INTEGRATED REPORT 2020

Editorial Policy

will strive to make a positive contribution to society with safe,
1 We
appealing, and useful technology and products.
will pull together culture based on trust, reliability and the
2 We
pursuit of excellence.

3

Website: Sustainability

Reporting MediaOur reporting via print and the web takes advantages of thecharacteristics of each medium. The print version narrows
down the content to those items of significant importance andthose of greatest interest to the public, presented in aneasy-to-read and easy-to-understand format. The web version
offers a more complete overview of our ESG initiatives.

We will be a good corporate citizen, ever mindful of ourenvironmental responsibilities.

Philosophy
SystemSelected 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 Integrated Report 2020 was prepared to assist understanding among our many stakeholders of the approaches taken by
Aichi Steel and the Aichi Steel Group in fiscal 2019, ended March 31, 2020. Besides describing these approaches with specific examples,it sets forth as much as possible the causes and future initiatives concerning items for which targets have not yet been met.
As we celebrate our 80th anniversary, we have written this report with a focus on the clear communication of our growth strategies, andthe value we contribute to society, during this major once-in-a-century transition. The report follows an integrated reporting format,
combining financial and non-financial information, and introduces our initiatives for creating medium- to long-term corporate value as we
strengthen our efforts to achieve the SDGs*1 to put our ESG*2 management into action.
Use of color, volume of text, text size and other factors weretaken into consideration to create a more easily readable report.

Aichi Steel Integrated Report(this report)

Complete overview

Our Vision

Importance to Aichi Steel Group and stakeholders

Our
VisionReference Guidelines

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

Report Period and Scope

MissionThe Report covers activities conducted by the Aichi Steel Groupduring fiscal 2019 (April 2019 to March 2020). However, some
activities conducted before or after fiscal 2019 are also explained
where necessary.

A great society comes fromgreat materials.

Vision 2030

GRI Standards
ISO 26000 (Corporate Social Responsibility)
International Integrated Reporting Framework (published by IIRC)

Information Available on Our Website
For topics with the “Web” mark, please refer to our website for

Websitefurther 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.

Company of Choice Globally*1 SDGs: Sustainable Development Goals*2 ESG: Environmental, social and governance

Shareholders
andInvestors

Aichi Steel Group Action Guidelines

Suppliers

Declaration on Labor-Management Cooperation

Customers

Employees

CONTENTS
Our Vision / Editorial Policy …………………………………………… 1

Priority Issues ........................................................................................................ 19
E Priority Issue 1 Contribute to a sustainable global environment ............. 21

The EarthandSociety

Our History of Value Creation
DNA of Aichi Steel ………………………………………………………… 3
Aichi Steel Today …………………………………………………………… 5
Value Creation Model …………………………………………………… 7

Brand Slogan

S Priority Issue 2 Encourage the creation of workplaces that are safe andcomfortable to improve employee happiness ................ 25
Priority Issue 3 Create a prosperous society through business reformand provide extremely competitive products ................ 27
Hagane Company.................................................................. 29
Stainless Steel Company ..................................................... 31
Kitaeru Company.................................................................. 33

In March 2020, we created our brand slogan. This is our declaration tosociety that we intend to become a company that expands thepossibilities of manufacturing by adding value to materials, as thestarting point, to evolve them into products and systems.
The orange dots in the logo symbolize our commitment to using materials
to support the future.
Brand website (Japanese only)

Message of Commitment from the President …………………… 9

Risks & Opportunities ………………………………………………… 15
Vision 2030……………………………………………………………… 17

Smart Company.................................................................... 35
Priority Issue 4 Strengthen Relationships with Local
Communities, and Actively Contribute to Society .......... 37
G Priority Issue 5 Increase Compliance Awareness Globally,
and Strengthen Corporate Sustainability .......................... 39
Priority Issue 6 Establish a Solid Financial Foundation to Support
Stable and Sustainable Growth .......................................... 45
Financial/Non-financial Highlights ........................................................................ 49

01

AICHI STEEL INTEGRATED REPORT 202002

Our History of Value Creation

History

DNA of Aichi Steel
Aichi Steel Corporation was originally established as a steel making division at
Toyoda Automatic Loom Works (currently Toyota Industries Corporation), and it
began operating in 1940 as Toyota Steel Works. The history of Aichi Steel shows ourefforts to contribute to society by carrying forward the spirit of our founder Kiichiro
Toyoda and his belief that “Great cars are made with great steel.”

2002
Successfully developed andproduced MI highly sensitive

magnetic sensor elements

2011
Completed construction of

No. 3 bloom
continuous castingmachine at Chita Plant

Conventional
product

Developed
product

2015

Developed steel forhigh-strength connecting
rods to improve fuel efficiency
for vehicles

1995

Net sales(Billion yen)

Established Aichi Forge
Philippines as first overseas
forging base

250

1943

1964

Started operations
at Chita Plant

Startedoperations at

steelmaking divisionof Toyoda Automatic
Loom Works

Forging Plant

150

1958

First prototype,A1 passenger
vehicle completed

100

50

Completed construction of
new production line at
Gifu Plant for power

Brought stainlesssteel rolled angle
bars to market

card lead frames
for EVs

2014

2016

the high-pressurehydrogen system of
MIRAI fuel-cell vehicles“Built integrated
production system fromraw materials to sensors
Started production
amorphous wire”

Used stainless steel in

Operatingprofit(Billion
yen)

20

2010

2001

Developed SUSCOn®
stainless steel bars forconcrete reinforcement asa solution to weaknesses
in steel bars

1935

Started autonomous
driving trials withautonomous driving
support system using
magnetic markers

2003

Developed TetsuRiki
Agri to promote
photosynthesis invegetation

1934

200

2018

(GMPS)

History of the Business

Established as the2017

Developed Dy-free
MAGFINE® magnetic

powder containing no heavyrare earth metals

15

1982

Developed world’s
first composite steel
making process

10

5

1940
Changed to become a

specialty steel
manufacturer

Net sales
Operating profit

0

0

1960

1934−

1970

1980

1990

Philosophy Evolution

1940

1985

1998

2018

Five Main
Principles of Toyoda

Our Vision

ActionGuidelines

Aichi Wayestablished as
management philosophy

03

establishedestablishedestablished

2020
Brand slogan

created

2000

2010

* Consolidated since 1995
* The standards for posting sales were changed in 1998 (the portion of sales from steel making basematerial are excluded from sales of steel products)

2020 2030(80th Anniversary)

Looking forward to our 90th, 100thand other future anniversaries
AICHI STEEL INTEGRATED REPORT 202004

Our History of Value Creation

At a glance

Aichi Steel Today
Manufacturing at Aichi Steel had its beginnings in specialty steel production. While carrying on this founding
DNA, it has evolved into a wide range of businesses. Taking advantage of the technical capabilities we havecultivated, we are creating the products of choice for our customers.

Segment

Hagane Company
Based on our experience and technicalcapabilities in manufacturing specialty
steels for over half a century, the Aichi
Steel Group continues to evolve in pursuitof being number one in quality.

Stainless SteelCompany
As the leading manufacturer of stainlesssteel shapes in Japan, the Aichi SteelGroup meets the various needs of thecustomers through large variety andsmall quantity production of over 4,000
products of different shapes and types.

Kitaeru Company
Leveraging the strengths of integrated
forging with steel making process, whichenables in-house production of everythingfrom steel material to forged products,
the Aichi Steel Group is producing highvalue-added components that contributeto lighter, higher-performance automobiles.

Smart Company
The Aichi Steel Group is creating new
businesses across five fields, fromelectronic components, magnets, dentistry
and sensors, to iron fertilizers developed
through knowledge of specialty steel
manufacturing.

Net sales (FY2019)82.8

billion yen

39.0

billion yen

102.0

billion yen

14.8

billion yen

Main products

Developed technologies

Carbon steels and alloys
for machine structuraluse, steel with guaranteed
hardenability for structuraluse, microalloyed steel,boron steel, spring steel,high carbon chrome bearing
steel, etc.

● Development capabilities that have
evolved with the accumulation of yearsof experience since foundation

Stainless steel shapes,
round bars, deformed bars
and titanium bars, andengineering of stainless steel
construction

Hot-cold-forged products andmachined products (engine,
chassis and drivetrain
components, etc.)

Electronic materials andcomponents, anisotropic
Nd-Fe-B bonded magnets(MAGFINE®), dental magnetic
attachments, ultra-compact
ultra-sensitive magnetic
sensors (MI Sensors), ironfertilizers, etc.

Establishment: March 8, 1940

Company Profile● High quality that contributes toautomobile safety, refined through thebelief that “Great cars are made withgreat steel.”● Hot-rolling technologies of various
shapes and dimensions accumulated
over the years since producing Japan’s
first hot-rolled stainless steel angle barin 1958

Market presence (FY2019)

Hot-rolled steel bars (alloys forstructural use)
Share of Japanese production

No.

No.

● Unique technical capabilities able
to contribute to a diverse range ofcustomers

1

(70%)

Production volume in Japan as asingle forging plant● World-class forging technologies thatcreate highly functional, highly accurate
products● Practical ability to expand thepossibilities of a smart society throughnew products that leverage steel
making technologies(25%)

Stainless steel shapes and flat
steel
Share of Japanese production● Stainless steel building structureengineering technologies, including
design partnership, plant production,and one site construction● Ability to offer solutions using highquality products that leverage thestrengths of integrated forging withsteel making processes

1

No.

1

(No. 3 globally)

Anisotropic Nd-Fe-B bonded
magnets
Share of global
production

No.

1
1

(40%)

Lead frames for EVs
Share of Japanese
production

No.

Capital: 25,016 million yen (as of March 31, 2020)

Business Description: Production and sale of specialty steel products, forgings andelectromagnetic products

Representative: Takahiro Fujioka, President

Head Office: Tokai City, Aichi Pref., Japan

Employees: 4,912 (Consolidated)

Sales Offices: Tokyo / Osaka / Fukuoka

2,687 (Non-consolidated) (as of March 31, 2020)

Overseas offices: Shanghai / Silicon Valley
Plants: Chita / Kariya / Forging / Higashiura / Gifu / Seki / Electronic Components

05

AICHI STEEL INTEGRATED REPORT 202006

Our History of Value Creation

Value Creation

About the Sustainable Development Goals

Value Creation Model

The Sustainable Development Goals (SDGs) wereadopted at a United Nations summit in September 2015as a number of goals for creating a sustainable world.
The global community is working together to achieve thegoals. Aichi Steel is also committed to the achievementof the SDGs through its businesses.

Even as our environment undergoes drastic changes, we will address social challenges through our businessactivities and achieve steady growth, supported by the spirit of our founder and his belief that “Great cars are
made with great steel.” Aichi Steel employees, who all share the Aichi Way mindset, will continue to provide
value to society with the belief that “A great society comes from great materials.” by leveraging the strengthsof materials developed since foundation in each of our business domains.

IdentityStrengths

Roots/DNA of Aichi Steel

Systems and people■ Established to manufacture thespecialty steels required forautomobiles■ Toyota Group’s only materials
manufacturer, supporting thebasic performance ofautomobiles■ Business organization comprising
Companies and a Corporate office■ HR diversity and HR development
systems to support sustainable growth

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

Business
Existing businesses
HaganeCompany

Development andmanufacturing capabilities■ 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 warming and air pollution■ Urbanization and aging
populations■ Information technologies andintelligent technologies■ Changes in automobiles■ Automation and driverlesstechnologies

07

Stainless SteelCompany

Specialty
Steel

Kitaeru
Company

Stainless Steel /Titanium

Smart
Company

Forgedproducts

Electro-magnetic
products

Expanded value through creativity andfurther leveraging of existing strengths

Electronic
functional
components

Batterymaterials

Motors andmagnets■ Global production and sales sites■ Robust supply chains■ Future-focused business and technicalcollaborations

GMPS (Global
Magnetic
Positioning
System)Ultra highsensitive
sensors

Autonomous
driving

Sensing andmedicalEnvironment
and energy
materials■ CO2 reductions through high strength, highperformance materials for lightweighting
vehicles■ CO2 reductions through waste heatrecovery and heat storage units■ Soil improvement and greening throughiron fertilizers■ Safer and more secure healthcare provision
through medical equipment using sensing
technologies■ Food safety through detection of foreign
matter in food
■ Safe and secure workplaces and richer
work lives

Iron
fertilizers

Supporting safe, secure andconvenient mobility

Heat storage material
developed by Aichi Steel

EVs

EVs

Heat storage
systems

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

Maintaining human andglobal healthLaying the foundation
for new businesses

HVs, EVs, FCVs

Changes in society and theenvironment

Value for Society

New value focused on social changes and needs

Business foundation that
supports steady growth● ESG management (Environmental, Social andGovernance)● Risk management and compliance● Prioritization (safety, quality, production, costs)● Employee contentedness and growth

Agriculture andbiotechnology■ Accident reductions and help formobility-impaired people throughautonomous driving support■ High strength, high performance materials
to support vehicle running, turning andstopping■ Highly functional
components for EVs
and FCVs

Creating an exciting future■ Creating clean and safe cities throughsuperior design and maintenance-freestainless steel■ Developing materials that make our
dreams come true
(Aerospace, oceanic andunderground development
etc.)
AICHI STEEL INTEGRATED REPORT 202008

Message of Commitment from the President

Message of Commitment from the President

Contributing to
Sustainable Earthand Society
Through Vision 2030

President

Takahiro Fujioka
Aichi Steel and the COVID-19 Pandemic

What We Should Do to Transform the Industry

Due to the spread of the novel coronavirus disease

optimal operations by reviewing our operating

Our response to CASE

(COVID-19), and an economic slowdown in China

systems and adjusting production.

caused by trade friction between the U.S. and China,developed systems for commercializing our GMPS

To stop the spread of COVID-19, we leveraged

Right now, the automotive industry is experiencing a(Global

Aichi Steel production dropped during FY2019 in an

our crisis management

capabilities, built on our

major once-in-a-century transformation. As CASE

autonomous driving support system that uses

environment of rapidly deteriorating demand in theexperience including the January 8, 2016 accident(Connected, Autonomous, Shared & Services, andmagnetic markers that we are developing for

global economy. Nevertheless, the falling price of raw

and natural disasters, to launch an Emergency

Electric) technologies accelerate and automakers

practical use. For electrification, we are focusing onmaterials and efforts to improve profits by managing

Control

implement

reinvent themselves as “mobility companies,” providing

developing electronic components and forgedwith Genryou Management (managing with limited

appropriate measures. We were also proactive inall kinds of mobility-related services, we also have to

products for EVs, and new products for EV motors.

order quantity), which we have been encouraging

adopting working from home and staggered workchange to be able to provide high value-added

company-wide since last year, have yielded results

hours for our employees. As a result of this disaster,

components

and while experiencing a slight drop in revenues, ourwe have had the opportunity to identify challenges

autonomous driving and vehicle electrification in

profits have increased.

withparticular to be areas in which we can make

The impact of COVID-19 on our business was only
minor in FY2019, but with production during the first09

contributions. For autonomous driving, we have

Headquarters

flexibleandworkstyles

quickly

andexplorefutureandsystems.

