AICHI STEEL REPORT2019

AICHI STEEL REPORT 2019

Editorial Policy

1. We will strive to make a positive contribution to society
with safe, appealing, and useful technology and products.
2. We will pull together culture based on trust, reliability andthe pursuit of excellence.
3. We will be a good corporate citizen, ever mindful of ourenvironmental responsibilities.

Common values and codes of conduct to be followed by all
employees of the Aichi Steel Group.
We established the Aichi Way as common values and codes of conduct forevery Aichi Steel Group employee to follow in order to help us continue
growing as a global company and improve our corporate value.
As a universal spiritual guide for our employees to use when making
decisions and implementing actions at work, the Aichi Way is the foundation forevery initiative we pursue, from raising awareness of compliance andcontributing to local communities to providing our many competitive products.
Now and forever, we aim to remain a trusted company by following the spiritof the Aichi Way and continuing to contribute to the sustainable developmentof society and the global environment.
Working together to be an even better company!
Noble ambitions

Value the spirit of our founders, who ambitiously created fromscratch the steel to manufacture Japan's first domestic motor
vehicle.

Sincerity

Face all things with sincerity, taking ownership, and approach
your work with an attitude of "I will."

Genba-ism

Go to the workplace and see for yourself (Genchi Genbutsu),
then resolve problems by reducing the gap between thefundamental principle (Genri Gensoku) and reality.

Founding spirit

Contribute to society by producing products that are chosen bycustomers, and create a company where teamwork fills ourteam members with happiness.

Readers

Reference Guidelines

This Report is mainly intended for our customers, suppliers, other business
partners, shareholders and investors, affiliated companies and our
employees.

Report Period and Scope

GRI Standards
ISO 26000 (Corporate Social Responsibility)

Information Available on Our Website

The Report covers activities conducted by the Aichi Steel Group during
fiscal 2018 (April 2018 to March 2019). However, some activities
conducted before or after fiscal 2018 are also explained where necessary.

For topics with the “Web” mark, please refer to our website forfurther details including figures.

https://www.aichi-steel.co.jp/ENGLISH/csr/csr_report/index.html

Important note about forecasts
The financial results forecasts in this report are based on judgments and assumptions from currently available information. Actual business results may differ
greatly from targets, in light of their inherent uncertainty and the potential of revision due to future business operation or changes to information inside or outside
the company.

CONTENTS…………………………………………………………………………………………………………………………

1………………………………………………………………………………………………

3………………………………………………………………………………………………………………………………

5……………………………………………………………………………………………

7…………………………………

11………………………………

13………………………………………………

15……………………………………………………………………………………

19………………

21

………

25

…

27

Priority Issue 4 Strengthen Relationships with Local Communities, and Actively Contribute to Society

……………

29

Priority Issue 5 Strengthen Initiatives toward Manufacturing in Harmony with the Global Environment

……………

31

…………………

33

Third-party View………………………………………………………………………………………………………………………………………

37

Corporate Profile………………………………………………………………………………………………………………………………………

38

Our Vision/Editorial Policy

Aichi Steel Group’s Engagement with Society
Value Creation Model

Message of Commitment from the President

Special Feature 01 Contributing to Autonomous Driving Evolution Through Materials
Special Feature 02 Benefits of New Administration Building, a Symbol of Transformation
Priority issues (Materiality) for the Aichi Steel Group

Priority Issue 1 Increase Compliance Awareness Globally, and Strengthen Corporate Sustainability

Priority Issue 2 Encourage the Creation of Workplaces That Are Safe and Comfortable for All Employees

Happiness for everyone

Priority Issue 3 Provide Highly Competitive Products That Are Safe and Secure and Offer New Value Globally

Good thinking
Good products
Heading to a bright future

AICHI STEEL REPORT

Aichi Steel Report (this report)

Aichi Steel’s Medium-term Management Plan and In-house Company System

Customers andteam members

01

Website: Environmental
and CSR information

Importance to Aichi Steel Group and stakeholders

Aichi Way

Aichi Way

Our reporting via print and the web takes advantages of thecharacteristics of each medium. The print version narrows down thecontent to those items of significant importance and those of
greatest interest to the public, presented in an easy-to-read andeasy-to-understand format. The web version offers a more complete
overview of our CSR initiatives.

Selected topics

We will strive to make positive contributions to society by providing appealing
products from global perspectives and based on our vibrant and trustworthy
corporate qualities.

The Aichi Steel Report 2019 was prepared to assist
understanding among our many stakeholders of the approaches
taken by Aichi Steel and the Aichi Steel Group in fiscal 2018,
ended March 31, 2019. Besides describing these approacheswith specific examples, it sets forth as much as possible thecauses and future initiatives concerning items for which targets
have not yet been met.
This fiscal year, with the goal of transformation at our core, wehave written our report with a focus on clear communication of
growth strategies, and the value we will contribute to society
during this major once-in-a-century transition. Use of color,
volume of text, text size and other factors were taken into
consideration to create a more easily readable report.

Complete overview

Our Vision

Reporting Media

Always anticipate the future, use our knowledge and curiosity
to maximize creativity as good products come from good
thinking and combine our strengths to head into a new world.

Priority Issue 6 Establish a Solid Financial Foundation to Support Stable and Sustainable Growth

AICHI STEEL REPORT

02

AICHI STEEL REPORT 2019

Aichi Steel Group’s Engagement with Society

Car

The Aichi Steel Group is committed to pursuing
the infinite possibilities of materials and creating new value.

We are contributing
to lower fuel consumption
and higher performance.

Hybrid vehicles (HV/PHV)

Fuel cell vehicles (FCV)

We are supporting theelectrification of environmentallyfriendly vehicles.

Hydrogen stations[Forged Products]
Crankshaft

We contribute to society by providing products that match the needs of our customers,

Cold platethus ensuring a more comfortable life for people.

Differential ring gear
CVT shaftHistorical buildings
Aichi Steel's technologies are
utilized not only in modernbuildings, but in preserving
historical heritage.

Farm, vegetable garden

MedicalMRIWorld-first attachment that uses
magnets to affix false teeth,
developed by Aichi Steel. These areused worldwide.

Stainless steel is employedinside MRI machines by taking
advantage of its non-magnetic
properties.

Tunnels
Stainless steel is also used
for interior structures oftunnels for which durability
and high-temperature
properties are critical.

Counter driven gear

[ElectroMagnetic
Products]
MAGFINE®
magnets and seat motor

Dentistry

To assist emergence of thehydrogen society, we arecontributing to the safety andreliability of fuel-cell vehicles andhydrogen station equipment.

Lead frame

Attachment in the tunnel ofcapital expressway

Hydrogen station

TunnelRailway
Seismic strengthening works ofa five-story pagoda

Dental magnetic
attachment

Household utensils
Building

Water gate
Station

Safety
安全第一
firstAgriculture, greenings

Hydrogen station

Clad steel kitchen knife“TetsuRiki” Iron Fertilizer and “TetsuRiki Aqua” activate
plant photosynthesis by using ferrous ion. Ensuring stablesupply of ferrous ion essential for plant growth.

Hydrogen station

AirportseriesCar

Hospital
Home gardening

Storage tankDentistry

BridgeFarming

Chemical tanker

Grass trimmers, drones
MAGFINE® is enabling manufacture of lighter equipment
for agriculture and forestry.

Crane

Power shovel

Energies

Dump truck

PCs, smart watches
Buildings, stores
Stainless steel is used for diverse applications for
its design and corrosion resistance, contributing toextended life of building appearances and concrete
structures.

We are supporting the evolutionof information terminals thatare increasingly becoming morecompact with higher performance.

Construction machineries

Stations, airports
Our stainless steel is also used in stations and airports
used by thousands of people every day.

Stainless steel is also used forconstruction machinery that
requires strength and durability.

Electromagnetic
compass for
smart watches

03

AICHI STEEL REPORT

Entrance eave, curtain wall

High-sensitive
MI sensor

RoadsSlag, a steel making
byproduct, is used as arecycled material in roadsubbase course material,
reducing environmental
impact.

Wide application for its rust-resistant properties,
including dams, water gates and plants.

Our products are also usedin energy applications that
require strength and durability
such as storage tanks, dams,
and wind power facilities.

Stainless steel concrete bar
SUSCOn®

Propeller shaft for ship

Water gate

BridgeDam

Boss

Seismic strengthening works at a
sewage treatment pumping station

Ships, water gates, bridges, plants

Wind power

Station skywalk

Handrail

Front idler

Propeller shaft

Gas tank(photo credit: Toho Gas Co., Ltd.)AICHI STEEL REPORT

04

AICHI STEEL REPORT 2019

Value Creation Model

About the Sustainable Development Goals
The Sustainable Development Goals (SDGs) were adopted ata United Nations summit in September 2015 as a number ofgoals for creating a sustainable world. The global community
is working together to achieve the goals. Aichi Steel is also
committed to the achievement of the SDGs through its
businesses.

Even as our environment undergoes drastic changes, we will address social challenges through ourbusiness activities and realize our vision, supported by the spirit of our founder and his belief that
“Great cars are made with great steel.”
Aichi Steel employees, who all carry the spirit of the Aichi Way, will continue to provide value toleveraging the strengths of materials developed since foundation in each of our business domains.

Roots/DNA of Aichi Steel■ Established to manufacture thespecialty steels required forautomobiles■ Toyota Group’s only materials
manufacturer, supporting thebasic performance ofautomobiles

MissionAt foundation:“Great cars are made withgreat steel”
Now:“A great society comes fromgreat materials”

Strengths
Systems and people■ Business organization comprising
Companies and a Corporate Office■ HR diversity and HR development
systems to support sustainable growth■ Material development capabilities
handed down since foundation■ Magnet and sensor technologies derived
from steel manufacturing■ High quality, stable manufacturing
capabilities developed by the Toyota Group

Networks and cooperation■ Global production and sales sites■ Robust supply chains■ Future-focused business and technicalcollaborations

Financial foundation■ Healthy and robust financial foundation■ Varied financing channels■ Cash flows with highly efficient capital

Changes in society and the environment■ Global warming and air pollution■ Urbanization and aging
populations■ Information technologies andintelligent technologies■ Changes in automobiles■ Automation and driverlesstechnologies

05

AICHI STEEL REPORT

Value for Society

Existing
businesses
HaganeCompany

Kitaeru
Company

Smart
Company

Forged productsElectro-magnetic
products

Development and manufacturing
capabilities

Next:“Co-creating a new smart
society through materials”

Businesses

Specialty Steel

Expandedfurther

Laying the foundation
for new businesses

Identity

Batteries

Stainless Steel / Titanium

value through creativity andleveraging of existing strengths

Electronic
components

Motors andmagnets

Smart
Transportation
Systems

Advancedfunctional
materials

Strand of hair Amorphous wire
(0.15 mm(0.02 mmdiameter)diameter)EVs

New value

Business foundation that
supports steady growth

HVs, EVs, FCVs

EVs

Autonomous
driving

Sensing andmedicalSupporting safe andconvenient mobility■ Autonomous driving support■ High strength, highperformance materials to
support running, turning andstopping■ Support for vehicle
electrification(EVs/FCVs)

Maintaining human andglobal health

Environment
and energy

Global environment,
agriculture andbiotechnology■ Medical equipment■ CO2 reductions through support
for vehicle electrification(EVs/FCVs)■ CO2 reductions through highstrength, high performancematerials for lightweighting
vehicles■ Soil improvement and greening

focused on social changes and needs● ESG management (Environmental, Socialand Governance)● Risk management and compliance● Prioritization (safety, quality, production, costs)● Employee contentedness and growth

Creating an exciting future■ Superior design andmaintenance-free stainless steel■ Aerospace, oceanic andunderground development:
Developing materials that makeour dreams
come true

Co-creating a new smart society through materials

society, and work to achieve the goal of co-creating a new smart society through materials, by

AICHI STEEL REPORT06

AICHI STEEL REPORT 2019

Message of Commitment from the President

Swinging thePendulum Higher
and AccomplishingTransformation as a
Group
President

Part 1

Major Transition in the Business Environment

Taking a hard look at materials

achieved these results because we were able to supply

profitability by leveraging the capabilities of Aichi Steelhelping to solve social issues. In addition to improving

products that met our customers’ needs in a timelyGroup companies. Our Group companies are active infinancial value, we must also improve social value

The business environment is continuing to undergo rapidmanner. On the other hand, operating profit fell short ofvarious areas of demand, where we are aiming tobefore we can achieve sustainable corporate growthchange as the automotive industry, where our major

the plan because our purchase costs rose sharply andmaximize profits on a consolidated basis.

and improve corporate value.

customers are, faces a major once-in-a-century transition.

exceeded any benefit we received from reduced cost of

Our existing businesses are currently focused on fourElectrification of vehicles in particular has an enormous

sales and increased prices. This means that our earning

different areas. They are (1) enhancing our stainlessperspectives

impact on our company and brings with it a serious sense

power is still insufficient.

For

this

reason,weinmanagement

our

are

incorporating
approach.

