics (Kunshan) Co., Ltd. (KRCK)]

Robot factory at Kawasaki Precision Machinery (Suzhou) Ltd.
(KPM Suzhou)

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

In the same year, Kawasaki (Chongqing) Robotics Engineering Co.,
Ltd. (KCRE) was established in Chongqing, the world capital forelectronics manufacturing services (EMS). In addition to
manufacturing and selling robots, KCRE expanded into the production
line building business, handling everything from design to the start-up
of factory assembly lines for automobile manufacturers.
Kawasaki established locations across Asia, from South Korea to
Taiwan and Thailand. In Singapore, it launched the Singapore
Kawasaki Robot Center (SKRC) in 2014 to provide after-sales
services, and in 2017, the Singapore Kawasaki Robot Engineering
Center (SKRE) to provide support for industrial robot applications
development and training for engineers. In 2015, Kawasaki establisheda robot division (KIRD) at its Indian subsidiary, Kawasaki Heavy
Industries (India) Pvt. Ltd.
In the United States, a local subsidiary of Medicaroid Corporation, ajoint venture between Kawasaki and Sysmex Corporation, which has abroad network in the medical field, began operating in Silicon Valley
in 2016. The company works jointly with Medicaroid on medical robot
technology development, marketing activities, and regulatory affairs
for approval by the U.S. Food and Drug Administration (FDA), withthe aim of expanding the sales of medical robots.
Since the 2010s, the Kawasaki Group has been accelerating the
introduction of robots around the world that contribute to a wide range
of industries.

3.

Toward the Sustainable Development of
the Group(Harmonious Coexistence with Stakeholders)

1) Corporate Governance

General Meeting of Shareholders
Resolution on appointment

Resolution on appointment

Basic Stance on Corporate Governance

Resolution on appointment

Audit

Directors (Board of Directors)
Compensation Advisory Committee
Nomination Advisory Committee

Corporate auditors (Board of Auditors)

Independent auditor(advice/recommend)

Appointment(advice/recommend)

Supervision

Cross-sectional cooperation

Audit

Supervision
Instructions

President

Auditing Department
ReportThe Kawasaki Group has established a corporate governance systemthat is suitable for a corporate group that operates globally, withdirectors and corporate auditors playing central roles.
Kawasaki believes corporate governance can raise enterprise value
through effective and sound management while forming solid
relationships with all stakeholders through highly transparent
management practices.

Establishment of the Nomination Advisory Committee
and Compensation Advisory Committee

Key Internal Committees
Management Committee

Corporate CSR Committee
Corporate Risk Management Committee

ReportBusiness operation execution divisions(Head office, Internal companies)

Audit

Discussion
Audit

Affiliated companies

Inspection

Corporate CSR Committee
Corporate Risk Management Committee

General Meeting of Shareholders
Resolution on appointment

Directors (Board of Directors)

Resolution on appointment

Audit/
Supervision

Statement of opinion

Audit & Supervisory Committee

Resolution on appointment

Independent auditor

AssistanceNomination Advisory
Committee

Consultation/ Advice

Compensation Advisory
Committee

Consultation/ Advice

Supervision

Appointment

Audit/
Supervision

Office of Audit &Supervisory Committee

Instruction

Instruction

President

ReportReportAudit

Mutualcooperation

Audition Department

ReportInstruction

Key Internal Committees
Discussion

Instructions

Management Committee
ReportRefer/Report

In May 2015, Kawasaki established the Nomination Advisory
Committee and the Compensation Advisory Committee as advisory
bodies to the chairman of the Board of Directors. With chairs and amajority of members who are outside corporate officers, thecommittees are designed to improve the transparency and objectivityof board decisions.
The Nomination Advisory Committee deliberates on theappropriateness of policies and proposals for the election of corporate
officers while the Compensation Advisory Committee deliberates on
the appropriateness of executive compensation policies and plans.
Both committees then report to or advise the Board of Directors.

Discussion Instructions

Instructions

Major Project Committee

Executive Officers Committee

Deliberative bodies related tobusiness risk
Short-Term Plan Conference, * MidYear Review Conference, * Major
Project Committee

Executive Officers Committee

ReportCompany-wide Quality Committee

ReportInstructions

Business operation execution divisions(Head Office, internal companies)

Sustainability Committee
Company-wide Compliance Committee

Audit

Instructions
Discussion

Affiliated companies

Audit

Instructions

Head Office and business segment compliance committees

Inspection*Internal conferences that consider the formulation andrevision of management plans

Kawasaki's Governance Structure (Top: As of June 25,
2015, Bottom: As of June 25, 2021)

Revising the Director and Executive Officer Positions

Robot sales office of Kawasaki Heavy Industries (India) Pvt. Ltd.

108

On April 1, 2018, Kawasaki revised the director and executive officer
positions in order to separate the supervisory and monitoring functionof the Board of Directors from its execution function with an eye tofurther strengthening corporate governance.
(1) With the exception of the chairman, vice chairman, and president,
the company would no longer appoint managing directors but
appoint representative directors and directors instead.
(2) The positions of president, senior executive vice president,
executive vice president, and senior vice president wererespectively changed to president and chief executive officer, vicepresident and senior executive officer, senior managing executive
officer, and managing executive officer positions.
The company also increased the number of outside directors by one inorder to strengthen the board’s ability to oversee business operations.

109Part 2/The Last 25 Years (Overall History)

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

Kids science class in Minami-sanrikucho, Iwate
Prefecture

Kawasaki Robostage3) Sustainability and SDG Initiatives
Establishing a Code of Conduct

Participating in Hyogo Prefecture’s forest conservation
activities

The Kawasaki Group drafted the Kawasaki Corporate Code of Ethics
in 1999 and the Global Business Ethics Guidelines for its overseas
subsidiaries in 2011 to ensure total compliance. In an effort to geteveryone across the Group on the same page, Kawasaki set forth the
Kawasaki Group Code of Conduct in September 2017. It is the
Kawasaki Group’s ethics bible to be followed religiously by all
officers and employees.