We

Magnetic

Positioning

System),anconsiderdirections, and we have had considerable help in
driving workstyle reform.

quarter of FY2020 falling below the break-even

On the other hand, I think our second quarter

point, the situation has become extremely difficult.

will be a turning point for us. With customer

To overcome this crisis, we have adopted the

production gradually recovering, this next phase

policies of (1) Ensuring safety and quality, (2)will see increased production. We will beat thisProtecting the health of employees and ensuring no

COVID-19 pandemic by building flexible production

one gets infected, (3) Ensuring customer production

systems and accelerating workstyle reform. And innever stops, and (4) Containing the impact on

the new normal of a post-COVID world, we willprofits to a minimum across the whole company.

continue contributing to the future by adapting

We have also worked to achieve continuous andappropriately to the new environment.

GMPS autonomous driving
support system

MI Sensors (ultra high sensitive
magnetic sensors) used for the
GMPS

Electronic components

Magnet rotor with high strength gear

AICHI STEEL INTEGRATED REPORT 202010

Message of Commitment from the President

Efforts to strengthen
our business foundation

system

in

2017

to

improve

the

speed

of

2020

as

an

outward-facing

initiative

todemonstrate the identity and vision of Aichi Steel.

threeprosperous society; to develop talent throughpromises

that

we

make:

to

createaalso added the Stainless Steel Company to theThis is our declaration to society that we will

The electrification of vehicles will certainly result insystem, as a spin-off of the stainless steel businessbecome a company that expands the possibilities

manufacturing; and to ensure employee happiness

reduced demand for our specialty steels in thefrom the Hagane Company, to become a new pillarof manufacturing by evolving materials, as theand company growth. In the midst of this major

future. For this reason, the company as a whole hasof our business. We did this in response to thestarting point, into components and systems.

transition, we will work to create a happy company,

started efforts to manage with Genryou Management

infrastructure crisis and hydrogen society expected

Created by a project team of employees as awith “people” as our top priority, with mutual trust

starting last year as part of activities to strengthen

in the future and in anticipation of increasing

bottom-up initiative, the final wording was chosen

between those people supporting our company,

our business foundation. Our Companies have been

expectationsforthrough a company-wide vote. The orange dots inand with workers and management heading in thefocused on lowering the break-even point, andstainless steel. We also split our Manufacturing andthe logo symbolize Aichi Steel’s commitment tosame direction.

consolidating equipment to build lean production

Future Planning Headquarters into a Research andsupporting manufacturing and future society fromsystems that are always profitable due to our

Development Headquarters and a Manufacturing

the center of each. In addition to being our“volume-matched costs” approach, and as a result

Innovation Headquarters to increase the speed ofmessage to others outside the company, the brand

we have seen a great improvement. When thecommercialization for development projects and toslogan will also become a unifying force within the

results of your efforts start to become visible likestrengthen

company.

this, it really boosts motivation among employees.

manufacturing functions.

and

the

demands

businessfromsocietyfoundation

for

our

To further accelerate executive decision-making

Management Cooperation that we signed as aconnected earnings capacity on a global basis.

by management, we have also consolidated thedeclaration of cooperation between unions and theStarting with our investment in, and technicalroles of Managing Executive Officer and Senior

support of, India’s Vardhman Special Steels Limited

Managing Executive Officer into a single Managing

in August 2019, we are building the foundations for

Executive

future steel supplies within India and to the ASEAN

governance as well, with the adoption of incentives

region.

to encourage the creation of sustainable corporate

reform. We introduced our in-house company

Officerrole.

Finally, the fourth of our pillars is Vision 2030,
which we established this year.

Our third pillar is the Declaration on Labor-

We are also actively working to strengthen

We are also actively driving organizational

We

are

enhancingvalue and a restricted stock compensation plan toprovide even greater value to shareholders.
Brand slogan

Declaration on Labor-Management Cooperation signingceremony

What We Had to Do as

Approach to creating Vision 2030

We Celebrated Our 80th

Including the above, we have been developing

manufacturing while putting ESG management into

Anniversary

various systems and implementing various reforms.

practice. We will ensure regulatory compliance,

At one point, we felt we had to have a vision thatsafety, quality, and stable supplies (in that order),would define future directions for the company andand continue managing with Genryou Managementalign all our employees. We cannot survive in thein line with the Toyota Production System (TPS), tomiddle of a rapidly changing environment by justflexibly

producing the same yearly plans that we haveprofitability,

produced in past years. We needed a long-termbusiness environment. While ESG management is anvision that could act as a light; one that could beinitiative that we have been implementing for aincorporated into our medium-term and annual

while, the ESG perspective is becoming more andmanagement plans. That was when we establishedmore important globally. We will therefore further

Vision 2030. We felt that with that vision, we could

enhance this initiative to remain a valued andmake every investment with the same unwavering

sustainable company.

becoming president, and a basic policy to enhanceearnings

Four pillars raised during

our 80th year

Aichi Steel celebrated its 80th anniversary in 2020.
To all our stakeholders, I offer you my sincerest
thanks.
Since I became president in 2011, I have worked
to make Aichi Steel the Company of Choice Globallyby strengthening the framework of the company. In

focus.

2020, as we celebrate our 80th anniversary, we

11company to tackle difficulties together. There aredecision-making in the CASE era. In April 2020, we

have raised four important pillars as guidelines

one of my ideas, which our officers formulated

toward our vision for the Aichi Steel Group.

through discussions and research into the history of

The first of those pillars is the Aichi Way, which

our company to embody the three concepts of

we established in 2018. This is an employee-

Sustain, Appreciate, and Create that are so

directed initiative that acts as a code of conduct

important to us.

and spiritual anchor for our employees to all share

The second pillar is our brand slogan, “Innovate

the common values with the same mind. This wasMaterials. Create Tomorrow.” established in Marchcapacity

andbyreformingsmoothlyevenin

respond,abusinessandandimprove

dramaticallychanging

In addition, to put our ESG management into

It is not easy to look 10 years ahead in the middle

action, we also believe the SDGs are importantof a period of turbulence. However, we decided togoals to actively focus on in order to contribute to athink together about what kind of company wesustainable Earth and society as a member of thewould like to become by 2030, even if it turns out toglobal community. In formulating Vision 2030, we

be wrong. Our Companies and Headquarters

have shown the relationships between each of ourtherefore came together to create a vision.

measures and the SDGs so that every employee canPart of that vision is the Company of Choice
Globally concept that I have been advocating since

be aware of how they can contribute to and address
global challenges.

AICHI STEEL INTEGRATED REPORT 202012

Message of Commitment from the President

Vision 2030: three management guidelines

The most important factors for implementing Vision

approach was not properly communicated. For this2030 are a sense of ownership and a change of thereason,There are three management guidelines that we will follow: Contribution to a sustainable global environment;

mindset for every employee. The vision will be

communicate this vision in his own words to enable

Creation of a prosperous society through business reform; and Employee happiness and corporate

meaningless if there is a miscommunication between

each and every employee to understand, and thendevelopment.

management and employees because management’s

work together to put it into practice.

(1) Contribution to a sustainable global
environment

industry-first exhaust heat recovery systems, and heatstorage systems undergoing the world’s first in-plant
trials. At the same time, we will further improve

pursued by the Japan Iron and Steel Federation, we

recycling technologies toward a zero-emission future tobelieve it is our obligation to reduce CO2 emissions infulfill our environmental responsibilities as a company.

the iron and steel industry, so we are implementing a

We will also contribute to maintaining biodiversity

range of initiatives to contribute toward a low-carbon

through the “Forestation to create a forest for beetles”

society.

initiative that we have been implementing since 2012.

we

will

further

reduceCompany

President

needs

to

efficiency through 4S Re-Engineering, finally achieving

As per the “challenge towards zero-carbon steel” being

Specifically,

every

CO2

These days, in addition to improving profitability,

that, in line with the Aichi Way, our brand slogan andcompanies must also contribute to a sustainable

the Declaration on Labor-Management Cooperation

Earth and society on a global scale. The SDGs haveandbecome a common language globally for use inpredecessors, our commitment to Vision 2030 will

customers. We have also manufactured a prototype ofevaluating those efforts. By contributing to thehelp increase corporate value for Aichi Steel.

a

In 20 years’ time, when we reach our 100themissions through initiatives including improving energy(2) Creation of a prosperous society throughbusiness reform

Vision for Aichi Steel on Our 90th, 100th andOther Future Anniversaries

high-speed

motor,

packed

Aichi

Steel

achievement of the SDGs through the realization ofmagnets,

with

with

the

mindsetandpurpose

of

our

high

our Vision 2030, we will be able to continue

anniversary, I want Aichi Steel to still be a company

In addition to reforming existing businesses, we will

strength materials and gears into a single motor unit forproviding new value to society through our beliefof happy, smiling employees. To achieve this goal,

improve profitability by quickly moving new businesses

EVs. As we drive such practical applications, we will

to a commercial standing. As we break away from ourcontinue to create new value that exceeds ourthat “A great society comes from great materials.”survive this major transition, and achieve steadyhistory as a material manufacturer, we will add further

customers’ expectations.

which has evolved from our founder’s belief thatgrowth, we will all work together with one mind

“Great cars are made with great steel.”

and with one force to improve our manufacturing

technologies,that

bringstogether

We plan to commercialize new businesses with avalue to our products as we focus on transforming fromcomponents

global focus, including our GMPS autonomous driving

manufacturer. For example, we will combine material

support system using magnetic markers and irondevelopment with forging technologies to supply thefertilizers that are expected to help improve soils, ascomponents

well as amorphous wire products for use in medical andamaterials

manufacturer

required

for

into

a

electric

cars—butascomponents that are almost finished products—so that

security fields, to help address global challenges.

While celebrating our 80th anniversary this year, I
feel that we have also laid the foundations for our
90th anniversary in 2030 and our 100th anniversarycapabilities and implement ESG management.
The Aichi Steel Group is looking forward to agreat future.

after that. In this first year of our major transition intoa stronger, more powerful company, I am confident

we can reduce costs and shorten the processes for

Directions for
future businesses

Consolidated
operatingprofits

Extending the DNA of materials into various fields and applications▶ Continuing to make broad contributions to society andgrowing steadily
Creativity applied to existing
businesses
Existing businesses

New businesses
2020

2030

Vision 2030

(3) Employee happiness and corporate
development

2040

strengths of all employees.
To improve individual productivity, we have also
expanded education at Aichi Steel to enable everyone

We believe that mutual growth is possible if we linktotargets for personal growth with targets for theprocess completion) approach and problem-solving

company, so we are driving initiatives that can increase

methods. This year, I have also been involved directly as

engagement with employees. The main prerequisite for

an instructor to focus on developing human resources.

this is ensuring the safety and security of ourunderstand

We

are

the

creating“Jikotei

Kanketsu”

workplaces

that(defect-free

are

more

employees. Therefore, we will create a culture of mutual

comfortable for our employees through a series ofawareness to develop places, people, and systems thattangible initiatives, which will include rest facilities,

can remain accident-free. In addition, we will continuebathhouses, and parking lots at our production sites, indeveloping

addition to the already completed administration

environments

where

we

can

supportdiversity in order to further evolve as an organizationbuilding and Ai-terrace recreation hall.

that recognizes and utilizes the individuality and

13

AICHI STEEL INTEGRATED REPORT 2020

14

Risks & Opportunities

Risks & Opportunities
As the social environment continues to change at a hectic pace, new challenges are appearing that wemust address. We have clarified a future vision for Aichi Steel by accurately understanding risks, as well
as opportunities for value creation, related to those challenges and reflecting them in our Vision 2030.
Going forward, we will respond flexibly to changes in our environment and accelerate initiatives foraddressing social challenges and achieving sustainable growth.

Environmental Analysis

Category

Risks and Opportunities

Measures (Current)● Adoption of carbon pricing
systems● Development and adoptionof technologies to reduce
CO2 emissions

Changes in the global environment● Global warming● Biodiversity● Response to society’s
requests to reduce CO2
emissions

Equipment able to reduce CO2 emissions● Improvement of energy
efficiencies and promotionof energy-saving activities
Heat recycling using a heat storage system

Changes in existing market environments● Social
infrastructure
lifespan● Iron and steel
demand trends

Arrival of the smart society● CASE(automobile
structuralchanges,autonomous
driving)● IT/AI

Changes in society and the environment● Growth of overseas
manufacturers and structuralreform of iron and steel
companies● Expansion of the EV market(expansion of demand for materials
and components for EVs)
● Reduction in use of specialty steels
due to electrification of vehicles● Expansion of markets for new
technologies and materials● Operational reform through use of IT● Improved
competitiveness of
integrated forging withsteel making processes

LNG tank (photo credit: Toho Gas Co., Ltd.)