ESG
We

steel business, (2) driving product development byfocused on governance in particular this year and madeof urgency. However, new businesses never develop

The reason we chose “transformation” as our goal forleveraging our integrated forging and steel making, (3)changes to our Board of Directors. In addition towithout a healthy sense of urgency. We are also currently

fiscal 2019 is because without changing awareness andfilling orders for electronic components, and (4)reducing the number of directors to six and increasing

tackling the new CASE* era. At the core of this challengesystems, and without reform, we will not be able toenhancing our magnet business. By implementing these

the ratio of independent outside directors, we are also

is the DNA of Aichi Steel. Our founder had a belief thatsurvive this major transition. Established in 2018 as a set

efforts while sowing seeds for new businesses, we areproviding opportunities for them to discuss special“Great cars are made with great steel,” but going forward,of universal values for all our employees to share, theachieving steady growth.

topics, such as current issues and medium- to long-term

we will contribute to society through materials with the

Aichi Way acts as a support for our company as it

conviction that “A great society comes from great

works together to meet this turbulent period head-on.

materials.”* Acronym for Connected, Autonomous, Shared & Services, andElectric.

Targeting steady growth

Contributing to the resolution of social
issues, and ESG initiatives

business strategies. We also established a voluntary
Director

Remuneration

andPersonnel

Planning

Committee, which has an independent outside director
as chairman and consists of the majority of other Board

Over recent years, a number of social issues are

members. The Committee discusses nomination of

To fulfill our mission of delivering high-value products tomaterializing, such as environmental issues and aging

director and auditor candidates, selection and removal

every customer, it is important that our productionsocieties. With the adoption of the SDGs by the UN andof senior management, and remuneration for directors

systems are able to flexibly, quickly and accurately

increasing interest in ESG investment, it is expected thatand senior management, and then reports to the Board.

respond to fluctuations in demand. We are currently

efforts be made to achieve sustainable growth for

Through this process, we are working to increaseforbuilding those systems while minimizing costs. Anothersociety as a whole and for companies individually. I

activity on the Board of Directors, and improve its

consolidated net sales by a wide margin. I believe wething we are working on is improving consolidated

believe that we should achieve corporate growth bytransparency and objectivity.

Transformation (FY2019 goal) and the
Aichi Way
During07

Takahiro Fujioka

fiscalAICHI STEEL REPORT

2018,

we

surpassed

our

plan

AICHI STEEL REPORT08

AICHI STEEL REPORT 2019

Message of Commitment from the President

Part 2

Efforts to Contribute to a Smart Society

Swinging the pendulum higher

Part 3

vehicle position with a high degree of precision. The

Aichi Steel’s Vision as it Approaches its 80th
Anniversary

Making the most out of every situation

system provides support in places where GPS- andautonomous

drivingisdifficult.

encouragecommunication

and

the

latestenergy-efficient design, the new building has not only

Going forward, we will continue contributing to a smart

camera-based

In

This is the third year since we adopted our in-houseincreased employee satisfaction but has resulted insociety as typified by CASE and MaaS* technologies, by

December 2018, we joined partner enterprises tocompany system. I feel that as a result, compared to

Aichi Steel receiving the New Office Promotion Awardleveraging our development capabilities and providing

conduct joint trials of a bus rapid transit (BRT) system inwhen we operated with a divisional business structure,and the Chief of Chubu Bureau of Economy, Trade andeven higher value-added materials. I always talk about

Rikuzentakata City, one of the areas affected by the

we now have a stronger sense of ownership andIndustry Ministry Award, at the 31st Nikkei New Office“swinging the pendulum higher,” which means looking

Great East Japan Earthquake. To quickly bring this tosolidarity in taking responsibility for all manner of things.

Awards sponsored by the New Office Promotion

at things from a completely new perspective andmarket, we are preparing to conduct more trials under

The “Step Up Plan” activities we launched after the

breaking through the status quo with bold ideas anda range of conditions and develop these technologies

accident of January 8, 2016* have now come to an end.

As an intangible initiative, I took the lead inactions. We will broaden our perspectives to include

into a system package that we can offer.

Association and Nikkei Inc.

In light of the enormous trouble this caused to society

establishing and following a set of action guidelines for

We are also working to increase our competitivenessand customers, we have spent the three years of thismanagers that will serve as a model for the workers. We

in automotive-related technologies. We are doing thisplan thoroughly identifying the causes of the accident,

are also promoting the use of teleworking systems andfocused on the smart society of the future.

by expanding our stainless steel business, developed

making improvements, and strengthening our corporate

use of parental leave by men as ways to help women* Acronym for Mobility as a Service. A new concept for treating allmodes of transportation, except personally-owned vehicles, as asingle mobility service.

for hydrogen stations and fuel cell vehicles (FCVs), andstructures. Of course, we will not stop there. In theplay even more active roles.

by adopting the latest forging machines to manufacture

future, we will ensure the lessons learned over these

In November 2019, we will open our new recreation

drivetrain components, where demand is high despite

three years are fully entrenched within the company

hall. This new facility will be a direct result of the hardelectrification being well advanced, to generate theand we will face new issues as they arise. We will

work of our employees and when they use it, I believe

high yields* and high productivity that are our strengths.

continue to show society our commitment to making

they will feel even happier to be working at Aichi Steel.

areas such as infrastructure and medicine, and willcontinuemakingsteadyprogresswithinitiatives

Developing autonomous driving support
systems* Yield: The ratio of product weight against the weight of materials
required for production of those products.

In response to CASE, we are currently developing a

the most out of every situation and becoming stronger
as a result.
* On January 8, 2016, an explosion occurred in the No. 2 Bar Mill
Shop at Aichi Steel s Chita Plant.

magnetic marker system as an autonomous driving
support system. Developed independently by Aichi

Driving workstyle reform

Steel, this system employs MI sensor modules on
vehicles to detect very weak magnetism from magnetic

Becoming a company that thecommunity needs
Communication with people in the local community isextremely important. Since January 2019, we have beenusing display rooms in the administration building tomarkers laid in the road, from which it can estimate▲ Newly adopted forging machine used to manufacture ring gears

Entering the fields of medicine and agriculture

One of the goals of our Medium-term Management Plan

hold plant tours for the general public and elementary

is the strengthening of our business foundation.

school students. We also plan to open up to the public

Essential for achieving this are active people andthe convenience store and restaurant located within theorganizations, and a shared happiness in aligning

new recreation hall.

growth of individual employees with growth of thecompany.

In 2020, we will celebrate our 80th anniversary. We
strive to be an attractive company that is continuallyWith these thoughts in mind, we are driving

welcomed by everyone in the community and to thatworkstyle reform at Aichi Steel. As a tangible initiative,

extent we will continue creating great products andAmorphous wire, a metal fiber with strong magnetic

we completed construction of our new administration

working to create ties with the community.

properties, is already being used for catheters in thebuilding in March 2018. With a range of ideas tomedical field because of its exceptional sensing
capabilities. We also expect it to have uses in manyother applications in the future. Plant growth activators,
which we are researching jointly with Tokushima
University, are another new development with thepotential for considerable growth. About 30 percent ofcultivated land globally apparently has soil whereplants struggle to absorb iron and crops are difficult to
grow. We expect that if plant growth activators can bemass produced, then we can contribute to eliminating
food shortages on a global scale by making barren land
suitable for cropping and increasing harvest volumes.

09

AICHI STEEL REPORT▲ Awards received at Nikkei New Office Awards▲ New recreation hall (illustration only)

AICHI STEEL REPORT

10

AICHI STEEL REPORT 2019

1 Company and others

Joint seven-company project with East Japan Railway

CASE

Autonomous Bus Trials on JR Ofunato Line BRT*
SpecialFeature01

Period: December 2018 to March 2019

Area: Vicinity of Takekoma Station on JR Ofunato Line BRT

Creating a next-generation smart society

Contributing to Autonomous Driving Evolution ThroughMaterials

Having sustained considerable damage in the Great East Japan
Earthquake, the JR Ofunato Line is in the process of recovery as a
BRT system*. However, the area serviced by the rail line is still facing
labor shortages resulting from aging and declining populations. In
hope

of

addressing

this

issue

with

autonomous

drivingtechnologies, trials of a BRT system, using a magnetic marker
systemthatfunctions

even

on

snow-covered

roads,

were

Rikuzentakata, Iwate
Prefecture

conducted on dedicated roads in the vicinity of Takekoma Station.
* Bus rapid transit system: A bus system, combining articulated buses, dedicatedbus roads, bus lanes and other elements, with advanced features that ensure
rapid, on-time performance and enable increases in transit capacity. (translationof MLIT definition)

Using smart technologies to resolve social issues
Right now, people all around the world are researching

POINT ・Model case for restoration support
・Safe transportation within unique BRT alternating traffic zones

TOPICSand developing autonomous driving technologies. The

CASE

In preparation for the arrival of a smart society, thisdivision was established in 2018 for the purpose ofcreating new businesses. The division is driving
research and development in a total of six
fields—Smart Transportation Systems, Batteries,
Electronic components, Motors and Magnets,
Advanced materials, and Environment and energy.

camera image recognition technologies, but those alone
are unable to cover all driving scenarios. For example, GPSdoes not reach some hilly and mountainous areas or intunnels. In areas of heavy snowfall as well, there is a riskthat the road dividing lines will be covered by snow andthe camera image recognition reliability will drop. In manyofsecuring

local

transportation

options

because of reduced or canceled rail and bus services due
to labor shortages and financial difficulties resulting fromaging and declining populations.

2 Joint project with MLIT

Period: May to June 2019

Autonomous driving business areas for
Aichi SteelTaiki, Hiroo District,
Hokkaido Prefecture

To quickly respond to urgent social challenges, we are

Since 2017, we have been collaborating with national

conducting

autonomous

drivingtrialsofWith aging and declining populations,this area is experiencing negative
effects on personal mobility and on thetransport of agricultural products andother goods.

designated,

Area: Two routes centered on Cosmall Taiki roadside rest area
(Level 2 trial of buses with up to 17 passengers traveling at speeds of
up to 40 km/h)

Snowy areas

ーShuttle service between Oda area

Camera-based
image recognition236

and roadside rest area
(approx. 12.5 km)

尾田地区

and local governments, and East Japan Railway Company,

specialized vehicles in enclosed areas, which we expect

to trial an autonomous driving system in various regions.

can be achieved in the near-term. In the future, we will look

This magnetic marker system, developed independently

into the potential of these technologies in open areas andby Aichi Steel, is able to support GPS and camera image

non-designated, general vehicles as part of efforts to

In the village of Taiki in Hiroo District, Hokkaido

ーTown loop (approx. 4 km)

recognition technologies.

achieve autonomous driving of non-designated, general

Prefecture, there are areas at night and when there is

55

vehicles on public roads.

snow cover where image recognition reliability is

55

236

“Cosmall Taiki”
Michi-no-Eki(roadside rest area)

poor. Trials have been conducted of a service that
Open areas

uses a magnetic marker system to follow two routes

Difficulty: Medium

Difficulty: High

Autonomous driving ofdesignated, specialized
vehicles on public roads

Designated,
specialized
vehiclesE.g., Unmanned delivery
trucks following
magnetic markers laid
along routes

and for transporting agricultural products to the roadside rest area

Non-designated,
generalvehiclesE.g., Autonomous vehicles andnon-autonomous vehicles mixed
together inside plant or hospital
premises

Difficulty: Medium

AICHI STEEL REPORTPOINT ・15 services each day, with maximum of 17 passengers, and speeds of up
to 40 km/h

Autonomous driving of
non-designated, general vehicles
in enclosed areas

Enclosed areas

Urban area

・Used by residents for a variety of reasons, including as daily transport

E.g., Autonomous vehicles andnon-autonomous vehicles
mixed together on Japaneseroad network

E.g., Aichi Steel trial vehicles on dedicatedbus roads (see Case 1 on page 12)236from the Cosmall Taiki roadside rest area, with fares
actually collected from passengers.

Autonomous driving of
non-designated, generalvehicles on public roads

Autonomous driving of designated,
specialized vehicles in enclosed
areas

11

Camera-based
image recognition

Autonomous Driving Service Trials at the“Cosmall Taiki” Michi-no-Eki (Roadside Rest Area)of these areas as well, communities are facing the urgent
challenge

Snowy areas(controlled by traffic signals via wireless exchange of bus locations)

Frontier Research and Development Div.

majority of development is focused on using GPS andThis area was affected by theGreat East Japan Earthquake,with labor shortages resulting
from aging and declining
populations now becoming
more severe.

TOPICS
Magnetic marker system

・Planned for commercial operation by 2020

MI sensor ▶

The magnetic marker system is a unique Aichi Steel technology that enables
vehicle position to be estimated with a high degree of precision. Magnetic sensors(MI sensor modules) are attached to the underside of buses or other vehicles todetect the very weak magnetism from magnets (magnetic markers) laid along
travel routes. In this way, the system enables stable autonomous driving in bad
weather, snow and tunnels where GPS- and camera-based autonomous driving
may be difficult.