Focusing on corporate and societal rules, section 1 of the Code of
Conduct, entitled “In Order to Ensure Correct Conduct,” covers
twelve areas that are strictly regulated around the world (including
fair business practices, prohibition of improper gifts andentertainment, information security, and personal information
protection). Section 2, entitled “In Order to Face Stakeholders,”
covers ten areas related to the Kawasaki Group’s responsibilities andethical duties to society and its stakeholders (which includes
providing safe, top-quality, high-performance products and services,
respecting human rights, ensuring a safe and healthy work
environment, and protecting the global environment). As of April
2021, the Code of Conduct has been published in ten different
languages (i.e. Japanese, English, simplified and traditional Chinese,
Korean, Thai, Indonesian, Portuguese, German, and Russian) anddistributed to employees around the world.

Identifying Material Issues
Today stakeholders are demanding companies be more responsible
than ever for the impact their operations have on the environment
while keeping pace with changes in society. The Kawasaki Group
took heed of those demands, and in 2018 reassessed how its
corporate activities would affect society and the environment. For the
first time ever, it pinpointed social issues and material issues itshould address so that it could develop and implement businessstrategies with these issues in mind. The company divided its
material issues into the two broad categories of social value createdthrough its business and the foundation of its business activities. This
move was aimed at stepping up efforts to solve issues facing society
through products and services and address CSR issues such as
corporate governance, supply chain management, compliance, andhuman rights.
Following the formulation of the Group Vision 2030, the company
reassessed materiality and identified its material issues in 2021 (seethe figure on the right). The company has set KPIs for the identified
material issues and designated departments responsible for steadily
implementing necessary measures and follow-up activities to achievetargets.
In 2021, the Sustainability Committee and the Company-wide
Compliance Committee, chaired by the president, were established inplace of the Corporate CSR Committee in order to address thegrowing importance of sustainability worldwide against the backdrop
of intensifying climate change due to global warming, and to further
strengthen compliance in corporate activities.

Efforts to Achieve SDGs
Participating in Team Tyura Sango

110

The Sustainable Development Goals (SDGs) were adopted by all 193
UN member states at the United Nations summit held in September
2015. The SDGs are composed of 17 goals to be achieved by 2030
that address eradicating poverty, inequality, injustice, and fighting
climate change, along with 169 specific targets aimed at achieving
them.

Kawasaki Group Code of Conduct

High

Material issues
Social and environmental value
created through our businessA safe and secure remotelyconnected society
Near-future mobility
Energy and environmental solutions

The foundation of our business activities
 Sustainablesupply-chain
management
 Business andhuman rights

Importance to society and stakeholders

Cumulative number of visitors to Kawasaki Good
Times World reaches three million

In November 2018, Kawasaki established the Kawasaki Group Social
Contribution Activities Policy in order to clarify its official position
regarding community engagement and its impact. Kawasaki is a good
corporate citizen committed to fulfilling its corporate social
responsibility through engagement and coexistence with local
communities with a focus on the following areas.
(1) The Kawasaki Group, as a corporate citizen, constructs a good
relationship with local communities and contributes to theirdevelopment.
• Operating Kawasaki Good Times World• Operating the Kawasaki Good Times Foundation in the U.S.
• Donating money and Kawasaki products to aid victims andareas hit by disasters around the world(2) The Kawasaki Group supports the next generation who lead thetechnology of the future.
• Hosting science classes for elementary school students• Participating in the Youngsters’ Science Festival that provides
elementary, junior high, and high school students with
opportunities to experience the fun of science• Operating Kawasaki Robostage, where visitors can experience
the cutting-edge technology and know-how behind Kawasaki
robots(3) The Kawasaki Group preserves the environment and achieves asustainable society.
• Conducting forest protection and restoration activities via
Kochi Prefecture’s afforestation project, Hyogo Prefecture’s
corporate forest restoration project, etc.
• Participating in Team Tyura Sango activities to restore coral
reefs in Onna-son, Okinawa Prefecture Promotion ofhuman resource  Energy and environmental
activities
solutions (Value chain) Compliance Product
liability/safety Occupational
health and safety
 Corporate
governance Information
security Technology
development andDX

Importance to the Kawasaki Group

High

Low

Materiality Matrix
Social and environmental value created through our businessA safe and secure remotely connected society: Scope of initiatives
Energy andenvironmental
solutions (value chain)

The foundation of our business activities

2) Establishment of the Social Contribution
Activities Policy

Especially importantmatters going
forward (mattersexerting an
increasing impact on
future financial
conditions)

Near-future mobility

Energy and environmental solutions
Kawasaki Group

Suppliers

Customers

Decarbonization
Improvement of resilience to climate change
Effective use of resources

Business andhuman rights

Implementation of human rights due diligence

Promotion of humanresource activities

Personnel system reform and humanresource development

Promotion of diversity
Technology
development and DX

Co-creation intellectual property strategy toward new
business creation

Open innovation
Promotion of DX
Product liability/safety

Product liability/safety

Compliance
Matters given
importance until
now but to be
steadilystrengthened going
forwardCompliance with the
Kawasaki Croup CSR
Procurement Guidelines

Compliance with the
Kawasaki Croup Code of
Conduct
Anticorruption measures

Occupational healthand safety

Information security

Occupational health andsafetyStrengthening of productsecurityStrengthening of information
securityStrengthening of cyberdefensePersonal information protection
Corporate governance (all mechanisms to be improved as business foundations

KHI Group Crisis Management System

111

Part 2/The Last 25 Years (Overall History)

Applicable SDGs

COOD HEALTH
AND WELL-BEING

DECENT WORK AND
ECONOMICCROWTH

INDUSTRY.NNOVAION
AND NFRASTRUCTURE

PARTNERSHIPSFOR THE GOALSCOOD HEALTH
AND WELL-BEING

INDUSTRY.NNOVAIONANDNFRASTRUCTURE

SUSTANABLE CITESAND COMNUNTTESPARTNERSHIPSFOR THE GOALSAFFDRDABLE AHD
CLEAN FNERGY

INDUSTRY.NNOVAION
AND NFRASTRUCTURE

SUSTANABLE CITESAND COMNUNTTES

CLMATE ACTIONPARTNERSHIPSFOR THE GOALS

A safe and secure remotelyconnected Society

Near-future mobility

Energy and environmental
solutionsRESPONSIBLE
CONSUNPTON AND
PRCDUCTON

Kawasaki Group's Approach to the SDGs

4) Addressing Climate Change Risks and theComing Decarbonized Society
Promoting Kawasaki Green Products
Since June 2014, the Kawasaki Group has evaluated its own
products, designated those with superior environmental performanceas Kawasaki Green Products, and made a list of these products
public. Once selected, they are re-evaluated every three years todetermine whether they will remain listed as Kawasaki Green
Products. The first set of Kawasaki Green Products included ten
products, of which nine were Kawasaki Super Green products
boasting the industry’s most outstanding environmental
performance. The list of Kawasaki Green Products has beenannounced annually since then.