Differential ring gear

● Development of materials
and components for EVs
and FCVs● Expansion of business
into new fields● Improvement of
productivity throughadoption of IT
technologies

CVT shaft

Electronic components
for EVs◀ MI sensor● Aging anddiversity● Spread of new
infectious
diseases● Dwindling workforce due todeclining birthrates● Driving workstyle reform● Impacts of pandemic onbusiness (declining demand,inability to operate)

Formulation of the

Vision 2030
Company of Choice
Globally
In light of these

Magnetic marker ▶

changes, we haveclarified our vision for● Enhancement of diversity● Safety andhealth15● Rebuilding of social
infrastructure● Development ofmaterials and productsthat can help with
updating of social
infrastructure

the next 10 years.

● Development of work
environments● Health promotion activities● Building of flexible
production systems andpromotion of diverse
workstyles (remote
working)

New Ai-terrace
recreation hall

Selected under the Health& Productivity Stock
Selection Program

AICHI STEEL INTEGRATED REPORT 202016

Vision 2030

Vision 2030

Vision 2030 clarifies what we want to achieve over the coming 10 years, and it presents a basic policy toenhance earnings capacity by reforming business and manufacturing while putting ESG management

Company of Choice Globally

into practice. Through efforts to achieve this vision and create a sustainable Earth and society, we willcontribute to the Earth, society and people, and the SDGs, and remain a valued and sustainable company.

Three management
guidelines for 2030

Creation of aprosperous society
through business reform

Contribution to asustainable global
environment
1 Fulfill environmental responsibilities
・Eliminate landfill waste, pollutants, and other substances ofenvironmental concern
・Work towards 100% automobile recycling

2 Contribute to a low-carbon society
・Achieve the industry's highest energy efficiency
・Contribution of the steel industry to the prevention of global warming
through technology to use exhaust heat and renewable energy

3 Harmony with nature
・Undertake CSR activities to protect biodiversity starting with
regional activities

Employee happinessand corporate
development

1 Reform existing business

1 Safe and reassuring work environments

・Develop materials and parts that respond to theelectrification of automobiles
・Provide products that are useful to updating social
infrastructure

・Transform worksites, personnel, and structures to continue eliminating
accidents
・Create an open culture where all employees can work with vitality

2 Develop business in new (smart) fields
・Healthcare field: Contribute to healthcare technologies thatmitigate physical burdens
・Agricultural field: Development products that contribute toincreased crop yields worldwide
・Transportation field: Provide systems that can driveautonomously even under poor conditions

2 Enhance work life
・Create structures where the company and individuals share objectives
and targets and can each grow (Engagement)

3 Produce autonomous human resources

3 Shift from manufacturing to building
value-added service systems

・Dramatically raise staff productivity and implement Jikotei Kanketsu
・Create workplaces that increase individuality and foster diversity

・Streamline processes based on TPS・Create innovations in quality assurance, R&D and engineering
technology

Company Visions

Refer to Priority Issue 3 on p. 27–36 for details.

Hagane Company

Stainless Steel Company

Kitaeru Company

Smart Company

Becoming the leading manufacturer of
specialty steels to contribute to thedevelopment of a mobility society

Contributing to creating a sustainable society
through stainless steels and engineering

Evolving from a hot-forged productmanufacturer into a components and finishedproduct manufacturer

Providing safety and security to people
around the world through materials andtechnologies

Important tasks for reform with a focus on Corporate Office functions
SafetySafety management,
development of safe
personnel, fundamentallysafe designs

17

Quality

Sales

Environment

Reform manufacturing basedon quality through ongoing
improvement of QMS

Shift from sales of materials
to sales of components andfinished products andcontinuously create new
business models

Create a roadmap forachieving zero CO2emissions in 2100 and zero
landfill waste

R&D
Dramaticallyincrease thespeed of R&D
and create
innovation

Engineering
Become an organization ofcomprehensive worksite
improvement professionals
using TPS, TPM, safety,
karakuri, and so onITAchieveconsistency ofdata using
cutting-edge IT

Work styles

Integrated forging withsteel making processes

Create workplaces where
all employees feel thatthey are performing
meaningful work for thecompany

Integrated manufacturingfrom steel materials to
forging and parts
processing (R&D, designs,
and technologies)

AICHI STEEL INTEGRATED REPORT 202018

Materiality

Priority Issues (Reconfigured to incorporate Vision 2030)

Reconfigured priority issues ★ Items enhanced due to Vision 2030

In 2016, we identified a number of issues to address through our business activities, which we refer toas the “Priority issues (Materiality) for the Aichi Steel Group,” and we have continued working on thoseissues since then. To actively drive ESG management in response to changes in the social environment,
we have reconfigured those previous priority issues to incorporate Vision 2030. In line with the
expanded priority issues, we will work to further enhance our efforts and address these social issues
on a global scale.

E

1Priority issues

Contribute to asustainableglobalenvironment

Components★

Environmental responsibility

Volume of direct and indirect landfill waste★

CO2 emission reductions

Breakdown of energy use (CO2 emissions)★

Harmony with nature

Environmental

Vision 2030

2

Company of
Choice Globally

Encourage thecreation of
workplaces thatare safe andcomfortable toimprove
employeehappiness

Key performance indicators (KPIs)★ Safe and reassuring work environments★ Work-life balance enhancement★ Autonomous human resources production

Status of efforts to preserve biodiversity (number ofNakashinden indicator species, number of volunteer
activities, etc.)

Status of facilities improvements based on safety
evaluations, status of safety measures and efforts
to strengthen safety awareness, and frequency oflost time accidents
Assistance and programs for supporting diverse
work styles, and their status of use
Status of efforts to improve employee productivity

Applicable section

p. 50

（

Volume of direct andindirect landfill waste（

p. 23, p. 50(Total CO2 emissions)p. 24(Harmony with nature)

p. 26

（

Frequency rate and numberof lost time accidents

（

p. 25
(Initiatives toward diversity)p. 26(Human resources development)

Contribution to asustainable global
environment

Previous priority issues

1
2

Encourage the creation of
workplaces that are safe
and comfortable for all
employees

3

Provide highly competitive
products that are safe andsecure and offer new value
globally

4

Strengthen relationships
with local communities,
and actively contribute tosociety

5
6
19

Increase complianceawareness globally, andstrengthen corporate
sustainability

Strengthen initiatives
toward manufacturing inharmony with the global
environment
Establish a solid financial
foundation to support
stable and sustainablegrowthCreation of aprosperous society
through business reform

S

Governance

Financialsociety throughbusiness reformand provide
extremelycompetitive

Social★

Existing business reform

4

G

5

Governance

F6
Financial

Strengthen
relationships
with local
communities,
and actively
contribute tosociety

Increasecomplianceawareness
globally, andstrengthen
corporate
sustainability

Establish a solid
financialfoundation to
support stable
and sustainablegrowthInitiative status and growth strategies of each Company

p. 27–36★ Development of business in new fields★

Shift from manufacturing to building
value-added service systems
Status of quality improvement efforts (number ofrecognitions received and description)

Quality-improvement initiatives

products

Employee happiness andcorporate development

G
F

3

Create aprosperous

Sales staff training, quality improvement activities(number of times held, number of participants, etc.)
Gathering of customer evaluations (number collected
and percentage of improvements, resolutions, etc.)

Presence in the local community

Local communities

Status of social contribution activities selectedunder 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)Compliance (environment)

Results of environmental management system audit

Compliance (society)

Status of various efforts to strengthen compliance(number of lectures and internal audits; held as apercentage of those planned)

Website(Awards for Group companies)

Website(Training programs for sales staff)

Website(Collection of customer evaluations)p. 37, p. 50(Annual number of volunteers)

p. 38(Interaction with the local community)

Website(Environmental audit results)

Compliance (product responsibility)

Certification and review by a third-party organization

p. 40(Compliance promotion activities)

Website(Third-party certifications)

Governance system

Profitability (operating profit, ROE, etc.)

p. 45–48

Financial performance
Soundness, capital efficiency(Net worth, capital equity ratio, etc.)(Financial information for fiscal 2019)

AICHI STEEL INTEGRATED REPORT 202020

Materiality ■ Priority Issue 1

EContribute to a sustainable global
environment

Priority Issue

The Aichi Steel Group has established medium- to long-term targets aroundthree 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
efficient use of energy and resources and, through harmony between the
global environment and manufacturing and by providing products andservices with low environmental impact, we are contributing to a sustainableglobal environment.

Environmental

1

Aichi 2020 Environmental Action Plan
SDGs relevance

470
460

■ FY2019 Action Items and Results
Action item

2.

WebsiteBuilding a low-carbon society

3.

In order to promote these revisions, we have established a neworganizational system. The Environmental Working Group now
oversees four subcommittees, the Global Warming Prevention
Committee, the Aichi Steel Group Environmental Committee,
and promotes a variety of activities aimed at environmental
conservation. In addition, we are currently working to ensurethat all consolidated subsidiaries that operate production sites
are ISO 14001-certified.

Three Core Themes

Environmental activity promotion system

Building a resource-recycling society
Harmony
with nature

Environmental Conservation
Subcommittee(Chair: President)

Awareness and Publicity
Subcommittee
Global Warming
Prevention committee(Meets twice/year)(Chair: Director in charge of Safety andEnvironmental Division)

438.6

Kariya Site

Environmental ISO Review
Committee(Meets twice/year)

Forging Site

(Chair: Director in charge of
Safety & Environmental Div.)Seki Site
Electronic Components Site

Process Energy Reforming
Subcommittee

Gifu Site

Logistics Energy Conservation
Subcommittee

Other relevant sites

Eco Life Subcommittee

Site environmental meeting(Chair: Head of each site)

Undertake development of
eco-products and technologies

Target—Major efforts• Development of products that reduce theenvironmental impact

Reduce CO2 emissions through Compliance with• Planning and implementing CO2 reduction
innovative improvements inactivities at each plant
Japan Iron andenergy efficiency• Promoting energy savings in production
Steel Federation’s
On-site inspections to improve energy
Low-carbon
SocietyThorough implementation
efficiency through joint patrols between eachPlan (Phase 1)of energy saving activities insite and EMS*1 top management
production

kg-CO
4202/t
470

15

16

17
Results

18

Seek better transportation
efficiency in logistics

13% reduction ofemission volume
per transportation
unit from the 2006
level

• Streamlining routes• Modal shift*2• Improve loading rates
Consolidation and shipment of cargo bydestination vehicle
Review of the number of scheduled routes tosuite cargo volume

19

5.

6.

Reduce by-products during
production and continue toutilize resources effectively

Promote projects that
benefit resource-recycling
corporations

220 kg/t or less
• Internal reuse of dust from electric furnaces
emission volume• Internal recycling of electric furnace refractories
per crude steel unit • External recycling of waste acid and sludge• External recycling of cleaned sludge• AS Shot®*3 technology PR and promotion—

kg-CO
4202/t470
460
kg-CO2/t
10.0
450

15

16

17

18

8.
9.

Reduce and effectively use
packaging materials in logistics
operations
Reduce water use inproduction activities
Promote activities forpreservation of nature andbiodiversity

Promote activities for zeroabnormalities and complaints

—

19

449.6

442.6
442.2

438.6

15

16

17

18

Target: 8.3
19

7.9

8.0
kg-CO2/t
7.5
10.0
06

15

16

17

—

18

Enhance consolidated
environmental management
—

12.

13.
14.

15.

Reduce emissions tocontribute to improvementof urban air quality in eachcountry and region
Promote environmental
activities in coordination withbusiness partners
Further reinforce global
employee environmental
education and awarenessactivities
Ensure active disclosure ofenvironmental informationand enhanced communication
activities

19

9.5
9.0

Target: 8.3

8.5

06

15

220
8.5
210
8.0
200

7.5
190

16

17

18

Target: 220
Target: 8.3

212
201

06

16

17

—

—

✔

7.9
212

204
187
15

19

18

19

✔

220 found• None

16

17

18

19

Target: 220

212

201

✔
204

200

212

• Continue managing water use• Managed water volume
use at Forging Plant and
187
190 Plant
Gifu✔

• Promotion of “connected” initiatives

180• Expanding
network of groups making efforts toachieveharmony
with naturekg/crude
steel
t
170
15 biodiversity-model
16
17
18 spaces19• Maintained
green
230
Target: 220• Enhanced
PR of activities to achieve harmony
with
220
212
nature✔

• Implement strict management to achieve
80% or below of regulation values set byenvironment-related laws
• Promote prevention activities• On-site inspections of domestic subsidiaries at“Aichi Steel Group Environmental Study Group”• Environmental audits of domestic subsidiaries
by the General Manager of the Safety &Environmental Division• Enhance chemical substance management
system• Monitor the adoption of low-emission vehicles

210

204
• Ongoing201
measures to prevent environmental
near
212
200
misses
187
190

✔

180

• Ongoing “Aichi Steel Group Environmental Study
170
Group” withdomestic
subsidiaries
15
16
17
18
19
• Ongoing environmental audits• Established regulations for managing chemical
substances in products✔

• Continue monitoring activities

—

—

✔

7.9

9.5
kg/crude steel t
9.0
230

210

—

Abnormalities/
complaints: 0/year

× (Note)Target: 441.8

180• Monitor for new packaging

✔

459.3

kg/crude
steel t
170
15
230

7.

Evaluation

459.3

8.5
420

4.

Target: 441.8

460• Evaluating
strength of steel for high strength
differential gears449.6
in progress
450• Started mass production of stainless steel for
next442.6
generation
high-pressure hydrogen applications
440
442.2
Target:441.8• Achieved compliance with Low-carbon
438.6 Society Plan
430
(Phase
1)

9.0
430

11.

Chita Site

Energy-Saving Production
Subcommittee

Aichi Steel Group
Environmental Committee

21

Administrative officeEnvironmental management

Environmental Working
Group(Meets twice/year)

442.2

9.5
440

10.

Resource Recycling
Subcommittee
・ Safety & Environmental Div.
Environmental Management
Group・ Individual sites

442.6

440

8.0

etc.) such as the Basic Environment Law; 3) Items related tothe advance evaluation of the environmental impact of our
products, raw materials, sub-materials, and facilities; 4) Items
related to supporting and cooperating with societal and local
environmental conservation activities.