100 mm dia. ×
2 mm thick

Magnetic
marker ▶

20 mm

AICHI STEEL REPORT

12

AICHI STEEL REPORT 2019

The main building of the new administration building was completed in
January 2017, and the hall was completed in March 2018, as tangible support

SpecialFeaturefor employee transformation. In use now for about two-and-a-half years, theTargeting new workstyles and coexistence withthe community

02

main building is receiving positive reviews from outside the company as well.
One example is the 31st Nikkei New Office Awards*, where the buildingreceived the New Office Promotion Award and the Chief of Chubu Bureau of

Benefits of New Administration Building, a Symbol ofTransformation

Economy, Trade and Industry Ministry Award. It has brought a range ofbenefits from the four perspectives below—enhancing business continuity
systems, supporting new work styles, halving energy usage, and coexistingwith the community. Going forward, in combination with intangible
initiatives, it will help drive further employee activity and provide support
during this period of transformation.
* Sponsored by the New Office Promotion Association and Nikkei Inc.,
these awards recognize originality and invention in creating advanced office spaces.

Work

Supporting new work styles

Employee satisfaction survey
5
4Overallevaluation

The new administration building was developed as amodel for our future offices for the purposes of improving
A

range

of

ideas

were

incorporated

321

intellectual productivity and supporting diversity of ourstaff.

Vicinity of deskWork
environment

Amenityand design

encourage lively communication between employees,
changes, and an IT environment that enables people towork from anywhere inside the building.

Intellectual
productivity

Halving energy usage

The building uses an all-surface radiantair conditioning system (ceiling, windows,
fittings,

construction, including our “Communication Stairs” that5and floors), high efficiency LED light

0

into

work areas that respond flexibly to organizational

EnergyEmployee comfort survey

Storageachieve

and

other

energytechnologies
efficiency,

toandincorporates specifications that create aWork,meetings

After
BeforeSatisfaction improved for all indicators

60% of respondents answered“intellectual productivity has improved”

noise

and

2
1

50.5% less

0

Noise

After
BeforeAir

Space

Comfort improved for all indicators

air

environment.

Community

Coexisting with thecommunity

A Visitor Center has been established withBCP

Now I understand the links
between Aichi Steel and
TOYOTA.

easy-to-understanddisplays

depictingthefounding of Aichi Steel, its steel making businessand its contributions to the future. From this fiscal
year, we rearranged our plant tours to start fromthis Visitor Center so that people in the local

Enhancing business
continuity systems

The new building has a seismically isolated
structure able to withstand a large earthquake ofintensity 7, and an emergency power generator
able to run for 72 hours. With the ability to provide
an Emergency Control Headquarters andevacuation area during emergencies, it acts as thebusiness continuity center for the whole company.

community can also enjoy visiting the company.

Aichi Steel manufactures
many products apartfrom automotive
components.

Built towithstand intensity
7 earthquake

Visitor Center
visitors

2,500

people approx.

(FY2018)

TOPICS
New recreation hall

AICHI STEEL REPORTHeating

3

Power
IT
consumption
per unit area(compared to last year)

lighting,

I learned about the origins ofJapan’s automotive industry.

13

4

Overallevaluation

comfortable(Results of internal survey)

Emergency generator
power capable of
72-hour operation

Lighting

New recreation hall (illustration only)

Built on the basic concepts of Sustain, Appreciate, Create, from the Aichi
Way, which was established as common values and codes of conduct for
Aichi Steel, the recreation hall is designed to blend in with theadministration building. Its facilities include a convenience store,
restaurant, communication lounge and multipurpose hall. It will be
opened in November 2019.

AICHI STEEL REPORT

14

AICHI STEEL REPORT 20192020 Medium-term Management Plan and President’s Message

Company Presidents Talk about the Present and Future of
Aichi Steel

Hagane Company

Anticipation of a Paradigm Change in the Automotive Industry

Manufacture of steel products and development ofrelated production technologies“Reinforcing Business Foundations & Creating New Businesses”

Specialty Steel Business Management Div., Stainless Steel Business Management
Div., Chita Plant, Kariya Plant, Hagane Production Engineering Div.

“Reinforcing Business Foundations & Creating New Businesses”

Laying theFoundation
for a Smart
Society

Strengthening
Business
Foundation

Realization of the 2020 Medium-termManagement Plan

Compliance & GovernancePresident
Divisions under directcontrol

Quality Assurance Div.
Safety & Environmental Div.
Audit Dept.

Companies

Corporate Office
Corporate Planning
Headquarters
Marketing & Sales
Headquarters
Manufacturing andFuture Planning
Headquarters

Hagane Kitaeru Smart
Company
Manufacture of steel products
and development of related
production technologies

AICHI STEEL REPORTAIKO CORPORATION, AICHI CERATEC CORPORATION,OMI MINING CO., LTD.
Aichi Techno Metal Fukaumi Co., Ltd., Aichi SteelSpecialty steel
Logistics co., Ltd.

Stainless Steel / Titanium

Company
Manufacture of forged products
and development of related
production technologies

Company
Sale and manufacture ofelectro-magnetic products andother functional products for the
next generation anddevelopment of related
production technologies

1. Current business environment and risks

3. Growth vision for a smart society

In fiscal 2018, we increased production to meet high demand
by running our production lines at full capacity. We actuallyachieved our target net sales for fiscal 2020 but as the impactof a recent slowdown in the Chinese economy becomes clear,
the future for steel demand is uncertain. There is also a risk ofsteep price rises for resources, such as the steel scrap used as
raw materials, and for secondary materials such as theelectrodes used for melting steel. Therefore, we have toachieve greater efficiencies and reduced costs if we want toachieve our profit targets.

The coming mobility revolution is a certainty. With thischange will come a decline in the amount of specialty
steels used around engines. However, there willcontinue to be a need for gears, shafts and other drive
transmission components. At the same time though, we
expect more and more reductions in size and weight.
We have identified opportunities for us in the mobility
revolution, including development of high strength
steelsfornext-generation
drive
transmission
components.
From a global perspective, pockets of high demand
for specialty steels will remain into the future, so we arecooperating with corporation divisions in areas such as
market surveys and analysis, and looking foropportunities to enter into new markets.
In this way, in addition to stainless steel and othernon-mobility related fields, we will investigate growthstrategies and will expand in mobility fields as well.

2. Initiatives for fiscal 2020
We are implementing a range of initiatives in preparation forthis risk of decreased profits, including reducing loss through all
production processes (steel making, rolling and refining),
reducing purchase costs through such measures as using
imported products and purchasing from multiple companies,
and improving specific consumption by extending the life ofrefractory materials. In this way, we are striving for “trueprofit-earning improvements” to help us achieve our fiscal 2020
profit targets.
As part of these profit-earning improvements, weestablished a separate Stainless Steel Business Management
Division and created systems able to meet high demand forstainless steel products. In addition to the automotive market,
we also plan to accelerate business expansion in the highly
profitable stainless steel market in the future.

Leveraging the mobility revolution as anopportunity, we will accelerate an evenbroader business expansion going forward.

Takashi Ishigami
Profile15

Example of products

Anticipation of a Paradigm Change in the Automotive Industry

Enhancing
Profit-earning

Right now, Aichi Steel needs toreinforce its business foundations
and create new businesses in
anticipation of a paradigm change in
the automotive industry. To achievethese goals, we have establishedour2020
Medium-termManagement
Plan
based
on
compliance and governance andwith the priority measures ofenhancingprofit-earning,
strengthening business foundation,and laying the foundation for asmart society. We are implementing
this plan with our three in-housecompanies playing a central role.

◆Main subsidiaries

H AG A N E

Aichi Steel’s Medium-term Management
Plan and In-house Company System

Presidents’ Message

Managing Executive Officer andHagane Company President

After working as Smart Company President, Takashi Ishigami took
on the role of Hagane Company President in April 2019.

AICHI STEEL REPORT

16

AICHI STEEL REPORT 2019

Presidents’ Message

Manufacture of forged products and development ofrelated production technologies

Example of products

Sale and manufacture of electro-magnetic products and otherfunctional products for the next generation and development Example of productsof related production technologies

Kitaeru Business Management Div., Forging Production Engineering Div.,
Forging Plant◆Main subsidiaries

Asdex Corporation, AICHI FORGE PHILIPPINES, INC.
(AFP), Aichi Forge USA, INC. (AFU), AICHI FORGE(THAILAND) CO., LTD. (AFT), Shanghai Aichi Forging
Co., Ltd. (SAFC), PT. AICHI FORGING INDONESIA (AFI)

Smart Business Management Div., Sensor Business Dept., Magnet Business Dept.,
Electronic Components Business Dept., Smart Production Engineering Div.,
Higashiura Plant, Gifu Plant, Seki Plant, Electronic Components Plant
CVT shaft

Crankshaft◆Main subsidiaries

Aichi Micro Intelligent Corporation, Aichi
Magfine Czech s.r.o. (AMC), Aichi Magfine
Technology (Pinghu) Co., Ltd. (AMT), Aichi
Europe GmbH (Ae)

Lead frame

Electric compass
for smart watches

Magnet

1. Current business environment and risks

3. Growth vision for a smart society

1. Current business environment and risks

3. Growth vision for a smart society

In the short term, the Chinese economy will slow down,
while in the medium to long term, we will see engine
downsizing and greater electrification. Due to the impact ofthese changes in the business environment, we areexperiencing declines in order volumes for our forgedproducts. On the other hand, because we are not doing
enough about reducing quality-related losses, andappropriately responding to reduced production volumes
by allocating people, things and finances without waste,
we are experiencing increased costs in manufacturing thatare putting pressure on profits.

The automotive industry is experiencing a major
once-in-a-century transformation. In this changing
environment, we expect to see reduced total demand in
the forging industry and a shakeout of inefficientcompanies, but the survivors will definitely see increasedorder volumes. We will be able to survive this period byleveraging the great strength of Aichi Steel, a unique systemwith material produced by the in-house Hagane Company,
achieving true integrated forging and steel making
processes, and pursuing better quality, lower cost
manufacturing. At the same time, we will manufacture
products with greater value and evolve from simple
manufacturers of forged products into manufacturers ofcomponents.

While our electronic components business is doing well due toincreasing demand for lead frames for hybrid vehicles (HVs) andelectric vehicles (EVs), our magnet business is experiencing somedecline, so overall business remains steady. The electronic
components business is anticipated to continue growing but it
faces risk if electrification of vehicles slows down in China or
elsewhere. The magnet business is subject to large demand
fluctuations outside of Japan in particular, so the risk it faces is thatthe future is uncertain.

In the smart technology domain, it is incredibly
difficult to predict what the next big technologies
will be. We might see our current core businesses
growing strongly. Or the medical or agricultural
fields might expand rapidly. What we can say forcertain is that we will continue to grow our ability todevelop products from materials, and that we willcontinue to make products that maximize theproperties of products and materials that no othercompany can match. We are also making good
progress in developing young people into theleaders of tomorrow.
Although we are still small compared to theHagane Company and Kitaeru Company, by 2030
we want to be one of the pillars of Aichi Steel inboth name and reality.

2. Initiatives for fiscal 2020
With manufacturing, we believe there are two areas where
we need to continue our efforts: adding value and reducing
costs. This year, we are focusing our efforts in particular on
reducing costs to build the foundations of our response to
the above unfavorable conditions. As a measure to tackle
quality defects at the source, we are pouring resources into
managing costs appropriately according to fluctuations involume as we reduce quality losses and tighten budget
management. To reduce quality losses, we are making
more effective use of the inspection data built up over theyears to drill down into the mechanisms behind each typeof defect, and truly tackle the source of our problems.
Through these activities, we are working to improve costs
and deliver true improvements to our manufacturing
capabilities.

2. Initiatives for fiscal 2020
To enable our electronic components business to meet future
demand increases, we have extended lead frame production lines
at our Gifu Plant. At the same time however, we are also focusedon increasing capacity of existing production lines. In our magnet
business, we have been developing magnets aimed at smaller andlighter products, and as a result they are starting to be used indrone motors and other new fields. While increasing thecompetitiveness of our production lines, we are currently also
diversifying them for non-automotive fields as well and developing
the framework for stable business operations. In addition to thesecore businesses, we are implementing a wide range of otherinitiatives, including application of Aichi Steel’s unique amorphouswire products to the medical field and use of our TetsuRiki Agriproducts in agriculture.

Using our strengths in integrated forging andsteel making, we will forge greater competitivenessto survive this period of transformation.

We will continue to leverage our ability todevelop products from materials, and create
products that no other company can match.

Motoshi Nakamura

Katsunori Kojima

Profile17

Smart Company

SM A RTK I TA ER U

Kitaeru Company

AICHI STEEL REPORT

Senior Managing Executive Officer
and Kitaeru Company President

After working as Assistant General Manager, Manufacturing andFuture Planning Headquarters, Motoshi Nakamura took on the roleof Kitaeru Company President in April 2019.

ProfileManaging Executive Officer andSmart Company President

After working as Kitaeru Company President, Katsunori Kojima
took on the role of Smart Company President in April 2019.

AICHI STEEL REPORT18

AICHI STEEL REPORT 2019

Priority issues (Materiality) for the
Aichi Steel GroupTo make an even greater contribution to achieving a sustainable society, in 2016, the Aichi Steel Group analyzed its impact
on society, particularly with regards to certain important aspects, and identified six issues, which we refer to as the “Priority
issues (Materiality) for the Aichi Steel Group,” as issues we should address through our business activities.
We are now working to establish CSR objectives and plans that will help resolve these issues.