As its value chain was expanding worldwide in step with theglobalization of its operations, Kawasaki established the Kawasaki
Group Human Rights Policy in 2019, recognizing the growing
importance of respect for human rights in corporate activities. The
Human Rights Policy states that it is essential that the human rights ofall stakeholders be fully respected in order to achieve the Group
Mission and that all Kawasaki Group employees must act inaccordance with the highest of ethical standards. It stipulates that theGroup will actively outline Kawasaki’s commitment to actively
addressing the key areas of human rights, including diversity, equal
opportunity, forced labor, child labor, discrimination, harassment,
freedom of association and collective bargaining rights, andoccupational health and safety, in fulfilling its responsibility to respect
all human rights.
Following the establishment of the Human Rights Policy, Kawasaki
signed and joined the United Nations Global Compact (UNGC) in
January 2020. The UNGC is a global initiative calling on leaders ofprivate companies and organizations to solve social issues and achievesustainable growth in the face of global conflicts, poverty, andwidening disparities caused by economic globalization. As a signatorycompany, Kawasaki supports the ten principles advocated by the
UNGC in the four areas of human rights, labor, environment, and anticorruption, and continues to work towards their achievement.

In the 9th Environmental Management Activities Plan, Kawasaki
picked up where the 8th Environmental Management Activities Plan
left off and continued to focus on aligning its business managementwith environmental management. The company also placed anemphasis on responding to the diversification of procurement
associated with energy liberalization, coordinating with Japan's
nationally determined contributions (NDCs) that were adopted after
being presented at the 21st session of the Conference of the Parties(COP 21) to the United Nations Framework Convention on Climate
Change, and ensuring appropriate disclosure and transparency ofenvironmental information to institutional investors, corporate
evaluation agencies, and others. Moving forward to achieve its
Environmental Vision 2020, the company worked to improve its
environmental brand by promoting Kawasaki Green Products andfocusing on four key issues: (1) reducing CO2 and energy costs; (2)promoting the 3Rs; (3) reducing environmentally hazardous
substances and conserving resources; and (4) enhancing the Group's
environmental management system.

Coordinate with business
management and promote
steps to contribute to theenvironment
Secure the practice ofenvironmental• Reduce CO2 emissions andmanagement
energy consumption

Mission Statement(established in 2007)

Undertakeenvironmental
management activities

Prepare andimplement
environmental
management systems

Environmental Vision 2010
(established in 2003)(1) Environmental management(2) Environmentally conscious
products(3) Environmentally conscious
manufacturing(4) Environmentally conscious
communication

Implementation Phase

Taking Root Phase

First to third environmental
management activities plans

Fourth to seventh environmental
management activities plans• Promote the 3Rs• Reduce environmental loads,
and promote resource
conservation• Enhance EMS operation• Promote green products

Environmental Vision 2020
(established in 2010)

Establishment of environmental
management systems

Development Phase
Eighth Environmental
Management Activities Plan

Ninth Environmental
Management Activities Plan

Kawasaki Group’s Environmental Management Activities

Formulating the Kawasaki Global Environmental
Vision 2050
Pledging to achieve a sustainable society in the future, the Kawasaki
Group formulated Kawasaki Global Environmental Vision 2050 inAugust 2017.
At this time the Paris Agreement following COP21, the UN SDGs,
and other global measures to combat global warming were coming
into effect, and corporations, public pension funds, and institutional
investors in Europe and the United States began to moveaggressively to reduce greenhouse gases, especially CO2. Leading
Japanese companies, including Toyota Motor Corporation, followed
suit with long-term visions and public disclosures of long-term
environmental management strategies.
CO2 FREE• Aim for zero CO2 emissions in business activities• Provide products and services that greatly curb CO2
emissions112

First Set of Kawasaki Green Products

Realization of a society
coexisting with nature

The 9th Environmental Management Activities Plan
(FY2016–2018)

Realization of a lowcarbon society

Establishing a Human Rights Policy and Joining theUnited Nations Global Compact

Realization of arecycling-oriented
society

UN Global Compact membership certificate

Corporations are also required to contribute to solving issues facing
the world through their business activities. The Kawasaki Group’s
mission statement, "Kawasaki, working as one for the good of theplanet” and the SDGs have a strong affinity. Kawasaki is working to
do its share in achieving the SDGs and believes that it can make asignificant contribution toward achieving them.
When looking at its material issues in 2018, Kawasaki identified thecorporate group’s most important long-term goal as creating social
value through its business operations. In light of that goal, it picked theSDGs it should contribute to achieving and set non-financial targets
for 2030. The company revised these targets when it reassessedmateriality in 2021. While regularly disclosing the progress towardachieving the targets, the company aims to maximize social value andsustainable growth, while contributing to the achievement of the
SDGs.

Value creation

Created Social andEnvironmental Value

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

Explanation of Kawasaki Global
Environmental Vision 2050 in thecompany newsletter

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Chapter 3 Using Cutting-edge Technology to Build a Brighter Future

Waste FREE
• Aim for zero waste emissions in business activities• Thoroughly enforce conservation and the recycling ofwater resources
Harm FREE• Aim for zero harmful chemical substance emissions inbusiness activities• Develop business with respect for biodiversity
The Annual Report on the Environment in Japan 2020 highlighted
frequent natural disasters and used the term "climate crisis" to refer toclimate change risks. Social demands for a decarbonized society
gradually increased, as evidenced by the 2017 TCFD
recommendations (which was endorsed by Kawasaki in 2019).
Takumi Juku, a professional skills training center5) Nurturing a Vigorous Workplace Culture
Efforts to Strengthen On-site Capabilities