■ Environment management promotion organization

Product and Environment
Subcommittee

449.6

Environment
Management450

kg-CO2/t
7.5
10.0

Environmental guidelines
In order to promote environmental management activities,
we have drawn up a set of Environmental Management
Regulations. Its content can be broadly divided into four parts:
1) Items related to promoting environmental management;
2) Items related to compliance with and management ofenvironmental regulations (laws, ordinances, agreements,

459.3

430

1.

We formulated the “Environmental Action Plan” in June 1993,
and the “Aichi Steel Environmental Charter” in June 1996. In orderto achieve our goals, we are actively rolling out new initiatives.
In light of the increasing global trend to ban, restrict, and control
certain chemical substances contained in products, we revised
the “Aichi Steel Environmental Charter” and management system
in February 2017 to strengthen our management of chemical
substances.

Building a
resource Harmony
withrecyclingnaturesociety

kg-CO2/t

Theme

Environmental management

Building a
low-carbon
society

We formulated the Aichi 2020 Environmental Action Plan, a statement of policies andplans for environmental actions from fiscal 2016 to fiscal 2020. The plan adopts threecore themes for the direction of our environmental action based on 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 asustainable company, to society and the global environment.

✔
• Obtain information on product chemical
substances• Obtain information on product chemical
substances from contract processors• Trial environmental risk prediction training tools • Expanded tool use (partial expansion in Japan andoverseas)• Continuous publication of environmental reports • Factory tours to demonstrate how we cope withand enhancement of content
environmental requirements• Enhancing environmental communication• Permanent product displays at administration
activities
building Visitor Center• Ongoing exchanges with local communities: thearea around Head Office, and the Kariya district

✔

✔

✔

Note. Incomplete action items will be addressed through new equipment upgrades and adoption of operational improvements.
*1 Environment Management System *2 Changing truck transport to rail and sea transport with low-environmental impacts*3 Recycled abrasives made from by-products of the steel making process

AICHI STEEL INTEGRATED REPORT 202022

Materiality ■ Priority Issue 1

Initiatives for building a low-carbon society
Fiscal 2019 targets and results
Based on the “Aichi 2020 Environmental Action
Plan,” we pursued reductions in carbon dioxide
to achieve the targets of “The Japan Iron andSteel Federation’s Commitment to a Low Carbon
Society” (Phase 1). Total CO2 emissions werereduced through a combination of reduced
production and improved operations.

Website■ Breakdown of energy used infiscal 2019 (CO2 emissions)Improvement factors

Oxygen 1.9%
Heavy oilclass A 0.9%

1. Reduced energy consumption due toreduced production
55,300 t-CO2/year
2. Reduced energy consumption due toimproved operations through optimizationof steel making materials

Other

0.5%

Coke

7.3%

WebsiteParticipation in “All-Toyota Green Wave Project” activities
Aichi Steel is participating in the “All-Toyota Green Wave Project” activities being implemented by the Toyota Group and otheraffiliated 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 contribute to restoration of ecosystems by connecting people
with other people and activities and linking habitats.

1,800 t-CO2/year

Total

Total
CO2 emissions
633,000 t-CO2

Electricity

City gas

60.4%

29.0%

t-CO2/year

57,100 t-CO2/year

Hindrance factors

Total CO2 emissions

633,000■ Factors behind changes
since last fiscal year

Measures to promote harmony with nature

1. Increased energy consumption due to reduced
production and the resulting drop in steel
making efficiency, etc.
7,500 t-CO2/year
2. Increased energy consumption due to reduced
production and the resulting drop in rolling
operation efficiency
1,600 t-CO2/year

Total

9,100 t-CO2/year▲Participation in All-Toyota activities (maintenance of Izu-numa, a wetland area registered under the Ramsar Convention)(-48,000 tons year-over-year)

Forestation to create a forest for beetles
Energy saving through logistics optimization
In accordance with the Energy Saving Act revised in April 2006,
we have been working on efficient environmentally-friendly
logistics optimization activities after understanding the flow of
distribution and reviewing issues.
More specifically, we are visualizing off-premise logistics
routes and volumes, and promoting logistics improvementsfrom the perspective of streamlining routes, modal shifts(from land transport to sea transport), and improving loading
rates.
From fiscal 2006 to 2019, we achieved a 17% reduction in
CO2 emissions per unit from logistics.

Measures to develop a recycling-based society

WebsiteSince fiscal 2012, we have been creating a forest for beetles.
We have been planting a broadleaf forest in about 20,000 m2
of Nakashinden green spaces around our plant and creating
an environment in which beetles and other creatures canlive their natural life cycles. We have been working with the
Chita Peninsula Ecosystem Network Council and members of
the Student Action Committee NPO to grow the trees. In fall
every year, we also hold a large harmony-with-nature event
called “Mori Mori event” where employees and their families
participate in various activities, including programs held in
collaboration with other organizations and companies, tree
cultivation activities, release of rare medaka (Japanese ricefish), and planting of wheat.
We have also started new initiatives in addition to the

Nakashinden green spaces. We are currently developing
an ecosystem network across the entire Chita Peninsula,cultivating trees using bamboo charcoal from bamboo groves
we are maintaining at the town of Mihama, and an initiativein collaboration with the Higashiura Natural Environment
Learning Forest to jointly research the beetles and foxes thatare attracted to, and symbolic of, Nakashinden green spaces.

Number ofNakashinden
indicator species

17▲Cultivating seedlings in area previously plantedwith trees

Contributions to end-of-life car recycling
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 now possible to recycle waste glass as a car recycling
sub-material.
As a result, the end-of-life car recycling rate increased to
99.8%.

▲Joint activity with the Mihama Town Bamboo
Forest Maintenance Commercialization Council▲Joint activity the Higashiura Natural
Environment Learning Forest

Forest-developing volunteers* Molten slag cooling down material:
A car recycling sub-material that is
added to control the slag
components, reduce thetemperature as a cooling material,and curtail explosive boiling.

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

23▲Aichi Steel Group employees and their families
at a “Mori Mori event”

We use large amounts of water in our steel production.
For this reason, since 2006 we have carried out
twice-yearly forest cultivation activities in Nagano
Prefecture, which is the source of Aichi Prefecture’s
service water. We recruit volunteer employees to takepart in improvement cutting and thinning activities aimed
at creating healthy forests, and in the process deepen
our interactions with local residents. In 2019, we signed
an Adopt-A-Forest Promotion Program agreement with
Otaki Village in Nagano Prefecture to develop a broad
area of about 12 hectares of forest into the FOREST of
AICHI STEEL GROUP.

▲Employees who participated in activities
in Otaki Village, Nagano Prefecture▲Forest thinning work

AICHI STEEL INTEGRATED REPORT 202024

Materiality ■ Priority Issue 2

SSocialPriority Issue

2

Encourage the creation of workplaces that are safe
and comfortable to improve employee happiness
SDGs relevance

The Aichi Steel Group is working to create a strong organization by maximizing thepotential of individuals through the creation of environments in which diverse humanresources can play an active role. This includes not only consideration of a wide varietyof anti-discrimination human rights involving nationality, language, culture, age andgender, but also encompasses women, seniors, people with disabilities, and thosecombining work with child-raising or care-giving.

Human resources development

Website"Jikotei Kanketsu" training

Procedure

To improve employee productivity, as part ofour efforts to maximize ability and performance,
we are conducting “Jikotei Kanketsu” training
for team leaders. “Jikotei Kanketsu” is a work
approach that emphasizes high-quality workwith an efficient arrangement of steps toprevent errors and avoid redos. ThroughＰ

training, we are able to teach the appropriate
approach and concrete steps. With the aim ofincreasing motivation among team members
and maximizing performance through efficient
work practices, we will continue efforts to teachthe “Jikotei Kanketsu” approach going forward.

Do (at every important

point, check, confidently
D call“Done!” and proceed)(reflect on work
C Check
process and look forproblems)

A

Specialized technical training

Report (can beanonymous)

Feedback ofoutcomeContact point
Internal

External

General Affairs &Public Relations Div.

AuditorLegal
representatives

Collaboration

Investigation team

(Investigation/interviews)
ReportPresident/Committees

WebsitePromotion of more active roles for womenin the workplace

Promotion of employment for people
with disabilities

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 continue to proactively hire more female
employees, setting goals for the percentage of female hires
among regular university hires. We have also developed
working from home and career design training for female
employees to consider their careers. In this way, we areadvancing initiatives to support women in developing theirskills. As part of our culture and awareness reform, we areproviding education to our managers on the prevention ofharassment and we have established a Harassment Consulting
Center to help create an environment where employees canbalance work with family-life and child-raising duties.

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

25

Suppliers▲Workshops for employees with intellectual impairments are held four times per
year. Study sessions and leisure activities not only enable these employees toacquire the knowledge required to work, but also provide them with theopportunity to network with fellow employees.

knowledge learning and practical skills acquisition.
Trainee proficiency is confirmed through written
tests, and determinations of whether trainees havereached a level that can be used in practical work
are confirmed through presentations on examplesof improvements and on-site monitoring. Trainees
who pass receive ranked certification. With Rank C
training starting in fiscal 2016, Rank B in fiscal 2017,
and Rank A in fiscal 2020, we are continuing to
expand training activities.
By having all skilled workers undergo this training,a culture of asking “why?” will be created andthe handing down of technology and skills to
successors will be encouraged.

Act (pass on yourknowledge to the next
person)Number oftimes held (total)

52

Number ofparticipants (total)

285

Employee safety and health

WebsiteEfforts to eliminate lost time accidents

Health promotion efforts

We have been conducting activities based on three pillars of safetywith the aim of eliminating lost time accidents.

We prioritize mental health and lifestyle-related disease prevention,and systematically implement relevant initiatives. As a result, wewere recognized for the first time by the Ministry of Economy,
Trade and Industry (METI) and Tokyo Stock Exchange under the2020 Health & Productivity Stock Selection Program. We werealso recognized for the third consecutive year as a Health andProductivity Management Outstanding Organization (White 500
category), in a program adopted by METI and
Nippon Kenko Kaigi. We continue to maintainand promote the health of our employees,
which is a priority issue for the company.

(1) Safety management: Searching for intrinsic safety,
pursuing the true causes of accidents, andimplementing countermeasures(2) Development of safety-conscious human resource:
Training to improve awareness through an “anzen
dojo training” program, and reflecting on the January 8
accident and teaching company traditions at the“Denshinkan Education Center”(3) Creation of safe worksites: Implementing preventive
measures for workplace-specific accidents
We are also improving safety management by improving
communication with operators in the factory, listening to problems
related to work issues, and implementing “Kaizen” improvements.

Mental health activities■ Number of lost time accidents and lost time
frequency rate
(Cases)

(%)

0.66

0.75

5
4

0.45

0.45

0.45

0.50

3
2

0.16

0.16

0.15

0.15

2013

2014

2015

2016

1
0

0.25

0.00
2012

Number of lost time accidents

2017

2018

2019

Lost time frequency rate

(FY)

Lost time frequency rate

Initiatives toward diversity

Aichi Steel employees

Correction/management

The Aichi Steel Group states in the Aichi Steel Group Action Guidelinesthat it will comply with domestic and foreign laws and regulations bothin letter and in spirit, and that it will respect human rights, and sets out
behavioral standards for this.
Through level-based training and other educational opportunities, wecultivate a corporate culture in which the diversity of each employee
is respected. A new Harassment Prevention Committee has been
established and workplace study sessions are held with the goal of
preventing workplace harassment. The Aichi Steel Compliance Hotline
is also in place for use by employees with issues regarding human rights.
This system enables employees to consult directly with advising legal
representatives.

Person/division concerned■ Aichi Steel Compliance Hotline flowchart

Initiatives toward respect for human rights

Number of lost time accidents

Respect for human rights and creation of comfortable workplaces Website

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 thoseplants. To raise understanding of the purpose andnecessity of each task, and lead to “Kaizen,” theroles of skilled workers, from the fundamentals of
manufacturing to the essentials of the facilities thatcreate products and measures for dealing withabnormalities, are divided into three ranks and thetraining is organized so that workers learn in steps.
(The ranks are Rank C for up to five years after
joining the company, Rank B for up to 10 years
after joining the company, and Rank A for first-levelsupervisors). The hands-on training combines

Plan (steps)

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.
In addition, we are enhancing management of risks associatedwith mental illness in the workplace through regular workplaceinspections by mental health staff and regular meetings toshare information with labor management staff from the Human
Resources Division.
Going forward, we will continue working with supervisors
to promote 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 INTEGRATED REPORT 202026

Materiality ■ Priority Issue 3

S

Create a prosperous society through businessreform and provide extremely competitive products

Priority Issue

In 2017, Aichi Steel introduced an in-house company system comprising three Companies and three
Headquarters. To maintain steady growth in a rapidly changing social environment, we evolved this system
into four Companies and four Headquarters in 2020 and started operating under an enhanced organizational
structure. Going forward, we will focus on better manufacturing, better talent, and better management of theorganization as we actively pursue Vision 2030.

Social3

A New Organizational Structure

Corporate Office

Companies

With four Headquarters providing groupwide checks
and balances of Company operations, we will
provide support to manufacturing with the supportof the Companies. In January 2020, we split our
Manufacturing and Future Planning Headquarters
into a Research and Development Headquarters anda Manufacturing Innovation Headquarters to increase
the speed of commercialization for development
projects and to strengthen ties with the Companies.

Each Company has manufacturing and production
technology development functions for theirbusinesses. Through the strong leadership anddecision-making speed of Company Presidents,
we will further strengthen our manufacturing
capabilities. With the addition of the Stainless SteelCompany, which split from the Hagane Company,
we have been operating under a four Company
structure since April 2020 to meet the needs of ourcustomers and drive greater profitability.