Items selected as priority issues

1

Items selected aspriority issues

2
3
4
5
6
19

Component identified in theanalysis map

Compliance (environment)

Increase complianceawareness globally,and strengthen
corporate
sustainability

Compliance (society)Compliance (product responsibility)

Occupational health and safety

Encourage thecreation of
workplaces thatare safe andcomfortable for all
employees

GovernanceG

GovernanceKey performance indicators (KPIs)

Results of environmental management
system audit
Status of various efforts to strengthen
compliance (number of lectures and internal
audits held as a percentage of those planned)
Certification and review by a third-party
organization

Based on safety evaluation selected underin-house criteria, status of facilities
improvements, status of safety measures andefforts to strengthen safety awareness, andfrequency of accidents resulting in lost work time

Mechanism for handling grievances
regarding labor practices

Labor incident record of accepting,handling and resolving complaints throughan in-house consultation office(number of cases)

Diversity and equal opportunity

Assistance and programs for supporting
diverse work styles, and their status of use

Security

Number of
directors

6

Provide highly
competitive
products that aresafe and secureand offer new value
globally

Strengthen
relationships withlocal communities,
and actively
contribute to society

Products and services

Training and education

Sales staff training, quality improvement
activities (number of times held, number ofparticipants, etc.)

Marketing and communications

Presence in the community

Local communities

Gathering of customer evaluations(number collected and percentage ofimprovements, resolutions, etc.)

Status of social contribution activities
selected under in-house criteria(number of participants; clear compilation
standards based on fixed-point observation)
Status of local community development
programs (plans and achievements against
those plans)

Energy consumption
Breakdown of energy use (CO2 emissions)

Strengthen
initiatives toward
manufacturing inharmony with theglobal environment

Atmospheric emissions
Wastewater and waste
Biodiversity

Volume of direct and indirect landfill waste
Status of efforts to preserve biodiversity(reforesting, number of volunteer activities,
etc.)

Number of meetingsof the Boardof Directors

Attendance rate at
meetings ofthe Boardof Directors

13

Web

（

Environmental audit
results（

Compliance promotion
system

p. 22
p. 27

（
（

(Third-party certifications)

p. 26

（

Frequency rate andnumber of accidents
resulting in lost work time

AICHI STEEL REPORT

Number of serious
information
security
incidents

Number of reporting
andconsultation
incidents（（

Whistle-blowing system,
respect for human rights,
mental health activities

p. 25

Women in management positions

Diversity

S
SocialChanges in number of employees■■ Male ■■ Female

29

0

13

(Persons)

(%)

3,000

2,000

180

（

Awards for Group
companies（

Training programs forsales staff（

Collection of customer
evaluations

p. 28
p. 28

p. 29

（

Annual number ofvolunteers

p. 30

（

Interaction with thecommunity

Volume of direct andindirect landfill waste

p. 32

191

212
2018

48

0

0

2.4

2016

2017

2018

■■ Days of paid
leave taken

（

2,000

（

1,000

0

0

2016

Statutory
employment rate

0

2018

2017

2,139

12.7
11.1

10

■■ Social contribution
expenditure

Usage rate of paid leave

(FY)

63.5

55.5

13.3

Number of volunteers(Million yen)(%)

(Persons)

160.63 * 10,000

180

100

66.5
93.54

90

9,175

93.01

5

8,000

7,276
6,629

2017

2016

2018

0

2016

(FY)

2017

2018

0

0

6,000

2016

(FY)

（

2017

0

2018

(FY)

* Increase due to maintenance of Nakashinden green spaces(maintenance to promote coexistence with nature and biodiversity)

Total CO2 emissions（■■ Total CO2 emissions
Production volume

E

Environmental(Thousand t-CO2/year)

750
700

(Thousand tons)

1,520

1,450

680.3
653.6

1,600

2014

14 t

1,000

2016

2017

2018

73,622 t

62,702 t(FY)

Chemicals in raw
materials andsecondary materials

Waste sent indirectly to landfill(Thousand tons)(Thousand tons)

15

30

13.2

Atmospheric emissions

1,200

636.0

2015

Companywide material balance of
PRTR substances

1,400

0

2005
Base year

Waste sent directly to landfill

7t
Discharge
to waters

25.5

9,971 tSteel and otherproducts(consumed)

929 t

Waste
Decomposition(transferred)andneutralization(elimination)

20

2.4
0

681.1

669.2

1,176
603.0

600
0

1,502

1,447

1,366

650

5

（

4

Social contribution expenditure andnumber of volunteers

50

0

（

2.6

6

2

(FY)

Changes in days of paid leave taken

（

2,177

2.5

(%)

Social contribution

15

2,219

52

55

40
50

Workstyles

5.1

（

60

Employment rate ofpersons with disabilities

20

(FY)

3,000

(Harmony with nature)

Financial information
for fiscal 2018

10

1%)

5

(Days)

p. 20, p. 32

（

10

100

6

(Hours)(Total CO2 emissions)

p. 20

100

(Persons)

8

Changes in employee annual
working hours(Initiatives toward diversity)

p. 28

100

(Proportion of all managers■■ Number of persons
with disabilities employed

(%)

4

2017

2016

Employees who returned
to work after childcare leave

2,451

2,401

2,341

1,000

100

12

8.0

7.3

7.1

10

2,663

2,592

2,521

0

（

■■ Employees who
took childcare leave

Percentage offemale employees

4

Changes in employment of persons
with disabilities

Changes in childcare leave(Persons)

p. 22, p. 25, p. 26

p. 33−36

Soundness, capital efficiency (Net worth,interest-bearing debt balances, capital ratio,
etc.)

Number of compliancetrainingclasses

Applicable section

Profitability (operating profit, ROE, etc.)

Financial performance(of which, 2
outside Audit &Supervisory
Board Members)％

Number of times
security
training held

12

4

96

10

Establish a Solid
Financial Foundation
to Support Stable
and Sustainable
GrowthNumber of
Audit &
Supervisory
Board
Members(incl. 1 woman)■■ Employee annual working hours

Status of quality improvement efforts(number of recognitions received anddescription)

2

Number ofoutside directors

Compliance2000 2014
Base year

4.7

2015

10

3.7

2016 2017 2018

Percentage ofISO 14001-certified
subsidiaries

Waste recycling rate

5.3

3.4

(FY)

0

2000 2014
Base year

3.0

3.3

3.2

2015

2016

2017 2018

1.3
(FY)

97.9

％

91

％

AICHI STEEL REPORT

20

Priority Issue

1

AICHI STEEL REPORT 2019

Increase Compliance AwarenessGlobally, and Strengthen
Corporate Sustainability
Materiality

ISO 26000 relevance

6.2 Organizational governance
6.6 Fair operating practices
SDGs relevance

The Aichi Steel Group is undertaking measures to further ensure governance and compliance, enhance awareness of legal
compliance, and conduct sound business activities worldwide. We are also revising our management structure and conducting
thorough employee training to quickly address risks.

Corporate governance● Basic approach to corporate governanceThe basic CSR policy of the Aichi Steel Group is “striving
to contribute to sustainable development of society andthe Earth through sound corporate activities.” With this inmind, we aim to manage our company in a way that always
enjoys extensive trust of our shareholders and society by
establishing and maintaining an organization capable ofresponding swiftly to changes in business environments anda fair and transparent management system.
We also fully comply with the Corporate Governance Code,and submit a report regarding disclosure to the Tokyo Stock
Exchange. We review our compliance status once a year andmake amendments or changes as required.

Compliance■ Aichi Way
In January 2018, we established the Aichi Way as a set ofuniversal values and codes of conduct for the Aichi SteelGroup with a focus on the three concepts of Sustain,
Appreciate, and Create. By instilling the Aichi Way among
all Group officers and employees, and ensuring each person
puts it into practice, we aim to strengthen our businessfoundations and show our integrity as a business group.

Working together to be an even better company!

Aichi Way

Noble ambitions

Value the spirit of our founders, who ambitiously created fromscratch the steel to manufacture Japan's first domestic motor
vehicle.

Sincerity

Face all things with sincerity, taking ownership, and approach
your work with an attitude of "I will."

Genba-ism

Go to the workplace and see for yourself (Genchi Genbutsu),
then resolve problems by reducing the gap between thefundamental principle (Genri Gensoku) and reality.

Founding spirit● Compliance promotion system● Whistle-blowing system

We aim to be a trusted company through the protectionof human rights and compliance with laws and regulations,and by respecting public decency. To enhance theoverall compliance of our Group, the Corporate Planning
Committee—headed by the Corporate Planning Headquarters
General Manager—sets and reviews compliance policies on aregular basis.
Based on our internal rules and the Aichi Steel Group Action
Guidelines, we strive to improve our compliance with laws andregulations as well as our social common sense. We enhance
employee awareness by distributing compliance manuals, and
the Aichi Steel Group Action Guidelines.

In fiscal 2018, a total of 13 cases were reported to the Aichi Steel
Compliance Hotline, the company's whistle-blowing system.
We will continue promoting recognition and awarenessof our whistle-blowing system among employees to further
improve our internal ability to govern ourselves. The president
will be informed and confirmation will be made that suchmeasures are carried out. We will also specify in the Code ofCorporate Ethics how the system is operated and rules on theprotection of whistle-blowers to ensure that whistle-blowers
are protected.

13 cases■ Changes in whistle-blowing cases■ Compliance promotion system

Contact point■General Affairs Div. ■Audit & Supervisory Board Member ■Lawyer(Cases)Corporate
Planning Committee

Person responsible forlegal compliance

Chair: Corporate
Planning Headquarters
General Manager

Director in charge ofGeneral Affairs Div.

Members:
Directors, executive
officers, Audit & Supervisory
Board Members

General Legal
Compliance Site

Happiness for everyone

8
6

6

5

4

Variousdepartments

2

General Affairs Div.

Good thinking
Good products

1010Persons in charge ofcomplianceContribute to society by producing products that are chosen bycustomers, and create a company where teamwork fills ourteam members with happiness.

1212

Departmental person
responsible for legal
compliance

Compliance Liaison Meeting

Customers andteam members

13

14

Each division0

Always anticipate the future, use our knowledge and curiosity
to maximize creativity as good products come from good
thinking and combine our strengths to head into a new world.

2014

2015

2016

2017

2018 (FY)

Heading to a bright future● Corporate governance structure● Compliance promotion activities● Fair transactions with suppliers

Aichi Steel uses an Audit & Supervisory Board. This systemsystems that function effectively to ensure objectivity andconcentrates authority and responsibility for businessneutrality of management oversight.
execution to the Board of Directors, as the ultimate body
Internally, we also develop and properly operate systems tofor management decision making, and assigns the role of
ensure the appropriateness of our operations in line with theaudit and supervision of the Board ofInternal Control System Basic Policy.
Directors to the Audit & Supervisory■ Corporate governance system diagram
Board and Audit & Supervisory Board
Members, which are independent of
the Board of Directors and business
Shareholder's Meeting
execution. We believe this system
Appoints/
Appoints/Dismisses
Appoints/Dismisses
Reports to
Dismisses
achieves
appropriate
management
ReportstoAccounting
Board of Directors
AuditsAudit Team
Audit &
decisions and execution of duties while
Inquiry
Response
Supervisory Board Evaluates the appropriateness of the account audit
providingsufficientorganizational
Audits
Officer Remuneration and Nomination Committee
AuditsMakes decisions/Supervises Appoints/Dismisses
checks and balances. We employ two
President
independent outside directors and two
Instructs / Supervises
Reports to
Instructs/Supervises
Audit
Dept.
outside Audit and Supervisory Board
Management Committee
Executive committees
Members, with extensive experience(Deliberation of critical issues, etc.)
Auditsand broad insights as managers, who
Instructs / Supervises
Makes proposals to/
Makes decisions/Approves
Reports tosupervise and audit the execution ofCompanies/Headquarters/Departments
duties of the directors, and we develop

To enhance the compliance awareness of employees, we provide educationon compliance to all employees. The importance of compliance is also
covered in the Action Guidelines workshop held for those promoted toeach level within the organization. In addition, other corporate scandal casestudies are reported to the Compliance Liaison Meeting to help prevent therecurrence of similar compliance incidents.
We also hold CSR seminars on preventing harassment, and on-sitecompliance training at each plant for the purpose of preventing crime andharassment.

We periodically hold Business Regulations,
Procurement Edition seminars to improve
compliance with the Subcontracting Act,
which is closely connected to our procurementtransactions, and to avoid breaches of the act
that is easy to fall foul of.

Reports toAdvises/Aids

Group Companies

21

AICHI STEEL REPORT

Level-based training

248

participants (10 levels)

CSR Seminar

1

CSR workshops

time (Dec)

4times (Feb, Apr, Jul, Oct)

Compliance Liaison Meeting4times (Apr, Jul, Oct, Dec)

On-site compliance training(crime and harassment prevention)

10

locations (Oct, Nov)
AICHI STEEL REPORT

22

Priority Issue

1

AICHI STEEL REPORT 2019

Risk Management● Risk management system
We have established internal rules, such as risk management
rules and disaster prevention rules, and have established a risk
management system, so that if we face or predict a serious
risk, we can take prompt and appropriate action and ensure
sound business operation.

