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Toyota Industries in Focus

Research and Development
Based on its founding spirit of “Be ahead of the times throughendless creativity, inquisitiveness and pursuit of improvement,”
Toyota Industries undertakes strategic R&D activities aimed atensuring sustainable future growth rather than just improving shortterm business results.
Toyota Industries’ R&D activities can be broadly divided into two
categories: Product development and improvement carried out
independently by each division, and R&D, conducted mainly by theCorporate Technical Center, that is separate from the work ofbusiness divisions and is carried out from the perspective of acompany-wide management strategy.
Toyota Industries has a diverse range of businesses, and eachof the Company’s divisions has its own distinct technologicalstrengths, core technologies and market characteristics. To
efficiently develop new products attuned to customer needs, it isessential that product improvement, technology development andapplied research activities be undertaken mainly by the technicaldepartments of each division. Accordingly, each division has its own
staff of engineers, experiment facilities and research laboratories,and engages in vigorous technology development activities inaccordance with product development plans.
The Corporate Technical Center plays a leading role in basic
R&D in materials fields — basic to all divisions — as well as
conducts R&D in such new fields as leading-edge electronics,
including power electronics devices, radio tuners, organic lightemitting diodes (OLEDs) and wireless LAN modules. The Centerengages in R&D together with each division or independently. It alsocollaborates with Toyota Central Research & Development
Laboratories, Inc., an R&D facility of the Toyota Group, and otheroutside R&D institutions, including universities.

The following are some of the new products and technologies developed by Toyota Industries in fiscal 2004.

Automobile Segment
Two-Way Compressor
We developed jointly with DENSO Corporation (“DENSO”) and started production of a
two-way compressor with a built-in motor for use in air conditioners for hybrid cars. This
compressor is driven alternately by the engine during driving and by a built-in motor
during engine stop. This achieves a balance between fuel efficiency and comfort when
the car air-conditioner is turned on. The compressor is installed in Toyota MotorCorporation’s (“TMC”) Estima Hybrid, which was re-introduced to the market in July
2003 after a minor change, and Alphard Hybrid, which was launched in the same month.

Electrically Driven Air-Conditioning Compressors for Hybrid Cars
We also developed jointly with DENSO and started production of an electrically driven
car air-conditioning compressor for hybrid cars. This compressor is driven by a built-inmotor, unlike conventional compressors that are belt-driven by the engine. As a result,the air conditioner can remain on even when the engine is turned off, ensuring bothinterior comfort and fuel economy for idling stop vehicles such as hybrid cars.
The optimized shape of the scroll and other innovations allow the electrically driven
compressor to improve the compression efficiency of the refrigerant and minimize energy
loss for optimum performance. What’s more, this compressor is 40% smaller and lighter
than previous electrically driven compressors. It is installed in the new Prius, a hybrid car
introduced by TMC in September 2003.

Rotary Valve-Type Variable Displacement Compressor (5SER09)
We developed jointly with DENSO and began production of a rotary valve-type variabledisplacement compressor (swash plate type). The use of a rotary valve intake, instead of
the traditional lead intake valve, gives the compressor excellent cooling capabilities andquiet running. The compressor is installed in TMC’s Sienta, which was introduced in
September 2003.

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ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

conducts technological exchanges with BT Industries and isconsidering the feasibility of jointly developing key parts for suchmaterials handling equipment as forklift trucks. Aichi Corporation
also has its own independent R&D facilities for the development ofspecial-purpose vehicles.
At our subsidiary TIBC Corporation, our joint-venture partner
Ibiden Co., Ltd. contributes to product development, while Toyota
Industries provides expertise in manufacturing technology fields.
ST Liquid Crystal Display Corp., an equity-method affiliate
established as a 50-50 joint venture with Sony Corporation (“Sony”),
receives technologies and personnel in product development fromSony, and know-how and personnel in production management
and technology fields from Toyota Industries.
In fiscal 2004, R&D expenses amounted to ¥29.6 billion, adecrease of ¥0.1 billion (0.5%) from the previous fiscal year, andaccounted for 2.5% of consolidated net sales, a decrease of 0.3
percentage point. By segment, R&D expenses were ¥15.8 billion inthe Automobile Segment, ¥10.6 billion in the Materials Handling
Equipment Segment, ¥1.2 billion in the Textile Machinery Segmentand ¥2.0 billion in the Others Segment.

Toyota Industries in Focus

The Business Planning Department, part of the Corporate
Center, is responsible for the promotion of new businessdevelopment and technology management. To establish a strongand efficient corporate R&D structure, the Business Planning
Department engages in lateral transfers of technologies among thedifferent divisions and examines new technology development
themes. Concurrently, it deploys the accumulated technologicalknow-how and external networks (both human and information) of
each division to systematically and continually explore the potential
for new products and services that may become future pillars of ourbusiness.
“E-Lab,” our IT research laboratory that serves as a base station
for the information system department, undertakes various R&Dactivities. It carries out research on digital simulation technologies
with the aim of shortening product development times as well as
reducing lead-times from development to manufacture andshipment. It is also developing an optimal network system for joint
development of parts with suppliers, and for parts procurement.
BT Industries, our largest subsidiary, operates its own
independent R&D facilities, which focus primarily on warehouseequipment research. TMHC, a Toyota Industries in-house company,

Materials Handling Equipment Segment
CBT Series of Compact Tow Tractors
In November 2003, we started domestic sales of the CBT Series of compact electric tow
tractors for transporting loads inside factories and warehouses. Consisting of three models, theCBT tow tractors are electrically powered in consideration of work environments insidewarehouses and similar facilities. The two CBT models with 4-ton towing capacity are available
in sit-down and stand-up types, while the model with a 6-ton towing capacity is a sit-down
type. Use of a high-output motor provides the appropriate power and a large-capacity battery
enables extended operation times. These tow tractors also feature designs that emphasize
comfort and ease of operability for the driver.

Electronics BusinessWhite OLED
Toyota Industries has developed a world-class white OLED that achieves an excellent balance
between outstanding color reproduction, brightness and life span. Using this technology, we
have completed prototypes of a white OLED backlight for LCD panels and an OLED display(white OLED + color filter). Our OLED creates white using a three-color light emission
technique (red, green and blue), enabling more faithful color reproduction compared withconventional white OLEDs (which emit orange and bluish green lights) or white light-emitting
diodes. We are currently working hard to improve the technology prior to commercialization,and first aim to supply assembly makers for applications in portable devices such as mobilephones and digital cameras.

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

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