Manabiya, a manufacturing skills creation center at the
Akashi Works

Employee training at Manabiya

Nadeshiko Brand markKurumin mark114

Eruboshi markPride Index Gold mark

● Opening Takumi Juku and Manabiya skills training
centers
Kawasaki opened training centers to actively pass down technicalskills with an eye to strengthening its manufacturing capabilities thatare the business foundation of its corporate group.
In March 2012, Takumi Juku, a professional skills training center, wascompleted at the Harima Works. The center offers various skill
development programs for young and mid-career workers, educational
training for trainees and new employees, and production technology
education for engineers. It serves as a facility that teaches both skills
and techniques.
In April 2014, Manabiya, a manufacturing skills creation center,
opened at the Akashi and started providing skills training. In addition
to skills training for new production workers, Manabiya provides
production staff with classroom and hands-on training designed toacquire basic skills. Its training programs include special educationand training for selected workers in preparation for various skills
competitions and support for acquiring qualifications required at
production sites.
Working in synergy with the technical skills education system
implemented so far, these training centers are not only successfully
passing on technical skills but also helping employees acquire newskills or develop technical and leadership skills in a short period oftime, and providing employees with opportunities to enhance eachother's skills.
Promoting Diversity
In April 2010, the Diversity Promotion Section was established within
the Personnel & Labor Administration Division. To enable diverse
human resources, regardless of race, gender, age, or faith, to make themost of their abilities, Kawasaki is taking various steps, such asallowing employees to embrace diverse workstyles to help them strikean optimal work-life balance, promoting the active participation of
women, facilitating the employment of people with disabilities,
extending support for the next generation and those engaging in
nursing care, promoting the active participation of non-Japanesenationals, and creating an LGBT-friendly work environment.

Kawasaki was recognized for its efforts to support the professional
development of women and named a Nadeshiko Brand by the
Tokyo Stock Exchange and the Ministry of Economy, Trade andIndustry in March 2015. It was also awarded Eruboshi certificationby the Ministry of Health, Labour and Welfare in May 2016. In
2010, the company was awarded the Kurumin mark from thedirector of the Hyogo Labor Bureau in recognition of its efforts to
support and nurture the next generation. In 2018, it won the highest
rating of Gold in Work with Pride’s Pride Index for its outstanding
LGBT-related workplace initiatives.

Workstyle Reform: Promoting K-Win Activities
In 2016, Kawasaki launched Kawasaki Workstyle Innovation
Activities (K-Win Activities) to embrace diverse and flexible
working styles. K-Win Activities are aimed at changing the way
people work, in mainly administrative and technical positions, withan eye to further enhancing enterprise value. These activities aredesigned to help employees reach their full potential and increase
productivity in order to improve profitability and achieve growthover the medium- to long-term while maximizing individuals’
abilities in the workplace and enabling them to lead rich andrewarding lives.
K-Win Activities are conducted with the participation of all
employees in a concerted effort to change three areas:organizational culture, operations, and personnel systems. As partof this initiative, Kawasaki introduced a remote working program in
January 2018. The program is designed to set working hours withincertain limits and improve work productivity by allowing flexible
work styles that are not restricted by location or time constraints.
Starting in fiscal 2018, the company revised its personnel
assessment method to raise awareness of its efforts to improve
productivity, as well as actively shared information with all
employees about tools that could help them visualize tasks, manage
time, and improve communication.
In fiscal 2020 Kawasaki took K-Win Activities to the next level inline with the Group Vision 2030 and has been working to transform
its corporate culture with the aim of achieving this vision.

Health and Safety Initiatives
The Kawasaki Group believes that ensuring the safety as well as
maintaining and improving the health of its employees are key
foundational components of corporate activities that enhance its
enterprise value. Its clearly defined Philosophy, Declaration, andBasic Policy on Safety, Sanitation and Health is the basis of its
three-year Medium-term Safety and Health Management plans aswell as its Safety and Health Management Platform (a one-yearplan) for occupational safety and health activities. These planscover the prevention of work-related accidents and illnesses, as wellas health maintenance and improvement, along with thedevelopment of comfortable workplaces.

Intranet site for K-Win Activities

Goals of K-Win Activities

Safety dojo

Inside the safety dojo

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Part 2/The Last 25 Years (Overall History)

Announcement of the Kawasaki
Health Challenge in the company
newsletter

Chapter 3 Using Cutting-edge Technology to Build a Brighter Future● Opening of the Safety Dojo
Kawasaki opened a safety dojo, its corporate safety education facility,
at the Kobe Works in July 2015. It’s a place that provides all
Kawasaki Group employees with training on safety basics and refines
their risk sensitivity with the objectives of learning from past
incidents, raising safety awareness, and developing the capabilities
needed to ensure safety.
● Named Certified Health & Productivity Management
Outstanding Organization
Kawasaki was named a Certified Health & Productivity Management
Outstanding Organization for three years running, from 2017 to 2019.
The certification is awarded in recognition of efforts to take strategic
measures to manage workplace health and productivity from abusiness-management perspective. Operated jointly by the Ministry of
Economy, Trade and Industry and Nippon Kenko Kaigi, the CertifiedHealth & Productivity Management Outstanding Organizations
Recognition Program recognizes companies that implement
outstanding health and productivity management initiatives that
address local health issues and Nippon Kenko Kaigi’s efforts topromote health.
Adhering to the core principle of respect for human life and promoting
good health, Kawasaki offers health education classes aimed atpreventing lifestyle diseases, including an eating habit improvement
seminar and exercise seminar. The company works with the healthinsurance union and labor union to hold the Kawasaki Health
Challenge, a health promotion campaign for employees and theirfamilies, and encourages everyone to participate.

6) Creating the Innovation Department

Innovation Department’s San Jose Office (photo taken in 2016)

The program received more than 100 submissions within a year of its
launch, from which the noslisu, a new three-wheeled electric vehicle,
and the iPNT-K, an indoor location information service, werecommercialized in no time. As these ideas, born from the passion of
employees, have taken shape and turned into real-world products, they
have inspired others across the Group to seize the opportunity thisprogram offers.