President
Division under
direct control
Corporate Office■ Corporate Planning Headquarters

Corporate Planning Div., IT Management Div., General Affairs & Public
Relations Div., Human Resources Div., Finance & Accounting Div.
Functions: Enhancing corporate functions and optimizing management
resources■ Marketing & Sales Headquarters

Sales and Planning Div., Toyota Sales Div., Tokyo Office, Nagoya Office,Osaka Office
Functions: Enhancing marketing through customer and product focuses■ Research and Development Headquarters

Technology Management Div., Frontier Research and Development Div.
Products Development Div., Material Testing Technology Div., Silicon Valley
OfficeFunctions: Developing new products, and providing development support
through planning and promotion, and materials testing■ Manufacturing Innovation Headquarters

Purchasing Div., Production Control Div., Facility Engineering Div.
Functions: Planning, procurement and production support for manufacturing

27

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

Companies
Becoming the leading
manufacturer of specialty
steels to contribute to thedevelopment of a mobility
society

HaganeCompany
Manufacture of steel
products and developmentof related production
technologies

Contributing to creating asustainable society throughstainless steels andengineering

Evolving from a hot-forgedproduct manufacturer into acomponents and finishedproduct manufacturer

Providing safety and security
to people around the world
through materials andtechnologies

Stainless
Smart
Kitaeru
SteelCompany

Company

Manufacture of forgedproducts and development ofrelated production
technologies

Sale and manufacture ofelectronic components,
magnetic materials and otherfunctional products for the
next generation, anddevelopment of related
production technologies

Company

Manufacture of stainlesssteel shapes, round bars
and deformed bars, andengineering

AICHI STEEL INTEGRATED REPORT 202028

Materiality ■ Priority Issue 3

Hagane Company
Becoming theleading
manufacturer of
specialty steels tocontribute to thedevelopment of amobility society

Business risks and opportunities(business environment and background)
Demand for iron and steel in Japan is expected to fall due to a range ofchanges in the business environment, from a shrinking population to cheap
imports of materials from overseas and the development of new alternative
materials.
Specifically, trends towards more compact vehicles and EVs lead to reduced
consumption of specific specialty steels, which carries the risk of market
shrinkage for Aichi Steel. On the other hand, we see this as an opportunity to
expand the value of steel. We have started implementing initiatives to expand
the market, including working with customers to select and develop
drivetrain components that are still required on EVs, including gears andshafts.
We also expect that societal demand for CO2 reductions will increase
further and regulations will become stricter to create a sustainable global
environment. Aichi Steel is both a resource-recycling company, using steel
scrap as raw materials, and a manufacturer using electric furnaces in anindustry that is a heavy user of energy. We therefore have a significant social
responsibility to implement CO2 reduction initiatives. To meet demands fromsociety for innovative and proactive efforts to reduce our impacts on theenvironment, we are working to launch Japan’s first electric furnace with an
exhaust heat recovery system, and eliminate by-product emissions. We arealso conducting a wide range of other initiatives, including reducing energy
consumption by leveraging the strengths of integrated forging and steel
making process to shorten manufacturing processes.

Takashi Ishigami
Managing Executive Officer and Hagane Company President

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

Business Overview

Manufacture of steel products
and development of related
production technologies

Specialty Steel Business Management Div., Hagane Production Engineering Div., Chita Plant◆Main subsidiaries AICHI CERATEC CORPORATION, OMI MINING CO., LTD., AICHISTEEL LOGISTICS CO., LTD.

Future growth strategies for achieving Vision 2030 (Company Vision)
With demand for specialty steels falling as vehicle structures change, it is important to build strong foundations to ensureprofitability while continuing to contribute to the development of a mobility society. To achieve continued growth going
forward, we will conduct a range of activities in line with the following three priority issues.

Priority Issue 1 Product and sales strategies
In Japan, we are collaborating with our development divisions and Kitaeru Company to develop andmanufacture components for EVs. We are focusing on everything from materials through to final
processing to leverage the strengths of our integrated forging and steel making systems and further
increase the value of our products. We are striving to make inroads into new markets by shortening
and streamlining processes, reducing total costs, and reducing energy and resource consumption.
Overseas, we see opportunities to expand markets for engine-powered vehicles and increasedemand for steel in India and the ASEAN region. To outcompete foreign material makers and breakinto new markets, we entered a business capital tie-up with, and provided technical support to,
India’s Vardhman Special Steels Limited. We have stationed Japanese representatives there, and weare providing technical guidance to improve quality and cost competitiveness while building global
systems for stable supplies of steel products.

Priority Issue 2 Manufacturing strategies
We see reducing environmental impacts and costs as important initiatives, especially in steel making processes which are heavy consumers ofenergy. By driving steel making process reform, which incorporates streamlining of production lines and shortening of processes, we areworking to achieve both energy savings and productivity improvements. In addition, we are pursuing even greater cost competitivenessthrough iron source reform based on reengineering with scrap iron.

Priority Issue 3 Subsidiary strategies
We are focusing more than ever on relationships with our three subsidiaries (Aichi Ceratec Corporation, Omi Mining Co., Ltd. and Aichi Steel
Logistics Co., Ltd.). Through distinct categorization of businesses to enhance collaboration and businesses to enhance independence, we areproviding appropriate support when required as we work to maximize consolidated profits.

FY2019 Initiatives: Results (Achievements)
With a focus on reducing total costs through “management with Genryou Management,” we are implementing a range ofinitiatives around the eight elements of this concept, including consolidating equipment, improving specific consumption, andmanaging personnel. As an example of consolidating furnace equipment in the rolling process, we have been working withproduction control to develop production plans adjusting for steel types and sizes, and working to improve operational
availability, to consolidate three furnaces down to two. As a result, we have developed volume-matched costs systems anddramatically reduced fuel specific consumption.
In the area of drivetrain components for EVs as
Fuel specific consumption andwell, we have constructed a steel heatproduction index
treatment furnace capable of achieving high(1) Improved operational availability
110110(2) Consolidated high efficiency
quality products and reliable delivery to meetfurnace equipment106
the complex and varied heat treatment
105 Production volume105
requirements of each customer. Also, by
Fuel specificconsolidating
andrationalizing
variousconsumption
100
99
100
100
equipment installed at separate locations within
5% down100
our plants, we have achieved secure and stable
96
Fuel specific consumption
supplies of steel, and have reduced CO2
95
95
95
emissions.
90

29

2017

2018

2019

(FY)

90

Steel heat treatment furnace

TOPICS
Contributing to the global environment through by-product recycling technologies:
AS Shot® Receives Silver Prize at 2020 Aichi Environmental Awards
AS Shot® is a high-strength abrasive made from recycled slag, which is a by-product of the steel
making process, using a unique Aichi Steel technology. It is used as a pre-treatment or rustremoval before coating in a wide range of applications, including bridges, automobiles, ships
and cultural assets. It generates little dust and can be reused many times.
Compared to natural mineral abrasives like garnet, which are widely used universally, AS Shot
has excellent hardness and strength, and good durability. It contributes to reducing
environmental impacts on many fronts, including reducing customer usage, waste volumes andtreatment, and reducing the amount of garnet that must be mined.
In recognition of these environmental achievements, it received the Silver Prize at the 2020
Aichi Environmental Awards, hosted by Aichi Prefecture for the 16th time.

AS Shot®

AICHI STEEL INTEGRATED REPORT 202030

Materiality ■ Priority Issue 3

Stainless Steel Company
Contributing tocreating asustainable society
through stainlesssteels andengineering

Business risks and opportunities(business environment and background)Approximately 50 million tons of crude stainless steel are produced globally
every year. With global production capacity of 70 million tons annually, thisrepresents an oversupply of about one third. This imbalance between supply
and demand is expected to continue for the foreseeable future, so there areconcerns that competition between stainless steel manufacturers will increase.
Plates and sheets cutting methods are continually evolving in Japan, whileorders for flat bars products continue to decline. Forming technologies forcold-rolled stainless steel sheets and plates and sheets and plates and sheets
products are also continuing to evolve, and orders for steel shapes (angle
bars, channel bars) are sluggish. Right now the value of hot rolled flat steel
and steel shapes in the markets is truly being tested.
If you look at the markets though, there are significant opportunities for us,
including new demand for stainless steel to help realize a sustainable society.
This demand includes support for a hydrogen society (solutions for thehydrogen energy chain, from manufacturing to liquefaction, transportation,
storage, electricity generation and FCVs) and response to an infrastructure
crisis (solutions to meet high durability requirements related to infrastructure
maintenance and renewal demands). For customers to choose Aichi Steel’s
flat and steel shapes products, we are proactively driving detailed market
creation activities around Value Analysis ideas that help shorten theprocesses for customers.

Kazuya Fukatsu

Business Overview

Manufacture of stainless steel
shapes, round bars anddeformed bars, and engineering

Kazuya Fukatsu took on the role of Stainless SteelCompany President in April 2020.

FY2019 Initiatives: Results (Achievements)◆Main subsidiaries AIKO CORPORATION, Aichi Techno Metal Fukaumi CO. LTD.

Future growth strategies for achieving Vision 2030 (Company Vision)
While focused on utilizing the various properties of stainless steel for the world, for society, and for people, our aim is tochange from a steel manufacturer to an engineering manufacturer providing stainless steel parts, structures and constructure.
To reach this goal, we are developing human resources capable of solutions-oriented engineering sales to strengthen our sales
capabilities. We are also working to expand our sales systems for materials and components. To strengthen our
manufacturing capabilities, we are also promoting technology transfer and innovation to support safe and efficient production
systems while investigating proactive investment in our Kariya Plant. We focus on the following two priority issues.

Priority Issue 1 Strengthening our business foundation (managing with Genryou Management
and creating workplaces with positive, open culture)
In addition to prioritizing safety in a quality-first manufacturing environment, we aim to reduce production costs through a commitment tototal-cost management and human-resource management. We also aim to lower the break-even point, and manage with Genryou Management
while maintaining consistent production volumes. We will manage and share information in short cycles and respond flexibly to production
volume variations and product shape/dimension variations. We will create a corporate culture around our identity as a new Aichi Steel Company,
and create workplaces with positive, open culture where everyone can contribute as we develop solidarity as a United Stainless Steel Team.

Priority Issue 2 Growth strategies (increasing profits through 6 projects)
We are implementing the following six projects to achieve
growth for the Stainless Steel Company.
Project 1

Reviewing product strategies (optimizing the
product range and manufacturing processes)

Project 2

Planning alliances (investigating external ties
rather than being closed to them)

Project 3

Expanding stainless steel parts, structuresand constructure businesses (enhancing steel
structure engineering functions)

Project 4

Enhancing ties with consolidated subsidiaries(expanding collaborations with Aiko Corporation
and Aichi Techno Metal Fukaumi Co., Ltd., etc.)

Project 5

Visualizing manufacturing processes andimproving workmanship (proposing future plantlayouts)

Project 6

Creating new markets (strengthening approaches
to the hydrogen society and infrastructure crisis)

Executive Officer and Stainless Steel Company President

ProfileStainless Steel Business Management Div., Stainless Steel Production Engineering Div.
Kariya Plant

Aichi Steel stainless steel used in a variety of applications

Service reservoir internal reinforcement (corrosion resistance) Internal stairs in Aichi Steel Administration Building (design
characteristics)

Receptacle on the MIRAI fuel cell vehicle (hydrogen
embrittlement resistance)

In fiscal 2019, we produced 64,000 tons of stainless steel, which was a 5% increase on last fiscal year. With this increasein production volume, we have met our customers' delivery date through enhanced production capabilities in bottleneckprocesses and flexible production support.
At the same time, we established a new Stainless Steel Business Management Division within the Hagane Company in April
2019 to plan growth strategies for our stainless steel business. Then in April 2020, we established the Stainless Steel Company
and launched concrete activities. As a materials and components manufacturing site, we also started up Kinuura Plant No. 2
at Aiko Corporation and started production of stainless steel materials mainly for the civil engineering field. While still in thedevelopment stage, we are working to expand capabilities as soon as possible.
In December 2019, we received the Japan
Stainless Steel Association Prize for our work on
plant manufacture and onsite construction of a
Stainless Steel Cubic Connection play structure
at Chippubetsu-cho, Hokkaido (received jointlywith Tsumura Company). Including welded
H-beam steel, 46 tons of SUS304A stainless steel
for building structures was used in construction.
Kinuura Plant No. 2, Aiko Corporation

31

Stainless Steel Cubic Connection playstructure at Chippubetsu-cho, Hokkaido

TOPICS
Establishing the Stainless SteelCompany as an independent entity

Kiyomizudera Temple slope protection for landslide
restoration (durability)

Stainless Steel Company
Stainless Steel Business Management Div.
Stainless Steel Business Strategy & Planning Group

Business planning and profit management

Stainless Steel Market Development GroupSpecifications, standardization and marketing

Stainless Steel AE Group

Steel building structure engineering

Stainless Steel Production Engineering Div.
Production engineering improvement and innovation
The Stainless Steel Company split from the Hagane Company as
an independent entity in April 2020. We are located at the same
Kariya Plant
Steel shapes and flat steel production basesite as the Aichi Steel Kariya Plant, which boasts 80 years of
Kinuura Plant No. 2, Aiko Corporation
Materials and components manufacturing basehistory, including 62 years of producing hot-rolled stainless steel
angle bars since becoming the very first Japanese company to produce these products in 1958. With increased expectations for stainless steel
to help in the realization of a sustainable society, the creation of our Company has been long-awaited.
To the right is the organizational structure of the Stainless Steel Company. A particular feature of this structure is the positioning of a StainlessSteel Business Strategy & Planning Group, Stainless Steel Market Development Group (which promotes market creation activities) and StainlessSteel AE Group within the Stainless Steel Business Management Division. The Company also integrally manages two manufacturing sites; theKariya Plant where we manufacture stainless steel shapes and flat steel, and the Kinuura Plant No. 2 (Aiko Corporation), where we manufacture
stainless steel materials and components.
In this our first year as a Company “for the world, for society, and for people,” we will bring a major transformation as we grow into a profit
base for Aichi Steel.