● Risk management education
We have newly developed a curriculum for “risk management”
designed for training of all job classes, where we explain how
risk management is positioned and emphasized in CSR, andwe include actual cases of crisis at Aichi Steel to heighten
employees' risk awareness and ensure they understand what
to do to prevent crisis occurrence/recurrence and what initial
response to take when a crisis occurs.
As a result of the accident on January 8, 2016, we havedeclared January 8 to be Start Over Day at Aichi Steel toraise awareness of our commitment, confirmed by everyone
at Aichi Steel, to preventing such an accident from recurring.
We have also established a permanent Education Center toteach and pass on to the next generation the lessons learned
from the accident and our other failures, and have started
providing special safety training to all employees.

■ “Step Up Plan” initiatives and outcomes
In February 2019, we held a “Step Up Plan Review Meeting”
where all employees were able to share the outcomes of theiractivities.
Based on lessons learned from the January 8 accident, the“Step Up Plan” is a three-year project designed to raise the bar
for manufacturing across the whole company. With activities
conducted on four themes since 2016 now complete, we
confirmed the outcomes and shared challenges for further
improving ourselves. We will continue tackling new challenges
and passing on the lessons learned so that the whole
company will be able to step up to an even higher level.

Examples of companywide initiatives on four themes
1. Safety andsecurity• Fail-safe functions based on safety/security evaluations• Safety function updates

2. Product andmanufacturing
management
systems• Centralized management from orders to shipping• Product code refresh• Building integrated management systems from steel
to forging

3. BCP/BAP
mechanisms• Building alternative production mechanisms• Damage prevention

4. Culture,awareness andbranding reform• Enhancing compliance, management capabilities,
and business foundations• Improving quality, corporate value, and brand image• Enhancing CSR● Disaster prevention measures
We established the Earthquake Preparedness Promotion
Committee through which we are developing disaster prevention
measures in the event of an earthquake in the Nankai Trough.
Including responding to warnings from the government(information issued instead of official warnings when an
earthquake cannot be predicted), we have also started
collecting information from the government and relatedcompanies rather than taking action alone. In preparation
for an earthquake in the Nankai Trough, which has a highdegree of probability in the future, we are aiming to achieve
damage minimization through self-help. The main actions
implemented during fiscal 2018 are detailed below.

■ Review of earthquake preparedness promotion committee
The Production Recovery Subcommittee, operated up until fiscal 2017, wasdisbanded and its activities were consolidated into another committee.
Responsibility for remaining issues was absorbed by the Human Safety
Subcommittee and Facility Safety Subcommittee.

Earthquake Preparedness Promotion Committee(General administration office: General Affairs Div.)* Name changed May 2017

Human Safety
Subcommittee(Office: Human Resources Div.)

Facility Safety
Subcommittee(Office: Facility Engineering Div.)

Role
MissionSpecify actions toprotect lives

Role
Mission

Maintain buildings
and facilities toprotect lives

Initiatives■ Human Safety Subcommittee

AICHI STEEL REPORT● Information security promotion system● Information security guidelines

Recognizing the importance of information security
management, and in compliance with the All Toyota Security
Guidelines (ATSG), we have established internal structures,provided employees with information and education on rules
and regulations, and conduct inspections and so on.
The Risk Management Department conducts security
inspections to ensure that there are no issues with external
email, that employees do not carelessly take internal
information outside the office, or that USB memory, cameras,
and other devices are handled properly. Along with enhanced
checking functionality in the system, including the adoptionof a system of alerts to persons in charge of confidentiality
management in each department in the event of unauthorizedaccess to confidential information, we are further enhancing
our confidentiality management structure to also provide
advice from experts.
We have applied the ATSGs at all Group companies, and areenhancing information security across the entire Aichi Steel Group.

We, for security controls and to prevent leakages of personal
information, have established rules regarding the proceduresfor handling documents and data, sending and receipt ofemail, and management standards and procedures forcomputers and peripheral devices.

■ Information security promotion system
Management system and roles of each department
Overall control

Director in charge of General Affairs Division•Person responsible for confidentiality management

1. Improvement of disaster prevention capabilities(1) Proficiency in use of disaster prevention equipment and materials• Emergency rice cooker training during dormitory disaster drills• Cooker training and joint demonstrations with manufacturers of manualwater purification systems

Administrative Depts.

■ Facility Safety Subcommittee
1. Improvement of escape route safety(1) Implementation of safety measures• Bolster shelf attachment: Forging Plant• Installation of crane escape equipment: Chita Plant• Installation of emergency gas shut-off valves: Chita Plant

2. Measures to minimize damage to buildings andequipment, etc.
(1) Liquefaction measures• Completed elevated construction of Aichi irrigation system (industrial
use water) pipes: Chita Plant(2) Additional measures after Kumamoto earthquakes (April 2016)• Derailment prevention of cranes: Kariya Plant, Forging Plant(completed), Chita Plant (planned for completion in 2019)■ Other actions

Role

Confidentiality
management supervisor(General managers ofindividual divisions)•Assumes all responsibility for confidential
information within the division•Designates people in charge of confidentiality
management•Has the final say in confidentiality classification•Designates employees authorized to create
top-secret documents•Implements self-auditing of confidentiality
management status•Establishes rules for the division

Confidentiality
management person(Manager, who is the
person in charge ofcompliance, designatedby the general manager)

Representative
managers, etc.

(1) Multiple communication methods secured• teleconferencing systems installed: 7 companies

2. Identification of issues through companywide
emergency drills

Employees

Examples of rules:• Document control rules• Information security control rules• Information disclosure rules• Private information protection rules, etc.
We carefully handle and strictly control any information
held by the Company or by any Group company, and any
information obtained from our customers, suppliers or
employees, etc., in accordance with our internal rules.

Definition of Confidential Information
All information, products, and facilities, regardless of form,
designated as subject to restrictions on disclosure by theconfidentiality management supervisor specified under
the information security system. Confidential information
regarding other companies obtained through proper means
is also included.

General Affairs Division and IT Management Division•Creates and revises measures related to the
management of confidential information•Audits and provides guidance according to theconfidentiality management status across theentire company•Manages systems (both technical and human aspects)

In each department

1. Cooperation with domestic subsidiaries(1) Emergency drills for production line workers• Consider using model workplace to conduct drills and extend to otherworkplaces(2) Nighttime disaster prevention drills• Conducted for selected workplaces in administration departments(3) Prompt employee roll calls• Shorter roll call times through deployment of information sharing system

23

Information security•Acts under the authority of the confidentiality
management supervisor(Designates confidentiality classification and sets
the operating rules within the division)•Works to promote and fully establish
confidentiality management in the division•Complies with laws, regulations, and company
rules related to confidentiality management•Gives approval, instructions, and guidance related
to confidential information used in their location•Complies with laws, regulations, and company
rules related to confidentiality management•Reports accidents, damage, illegal acts andwrongdoing to his/her superior● Information security awareness andeducation

Through our CSR meetings, management receives updates
on current Group information security management levels,
as well as issues and ongoing efforts, ensuring a common
awareness of information security as a management issue.
For employees, a check is conducted using an "information
security checklist" for every employee using a personal
computer in their day-to-day work, regarding handling of
information devices and various related rules. Based on thoseresults, staff responsible for education in each department,along with department heads, provide individual instruction.
We also present public incidents of information leaks
in a news format, and issue company-wide alerts when acomputer virus or other malicious program is discovered in
the Company, in order to raise awareness of security controls.

Number of times
security training held

12

AICHI STEEL REPORT

24

2

Encourage the Creation ofWorkplaces That Are Safe andComfortable for All Employees

Human resources development

6.3 Human rights
6.4 Labor practices
SDGs relevance

The Aichi Steel Group is working to create a strong organization by maximizing the potential of individuals through the creationof environments in which diverse human resources can play an active role. This includes not only consideration of a wide varietyof human rights involving nationality, language, culture, age and gender, but also encompasses women, seniors, people withdisabilities, and those combining work with child-raising or care-giving.

Respect for human rights and creation of comfortable workplaces

Aichi Steel employees

Suppliers

Report (can be anonymous)

Feedback of outcome

Contact point
Internal

GeneralAffairs Div.

AuditorExternal

Legal
representatives

Collaboration

Investigation team (Investigation/Interviews)
ReportPerson / division concerned

The Aichi Steel Group states in the Aichi Steel Group Action
Guidelines that it will comply with domestic and foreign laws andregulations both in letter and in spirit, and that it will respect humanrights, and sets out behavioral standards for this.
Through level-based training and other educational opportunities,
we cultivate a corporate culture in which the diversity of each
employee is respected. Workplace study sessions are held with thegoal of preventing workplace harassment, and a “Hotto (hot)” line isin place for use by employees with issues regarding human rights.
This system enables employees to consult directly with advisinglegal representatives.

■ Aichi Steel Compliance Hotline flowchart

Correction/
management● Initiatives toward respect for human rights

women in the workplace

Aichi Steel considers the promotion of diversity to be an
important part of its management strategy, and as part ofthat is strengthening measures to promote more active roles
for women. We proactively hire more female employees,
setting goals for the percentage of female hires among regular
university hires. We also run seminars aiming to spread
understanding of how to promote active roles for women, as
well as career design training for female employees and theirbosses. In this way, we are advancing initiatives to support
women in developing their skills. As part of our culture andawareness reform, we are holding diversity seminars to help
create an environment where employees can balance workwith family-life and child-raising duties.

25

AICHI STEEL REPORTIn April 2017, we relaunched our Overseas Trainee (OT)
program, and stationed one young employee in Thailand
from April 2017 to September 2018.
In this new program, we are focusing on providing real work
experiences at overseas affiliates, and on language studies toenable trainees to work alongside local employees using the
local language. The trainee in Thailand attended language
school to learn Thai while working on specific training topics.
We believe this system will improve understanding of thelocal languages and cultures, and enhance relationships withlocal staff.
As we increase our physical presence around the world, weare providing more opportunities for our young employees towork overseas.
The experiences provided in this training system help
participants understand the significance of working overseas
and the importance of communicating in the local languages,
and through that we hope to help them grow into globally
active employees of Aichi Steel.

Since August 2016, we have been providing specialized
technical training for all skilled workers in forging plants
to provide systematic training on the knowledge and skills
needed at those plants.
To raise understanding of the purpose and necessity of eachtask, and lead to “Kaizen”, the roles of skilled workers, fromthe fundamentals of manufacturing to the essentials of the
facilities that create products and measures for dealing withabnormalities, are divided into three ranks (Rank C, Rank B,
and Rank A), and the training is organized so that workers
learn in steps (Rank C: five years after joining the company;
Rank B: 10 years after joining the company; Rank A: first-levelsupervisor).
The hands-on training combines knowledge learning andpractical skills acquisition. Trainee proficiency is confirmed
through written tests, and determinations of whether
trainees have reached a level that can be used in practicalwork are confirmed through presentations on examples ofimprovements and on-site monitoring. Trainees who passreceive ranked certification. With Rank C training starting infiscal 2016, and Rank B training starting in fiscal 2017, we arecontinuing to expand training activities.
By having all skilled workers undergo this training, a cultureof asking “why?” will be created and the handing down oftechnology and skills to successors will be encouraged.

Employee health and safety● Promotion of employment for people

with disabilities

We have employees with disabilities working in a range of
workplaces, from our manufacturing sites to administrative
divisions. To enable them to remain at work, it is important
to not only provide the appropriate work support but toprovide them with work that suits their individual abilities, so
at the time of recruitment, we follow a program of practicaltraining and interviews to decide where to assign them. With
the majority of people with disabilities working at Aichi Steelbeing those with intellectual impairments, we hold seminars
aimed at developing their capabilities and workshops aimed
at helping them acquire internal qualifications as part ofcontinued support to provide them with rewarding careers.
We are also systematically training and allocating VocationalLife Consultants for Persons with Disabilities and Job Coaches
to provide work-related coaching to develop workplaces
where all employees can enjoy working together.
● Post-retirement reemployment system▲Diversity seminar on male participation in domestic and childraising duties● Specialized technical training

President / Committees

Initiatives toward diversity● Promotion of more active roles for● Global human resources development

We have in place a Nice Senior System, which in principle
allows all employees who wish to work after retirement tocontinue working until they begin receiving their pensions.
To make work more enjoyable for our older employees, weare also creating workplaces that are easier to work in and
we are reassessing employee benefits.

● Efforts to eliminate risks that

● Health promotion efforts

lead to occupational accidents

We are changing our safety culture, creating safe workspaces,
eliminating accidents leading to occupational accidents,
and never forgetting the lessons learned from the January
8 explosion. We are restructuring our workplace safety by
preventing recurrence of fires and explosions, and improving
workplaces that have high risk of serious accidents. We
are also improving safety management by improving
communication with operators in the factory and listening to
problems related to work issues.