7) Toward the Achievement of a Hydrogen Society
Joining the Hydrogen Council
Aiming to build a CO2-free hydrogen supply chain, Kawasaki
developed the first industrial hydrogen liquefaction system using its
home-grown proprietary technology. After beginning hydrogenliquefaction testing at its Harima Works in November 2014, thecompany worked on building a hydrogen supply chain, with a focus
on liquefied hydrogen.
In February 2016, Kawasaki, working jointly with Iwatani
Corporation, Shell Japan Limited, and Electric Power Development
Co., Ltd., established the CO2-free Hydrogen Energy Supply-Chain
Technology Research Association (HySTRA) to promote theconstruction of a CO2-free hydrogen supply chain and began moving
full-steam ahead.
In January 2017, the Hydrogen Council was formed as a global
initiative by 13 leading energy, transport, and manufacturing
companies, including Kawasaki, with the shared vision and long-term
ambition to foster a transition to hydrogen energy. As of 2018, thecouncil is comprised of 39 companies (including steering members
and supporting members).

Hydrogen Council

Kawasaki started conducting ICT/IoT research in January 2015, andopened a corporate office in the United States’ Silicon Valley in
October 2016 with the aim of gathering innovation-related
information and cultivating business partnerships. Having observed
cutting-edge technologies, marketing methods, and the entrepreneurial
ecosystem in Silicon Valley, Kawasaki decided that Japan needed an
innovation organization.
The company then established the Innovation Office within theMarketing Division in April 2017. It was renamed the Innovation
Department in June of the same year and placed under the Corporate
Planning Division in April 2019. The department was established withan aim to create value through collaboration with external startups,
etc. (promote open innovation) and foster a culture of innovation. The
company worked with several startups, including Global Mobility
Service, Inc., a Japanese company that provides credit services totricycle drivers, in 2018, and OSARO, Inc., an American company
that develops AI for robots, in 2019.
In April 2020, Kawasaki launched an in-house program for soliciting
business ideas in an effort to spark innovation throughout theorganization. The program serves as a tool that can be used to tap into
employees’ creative side and passions.

The noslisu three-wheeled electric vehicle

116

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Chapter 4 Driving Innovation to Stay Ahead in a Changing World

Chapter 4

1.

Transforming the Organization andCorporate Culture1) Formulation of MTBP 2019

Driving Innovation to Stay Ahead in a
Changing World
2019–2021

Finding itself in a rapidly changing business environment, the Kawasaki
Group implemented a series of reforms under the banner of “Changing
Forward.” In 2019, it launched its Medium-Term Business Plan
(MTBP) 2019 (FY2019–2021). Moving toward its primary goal of“balancing autonomous business management and company-wide
corporate governance," Kawasaki introduced a divisional system andchanged its corporate structure from that of a company with a board ofcorporate auditors to a company with an audit and supervisorycommittee. On top of that, it spun off the rolling stock business as wellas the motorcycle and engine business into new companies.
COVID-19 began to spread globally in the early 2020s. This spreadbrought business across the world to a near standstill as thetransportation of people and goods came to a grinding halt and supply
chains suffered massive disruptions. Working against this backdrop, theKawasaki Group saw aerospace and rolling stock orders spiral
downward, resulting in year-on-year decreases in sales and profits infiscal 2020.
In the meantime Kawasaki adopted the Group Vision 2030: Trustworthy
Solutions for the Future in November 2020. The company identified
three areas it should focus on in order to achieve the vision of a safe andsecure remotely connected society, near-future mobility, and energy andenvironmental solutions.
Kawasaki was determined to leverage its diverse range of unique
technologies and work hard to overcome the hurdles created by the
COVID-19 pandemic while solving a myriad of problems facing theworld as it kept its eye on achieving a sustainable society.

Kawasaki saw the profitability of some of its businesses significantly
drop during the period of the MTBP 2016 medium-term business planthat ended in fiscal 2018 and urgently needed to strengthen its financialbase. On the other hand, the businesses that were driving growth wereabout to reap returns as expected on investments that had been made on
an ongoing basis.
It was against this backdrop that Kawasaki launched its MTBP 2019 inApril 2019. The plan envisioned a fiscal 2030 operating income marginof 10% or more (with annual sales growth of 5% or more) in light ofmegatrends in the business environment and the SDGs. The company
decided to make selective investments over the three years of the MTBP
2019 by placing the most emphasis on strengthening its financial base inorder to achieve further growth. The outline of the plan is as follows.
[Basic Policy](i) Strengthen the financial base
Return to the philosophy of emphasizing quality over quantity to
improve operational quality (including project risk management),and strengthen the financial base toward future growth(ii) Total optimization of business portfolios
Balance autonomous business management and company-wide
corporate governance
Implement carefully selected investments of labor, resources, andbudgets, from the viewpoint of total optimization. Consider
megatrends and SDGs. Clarify each business’s role, optimal scale,and form(iii) Business model innovation (“Changing Forward”)
Make good use of core competencies to increase enterprise value
through business and value chain innovations (without sticking toin-house development and production)(iv) Innovate company organization/culture (“Changing Forward”)
Construct cross-organizational functions and management systems
for total optimization and a company culture to face evolving
challenges

MTBP 2016

MTBP 2019

Operatingincomemargin: 10%
or moreFCF: ¥120 billion or more
over 3 years

Core components(precision machinery, general-purpose
engines, semiconductor robots) Remote monitoring (track monitoring,gas turbines etc.)
 Engine MRD1 AUVS2 SOPass3
 Medical robots

Existing Business Domains

Brand licensing marker
development

FY2019-2021

Designpars

Manufacturing/assembly

Sales/logistics

Service/maintenanceand operation

Value chain

FY2030Long-Term Vision and the MTBP 2019118

 Hydrogen technologies
 Medical robots
 Next-generation vehicles

Strengthen financial base Selective
Investments toward further growth
Sales growth rate after
FY2019:5%or more per year

FY2016-2018

Amount of added value

Before-tax ROIC:10% or more
Operating income margin:
6% or more

Press conference announcing the MTBP 2019

Continuously increase value Expanding value chains not dependent solely on internal resources

FY2030Goals for FY2021 (milestone) Profitability declined andquantitative goals were notachieved
 However, development of
medium-to long-term
growth driver businesses
progressed as planned
 Expecting to begin reaping
returns from fiscal 2021

Group report on the MTBP 2019

1. MRO: Maintenance, repair and overhaul
2. AUVs: Autonomous underwater vehicles
3. SOPass: Ship Operation and Performance Analysis Support System

Business Model Innovation Breaking Away from Insourcing Policies(Changing Forward)