AICHI STEEL INTEGRATED REPORT 202032

Materiality ■ Priority Issue 3
Business Overview

Kitaeru Company
Evolving from a
hot-forged productmanufacturer into acomponents andfinished productmanufacturer

Manufacture of forgedproducts and development ofrelated production
technologies

Business risks and opportunities(business environment and background)

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. AICHIFORGING INDONESIA (AFI)

Future growth strategies for achieving Vision 2030 (Company Vision)

Going forward, it is expected that the Japanese forged product market
will shrink. Causes include declining demand for automobiles as fewer
people are born and young people choose lifestyles without cars, declining
production of forged products as more EVs enter the market, and increasing
local procurement practices overseas.
Within this market shrinkage and subsequent restructuring of the forging
industry, we will expand our presence through industry-leading production
capacity and technical capabilities that utilize the strengths of integrated
forging with steel making process, as well as further additions of value andcost reductions. Through manufacturing that exceeds our customers’
expectations, we will also create products that enable us to maintain our
position as the Company of Choice Globally.
Labor shortages resulting from a dwindling workforce also carry risks for
manufacturing. We therefore need to maximize productivity with a limited
number of workers, so we will endeavor to increase per-worker productivity
and enhance true competitiveness. We will do this through tangible
measures such as reducing manpower requirements by autonomation andincreasing equipment productivity and intangible measures such as humanresource development and workstyle reform.

To remain the company of choice for our customers and continue our steady growth, we must continue playing a broad rolein society as a company for the world and for the people. We aim to further enhance competitiveness and remain the
Company of Choice Globally through the following five priority issues.

Priority Issue 1 Evolution into a finished product manufacturer
Going forward, automakers are expected to pivot to the development of advanced technologies as “mobility companies.” Because we are also
currently handling machining as part of our customers’ processes, we will be able to make a contribution to them by providing high value-addedcomplete components.

Priority Issue 2 New product development
Amid an accelerating shift to next-generation automobiles, we are developing new products with a focus on EV and FCV components tomaximize our customer support. To improve functionality and reduce costs we are leveraging the strengths of our integrated forging with steel
making process and working on development with customers, from materials through to processing.

Priority Issue 3 Building many models production system
To contribute to a stable supply chain for our customers, even when the industry is going through a restructuring, we have to be able toproduce all types of components. With a focus on industry trends, we will investigate and develop the means and equipment able to efficiently
produce many different products.

Priority Issue 4 Strengthening company connectivity on a global basis

Motoshi Nakamura
Executive Vice President and Kitaeru Company President

ProfileAfter working as General Manager, Manufacturing andFuture Planning Headquarters, Motoshi Nakamura took
on the role of Kitaeru Company President in April 2019.

FY2019 Initiatives: Results (Achievements)

Costs

We are promoting management with Genryou Management as a way of quickly and flexibly responding, while maintaining profitability,
to fluctuations in production due to changes in the business environment. As part of these efforts, in fiscal 2019, we shared our“volume-matched costs” approach with our manufacturing sites to produce only the necessary volumes at the exact costs.
By further improving costs (kaizen in cost) through such initiatives as improving the design of dies to reduce material costs,
we were able to maintain profits even when sales volumes decreased. These efforts helped lay the groundwork for creatinga stronger company.
As a top priority built on our safety initiatives, we have also
Volume-matched costs and cost
Quality defect-related losses
conducted activities to reduce quality-related loss. Throughimprovements(index)collaborative efforts between our administrative divisions,100
whose job is to identify conditions that ensure productVolume-matched
quality, with our manufacturing divisions, whose job is to
costs
76
66
standardize, maintain and manage those conditions, wehave succeeded in contributing to profits.
Cost
improvements

Production volume

33

2018

H1 2019

H2 2019

To continually manufacture the products of choice for our customers in Japan and overseas, and meet their need for high quality and low cost,
we need to achieve the same level of manufacturing capabilities globally. While further improving and standardizing our manufacturing
capabilities in Japan, as the “mother plant,” we will work to expand and implement those capabilities in our global sites. At the same time, wewill further strengthen company connectivity to take the entire Group to the next level through relationships of mutual learning.

Priority Issue 5 Environmental measures
To reduce CO2 emissions and contribute to a sustainable global environment, we will improve our facilities by improving the efficiency of ourmaterial heating equipment and improving the combustion efficiency of our heat treatment furnaces to reduce energy consumption. Leveraging
the technical strengths of our integrated forging with steel making environment, we will also develop components that enable to reduce heat
treatment process to establish forging processes that are highly energy efficient.

TOPICS
Implementing the Aichi Way with the President
taking the leadBy putting the Aichi Way into practice, our President is playing a central role in creating a
corporate culture that enables everyone to work together and overcome any difficulty.
In addition to regular onsite inspections of tasks accomplished in manufacturing (traditionof Genba-ism), we are using business results briefings and other opportunities, offeringwords of thanks directly to employees (appreciation), and sharing examples of improvement
using originality and invention in our workplaces (creativity). Through these and othermeasures, the President and employees are always united in their activities to create a strongorganization. In this way, we have fostered a culture that enables every employee to play arole in addressing challenges across the Company, which has also enabled us to quickly
respond to supply issues caused by COVID-19.

President giving guidance directly in the workplace

AICHI STEEL INTEGRATED REPORT 202034

Materiality ■ Priority Issue 3
Business Overview

Smart Company
Providing safety
and security topeople around theworld throughmaterials andtechnologies

Sale and manufacture of electronic components,
magnetic materials and other functional
products for the next generation anddevelopment of related production technologies

Business risks and opportunities(business environment and background)With applications of CASE technologies in the automotive industry expected
to increase going forward, being able to respond in a timely manner is anurgent issue. We will be most active in the autonomous and electric fields,
where we contribute to realizing the next-generation mobility society. In theautonomous field, we are working to commercialize our GMPS autonomous
driving support system using magnetic markers, which will help reduce traffic
accidents and provide modes of transportation for use in depopulated areas.
In the electric field, we are working to manufacture power card lead frames
as heat-dissipating components of EVs, and to develop the main motors for
EVs using MAGFINE®, Dy-free bonded magnets that do not use heavy rareearth materials.
At the same time, interest is growing for the SDGs as targets for achieving asustainable world. In this modern age, companies are expected to not only
pursue profits but also provide value by helping to address social issues. Oneof our strengths is that we operate many SDGs-related solutions businesses
that extend beyond the confines of the automotive industry. As a member ofthe global community, we will create value by setting concrete SDGs targets
and working to develop new technologies and manufacture innovative
products.

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◆Main subsidiaries Zhejiang Aichi Mechanical & Electrical Co.,
Ltd. (AME), Aichi Magfine Czech s.r.o. (AMC),
Aichi Magfine Technology (Pinghu) Co., Ltd.
(AMT), Aichi Europe GmbH (Ae)Future growth strategies for achieving Vision 2030 (Company Vision)
To contribute to next-generation mobility and smart society through high performance materials, we will steadily grow our fivebusinesses to become a profit base for Aichi Steel.
From the perspective of the SDGs, we have also identified four areas for value creation—energy, healthy lifestyles, foodsupplies, and safe public transport systems. By reaching the SDGs targets that we set in each of our businesses, we will meet
our responsibilities as a member of the global community.

Electronic components business: Becoming a manufacturer of heat-dissipating
components for EVs
We are building stable supply systems to meet growing demand for power card lead frames for EVs. We are also developing products for
related units that are evolving to improve energy efficiency, with the goal of contributing to the field of energy.

Magnet business: Becoming an innovative manufacturer able to makecomponent-oriented proposals
We aim to become a manufacturer able to propose complete components by combining direct injection molding technologies with our
in-house capabilities for development and manufacturing of magnetic powder materials. As part of this goal, we are developing energy-efficient
main motors for EVs in particular. By using MAGFINE® Dy-free bonded magnets that do not use heavy rare earth materials, we will improvenatural resource usage efficiency and contribute to the field of energy.

Dental business: Providing dental appliances to improve the quality of lives
We will contribute to healthy lifestyles by strengthening sales of dental magnetic attachments through alliances with industry leaders, and by
developing new products to expand the range of compatible implants that more people can use in Japan and overseas.

Katsunori Kojima
Managing Executive Officer and Smart Company President

ProfileAfter working as Kitaeru Company President, Katsunori
Kojima took on the role of Smart Company President inApril 2019.

FY2019 Initiatives: Results (Achievements)
To become a stronger organization as a profit center for Aichi Steel, we have been implementing our policy of managing
with Genryou Management through efforts such as improving productivity and reducing fixed expenses. We have also beenenhancing our sales capabilities through efforts such as building a global sales network. In this way, we have been able tostrengthen profits and our business foundations while meeting our annual targets in all our businesses.
In terms of CASE support, we constructed a second production line at our Gifu Plant with a view to expanding demandfor power card lead frames, the essential heat-dissipating components of EVs. We almost tripled our fiscal 2017 production
capacity, including at our Chita Plant which also handles these products, in part as support for business continuity planning.
This has enabled us to provide highquality products in a reliable and timely
manner. We have also been working
toward commercialization of our GMPS
autonomous driving support systemusing magnetic markers. In fiscal 2019, weverified problems and built knowledge
through a series of 15 trials conducted in
specific environments, including bus rapidtransit (BRT) systems and airports.
Second production line at Gifu Plant

35

GMPS trials

Sensor and metallic fiber business: Contributing to a safe and healthy society
through micro-magnetic sensing technologies
We will promote the use of our GMPS autonomous driving support system using magnetic markers, and the use of ultra-sensitive magnetic MI
Sensors at security checkpoints in airports and stations to build safe public transport systems. We will also promote the use of amorphouswire metallic fiber products in medical devices as part of our contribution to healthy lifestyles.

Iron fertilizer business: Expanding globally as a food solution
Iron has been confirmed to be effective for the one-third of cultivated land globally that is alkaline, which tends to be iron-deficient and makes
growing crops difficult, and against citrus greening disease, which is a citrus-specific disease spreading globally. Utilizing the achievements andknow-how we have built up developing iron fertilizer for improving iron-deficient plants in Japan, we are continuing our development with thehope of solving this global soil problem, which will contribute to stable food supplies.

TOPICSMAGFINE®, contributing to the SDGs
MAGFINE® Dy-free bonded magnets have a strong magnetic force. In combination with ourown direct injection molding technologies, they are helping improve the performance of
motors and reduce their size and weight. Also, because they do not use dysprosium (Dy),which is a heavy rare earth material, they also help avoid resource risk. With these magnets
recently being used in drone motors, we have been recognized for helping solve the problemof labor shortages in logistics and agriculture, receiving the Monodzukuri Nippon Conference
Joint Chairman’s Award at Nikkan Kogyo Shimbun’s Cho Monodzukuri Grand Award for Parts.
We were also selected to be included in the Ministry of Economy, Trade and Industry’s
Global Niche Top Companies Selection 100, which recognizes the uniqueness andimportance of this technology. Going forward, we will apply the MAGFINE® value to a wide
range of fields as we work toward addressing global and social issues and achieving theSDGs.

MAGFINE®

AICHI STEEL INTEGRATED REPORT 202036

Materiality ■ Priority Issue 4

SSocialPriority Issue

4

Strengthen Relationships with Local
Communities, and Actively Contribute to Society
SDGs relevance

The Aichi Steel Group seeks prosperous coexistence with surrounding communities, isconscious of its role as a “good corporate citizen,” and is actively involved with the local
community. We place importance on communication through our social contribution
activities and other efforts, and by gaining the trust of communities and understandingof our business activities, we strive to be a company that is continually welcomed in thecommunity.

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, thestation nearest
our offices,
as one ofour 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 isin its tenth year, aims to teachelementary school fifth graders
about the local industry of Tokai
City, the largest iron-producing
region in central Japan. Through alesson called “Making Magnets,”
we offer a fun way for local
elementary school students toexperience manufacturing.

▲Aichi Steel Technical Training Institute students
planting greenery on the roundabout in front of
Shurakuen Station

Social contribution activities

Volunteer support■ Changes in the number of volunteers insocial contribution activities (cumulative)

Activity promotion system

10,000In 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 & Public Relations
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 2019, we increased participation in activities, and set
a new record for the number of participants, through efforts such as
an increased number of activities to promote harmony with nature,
expanding the sale of bakery goods from welfare facilities across the
Aichi Steel Group, and introducing a cafe menu at our lunch room andrecreation hall with foods that support regional recovery.

9,175
9,904

Number of volunteers

9,000
8,000
7,000
6,000

6,629
5,914

12 schools, 34 classes

WebsiteEstablished in 1993, the Aichi Steel Volunteer Fund continued to donate to local social welfareorganizations and volunteer groups near our company, and to provide support after the Kumamoto
Earthquake. It also provided support to areas affected by Typhoon Hagibis in 2019. Anothervoluntary and ongoing program that employees can participate in is the “one-coin” donation
program, where they donate 100 yen from their pays every month.
Using paid leave and welfare leave, employees also launched a new initiative in fiscal 2019, visiting
child welfare facilities on weekdays.

■ Support for disaster-affected areas“One-coin” donation

593 volunteers■ Lunchtime volunteer activities

5,000
4,000
3,000
2,000

2015

2016

2017

2018

2019
(FY)

Number of volunteers in FY2019
Clean (beautification, safety, security)

7,276

Creative lessons

9,904(729 person increase year-on-year)

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 Monthactivities.
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.

▲Local specialties from areas
affected by the Great East Japan
Earthquake on sale at plant open
days and other events▲Special menu in supportof regional recovery▲Typhoon Hagibis Relief
Fund (Aichi Steel
Volunteer Fund)▲Lunchtime volunteering activity to separate
fabric from collected ties (Kariya Plant)

Interaction with the community
Events and participation

Nearby roads clean-up campaign

Clean Aichi Day

5 events,128 volunteers 1,645 volunteers

37

Traffic safety awareness

2,103 volunteers

We hold community meetings in thecities of Tokai (February) and Kariya(December),where
we
promoteexchanges with residents of the local
communities and actively participate ina variety of local volunteer activities. We
also support activities involving festivals,
sports days and other local events inthe communities surrounding our sites,and dispatch employees to assist withthe operation of those events. We also
invite local residents to events heldat our headquarters and plants, andwork to encourage interaction with our
employees.

