2nd period of Mid-Term Plan -2030 Vision – Q&A session
Aug 27, 2024
JTEKT CORPORATION
Q1.

Your target profit in the 2nd period of mid-term plan is same level as
the target you set for 1st period. What was the reason why you missed
the target in the 1st period?

Do you still have difficulties in yourEuropean operations and low profitability of automotive businessdivisions?
A1.

In the 1st period of the mid-term plan, we took actions to improve ourbreak-even point and successfully recovered from red-ink result, however
we missed the target, mainly because our actions to reform European
operations delayed and losses in North American operations with low
productivities especially after Covid-19 pandemic.
Expanding “solution business model” is key to improve our profitability. We
establish the foundation of the business model in the 2nd period of midterm plan so that we can enjoy higher profitability in the 3rd period.

Q2.

From the manufacturing point of view, what is the actions required
to improve your profitability?

A2.

We believe our products are competitive, however we could not provide theproper product in proper regions in proper timing. That was our problem.
Especially because our manufacturing preparation was not efficient enough,our top priority is to complete production lines with making front-loading
effort.

Q3.

Please tell us the detail of pay-backs to the shareholders and how to
improve your PBR.

A3.

Focusing more on the profitability by shifting to “solution provider” is ourimportant message. Also, we are expecting cost saving effect by promoting
problem-solving activities inside of JTEKT Group throughout our effort toestablish solution business model.
New dividend policy is to pay stable dividends based on DOE, rather thanpayout ratio which has been based on the concept of returning a portion ofprofits. We are going to promote activities for further profitability
improvement with new dividend policy in mind within the company.
In addition to dividend policy change, we plan to conduct share buybacks.

Q4.

Where does JTEKT's shifting to solution business model position
strategically in Toyota Group??

A4.

We cannot explain in detail. To make good cars, it is important to makeproposals for solutions together with all the other Toyota Group Companies.
We are developing our main products such as steering systems anddriveline products that we have strong advantage of JTEKTʼs technologies.

Q5.

You mentioned about importance of the management focusing
human resources. On the other hand, for restructuring the business,lay-off of workers might be required.

How do you reform yourbusiness and reorganize your business entities?
A5.

We must make decision of reorganization. We will take care of our teammembers when we proceed the restructuring. We have good resources inthe various regions, so we will consider utilizing such good human resources
for the activities for shifting to the solution provider.

Q6.

Please tell us the details and expecting profit impact of the businessreform mentioned in the “cash allocation” of the presentationmaterial.

A6.

We cannot tell the details of each business reform activities, now. Our main
actions will be for the operation reforms in Norh America and Europe. By
using cash for these, we will change them to stable profit-making
operations. Our reform plan for the European operations will be disclosed
in proper timing soon after we set directions.

Q7.

Why your sales plans show weak growth in Automotive and Bearing
segment? Please tell us your assumptions for car productions.

A7.

We cannot tell you details of the assumptions. Car productions fluctuatewith market conditions.
Our profitability in automotive division will be improved by introducing next
generation product such as next generation EPS etc. Contributions of newproducts such as SBW etc. on our profit is very limited in the 2nd period of
mid-term plan, but we are expecting profit in 3rd period.
Majority of sales in bearing division are for automotive business with bigvolume and thin margins. We will improve profitability by increasing sales
for industries in target market area and by utilizing inhouse resources more
for high margin bearings with using outside second source. Restructuringbusiness in North America and Europe also will contribute on our profit
improvement.

Q8.

What will be challenges to establish technology platform?

A8.

In the 1st period of mid term plan, we successfully build one team mind by
breaking psychological barrier among the team members.
Speed is required to adjust to market changes. However, our technologies
were not shared among the business divisions effectively enough, andthose were not used for quick technical solutions.
Not only store technical information in the database, but we will establish
the technology platform as internal system that provide technical solutions
when we input information of issues to be solved.

Q9.

How is the situation of productivity issues in North America? Pleasetell us your action plan to solve this issue.

A9.

We are struggling with labor issues in automotive industry. After Covid-19
pandemic, their working style changes in North America.

Not in USA, wehave same trend in Mexico. Productivities are recovering gradually by
improving working conditions and strong support from Japan.

We havejust organized the cross-functional task force team and started the activities
to minimize loss cost in N.A operations.

Q10.

Please tell us the timeline to expand the business model of
AUTOMATIONDIRECT.com (ADC)︖

A10.

We cannot answer the timing clearly at this stage.
ADC business model is symbolic example how to realize solution provider
business within JTEKT Group.
ADC is successful in the US market which has big DIY demand. We areinvestigating the market and studying how we can apply advantage of ADC
business model in each region.

Q11.

Which processes are you promote to be digitized? Please tell us youractivities to create extra capacity.

A11.

Within the engineering chain, we are digitizing design and development
processes. I think digitalization of manufacturing preparation have been
weak still now. If the digitalization of this process is advanced, everything
up to the production site can be connected in a single flow. I think thebalance between input and output will become imbalanced if digitalizationis undertaken only in areas where it is possible.
Now, we are promoting an initiative called “Digital Festival,” in which all
employees participate, with the aim of improving digital literacy and using
digital technology to make work easier for someone else. Through thisactivity, we will create extra capacity.

Q12.

Will you launch SbW and Pairdriver on the market during the 2nd
period of mid-term plan? Please tell me any quantitative target of
those products if you have.

A12.

I canʼt give specifics because it contains confidential customer information.
Both products are value-added, and we have very high expectations forthem. We plan to launch them in the market in the 2nd half of the 2nd
period of mid-term plan.