119

Part 2/The Last 25 Years (Overall History)[Management Targets (FY2021)]
Before-tax ROIC*1
10% or more
Ratio of operating
6% or moreincome to sales(100 billion yen or more)
120 billion yen or more
FCF*2
over 3 years*1 ROIC = EBIT/invested capital (i.e. shareholders’ equity + interest-bearing debt)*2 FCF before spending on growth investment

Company

Division
Naval and Special Ship Business
Ship & Offshore
Division
Structure Company
Merchant Ship Business Division
Rolling Stock,
Domestic and Asian Business
Construction
Division
Machinery & Crushing North American Business Division
Plant Company
Aerospace Systems
Aerospace Business Division
Company
Aero Engine Business Division
Energy Solutions Business Division
Energy System & Plant
Plant Engineering Business Division
Engineering Company
Marine Machinery Business Division
Motorcycle Business Division
Motorcycle & Engine 4 Wheel & PWC Business Division
Company
General Purpose Engine Business
Division
Precision Machinery & Precision Machinery Business
Robot Company
Division
Robot Business Division

Chairman Kanehana (left) and President Hashimoto (right)

120

Chapter 4 Driving Innovation to Stay Ahead in a Changing World[Key Measures]<Reinforce earning power and corporate strength ahead of fiscal
2021>• Improve earning power and free cash flow
• Strengthen project risk management/quality control systems• Clarify the position of each business via a portfolio and rebuildthem• Innovate business models by breaking away from insourcing
policies• Innovate company organization/culture and implement K-Win
activities<Achieve quantitative goals with FY2021 as a checkpoint>• Achieve goals through profit & loss/cash flow quantity models<Spell out long-term policy for years up until FY2030>• Growth vision for FY2030• Megatrends in Kawasaki’s markets/SDGs• Achieve discontinuous innovations
Although the outlook for the global economy was uncertain due to thetrade friction between the United States and China and the slowdownof the Chinese economy, Kawasaki decided to invest in growthbusinesses with an eye to fiscal 2030 while moving forward to achieve
its management goals. The company also started looking at its vision
for 2030 (Kawasaki Vision).

4) Transition to a Company with Audit &Supervisory Committee
Kawasaki changed its status from a company with a board of corporate
auditors to a company with an audit and supervisory committee
following the approval of its shareholders at their ordinary general
meeting on June 25, 2020. The transition was designed to give the Boardof Directors more input on management strategies and other matters andenable them to respond swiftly to rapid changes in the businessenvironment while further strengthening its supervisory function.
This change delegated a significant portion of the authority to makebusiness decisions to executive directors and executive officers
appointed by the Board of Directors and added greater agility to thedecision-making process. At the same time, the composition of the Boardof Directors was also changed. The percentage of outside directors wasincreased to make management more agile and efficient as well as ensuretransparency. As of October 2021, six of the 13 directors were outside
directors. In order to ensure the board maintained a diverse perspective,
two women and one non-Japanese national were appointed as members.

Structure after Transition to a Company with
an Audit & Supervisory Committee
Before transition
Inside11 directors
OutsideInside5 corporate auditors
OutsideAfter transition
Directors who are
Insidenot Audit &Supervisory
Outside13
Committee Members
directors
Directors who are
InsideAudit & Supervisory
OutsideCommittee Members

8
3
2
3

5
3
2
3

2) Introduction of a Divisional Organizational
Structure
Kawasaki focused on ensuring both autonomous business
management and company-wide corporate governance under the
MTBP 2019. As part of this policy, it introduced a divisionalorganizational structure in April 2020. This involved reorganizing 28
business units into 14 strategic divisions of the company-widebusiness portfolio and appointing division heads who would be incharge of executing the operations of their respective divisions.

3) Inauguration of Yasuhiko Hashimoto as
President
In June 2020, Kawasaki’s president, Yoshinori Kanehana, became its
chairman, and Yasuhiko Hashimoto, its senior executive vicepresident, became president. Hashimoto had worked on thedevelopment of industrial robots and taken charge in the launch of arobot business for semiconductor manufacturing equipment as well as
the establishment of Medicaroid Corporation, a company thatdevelops medical robots.
In assuming the position of president, he stated, "I have theresponsibility to chart a course for the future and take steps needed toenhance our potential as a company while continuing the reforms
former President Kanehana has implemented so far." He also
proclaimed his commitment to tackling the issues facing society withspeed while keeping an eye on the market.

121Part 2/The Last 25 Years (Overall History)

2.

Chapter 4 Driving Innovation to Stay Ahead in a Changing World

Implementing Group Vision 2030
1) Formulating Group Vision 2030

Group Vision 2030 and the three key themes that drive theGroup’s efforts to achieve it

In November 2020, Kawasaki adopted a new vision statement, theGroup Vision 2030: Trustworthy Solutions for the Future, describing
what the Group envisioned itself becoming by 2030. Group Vision
2030 embodies the corporate message, “changing forward,” which
Kawasaki announced in 2017. It underscores the Group’s commitment
to providing timely and innovative solutions in an ever-changing
world in order to build a future full of hope. It promises to go beyond
organizational and divisional boundaries in taking on new challenges
and expand the horizon of possibilities to sow the seeds for further
growth. The company picked three key themes that drive its efforts tofulfill Group Vision 2030.

Frontier

Pioneering the technology frontier with ourchallenger “DNA”
We will continue to respond to the frontier of the new era’s social
challenges, based on the unique perspective of challengers we’ve
always had since our founding, in order to create a hopeful future.