▲Community meeting (Tokai City)▶Shiawase Mura: Support for production
workshops for parents and children at
Momiji Matsuri (Tokai City)AICHI STEEL INTEGRATED REPORT 202038

Materiality ■ Priority Issue 5

Increase Compliance Awareness Globally, andStrengthen Corporate Sustainability

G

Governance

Priority Issue

5

SDGs relevance

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

Basic approach to corporate governance
The goal of Aichi Steel is to contribute to sustainable
development of the Earth and society through soundcorporate activities. With this in mind, we aim to manage
our company in a way that always enjoys extensive trust of
our shareholders, investors and society by establishing andmaintaining an organization capable of responding swiftly tochanges in business environments and a 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.

Corporate governance structure
Aichi Steel uses an Audit & Supervisory Board. This system
concentrates authority and responsibility for businessexecution to the Board of Directors, as the ultimate bodyfor management decision making, and assigns the roleof audit and supervision of the Board of Directors to the
Audit & Supervisory Board and Audit & Supervisory Board
Members, which are independent of the Board of Directors
and business execution. We believe this system achieves
appropriate management decisions and execution ofduties while providing sufficient organizational checks andbalances.
We employ two independent outside directors and twooutside Audit and Supervisory Board Members, with extensive
experience and broad insights as managers, who supervise
and audit the execution of duties of the directors, and wedevelop systems that function effectively to ensure objectivity
and neutrality of management oversight.
Internally, we also develop and properly operate systems toensure the appropriateness of our operations in line with theInternal Control System Basic Policy.

Corporate governance system diagram
Shareholder's Meeting
Appoints/Dismisses

Board of Directors
Inquiry

Appoints/Dismisses
AuditsResponse

Officer Remuneration and
Nomination Committee

Appoints/Dismisses

Reports to

Accounting
Audit Team

Reports to

Audit &
Supervisory Board
Audits

Evaluates the appropriatenessof the account audit
AuditsCompliance
Compliance promotion system

Internal Audit Depts.

Reports to

Instructs/Supervises

Management Committee(Deliberation of critical issues, etc.)
AuditsMakes proposals to/Reports toWhistle-blowing system

Chair:
Corporate Planning
Headquarters
General Manager
Members:
Directors, executive
officers, Audit &Supervisory Board
Members

Person responsible
for legal
compliance

Each division
Departmental person

Director in charge ofGeneral Affairs &Public Relations Div.

responsible for legal compliance

Persons in charge ofcompliance

Compliance Liaison Meeting
General Legal
Compliance Site

Variousdepartments

General Affairs &Public Relations Div.

Changes in whistle-blowing cases

In fiscal 2019, a total of 8 cases were reported to the Aichi Steel
Compliance Hotline, the company's whistle-blowing system.
We will continue taking corrective measures when necessary andinform the president of important matters for confirmation. We
will also specify in the Code of Corporate Ethics how the system isoperated and rules on the protection of whistle-blowers to ensurethat whistle-blowers are protected. We will also continue promoting
recognition and awareness of our whistle-blowing system among
employees to further improve our internal ability to govern ourselves.

8 casesCompliance promotion activities
To enhance the compliance awareness of employees, we
provide education on compliance to all employees. The
importance of compliance is also covered in the Action
Guidelines workshop held for those promoted to each levelwithin the organization. In addition, other corporate scandalcase studies are reported to the Compliance Liaison Meetingto help prevent the recurrence of similar compliance incidents.
We also hold CSR seminars on preventing harassment, andon-site compliance training at each plant for the purpose of
preventing crime and harassment.

(Cases)Contact point ■General Affairs ＆ Public Relations Div.
■Audit & Supervisory Board Member ■Lawyer

14

13

12

12

10

10

8

8
6

5

4
2
0

2015

2016

2017

2018

2019 (FY)

Level-based training

230 participants
CSR Seminar

1 time(Jan)(8 levels)

Compliance Liaison
Meeting

4 times
10 locations(Apr, Jul, Oct, Dec)

On-site compliancetraining (crime andharassment prevention)

Instructs/Supervises

Instructs/Supervises Makes decisions / Approves

Advises/Aids

Group Companies

39

Corporate Planning
Committee(Oct, Nov)

Executive committees

Companies/Headquarters/Departments
Reports toCompliance promotion system

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

Makes decisions/Supervises Appoints/Dismisses

President

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

AICHI STEEL INTEGRATED REPORT 202040

Materiality ■ Priority Issue 5

Risk Management

Information security

Risk management system

Information security promotion system

Information security guidelines

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 soundbusiness operation.

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, 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 SteelGroup.

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

Definition of Confidential Information

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 to raiseawareness of our commitment, confirmed by everyone at
Aichi Steel, to preventing such an accident from recurring. We
have also established a permanent Denshinkan Education
Center to teach and pass on to the next generation thelessons learned from the accident and our other failures, andhave started providing special safety training to all employees.

Disaster prevention and risk mitigation measures
We established the Earthquake Preparedness Promotion Committee
through which we are developing disaster prevention measures in theevent of an earthquake in the Nankai Trough.
2019 was the 60th anniversary of Typhoon Vera, so we also re-examined
our response to frequent wind and water damage over recent years.
From February 2020, we have been dealing with the novel coronavirus
disease (COVID-19).
The main actions implemented to mitigate risk during fiscal 2019 are
detailed below.

■ Companywide disaster drills
We plan and conduct companywide disaster drills twice ayear. In fiscal 2019, we conducted the following drills in May
and November.
1. Evacuation drills for all employees (assuming a large
tsunami warning after an earthquake)
2. Information sharing by members of the companywide
Emergency Control Headquarters (assuming typhoons
and other natural disasters other than earthquakes)
3. Disaster preparedness seminar by external crisis

Earthquake Preparedness Promotion Committee(General Administration Office: General Affairs &Public Relations Div.)

Overall control

Human Safety
Subcommittee(Office: Human
Resources Div.)
Facility Safety
Subcommittee(Office: Facility
Engineering Div.)

Role
MissionRole
MissionSpecify actions toprotect lives

In each department■ Response to novel coronavirus disease (COVID-19)
To respond appropriately to this constantly changing
situation, we launched an Emergency Control Headquarters
as soon as COVID-19 started spreading in Japan.
This cross-company organization continually collects
information from inside and outside the company, reviews
internal operations, adjusts production, and works tomaintain business continuity. We have also established a
Support Center to support employees when they experience
difficulties. It is implementing the following measures andproviding support to prevent the spread of the disease
among employees. (These are just some examples.)overseas subsidiaries, employees)

41

Confidentiality
management supervisor(General managers ofindividual divisions)

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

Representative
managers, etc.

Employees● Providing masks from reserves (Japanese and

The chairman and president have launched a program of
on-site disaster preparedness inspections with the aim of
improving disaster preparedness in each plant.

Administrative Depts.

Maintain building
and facilities toprotect lives

management consultant■ Inspections of disaster preparedness of plants bychairman and presidentManagement system and roles of each department● Changing workstyles to prevent infection (changing
means of commuting, working from home, reducing
business trips, etc.)● Procuring additional supplies of personal protective
equipment (protective gowns, hand sanitizer, masks, etc.)

Director in charge of General Affairs & Public Relations Div.
•Person responsible for confidentiality management

General Affairs & Public Relations Div. and IT Management Div.
•Creates and revises measures related to the management ofconfidential information•Audits and provides guidance according to the confidentiality
management status across the entire company•Manages systems (both technical and human aspects)

Role•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•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

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.

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.

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 another malicious program is discoveredin the Company, in order to raise awareness of security
controls.

Number of times security
training held

12

AICHI STEEL INTEGRATED REPORT 202042

Materiality ■ Priority Issue 5

Messages from Outside Directors

Directors and Audit & Supervisory Board Members
Takahiro Fujioka

Motoshi Nakamura

President

Executive Vice President
Kitaeru Company President

Q2. What do you think of your own role as an outside director?

Attendance at Board of Directors meetings

Attendance at Board of Directors meetings

As a member of management in the past, I always tried topersonally visit the front lines of gas supply and sales to see andconfirm situations with my own eyes. Even as an outside director,
I visit those sites as much as possible to get direct access to theideas and thoughts of the people working there. I am therefore
fully aware of the background and facts behind each situation.
I believe my role is to apply my past experiences, knowledge
and expertise to continually question management, to discuss any
concerns I might have, and to provide support at all other times.

13 of 13 (100%)

13 of 13 (100%)

Naohiro Yasunaga

Katsunori Kojima

Director and Managing Executive Officer
General Manager, Manufacturing Innovation
Headquarters

Director and Managing Executive Officer
Smart Company President

Q1. What is your impression of Aichi Steel?
Aichi Steel is a globally expanding and growing company. It has successfully implanted the Aichi Way into theminds of its employees who put it into practice conscientiously, and who work hard toward shared goals througha strong unifying force. I believe this is largely as a result of its culture of care and respect for employees as
demonstrated by its recognition both under the Health & Productivity Stock Selection Program and as a Healthand Productivity Management Outstanding Organization, and by the signing of a Labor-Management Agreement.

Koichi Yasui
Outside Director

Q3. What issues do you see, and what expectations do you have, in relation to sustainablegrowth at Aichi Steel?
With the development of CASE technologies and changing social needs for mobility, it is a very difficult time to predict the future. At the sametime, though, there are enormous opportunities for Aichi Steel to grow right now as well. To take advantage of these opportunities, it needs tocreate value that is unique to Aichi Steel by accurately understanding the social environment and customer needs. It can do this by relying on
the unique technical capabilities it has built up as a materials manufacturer, as well as its passion of “steel” and strong spirit. I look forward tocontinuing sustainable growth for Aichi Steel through the supply of products that contribute to the whole industry, the whole of society, and to
the global environment.

Attendance at Board of Directors meetings

13 of 13 (100%)

New

Koichi Yasui

Yuko Arai

Outside Director

Outside Director

Attendance at Board of Directors meetings

Attendance at Board of Directors meetings

12 of 13 (92%)

13 of 13 (100%)

Hiroaki Chino

Takashi Goto

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Attendance at Board of Directors meetings

Attendance at Board of Directors meetings

10 of 10 (100%)

13 of 13 (100%)

Koichi Ito

Katsuyuki Ogura

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Attendance at Board of Directors meetings

Attendance at Board of Directors meetings

13 of 13 (100%)

13 of 13 (100%)

Q1. What is your impression of Aichi Steel?
The DNA of manufacturing at Aichi Steel has its roots in the belief that “Great cars are made with great steel.”
Through the company’s culture of honesty and reliability, through the words and character of its employees,
I see that DNA being passed down even today. Aichi Steel’s strengths are evident in the new innovations it
produces and the high social value it provides through a combination of solid technical capabilities, built on
its manufacturing tradition, and a wealth of experience.

Q2. What do you think of your own role as an outside director?
The airline industry and Aichi Steel have a common mission of
supporting safety and security in people’s lives. I am able to bringknowledge and experience to this role, together with questions anddifferent perspectives from my time in a different industry, which
generates more meaningful discussions in meetings of the Board of
Directors.
I have many years of sales experience in the airline industry, so I
Outside Director
always value direct communication and building relationships withcustomers. With a focus on business expansion from global andcustomer perspectives, and while prioritizing communication throughinformal meetings with employees, I want to contribute to creating a better organization and developing
human resources by promoting diversity.

Yuko Arai

Q3. What issues do you see, and what expectations do you have, in relation to sustainablegrowth at Aichi Steel?
Good products and services are all created by people. This is why my highest priorities are eliminating unsafe practices among employees andcreating safe and secure working environments.
If Aichi Steel can also leverage the technologies and knowledge it has acquired over many years to further expand its business operations, andsupport many more people in their daily lives, it will be able to continue increasing corporate value into the future. Aichi Steel’s business
operations now extend beyond automotive components to also include the fields of agriculture, medicine and transportation, as well as rebuilding
social infrastructure. It is also developing many products for the business-to-consumer (BtoC) market. I look forward to seeing the company
continue to branch out into new fields, and to maintain steady growth as a manufacturing company supporting the society of the future.

43

AICHI STEEL INTEGRATED REPORT 2020

44

Materiality■ Priority Issue 6

FEstablish a Solid Financial Foundation to
Support Stable and Sustainable Growth

Financial

Priority Issue

6

The establishment of a solid financial foundation is critical for enhancing corporate value and supporting 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.

Kazutaka Maeda
Managing Executive Officer
General Manager,
Corporate Planning Headquarters

Message from the Finance Director
1. Improving corporate value through dialogue
with stakeholders
Aichi Steel considers that the establishment of a solid
financial foundation is critical for supporting stable
and sustainable returns to stakeholders. We conduct
our business with a deep awareness of the need toachieve an appropriate balance between shareholder
returns,
investments,
andrepaymentofinterest-bearing debt. We are also focused on
maintaining financial health and sustainably improving
earnings capacity (steady growth) across the company
while keeping an eye on ROE and debt-equity ratio
indexes.
With corporate value increasingly being evaluatedfrom ESG and SDGs perspectives, we are focused onenhancing and disclosing information in a timely
manner to investors and other stakeholders. By
accurately explaining current business and financial
status as above, as well as future issues, we aim toachieve appropriate evaluations from capital markets
and society in general.
We will listen carefully to the opinions and advice we
receive and reflect that in our management tocontinue improving corporate value.