■ Number of lost-time accidents and lost-timefrequency rate
(%)
1.00

(Cases)
5
4

0.66

0.75

3

0.45

2
1
0

2012

0.16

0.16

0.15

0.15

2013

2014

2015

2016

Number of lost-time accidents

0.45

0.50
0.25

2017

2018

Lost time injury frequency rate

0.00
(FY)

Lost time injury frequency rate

Materiality

ISO 26000 relevance

Number of lost-time accidents

Priority Issue

AICHI STEEL REPORT 2019

We prioritize mental health, lifestyle-related disease prevention
and health management support for employees assigned
overseas, and systematically implement relevant initiatives. As aresult, we were recognized for the second consecutive year as a
Health and Productivity Management Outstanding Organization(White 500 category), in a program adopted by the Ministry of
Economy, Trade and Industry and Nippon Kenko Kaigi. We work
to maintain and promote the health of our employees, which isa priority issue for the company.
● Mental health activities
The Aichi Steel Group is working to maintain the mental healthof its employees and prevent the development of mental issues,
through various educational programs and individualized mental
health care based on the results of stress check tests.
We have also provided advice to workplaces that were
determined to be at high risk for mental health based on
analysis of these results.
From the perspectives of self-care and line care, we held
mental health seminars in cooperation with Tokai City to deepen
employee understanding of self-expression, to facilitate personal
relationships in the workplace, and prevention of harassment.
Going forward, we will continue working with supervisors topromote the creation of open workplaces that enable free
discussion, to prevent the development of mental issues, andenable early detection of issues and early provision of care.
AICHI STEEL REPORT

26

Priority Issue

3

AICHI STEEL REPORT 2019

Provide Highly Competitive
Products That Are Safe and Secureand Offer New Value Globally
Materiality

ISO 26000 relevance

6.7 Consumer issues
SDGs relevance

Products provided by the Aichi Steel Group are important parts directly related to automobile running, turning and stopping.
To offer customers greater peace of mind in using our products, it is essential that we provide a stable supply of high quality
products. To ensure our products gain the trust of our customers around the world, we are aiming to become an integrated
forging and steel making company that provides the world's finest quality, and we are working as one to build a globallycompetitive, leading quality assurance system.

Quality improvement initiatives● Quality awareness activities● Customer recognition of quality

November has been designated Quality Month. With afocus on the concepts of “Customer First” and “Quality
First,” we are working to raise awareness of quality among
our employees by holding site inspections by the president
and quality seminars, displaying quality mottos and posters,
and implementing other initiatives. We also relaunched our
Quality Learning Center, previously held as part of Quality
Month, and established a permanent Education Center inMarch 2019 to relearn the essence of quality and emergency
lessons learned from our past failures.

Aichi Steel Group initiatives to improve quality are being
recognized by customers. In December 2018, Shanghai Aichi
Forging Co., Ltd. (Headquarters: Shanghai, China), one of ouroverseas subsidiaries, received an Outstanding Quality Award
from Guangzhou Automobile. In March 2019, our Forging Plant
received an Excellence Award for quality during 2018 fromthe Head Office Plant of Toyota Motor Corporation. In April
2019, our Electronic Components Plant received an ExcellenceAward for supplier contributions to quality improvement
during 2018 fromthe Hirose Plant
of Toyota Motor
Corporation.

● Survey of customer evaluations● Training programs for sales staff

Every year, we collect customer evaluations of Aichi Steelthrough a survey rating quality, delivery and service on
a five-level scale. If any areas drop below standard, we
implement initiatives the following year to improve thoseareas and improve customer satisfaction.

We are focusing on sales education for new and younger staff
members to develop essential sales skills through a rich basic
curriculum including training from outside specialists. The true
purpose of our program is to strengthen each person’s skills
and also improve our sales management process.

Quality management system (QMS)● Activity promotion system■ Quality assurance system

Quality Function Board

In accordance with our policy of “Quality First,” we will
strive to maintain a business structure, based on ISO 9001,
ISO 13485 and other standards, that gains customer trustand enables us to deliver attractive products that meet
expectations and needs. In line with our Medium-term
Quality Vision 2020, we are working as one to build a globallycompetitive, leading quality assurance system. In addition todomestic efforts, head office regularly sends support people
to overseas plants to provide training to quality officers at
each site and provide appropriate assistance regarding quality
issues to strengthen their quality assurance systems. We arealways working to improve our level of quality assurance.

(Quality &Technology Committee)

Quality Assurance Div.

(ISO Review Committee)

Quality Control Dept.
for each plant

Plant sections

Development and Production
Engineering Dept.
Other related departments(Sales, Purchasing,
Human Resources etc.)

Overseas Support
Dept.

■ Medium-term Quality Vision 2020
1） Enhancing the “Ji-kotei-Kanketsu” initiative toachieve customer-first manufacturing
2） Strengthening global quality assurance system
3） Promoting Total Quality Management (TQM) to
improve the quality of work

● Third-party certifications and compliance with International Standards
accreditations.
After the 2015 revision of ISO 9001, we passed therevision approval for Steel products, forged products, andelectro-magnetic products.

■ Acquisition status of Quality ISO certification
1. Steel products
and forgedproducts

Passed surveillance audit for ISO 9001 (October 2018)

2. Electro-magnetic
products

Passed surveillance audit for ISO 9001 (December 2018)
Passed revision approval and surveillance
audit for ISO 13485(November 2018)

3. Analysis andtesting

27

AICHI STEEL REPORT(All customers who were supplied withabove a certain amount of steel materials and forged products)

Promotion of CSR procurement

Becoming an integrated forging and steel
making company that provides the world's
best quality—Gaining customer's trusts on
a global scale

In addition to ISO 9001 certification, we have also obtained
other third-party certifications and public institution
accreditations based on our QMS, and we are assessed
every one to five years for review of these certifications and

85 offices

Number ofcustomers surveyed

Passed surveillance audit for ISO/IEC 17025(February 2018)■ Third-party certifications excluding
ISO certification● JIS Certification (JICQA)● Certifications issued by classification societies(ABS, CCS, DNV GL, KR, LR, NK)● European Pressure Equipment Directive (PED),

European Construction Products Regulation (CPR)● European Medical Devices Directive(MDD Annex v.3.2)

3 programs
19 persons

per year

Total numbers ofparticipants(All new and younger mid-level employees)● Global, open and fair transactions● Green procurement efforts

We strive to provide all of our suppliers, at home and abroad,with procurement information and the opportunity for open,
fair transactions. Actual transactions are determined basedon a comprehensive review of quality, technology, costand delivery times, as well as soundness of management,
approach to and structures for ongoing improvement, andother factors.

Since formulating the Aichi Steel Environmental Charter in
1996, we consider environmental conservation in all phasesof our business activities, and work to achieve continuous
improvements. In March 2017, we revised our Green
Procurement Guidelines, which were established in 2003, toreflect changes in environmental laws and regulations, andcustomer demands and regulatory trends. We also work topurchase products with minimal environmental impact andprioritize purchases from suppliers engaged in proactive
environmental conservation efforts.
We identify and manage banned substances and restricted
substances in line with chemical substance regulations andcustomer requirements.
When entering a new transaction or making changes tocurrent transactions, we also request that suppliers submit aReport on Presence of Environmentally Hazardous Substances,and ensure they are not used.

● Mutual growth based on mutual trust
Our relationships with our suppliers based on building
and maintaining relationships of trust through close
communication, and a basic approach that calls for us togrow together with our business partners and share thefruits of our mutual efforts.
● Legal compliance
We comply with all relevant laws and regulations related
to our purchasing activities, and also carefully control theconfidential information of our suppliers in accordance withour company rules.

AICHI STEEL REPORT28

Priority Issue

4

AICHI STEEL REPORT 2019

Strengthen Relationships
with Local Communities, andActively Contribute to Society
Materiality

Green (planting and environmental conservation)

Creative (education, culture)

Twice every year, students of the Aichi Steel TechnicalTraining Institute plant flowers in the roundabout in frontof Meitetsu Shurakuen Station, the station nearest our
offices, as oneof our activities
to clean theneighborhood.

Launched in 2010 to mark the 70th anniversary of our founding,every year we visit schools to present a “Lesson about Iron” tostudents. The project, which is in its ninth year, aims to teachelementary school fifth graders
about the local industry of Tokai
City, the largest iron-producing
region in central Japan. Throughalessoncalled“Making
Magnets,” we offer a fun way for
all elementary school students
to experience manufacturing.

ISO 26000 relevance

6.8 Community involvementand development
SDGs relevance

The Aichi Steel Group seeks prosperous coexistence with surrounding communities, is conscious of its role as a “goodcorporate citizen,” and is actively involved with the local community. We place importance on communication through oursocial contribution activities and other efforts, and by gaining the trust of communities and understanding of our businessactivities, we strive to be a company that is continually supported welcomed in the community.

▶
Student plantingof flowers infront of Meitetsu
Shurakuen Station

Creative lessons

12 schools, 36 classes

Volunteer support

Social contribution policy■ Changes in the number of volunteers
in social contribution activities (cumulative)

In pursuit of harmonious coexistence and co-prosperity, Aichi Steelpromotes community-oriented activities focused around four key words:“clean,” “green,” “creative” and “volunteerism.”
The Volunteer Center, located in the General Affairs Division, provides
information and promotes educational activities with the aim of supporting
employee volunteer activities. It also plans smaller-scale volunteer activities
which employees can participate in, and encourages them to experience
volunteering for themselves. During fiscal 2018, we increased participationin activities through efforts such as an increased number of activities topromote harmony with nature, and starting the sale of bakery goods andlunchtime volunteering activities in the area around Head Office. We set a
record with a total of 9,175 volunteers, which was 1,899 more people thanlast year.

Number of volunteers in FY2018

10,000

9,175

9,000
Number of volunteers● Activity promotion system

8,000
6,629

7,000

5,914

6,000

7,276

5,000

■ Support for disaster-affected areas

4,000
3,000
2,000

Established in 1993, the Aichi Steel Volunteer Fund continued this fiscal year to donate to
local social welfare organizations and others near our company, and to provide support
after the Kumamoto Earthquake. It also provided ongoing support to areas affected by
the heavy rains in July 2018. Another voluntary and ongoing program that employees canparticipate in is the “one-coin” donation program, where they donate 100 yen from theirpays every month.
In fiscal 2018, we launched a new initiative to support welfare facilities by starting thesale of bakery goods at new locations. We also called for the donation of old ties andchildren’s books, and started lunchtime volunteering activities where employees cleaned
up the collected books and separated the fabric from collected ties.

“One-coin” donation

544 volunteers■ Lunchtime volunteer activities

3,837
2014

2015

2016

2017

2018
(FY)

9,175

(1,899 person increase year-on-year)
Clean (beautification, safety, security)▲Local specialties from areas affected by the Great
East Japan Earthquake on sale at plant open days
and other events

In addition to holding the “Nearby roads clean-up campaign” every two months to help clean our neighborhoods, we have been
holding Clean Aichi Day every October since 2009, together with employees of domestic and overseas subsidiaries, as one of Aichi
Steel's CSR Enhancement Month activities.
We also conduct traffic safety awareness activities as a responsible manufacturer in the automobile industry. One of those
activities is “Zero Day” safety patrols that each site continues to conduct.

Nearby roads clean-up campaign

Clean Aichi Day

Traffic safety awareness6 events, 152 volunteers 1,468 volunteers 2,381 volunteers

29

AICHI STEEL REPORT▲Approximately 1,800 towels donated by
employees to Seki City, Gifu Prefecture, an area
affected by heavy rains▲Separating the fabric from ties as a lunchtime
volunteer activity

Interaction with the community◀Community meeting (Tokai City)● Events and participation
We hold community meetings in the citiesof Tokai (February) and Kariya (December),where we promote exchanges with residentsof the local communities and actively
participate in a variety of local volunteer
activities. We also support activities
involving festivals, sports days and otherlocal events in the communities surrounding
our sites, and dispatch employees to assist
with the operation of those events. We
also invite local residents to events held at
our headquarters and plants, and work to
encourage interaction with our employees.

▶Shiawase Mura: Support for
production workshops forparents and children at
Momiji Matsuri (Tokai City)AICHI STEEL REPORT

30

Priority Issue

5

AICHI STEEL REPORT 2019

Strengthen Initiatives toward
Manufacturing in Harmony with
the Global Environment

Initiatives for building a low-carbon society

ISO 26000 relevance

6.5 Environment
SDGs relevance

The Aichi Steel Group has established medium- to long-term targets around three environmental issues—“building a low-carbon
society,” “building a resource-recycling society” and “achieving harmony with nature”—and is working to achieve those targets.
Through these efforts, we are achieving effective use of energy and resources and, through harmony between the global
environment and manufacturing and by providing products and services with low environmental burden, contribute to thesustainable growth of society and our world.

Materiality

Action item

Building a low-carbon
society3.

Thorough implementation of energy
saving activities in production

4.