New Values Providing innovative solutions to the problems
facing the world
We are committed to providing solutions with new and high added
value to a wide range of customers and society, by concentrating thetrustworthy technologies and knowledge that we have been building inorder to provide innovative solutions and to speedily accommodatesocial change.
Cross Over Becoming a creative challenger that continues togrow by breaking barriers
To provide innovative solutions focused on social challenges, we willcontinue to be an open-minded, free-thinking, and creative team that
goes beyond the boundaries of internal and external organizations andof product/service categories, leveraging our rich diversity.
Business scale 200 billion yen

Business scale 600 billion yon

A Safe and Secure RemotelyConnected Society

RCP Testing BusinessGroup Vision
2030 initiatives
Robotic Assisted
Surgery System

For the Future

Remote Robot Business

Near-Future Mobility
Delivery Robot• Decreasing birthrate
and aging population• Remotely-connectedsociety• Global environment

Unmanned VTOL
Energy and Environmental Solutions• Disaster response

Hydrogen Technology
Demonstration

Commercial
Demonstration

Full-Scale
Commercialization

Group Vision 2030 initiatives

122

The company identified three areas it should focus on in order toachieve this vision, including a safe and secure remotely connectedsociety, near-future mobility, and energy and environmental solutions.
A safe and secure remotely connected society: Applying remotecontrol and robot technologies in various fields such as medicine,
healthcare, manufacturing, and industrial infrastructure to make"working from a remote place" possible with an eye to achieving asafe and secure society and proposing new ways of working andliving. And in addition, providing solutions that will protect lives andproperty from disasters that have been a common occurrence in recent
years.

Near-future mobility: Combining technologies for aircraft, off-road
four wheelers, robots, and more to develop new forms of mobility,
such as remotely controlled, unmanned transport helicopters and selfdriving delivery robots, to offer smart society solutions that use newmodes of transport and travel, including solutions to the last-miledelivery challenge.
Energy and environmental solutions: Leading the world in building ahydrogen supply chain for the production, transportation, storage, andutilization of hydrogen, developing CO2 separation and capture
technology, electrifying transportation systems, and more to help
achieve a sustainable, carbon-neutral future.

2) Transitioning to a Business Structure forCreating Solutions
In addition to focusing on the three fields noted above, Kawasaki
decided to operate businesses within the three areas of Land & Air
Transportation Systems, Motion Control & Motor Vehicles, andEnergy & Marine Engineering to create solutions and allow businesssegments to collaborate more effectively. The company alsotransformed via major organizational changes. In April 2021, it
merged the Ship & Offshore Structure Company and the Energy
System & Plant Engineering Company to establish the Energy
Solution & Marine Engineering Company, with the aim ofstrengthening competitiveness through synergies among the hydrogen,marine, and engineering businesses.
Parallel to this restructuring, the company spun off its Rolling Stockand Motorcycle & Engine Companies as separate companies in orderto ensure the autonomous management of each.

Transitioning to a Business Structure for Creating Solutions

Land & Air Transportation Systems
Airplane and rolling stock businesses
leveraging dependable quality andcompetitiveness Aerospace Systems Company
 Kawasaki Railcar ManufacturingCo., Ltd.
New company established in
October 2021

A safe and secure remotelyconnected society

Near-future mobility

Motion Control & Motor Vehicles
Extending management resources
to mass-production businesses andstrengthening synergies in corecomponent businesses
 Precision Machinery & Robot
Company
 Kawasaki Motors, Ltd.
New company established in
October 2010

Energy and environmental
solutions

Energy & Marine Engineering
Businesses in energy, mainly hydrogen, as well as marine engineering Energy Solution & Marine Engineering Company

Transitioning to a Business Structure for Creating Solutions3) Spinning off Rolling Stock and Motorcycle &Engine Businesses
Establishing Kawasaki Railcar Manufacturing Co., Ltd.
Kawasaki Railcar Manufacturing Co., Ltd. was established on October
1, 2021. Rail systems are an environmentally friendly means of public
transportation intertwined in people’s daily life and can contribute in a
big way to carbon neutrality. The market was expected to grow at a
relatively stable pace across the globe, as illustrated by the growing
need for rail services that accompanied economic development incountries across Asia.
Having established an organizational structure that would enable it toquickly and flexibly work with other industry players in this growing
market, Kawasaki Railcar Manufacturing adopted the following
corporate philosophy: “We pledge to ensure day-to-day safety and tobring about an exciting future by constantly tackling challenges incraftsmanship and technological innovation.”

Dhaka Mass Transit Company Limited’s Dhaka MRT Line-6 in
Bangladesh

123Part 2/The Last 25 Years (Overall History)

Chapter 4 Driving Innovation to Stay Ahead in a Changing World

Establishing Kawasaki Motors, Ltd.

Hybrid motorcycle under development by Kawasaki Motors, Ltd.

Kawasaki Motors, Ltd. was established on October 1, 2021. The
power sports business, selling motorcycles and off-road four wheelers,and general-purpose engine business were experiencing a once-in-acentury transformation with CASE.* They were also making headway
on compliance with environmental regulations and partnerships inelectrification and advanced safety technologies. The power sportsbusiness was a Kawasaki Group core business and its only B2C
business, and required flexible and bold decision-making.
Working against this backdrop, Kawasaki Motors focused on keeping
its operations flexible, creating stores based on the concept of“enjoying with five senses,” and offering products and services thatwere tailored to customer needs in order to build a stronger brand andachieve sustainable growth.
* CASE stands for Connected, Autonomous/Automated, Shared, andElectric.

4) Introduction of a New Personnel System

Off-road four wheeler

In April 2021, Kawasaki overhauled its personnel system. Aiming toachieve Group Vision 2030, the company introduced a brand new
personnel system that would enable the people that made up its
diverse workforce to maximize their abilities and produce high addedvalue results. It adopted a new approach and framework ofcompensation and evaluation that placed greater emphasis on abilities,
roles, and achievements to enhance its ability to respond quickly tochanges in society.
Built around the concept of “challenge and commitment” (setting
challenging goals in addition to minimum goals and accomplishingthem with speed and determination), the new personnel system wasdesigned to foster a culture that encouraged employees to try new
things.

Job-based System Boosts Employees’ Desire to Grow
For senior officials, the company adopted a job-based system, inwhich salary and compensation were determined on the basis of theirroles, such as the duties they should perform and results they should
achieve. The breadth of jobs associated with all positions in thecompany was measured by clarifying the required knowledge,
experience, responsibility for achieving expected results, etc. The
company applied job ranks that were based on this to raise awarenessabout the new personnel system.
The company also designated certain individuals as corporate
executives, from among those who perform important corporate duties
and those who possess outstanding behavioral characteristics, to beevaluated, trained, and assigned with a bigger corporate picture in
mind.

124

This would facilitate active exchange among employees and bridge
the chasm between internal companies while unleashing potential
synergies between businesses as the company aimed to continuously
enhance its enterprise value.