2. Business performance for fiscal 2019
Consolidated net sales for fiscal 2019 declined by 15
billion yen to 242.2 billion yen compared to theprevious fiscal year, while operating profits increasedby 2.7 billion yen to 13.9 billion yen compared theprevious fiscal year. Sales volumes decreased due tofactors including an economic slowdown in China
caused by trade friction between the U.S. and China
and depreciation expenses increased which put
downward pressure on profits. Despite this, werecorded increased profits from decreased income
compared to the previous year through lower prices
for scrap metal and ferroalloys, and companywide
efforts to improve profits.
Operating cash flow was 36.3 billion yen, which was
an increase of 22.7 billion yen compared to the previous
fiscal year, mainly due to accumulated profits andimproved working capital. We are systematically and45

efficiently expanding our strategic capital expenditure
to help build solid manufacturing infrastructure andachieve a stable profit base, which are two of theobjectives
establishedbyourMedium-termManagement Plan (FY2017–2020). During fiscal 2019,
we made capital investments totaling 20 billion yen,mainly for the purposes of increasing production
capacity on steel, forged and electro-magnetic productmanufacturing equipment, and for streamlining,
updating and functionally improving steel and forgedproduct manufacturing equipment.
Aiming to develop and expand new applications andproducts for our existing businesses by leveraging theadvantages of materials, and steadily fostering andstrengthening next-generation businesses for the coming
smart society, we proactively implemented R&D activities
with R&D expenses of 3.7 billion yen in fiscal 2019.
Aichi Steel’s targets for fiscal 2020, the final year of
our Medium-term Management Plan, are consolidated
net sales of 250 billion yen or higher, consolidated
operating profits of 20 billion yen or higher, and ROE of
8% or higher. However, the spread of the novel
coronavirus disease (COVID-19) had had a severe
negative impact on business, which makes it highly
unlikely that we will achieve these targets.
On the other hand, we were financially healthy at theend of fiscal 2019, with a debt-equity ratio of 0.38,
capital adequacy ratio of 55.16%, and an “A” ratingfrom the Japan Credit Rating Agency, Ltd. Despite ROE
for fiscal 2019 being 5.6%, which was higher than theprevious year, it is still lower than our target for fiscal
2020, so we consider earnings capacity to be an
important issue in the future.
Going forward, we will further improve our earnings
capacity through efforts to strengthen our Groupwide
management with Genryou Management, through businessexpansion and strategies that utilize our DNA as a materials
manufacturer to drive component development in an
integrated forging with steel making process, and throughcommercialization of new businesses.

3. Working to achieve growth strategies (Vision 2030)
This year, we formulated Vision 2030 (see pages
17–18) with a focus on CASE technologies and otherelements of the major transition that the automotive
industry is currently going through. We also clarified
initiatives for our various internal functions to
implement, and the resources that will be required toachieve those initiatives, in order to achieve our threemanagement guidelines: Contribution to a sustainableglobal environment; Creation of a prosperous society
through business reform; and Employee happinessand corporate development.
Going forward, we will make a range of investments
in growth to dramatically reform our business model
mix and contribute to the global environment andsociety. While increasing our ratio of expenditure on
improvements in areas such as reengineering for 2030
and beyond, new business fields and capacity
enhancement, our capital expenditure will actively
target improvements to the global environment andemployee workplaces, and enhancement of ESG
management, including investing in reducing CO2
emissions and enriching tangible efforts to further
expand the functions of our development divisions.
We will also focus our research and development
activities on developing high value-added products by
utilizing our potential as a materials manufacturer,
actively creating new businesses, and expanding thepotential of manufacturing. The key to the success ofthese growth investments is how appropriately we candistribute our limited resources, but we also have toproceed carefully after thorough examination of theeffects on profitability, risk and financial health.
With Aichi Steel approaching a period of
considerable turbulence, our role in the Corporate
Planning Headquarters is to clarify milestones in future
medium-term and annual management plans basedon Vision 2030, and to secure and invest resources ina timely and effective manner while accurately
monitoring the progress of each new project.

tough business environment will continue, but tominimize any subsequent negative impact from thepandemic, we will respond little by little as thesituation changes. This response will include creating
more efficient operations through initiatives such as
consolidating
equipment
andconcentratingproduction, and getting ready for a smooth transition
when production picks up again. We will also
implement as many initiatives as possible to improve
profits by reducing overtime expenses throughworkstyle reform and reducing other expenses
through zero-based budgeting.
In terms of finances, we believe ensuring capitalliquidity is our greatest challenge. For this reason, weare obtaining regular updates of our financial situation,
including our subsidiaries, and ensuring the Group’s
internal financing system is functioning properly. We
are also implementing responses that include
enhancing inventory management, obtaining earlyfinancing, and establishing flexible bank credit
facilities.

4. Financial management in COVID-19 times

To achieve Vision 2030, we will steadily implement
these measures and meet the expectations of our
stakeholders through appropriate and timely
disclosure of financial information.

As part of our response to the spread of COVID-19,
we aim to ensure the health and safety of ouremployees while making every effort to avoid
inconveniencing our customers’ operations.
We have no way of knowing how long the current

5. Shareholder returns
Respect for shareholder profits is an importantmanagement policy at Aichi Steel. While striving toenrich and strengthen our corporate structures, we areworking to increase corporate value and enhance ourdividend policy by systematically expanding ourbusinesses. Following this policy, we aim to achieve a
consolidated payout ratio of 30% for our dividends
while maintaining the internal reserves necessary for
futurebusiness
expansionandtakingfull
consideration of our business performance, financial
condition and payout ratios. In line with our policy
detailed above, the annual dividend paid for the fiscal
year ended March 31, 2020, was 130 yen per share.

AICHI STEEL INTEGRATED REPORT 2020

46

Materiality■ Priority Issue 6

Key Financial Data (11-year summary)(Million yen)

FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019174,278

215,453

227,478

217,279

237,420

240,647

214,120

212,837

236,237

257,315

242,262

Hagane Company

96,225110,974

130,180

121,899

Kitaeru Company

99,599107,352

109,217

102,018

Smart Company

13,82014,786

14,627

14,865

Other businesses

3,191

3,123

3,290

3,477

7,218

11,813

11,11913,901Hagane Company

5,653

8,006

9,245

8,970

Kitaeru Company

845

2,747

1,057

3,329

Smart Company

237

348

-39

606

Other businesses

482

710

856

994

Profit and loss
Net sales
Segment:

4,313

Operating profit
Segment:

14,072

8,458

7,332

9,627

10,616

5,883

Operating profit margin (%)

2.48

6.53

3.72

3.37

4.05

4.41

2.75

3.39

5.00

4.32

5.74

Ordinary profit

3,906

12,873

7,925

7,929

9,810

11,141

5,835

6,863

11,774

11,324

13,776

9,779

8,045

12,371

10,455

13,158

Profit before income taxes

3,729

11,948

7,884

7,768

10,693

1,409

Profit attributable to owners of parent

6,625

15,205

4,246

4,898

5,503

6,023

20

5,084

8,182

6,503

8,543

Profit margin attributable to owners of parent (%)

3.80

7.06

1.87

2.25

2.32

2.50

0.01

2.39

3.46

2.53

3.53

Capital Expenditures

8,163

20,528

10,64910,272

12,93012,752

15,40820,831

19,02020,91420,068Depreciation Expenses

13,37012,475

14,447

12,84012,355

11,833

12,692

12,353

13,81814,423

15,884R&D expenses

2,531

2,776

3,337

3,597

3,471

3,538

3,282

3,304

3,777

3,992

3,758

Return on equity (ROE) (%)

6.40

13.45

3.55

3.96

4.17

4.14

0.01

3.60

5.55

4.27

5.56

Return on assets (ROA) (%)

2.87

6.30

1.76

2.04

2.23

2.33

0.01

1.95

2.99

2.30

2.99

242,350240,217

241,951

238,165

255,259

264,694

251,078

271,763

275,315290,294

280,380

160,806

161,889

163,691

Capital expenditures and R&D expenses

Profitability

Assets, liabilities and capital
Total assets
Net assets

112,376

123,671

126,111

132,436

144,965

161,669

147,534

151,273

Capital adequacy

107,487

118,682

120,786

126,323

137,592

153,316

139,344

143,024

151,891

152,638

154,647

Capital adequacy ratio (%)

44.35

49.41

49.92

53.04

53.90

57.92

55.50

52.63

55.17

52.58

55.16

Interest bearing debt

78,722

57,77358,98351,24352,04644,91537,44754,59847,31759,61859,445

0.31

0.39

0.38

0.73

0.49

0.49

0.41

0.38

0.29

0.27

0.38

Cash flows from operating activities

19,427

19,787

11,16427,757

14,992

19,33625,193

13,35013,164

13,58036,308Cash flows from investing activities-8,288-17,445-14,067-11,867-11,993-13,565-12,122-19,677-20,954-19,765-24,517

9,035-3,290Debt-equity ratio (Ratio)
Cash flows

3,717-22,848-741-10,198-1,911-10,158-9,466

15,231-9,509Net profit per share (Yen)

337.69774.89216.21

249.37279.94306.251.02

258.34415.71330.38434.05

Net assets per share (Yen)

5,478.53

6,044.28

6,148.61

6,430.50

6,995.84

7,794.08

7,080.24

7,266.42

7,716.77

7,754.80

7,857.00
130

Cash flows from financing activities
Investment indicators

Dividends per share (Yen)

80.5

100

100

100

100

100

100

100

120

120

Payout ratio (%)

25.2

12.9

46.3

40.1

35.7

32.7

—

38.7

28.9

36.3

30.0

4,282

4,351

4,406

4,504

4,613

4,617

4,654

4,773

4,847

4,957

4,912

Non-financial information
Employees (Persons)*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 2009.
*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.
Indicators and other information for FY2009, FY2010, FY2011, FY2012 and FY2013 remain as they were prior to application of this accounting standard.

47

AICHI STEEL INTEGRATED REPORT 2020

48

Highlight

Financial Highlights

Non-financial Highlights

Net sales

Operating profit and operating profit margin(Billion yen)

Operating profit
Operating profit margin(Billion yen)

20

300
250

214.1

212.8

236.2

257.3

(%)

6

5.00

242.2

5.74

15

200

11.8
10

150

2.75

4.32
11.1

13.9

4

E

Environmental

7.2

2

Website

2017

2018

2019

(FY)

Net assets and ROE
Net assets
ROE(Billion yen)

300

0

2015

2016

(%)

5.56

5.55

3.60
147.5

151.2

6

4

160.8

161.8

Total assets
ROA(Billion yen)

600

2017

2018

2019

(%)

2.99

3

2.30

1.95

400

271.7

0

2

(FY)

275.3

290.2

S

(Billion yen)

0.01
2017

2018

2019

0

(FY)

100

0.38

80
60
40

49

0.39

0.27

0.31
54.5

59.6

0.38
59.4

(Billion yen)

0.5

15

20

0.1

0

0

2016

2017

(Yen)

434.05258.348.1

330.38

2018

2019

500

8.5
250

(FY)

5.0

5

0

0 1.02
2015

2016

2017

2018

2019

58,644 t

Chemicals in
raw materials
and secondary
materials

Waste sent indirectly to landfill

0

(FY)

G
Governance7t

9,397 tDischarge
to waters

Waste(transferred)

Steel andother
products(consumed)

25.5

5.1
5

10

1.5

2000 2015 2016 2017 2018 2019
Base year

3.3

3.0
0

(FY)

3.2

1.3

99.1

1.0

2000 2015 2016 2017 2018 2019
Base year(FY)

Women inmanagement positions

Changes in number of employees

Changes in childcare leave■■ Male■■ Employees started■■ Female

Percentage of female
employees(Persons)

3,000

2,000

(Persons)

(%)

8.0

191

100

10

(%)

(Persons)

100

60

7

8

221
2019

50

%

1%)

Employment rate

52

55

2.5

2.6

(%)

59

2.75

20

6

4
Statutory
employment rate

2

5
0

0

(FY)

2017

2019

2018

0

(FY)

0

2017

2018

0

2019

(FY)

Social contribution

Changes in employee annual working hours

Changes in days of paid leave taken■■ Annual working hours■■ Days taken(Hours)(Days)

3,000

15

2,139

2,050

12.7
63.5

10

1,000

5

0

0

2017

Number of
directors(Proportion of all managers

40

4

212
2018

10

4

■■ Persons employed

Employees returned

100

91

%

Changes in employment of persons
with disabilities

2,466

2,451

2017

100

12

8.2

7.3
2,401

10

2,687

2,663

2,592

Percentage of ISO
14001-certified
subsidiaries

Waste recycling rate

5.3

4.7

3.4

Social contribution expenditure andnumber of volunteers■■ Social contribution
expenditure

Usage rate

13.3

13.6

66.5

68.0

(%)

2018

2019

(FY)

100

6

Number of meetingsof the Boardof Director

13(Persons)

180

12,000160.63124.76
90

93.01

2017

2019

2018

(FY)

0

0

2017

Security
Number of outside
directors

Number of volunteers(Million yen)

9,175

9,904

9,000

7,276

Governance

10

6.5
0.2

70,049 t

(FY)

50

0.4

47.3

37.4

2015

Profits attributable to owners of parent
Net profit per share

415.71

0.3

2019

20

2,000

net profit per share(Ratio)2018

Workstyles

Profits attributable to owners of parent andInterest bearing debt
Debt-equity ratio

2017

30

2,177

Interest bearing debt and debt-equity ratio

2016

13.2

Social

1

2016

2015

(Thousand tons)

0

2015

2005
Base year

Waste sent directly to landfill

280.3

200

0

1,000

(FY)

2.99

251.0

0.01
2016

0

1,200

0

0

1,000

2

2015

2019

633.0

WebsiteAtmospheric emissions

11 t

Diversity

163.6

100

0

2018

Total assets and ROA

4.27
200

2017

1,400

603.0

600

0

2016

636.0

650

1,347

681.1

669.2

10

50

2015

680.3

1,600

1,502

1,447

1,366

700

Companywide material balance of
PRTR substances(Thousand tons)

1,520

750

1,176

15

5

0

(Thousand t-CO2/year)■■ Total CO2 emissions
Production volume(Thousand tons)

3.39

5.8

100

Total CO2 emissions

2(incl. 1 woman)

Attendance rate at meetingsof the Boardof Directors

98.9

％

Number of
Audit &
Supervisory
Board
Members

4(of which, 2 outside
Audit & Supervisory
Board Members)

6,000

2018

2019

0

(FY)

Compliance

Number of times
security
training held

Number of compliancetraining classes

Number of serious
information
security incidents

Number of reportingand consultation
incidents

12
0

23
8

AICHI STEEL INTEGRATED REPORT 2020

50

Primary contact: General Affairs & Public Relations Div.

Released: August 2020

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