Seek better transportation efficiency
in logistics

Harmony
withnatureMajor efforts

Building a resourcerecycling society

Coke

7%

Total CO2
emissions
681,000 t-CO2

Total CO2 emissions

t-CO2/year

1. Reduce energy consumption by
improving productivity, etc.
2,900 t-CO2/year
2. Reduce energy consumption by
improving thermal efficiency of
forging heat treatment furnaces,
etc.
5,800 t-CO2/year
Total

8,700 t-CO2/year

Hindrance factors
City gas

29.9%

Electricity

59.9%

1. Increase in energy consumption
due to increased production
20,600 t-CO2/year

20,600 t-CO2/year● Contributions to end-of-life car recycling

Evaluation• Development of products that reduce the environmental burden✔

• Planning and implementing CO2 reduction activities at each plant• Promoting energy savings in production
On-site inspections to improve energy efficiency through joint patrols
between each site and EMS*1 top management✔

• Reduce traffic lines• Modal shift (from land transport to sea transport)• Improve loading efficiency (Kariya and Forging plants)✔

• Internal reuse of dust from electric furnaces
Reduce by-products during production• Internal recycling of electric furnace refractories
and continue to utilize resources• Some external sale of stainless steel electric furnace dust
effectively• External recycling of waste acid and treated sludge
6. Promote projects that benefit• Operate second “AS shot”*2 machine
resource-recycling corporations
7. Reduce and effectively use packaging• Monitor for new packaging
materials in logistics operations
8. Reduce water use in production• Continue managing water use
activities
Harmony
9. Promote activities for preservation of• Participation in “All-Toyota Green Wave Project” activities
with nature
nature and biodiversity• Implement strict management to achieve 80% or below of regulation
10. Promote activities for zero
values set by environment-related laws
abnormalities and complaints• Promote prevention activities• On-site inspections of domestic subsidiaries at “Aichi Steel Group
Environmental Study Group”
11. Enhance consolidated environmental• Environmental audits of domestic subsidiaries by the General Manager ofmanagement
the Safety & Environmental Division• Enhance chemical substance management system
12. Reduce emissions to contribute toimprovement of urban air quality in• Monitor the adoption of low-emission vehicles
each country and region• Obtain information on product chemical substances and ensure
13. Promote environmental activities incoordination with business partners
compliance with Green Procurement Guidelines
14. Further reinforce global employee
environmental education and• Trial environmental risk prediction training tools
awareness activities• Continuous publication of environmental reports and enhancement of
15. Ensure active disclosure ofenvironmental information andcontent• Enhancing environmental communication activities
enhanced communication activities

0.4%

Measures to develop a recycling-based societyManagement

In accordance with the End-of-Life Car Recycling Act, whichcame into effect in 2005, the Toyota Group has been working
towards total recycling. Aichi Steel is cooperating with Toyota
Metal Co., Ltd. to improve recycling and develop recycling
technology for glass parts, which have been the most difficult.
We introduced silica sand into steel making slag generated
in electric furnaces as a molten slag cooling down material,
but we focused on the similarities between silica sand andthe glass components and made it possible to achieve thesame effects by mixing silica sand with waste glass, and it is* Molten slag cooling down material: An electric furnace byproductthat is added to control the slag components, reduce thetemperature as a cooling material, and curtail explosive boiling.

5.

Environmental management

Three Core Themes

2.

Resource
recycling

Other

Total

Lowcarbon
society

We formulated the Aichi 2020 Environmental Action Plan, a statement of policies
and plans for environmental actions from fiscal 2016 to fiscal 2020. The plan
adopts three core themes for the direction of our environmental action basedon environmental management: “building a low-carbon society,” “building a
resource-recycling society” and “achieving harmony with nature.” By reinforcing
management from a global perspective that extends to consolidated subsidiaries,
we are contributing, as a sustainable company, to society and the global
environment.

Undertake development of ecoproducts and technologies
Reduce CO2 emissions throughinnovative improvements in energy
efficiency

Heavy oil class A 0.9%

■ Factors behind changes
since last fiscal year
Improvement factors

Oxygen 1.9%(+12,000 tons year-over-year)● 2020 Environmental Action Plan

1.

Based on the “Aichi 2020 Environmental Action Plan,”
we pursued reductions in carbon dioxide to achieve
the targets of “The Japan Iron and Steel Federation’s
Commitment to a Low Carbon Society” (Phase 1).
We attempted to improve CO2 specific consumption
through energy saving practices, but total CO2
emissions increased due to increased production.

681,000

Environmental management

Theme■ Breakdown of energy usedin fiscal 2018 (CO2 emissions)● Fiscal 2018 targets and results

✔

✔
✔
✔
✔
✔

✔

✔
✔
✔

✔

now possible to recycle waste glass as an electric furnace
byproduct.
As a result, the end-of-life car recycling rate increased to
99.8%. Recycling will continue after fiscal 2019 as well.

▲Waste glass from cars was previously difficult to recycle due toits specialty components and color

Measures to promote harmony with nature● Participation in “All-Toyota Green Wave Project” activities
Aichi Steel is participating in the “All-Toyota Green Wave
Project” activities being implemented by the Toyota Groupand other affiliated companies as part of efforts to coexist
with nature. This project includes a range of activities to“connect communities toward harmony with nature.” We
are undertaking activities that contributing to increased
restoration of ecosystems by connecting people with otherpeople and activities and linking habitats.

● Forestation to create a forest for beetles
Since fiscal 2012, we have been creating a forest for beetles
with the aim of planting a broadleaf forest and creating anenvironment in which beetles and other creatures can live
their natural life cycles. We have been working with the
Chita Peninsula Biodiversity Network Promotion Council andmembers of the Student Action Committee NPO to growthe trees. In fiscal 2018, we received a subsidy from Aichi
Prefecture and together with members of the Student Action
Committee NPO, we helped form “living creature mounds”
and completed the creation of new streams. In fall every year,
we also hold a large harmony-with-nature event called “Mori

Mori event” where employees and their families participate
in programs held in collaboration with other organizations
and companies, nature craft activities, collecting acorns andgrowing seedlings.

▶ Maintaining an
area planted withtrees in 2017

*1 Environment Management System

31

AICHI STEEL REPORT*2 Recycled abrasives made from by-products of the steel making process

AICHI STEEL REPORT

32

Priority Issue

6

AICHI STEEL REPORT 2019

Establish a Solid Financial Foundation to Support Stable
and Sustainable GrowthMateriality

Aichi Steel recognizes that the establishment of a solid financial foundation is critical for enhancing corporate value andsupporting stable and sustainable returns to stakeholders. With the intention of establishing a solid financial foundation
realizing an ROE of 8% or higher as a target for improved profitability, we will steadily and systematically promote effective
capital measures and capital investments aimed at perennial growth.

Business performance for fiscal 2018
Business performance for fiscal 2018 was underpinned byrobust demand for Aichi Steel Group’s main products, steel
and forged products, with net sales increasing by 21 billion
yen (8.9%) to 257.3 billion yen compared the previous fiscal
year. Of those net sales, the Hagane Company accounted for130.1 billion yen, the Kitaeru Company for 109.2 billion yen,
the Smart Company for 14.6 billion yen, and other businesses
for 3.2 billion yen.
On the profit side, factors increasing Group profits included
increased sales volumes, increased selling prices, andincreased profits by overseas subsidiaries. Despite this,operating profits dropped by 694 million yen (5.9%) to
11.119 billion yen compared the previous fiscal year due toincreased costs of raw materials, secondary materials, energy
and increased depreciation expenses. In addition, ordinary
profit decreased by 450 million yen (3.8%) to 11.324 billion
yen compared the previous fiscal year, and profit attributableto owners of parent decreased by 1.679 billion yen (20.5%) to
6.503 billion yen compared to the previous fiscal year.
Profits decreased compared to the previous fiscal year, but
the whole company worked together on measures to improve
profitability, such as reducing costs, increasing sales volumes,
improving sales prices, and improving costs of purchased
goods.

Net sales breakdown(Billion yen)

Other businesses
3.1

FY2017

Smart
Company
14.7

FY2017

HaganeCompany
110.9

FY2018Other businesses
3.2

Smart
Company
14.6

FY2018257.3
Fiscal 2018 consolidated operating profits:
Change from previous fiscal year
(Billion yen)
25

Sales price+11.4

Cost ofpurchased goods–15.3

Sales volume
+0.3

10

33

Despite forecasts that the current steady demand for specialty
steels will continue, the Aichi Steel Group’s business environmentis going through a major once-in-a-century period of profoundtransformation, as represented by the advancement of vehicle
electrification and automated driving technologies. We expect thetrend toward a smart society, which creates and offers new value,
will accelerate going forward.
In such an environment, our aim is to always respond appropriatelyfrom the ESG perspective (environment, society and governance)
and according to the Aichi Way (Aichi Steel Group’s universal
values and codes of conduct), and to continue providing value tosociety through materials. As the second year of our Medium-termManagement Plan (FY2017–FY2020), formulated to achieve thesegoals, the whole Group worked to improve profitability this fiscal
year.

Operating profit and operating profit margin
Operating profit
Operating profit margin(Billion yen)

20

11.8

FY2017
results

AICHI STEEL REPORT

Improved
profits+3.6

Increased operating
profits by consolidated
subsidiaries+1.4
Increased
depreciation,
expenses, etc.
–2.1

(%)

6

5.00
15

4.41

4.32
11.8

10.6

11.1

4

3.39

10

2.75
5.8

7.2

2015

2016

2

5

0

2014

Aichi Steel’s targets for fiscal 2020, the final year of our Medium-termManagement Plan, are consolidated net sales of 250 billion yen or
higher, consolidated operating profits of 20 billion yen or higher, andROE of 8% or higher.
To reach these targets, we will work to improve capital productivity
and profitability of our businesses to both maintain and strengthena solid financial foundation.
During fiscal 2018, we exceeded our net sales target due to therobust demand that our core products were experiencing.
ROE during fiscal 2018 was 4.27%, which is still short of our fiscal
2020 target of 8%, but we will strive to increase the efficiency of
capital and assets by increasing profits and streamlining our balance
sheet.
Sales, purchasing, plant and various other divisions have beenworking on drastic measures to improve profitability, which wecall breakthrough activities. To increase profits, we will further
strengthen our efforts to “reform selling and buying practices andraise profitability through improved manufacturing capabilities,”and “reform fixed cost management from the planning stage in linewith selling prices.”
Over the medium- to long-term, we will also accelerate efforts
to “develop areas of expertise in “Home & Away” from a global
perspective and “create new businesses by enhanced planning
through stronger ties between Headquarters and Companies.”
Streamlining the balance sheet, on the other hand, will entail
continued measures to achieve efficient capital expenditure,
reduced inventories, effective capital utilization across the Group,and reduced strategic cross shareholdings.

2017

02018 (FY)

5.55

6

Net assets and ROE
Net assets
ROE(Billion yen)

300

(%)

4.27

4.14
3.60

200

161.6

151.2

147.5

4

160.8

161.8

100

0

2

0.01
2014

2015

2016

2017

0
2018 (FY)

Total assets and ROA
Total assets
ROA(Billion yen)

600

(%)

2.99

3

2.30

2.33
1.95

400

15

0

HaganeCompany
130.1

Kitaeru
Company
109.2

20

5

● Business environment● Initiatives to improve corporate value

236.2
Kitaeru
Company
107.3

Targeting improved corporate value

264.6

251.0

271.7

2

275.3

290.2
1

200
11.1

FY2018results

0

0.01
2014

2015

2016

2017

0
2018 (FY)AICHI STEEL REPORT

34

Priority Issue

6

AICHI STEEL REPORT 2019

Key financial data
We are systematically and efficiently expanding our strategic
capital expenditure to help build solid manufacturing infrastructure
and achieve a stable profit base, which are two of the objectives
established by our Medium-term Management Plan.
During fiscal 2018, we made capital expenditure totaling 20.9 billion
yen, mainly for the purposes of increasing production capacity on
forged and electro-magnetic product manufacturing equipment, andfor streamlining, updating and functionally improving steel and forgedproduct manufacturing equipment.
We obtain the necessary funds for investment through funds
on hand, loans and corporate bond issues. Going forward, while
keeping an eye on our cash flows from sales and investing activities,
we will continue sourcing external funding when necessary tomaintain capital liquidity, and working to increase cash flows fromoperating activities to reduce interest bearing debt.
Aiming to develop and expand new applications and products forour existing businesses while leveraging the DNA of our materials
business, and steadily fostering and strengthening next-generation
businesses for the coming smart society, we proactively
implemented R&D activities with R&D expenses of 3.9 billion yen in
fiscal 2018.