Assigning Employees with the Right Stuff andDeveloping Next Generation Leaders
For general employees, seniority, including age, and employment
history was off the board. The new system placed greater weight on
individual abilities. Kawasaki could now quickly find and promote
outstanding young employees in a system that motivated young
employees to further their professional development while still
enabling veteran employees to thrive in the workplace regardless of
their age.
The new system also integrated categories E (clerical and technicalpositions) as well as R (planning management and development
positions) and created category V (planning and professional
positions) while merging full-time positions into category G andpartner employees into category A (clerical positions). This
realignment of positions and professional qualifications into larger
categories would provide employees with opportunities to work awider range of jobs and help them gain extensive experience while
recognizing employees who performed more difficult tasks.

5) Launching Presidential Projects
Moving toward achieving the objectives of Group Vision 2030,
Kawasaki went beyond the boundaries of its individual internal
companies to leverage the Group’s strengths as a whole. This
included implementing a series of company-wide reforms andestablishing the Presidential Project Management Division in January
2021. It set up various organizations dedicated to PCR testing
services, near-future mobility, and more in order to quickly create
new businesses that transcended the frameworks of its internal
companies.
The Presidential Project Management Division consisted of the
Project Promotion Department, Administration Department, PCR
Supervisory Department, Advanced Smart Mobility Supervisory
Department, and eWork Business Group (newly established in
February of the same year), where many employees appointed fromacross all internal companies could pursue synergies that crossed theboundaries of the internal companies.

Initiatives of the PCR Supervisory Department
In early 2020, the novel coronavirus (COVID-19) began to spreadaround the world. In April of the same year, the Japanese government
declared a national emergency.
Kawasaki and its subsidiaries, Medicaroid and Sysmex Corporation,
jointly developed an automated robotic PCR testing system that fully
automated processes involving the risk of infection. Following thelaunch of the first testing service at Fujita Health University in March
2021, Kawasaki started offering a testing service for local
governments in May and for international passengers departing from
Kansai International Airport in September.

Automated robotic PCR testing system

125Part 2/The Last 25 Years (Overall History)

Chapter 4 Driving Innovation to Stay Ahead in a Changing World

Initiatives of the Advanced Smart Mobility Supervisory
Department

K-RACER unmanned VTOL aircraft

In August 2021, Kawasaki was commissioned by Ina City, Nagano
Prefecture to build a platform for transporting cargo to locations deepin the mountains using the K-RACER unmanned VTOL aircraft. The
company also developed an automated delivery robot designed toachieve smooth, stable operations even on rough and bumpy roads
and conducted testing at a hospital and in urban areas. In November
2021, the company successfully completed proof-of-concept testingfor unmanned cargo transport using its K-RACER and delivery robot
with the aim of helping to solve societal issues such as labor shortages
in the logistics industry.

Initiatives of the e-Work Business GroupIn December 2021, Kawasaki and the Sony Group Corporation
established Remote Robotics Inc., a joint venture for remote robot
platform businesses. The joint venture started demonstration tests withan aim to build remote control platforms for robots utilizing theadvantage of both companies.
Automated delivery robot

Suiso Frontier liquefied hydrogen carrier

Artist’s rendering of the pilot scale test facility at the Maizuru
Power Plant (Photo: Kansai Electric Power Company Inc.)

126

6) Initiatives for a Decarbonized Society
In 2010, the Kawasaki Group publicly announced its plan to build a
CO2-free hydrogen supply chain for the international transport of lowcost hydrogen produced overseas in order to meet growing
expectations for hydrogen-related businesses that hold the key toachieving a decarbonized society. In 2018, with the support of theJapanese and Australian governments, the Group started working withpartner companies to demonstrate its technology for building aninternational supply chain designed to liquefy hydrogen produced
from Australian brown coal and transport it to Japan. In 2022
Kawasaki became the first in the world to successfully transportliquefied hydrogen internationally. In 2021, a commercialization
demonstration project aimed at making the transport of hydrogen
more economically feasible by increasing the size of equipment andfacilities was adopted as a Green Innovation Fund project. Efforts areunderway to achieve an annual supply of 225,000 tons when the
supply chain becomes available for commercial use in 2030.
Kawasaki has also announced that it would aim for achieving carbon
neutrality on its own at its domestic plants by 2030 through initiatives
centered on hydrogen power generation.
In addition, the company and the Research Institute of Innovative
Technology for the Earth (RITE) will start a joint pilot demonstration
at the Kansai Electric Power Company Inc.’s Maizuru Power Plant in
2023 under the New Energy and Industrial Technology Development
Organization (NEDO) project for applied research on coal combustion
waste gas and advanced carbon dioxide solid absorption materials.
The energy-saving carbon dioxide separation and capture system usedin the demonstration is expected to be a next-generation CO2
separation and capture technology because it has the potential tosignificantly reduce the energy required for CO2 separation andcapture compared to conventional technologies.

7) Trustworthy Solutions for the Future
Kawasaki aims to create a new world via each of the three key focusesof its Group Vision 2030: a safe and secure remotely connectedsociety, near-future mobility, and energy and environmental solutions.
The hydrogen business will not only produce products that arecompatible with hydrogen fuel, but also create a clean hydrogenpowered society. Near-future mobility will focus on creating a society
with new transportation and logistics systems tailored to changes in
the movement of people and goods. This also means shifting fromconventional manufacturing to selling services, i.e., shifting to thebusiness model of providing solutions that meet the changing needs ofsociety. In order to make that possible, Kawasaki will bolster
partnerships with government agencies and other companies as it
works to build a network of like-minded partners.
Today, the world is facing multiple problems, including climatechange, resources, poverty and hunger, aging populations, and ashrinking workforce. On top of that, the spread of COVID-19 ishaving a tremendous impact on people's health and economies aroundthe world.
Working in a global environment, the Kawasaki Group will continue
to explore market wants and how it can satisfy those wants as it strives
to quickly deliver needed solutions. The Group's social role andresponsibility is to do its best to achieve a sustainable society byproviding solutions that meet the needs of all. All of Kawasaki’s
businesses will continue to make a change for the better and do
everything necessary to create the kind of new customer value theworld needs as it moves forward to provide “Trustworthy Solutions
for the Future.”

Ceremony to commemorate the completion of the JapanAustralia supply chain for large-scale marine transportation ofbrown coal-derived hydrogen127