Capital Expenditure, depreciation Expense
25

20.8

20
15

15.4
12.711.8
12.6

13.8

12.3

Segment:

20.9

19.0

14.4

Segment:
2014

2015

2016

2017

2018 (FY)Interest bearing debt and debt-equity ratio
100

Interest bearing debt
Debt-equity ratio

80

0.38

(Billion yen)40

FY2016FY2017FY2018240,647

214,120

212,837

236,237

257,315

Hagane Company

96,225110,974

130,180

Kitaeru Company

99,599107,352

109,217

Smart Company

13,82014,786

14,627

Other businesses

3,191

3,123

3,290

7,218

11,813

11,119Hagane Company

5,653

8,006

9,245

Kitaeru Company

845

2,747

1,057

Smart Company

237

348

−39

Other businesses

482

710

856

Operating profit

560

FY2015

Profit and loss

100FY2014

Net sales

Capital expenditure
Depreciation expense(Billion yen)

(Million yen)

0.29

0.27

44.9

(%)

0.39
0.31

54.5

59.6

47.3

37.4

0.5
0.4

0.3
0.2

10,616

5,883

4.41

2.75

3.39

5.00

4.32

Ordinary profit

11,141

5,835

6,863

11,774

11,324

Profit before income taxes

10,693

1,409

8,045

12,371

10,455

Profit attributable to owners of parent

6,023

20

5,084

8,182

6,503

Profit margin attributable to owners of parent (%)

2.50

0.01

2.39

3.46

2.53

Operating profit margin(%)

Capital expenditures and R&D expenses

20

0.1

Capital Expenditures

12,752

15,40820,831

19,02020,9140

0.0

Depreciation Expenses

11,833

12,692

12,353

13,81814,423R&D expenses

3,538

3,282

3,304

3,777

3,992

2014

2015

2016

2017

2018 (FY)Profitability

Shareholder returns

Profits attributable to owners of parent andReturn on equity (ROE)

(%)

4.14

0.01

3.60

5.55

4.27

net profit per share

Return on assets (ROA)

(%)

2.33

0.01

1.95

2.99

2.30

264,694

251,078

271,763

275,315290,294

Profits attributable to owners of parent
Net profit per share(Billion yen)

15

Respect for shareholder profits is an important management policy
at Aichi Steel. While striving to enrich and strengthen our corporate
structures, we are working to increase corporate value and enhance
our dividend policy by systematically expanding our businesses.
Following this policy, we aim to deliver dividends that meet ourshareholders’ expectations while maintaining the internal reserves
necessary for future business expansion and taking full considerationof our business performance, financial condition and payout ratios.
Our target consolidated payout ratio is 30%.
In line with our policy detailed above, the annual dividend paid infiscal 2018 was 120 yen per share.

10415.71

258.34

8.1

5.0

5

0
2014

500

330.38306.25
6.0

0

(Yen)

6.5

Net assets

161,669

147,534

151,273

160,806

161,889

Capital adequacy

153,316

139,344

143,024

151,891

152,638

57.92

55.50

52.63

55.17

52.58

44,91537,44754,59847,31759,618

0.29

0.27

0.38

0.31

0.39

Cash flows from operating activities

19,33625,193

13,35013,164

13,580Cash flows from investing activities−13,565−12,122−19,677−20,954−19,765

Cash flows from financing activities−10,158−9,466

15,231−9,509

9,035

Capital adequacy ratio(%)

Debt-equity ratio (Ratio)
2016

2017

0

2018 (FY)

Cash dividends per share and payout ratio(Yen)Cash flows

Investment indicators

150

120
100

Total assets

Interest bearing debt

1.02

2015

250

Assets, liabilities and capital

100

100

120

100

Net profit per share(Yen)

306.251.02

258.34415.71330.38

Net assets per share(Yen)

7,794.08

7,080.24

7,266.42

7,716.77

7,754.80

Dividends per share

(Yen)

100

100

100

120

120

(%)

32.7

−

38.7

28.9

36.3

(Persons)

4,617

4,654

4,773

4,847

4,957

Payout ratio

50

Non-financial information
0

Employees
2014

2015
FY2014

Payout ratio (%)

35

AICHI STEEL REPORT

32.7

2016
FY2015ー20172018 (FY)FY2016FY2017FY2018

38.7

28.9

36.3

*1 Every 10 shares in the Company were consolidated into one share effective of October 1, 2016. Net profit per share, net assets per share, and dividends per share
were calculated in anticipation of this share consolidation at the beginning of fiscal 2014.
*2 The ASBJ Statement No. 28, Partial Amendments to Accounting Standard for Tax Effect Accounting (February 16, 2018) came into force at the beginning of fiscal
2018. The key management indicators for FY2014, FY2015, FY2016 and FY2017 represent retrospective application of this accounting standard.

AICHI STEEL REPORT36

AICHI STEEL REPORT 2019

Third-party View
Corporate Profile

This year’s Aichi Steel report again accurately describes thecompany’s stance toward strategic and proactive management
for a smart society, based on the clear commitment of thepresident.
Mr. Satoshi Chikami
Executive Officer and Professor, Faculty of International
Welfare Development, Nihon Fukushi University
Clear stance toward transformation for a smart society
The Message of Commitment from the President points toward
development of autonomous driving support systems and research anddevelopment in the areas of healthcare and agriculture as new businessfields where Aichi Steel is focusing its efforts for a smart society. Special
Feature 1 also details the outcomes of autonomous driving support
trials in Ofunato and Taiki areas.
These sections clearly communicate how Aichi Steel is tackling thesmart society and expanding new businesses. The automotive industry
is in the middle of a major transformation right now. Establishing a
Frontier Research and Development Division and clearly demonstrating
the proactive stance the whole company is taking to this issue are both
important for gaining the trust of society, shareholders and investors,
which is a commendable approach.
Aichi Way demonstrates corporate governance (Pages 1, 21)This year’s report even more clearly explains that the Aichi Way,established in January 2018 as a set of values and codes of conduct
for the Aichi Steel Group as a whole, is part of the Group’s corporate
governance activities. The Aichi Way focuses on the three concepts of
Sustain, Appreciate, and Create, which each form an important ethicalfoundation for companies and employees to share. From next fiscal
year, I suggest the inclusion of a number of case studies of the Aichi
Way in action to demonstrate the connection to these three keywords.
Future created by in-house company system (Pages 15–18)
Launched in April 2017, the three-Company in-house company system
is now three years old. Compared to last fiscal year, this year’s report
more clearly describes the business risks and challenges faced by each
Company. The straightforward explanations of short-term initiatives
for 2020, and of medium-term strategies for Company growth in asmart society are commendable. From next fiscal year, providing more
information on the outcomes being achieved by the in-house company
system, while also linking them to priority issues, might demonstrate
more conclusively the road to transformation in the Message ofCommitment from the President that I mentioned above.

the way it illustrates in an easy-to-understand manner the connections
between the priority issues and the four perspectives of environment,social, governance and finance, and the progress being made. Clear andeasy-to-understand presentation of the implementation and progressof initiatives in each area is important for responding proactively to ESG
investment, and the page layout is commendable for the straightforward
way it depicts connections to each of the priority issues.
What issues stand out among the individual ESG indicators are that
employee total annual working hours continue to decline, that social
contribution expenditure and number of volunteers grew considerablycompared to the previous fiscal year, and that indirect landfill waste
has more than halved from the previous fiscal year despite waste sent
directly to landfill increasing compared to the previous fiscal year. Other
indicators are also showing steady improvements. I look forward tofurther evolution of initiatives from all ESG perspectives.

Corporate Profile
Establishment
CapitalRepresentative
Employees
Business
Description

March 8, 1940
25,016 million yen (as of March 31, 2019)
Takahiro Fujioka, President and Representative
4,957 (Consolidated)/2,663(Non-consolidated) (as of March 31, 2019)
Production and sale of specialty steel products,
forgings and electromagnetic products

Major Products
Specialty steel

Stainless steel / titanium
Based on our morethan half-century
ofexperience
andtechnology
in specialty steel
manufacturing, theAichi Steel Group
continues to evolvein pursuit of being
number one inquality.

Example products:
Structural steel, free-cutting steel, spring steel, etc.

The durability of stainless steel,which resists the rust that is oneof iron's weaknesses, has been
demonstrated in dams, floodgates,
ships, bridges, chemical plants anda wide variety of other fields. In
recent years, stainless steel has also
found many uses in architecture.
Furthermore, using the metalworking
technologies we have developed
through stainless steel, we also
develop titanium rods.

Example products: Stainless steel shapes, round bars, etc.

Forged productsElectro-magnetic products
The Aichi Steel Group offers
integrated
production,from steel material toforgedproducts,
andthat strength contributes
tomorecompact,
higher-performance
automobiles. While we
produce a wide range of
forgings, we are particularly
proud
to
be
highlycompetitive in crankshafts,
ring gears and shafts.

Conclusion
This fiscal year was the final year of a three-year effort, started infiscal 2017, to integrate both financial information and non-financial
information (ESG information) into the report. This demonstrates
another accomplishment toward creating a new investor-focused
report. I look forward to continued efforts to create a report that all
stakeholders need.
* This third-party view was written based on interviews with management and related parties.

Easy-to-understand presentation of priority issue establishment andprogress (Pages 19–20)

Head Office: Tokai City, Aichi Pref., Japan
Sales Offices: Tokyo/Osaka/Fukuoka
Overseas Offices: Shanghai/Silicon Valley
Plants: Chita/Kariya/Forging/Higashiura/
Gifu/Seki/Electronic Components

Refer to the website for further detail: https://www.aichi-steel.co.jp/ENGLISH/products/index.html

Significant enhancement to description of financial foundation (Pages
33–36)
Information on Priority Issue 6. Establish a Solid Financial Foundation
to Support Stable and Sustainable Growth has been expanded
considerably, and the way this section also expresses the Group’s
positive stance with awareness of ESG investment is highly
commendable. In addition to the easy-to-understand description ofchanges in consolidated operating profits compared to the previous
fiscal year, the report proactively discloses financial indicators forinvestors, including ROE, ROA, capital investment, R&D expenses,
debt-equity ratios and cash flows. I look forward to the continuationof this positive practice as a way to improve corporate value.

Offices

Example products:
Crankshafts, differential ring gears, rear axle shafts, etc.

The
Group
is
also
expandingintonewbusinesses
extendingfrom stainless steel thatcombinetechnologies
in materials, magnetics
and surface treatment,
including electronic parts,
magnets, sensors, anddental appliances.

Example products: MAGFINE®, MI sensors, etc.

The compilation of six priority issues that Aichi Steel Group is working
on to help realize a sustainable society requires special mention for

Aichi Steel Group

Response to the Third-party View

Mitsuharu Tsuzuki
Officer in charge ofCorporate
Communications Div.

37

AICHI STEEL REPORT

Professor Chikami has provided us with valuable insights and proposals
since fiscal 2010, and we are extremely grateful for his support.
This year, as we focus on the coming smart society, we have
implemented a variety of initiatives under the banner of transformation,in line with our 2020 Medium-term Management Plan, so that we
can survive this major once-in-a-century transition and continue
contributing to society as a company. When putting this report
together, as the final year of a three-year effort, we also tried to make
improvements that would deliver a report that is even more needed byour stakeholders.
The high praise we received for our initiatives here encourages us in
our continuing efforts. To live up to these expectations, we will further

enhance our initiatives as we strive to contribute to society and achieve
steady growth for the company. In regard to the comments about
including case studies of the Aichi Way in action and linking outcomesof the in-house company system to priority issues, we will share thisadvice with relevant divisions and use it to create reports that are eveneasier to understand from next fiscal year.
Aichi Steel celebrates its 80th anniversary in 2020. Going forward,
we will continue to provide new value to a new society and contributeto resolving social issues. At the same time, we will improve andbroaden communication with stakeholders through such things as our
new recreation hall and plant tours, as we strive to be a more open
company that is a company whose presence is cherished by locals.

Refer to the website for further detail: https://www.aichi-steel.co.jp/ENGLISH/about/aichi_steel_group.html

9 companies in Japan

9 companies overseas

・AIKO CORPORATION
・AICHI CERATEC CORPORATION・OMI MINING CO. LTD.
・Aichi Techno Metal Fukaumi Co. Ltd.
・Aichi Steel Logistics co. ltd.
・Aichi Information System Corporation
・AIKO SERVICE CO. LTD.
・Aichi Micro Intelligent Corporation
・Asdex Corporation

・AICHI FORGE PHILIPPINES, INC.(AFP)・Aichi Forge USA, INC. (AFU)・Aichi Europe GmbH (Ae)・AICHI FORGE (THAILAND) CO. LTD.(AFT)・Shanghai Aichi Forging Co. Ltd. (SAFC)
・PT. AICHI FORGING INDONESIA (AFI)・Aichi Magfine Czech s.r.o (AMC)
・Aichi Korea Corporation (AKC)・Aichi Magfine Technology (Pinghu) Co. Ltd. (AMT)AICHI STEEL REPORT38

FSC-certified paper, with the

100% vegetable oil non-VOC

Waterless printing without

proof of wood product fromink (not containing volatile

the use of damping water

appropriately managed

organic compounds) is used.

containing harmful

forests, is used.

substances is employed.

Primary contact: Corporate Communications Div.

Released: September 2019

1, Wanowari, Arao-machi, Tokai-shi, Aichi 476-8666, Japan
Tel: +81-52-603-9216
Fax: +81-52-603-1835
https://www.aichi-steel.co.jp/ENGLISH/index.html

The idea expressed

Aichi Steel contributes to the continuous growth of people, communities, and the environment.

by the cover

As a material manufacturer, we want to create paths to the prosperous society of the future and support the people
who will live in it. It is with this desire that for three years starting 2017 the cover will tell stories of continuous
development and growth of people, communities, and nature through the efforts of Aichi Steel. We hope that you will
look forward to the changes made next year.