More enthusiastically, strongly and straightforwardly

AICHI STEEL REPORT 2015
Year ended March 31, 2015

Mission Statement
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.
1. We will strive to make a positive contribution to society with safe, appealing, anduseful technology and products.
2. We will nurture a corporate culture based on trust, reliability and the pursuit of excellence.
3. We will be a good corporate citizen, ever mindful of our environment responsibilities.

CSR Policy
We will contribute to the sustainable progress of society and the Earth through our soundcorporate activities.

CSR Vision 2015
We will gain the trust and confidence of and give satisfaction to our customers and all
our stakeholders.
We will develop employees who are open and fair, developing a corporate culture
characterized by a challenging spirit.

1S Culture
To be and to remain a globally valued
enterprise, we will promote our "1S" culture
with top priority on the three Ss:

Sincerity first (Shojiki)
Cleanliness (Seiso)
Safety first (Safety)
Editorial Policy

Readers

The Aichi Steel Report 2015 was prepared to assist
understanding among our many stakeholders of theapproaches taken by Aichi Steel and Aichi SteelGroup in fiscal 2014. Besides describing theseapproaches with specific examples, it sets forth asmuch as possible the causes and future initiatives
concerning items for which targets have not yet
been met.
Besides a progress report on the specification ofimportant items required under the Global Reporting Initiative (GRI) guidelines, this year’s Aichi Steel
Report presents the highlights of action in fiscal
2014 as a special content. In addition to adopting
the UD font1 with consideration for universal
design2 as in past editions, it reflects concern forlayouts that facilitate reading in its use of color andbold type, for example.

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

1 A typeface design based on the concept of universal design.
2 Design that enables all persons, regardless of age, gender, ordisability, to make use of products, services, housing, or
facilities, both conveniently and comfortably.

1

Report Period and Scope
The Report covers activities conducted by the Aichi Steel Group during fiscal
2014 (April 2014 to March 2015). However, some activities conducted before
or after fiscal 2013 are also explained where necessary.

Reference Guidelines
The Global Reporting Initiative (GRI) "Sustainability Reporting Guidelines"(versions 4)
ISO26000 (Corporate Social Responsibility)

Mini-quiz
There are three significant changes from last year on the cover of this year’s
Aichi Steel Report.
Can you figure out what they are? (The answer is on the back cover.)CONTENTS

Mission Statement/Editorial Policy/Corporate Profile …
Message from the President ……………………………

1
3
SpecialContent1 The Aichi Steel Group’s Engagement with Society …
7SpecialContent2 Highlights of activities in FY2014 ……… 11
Governance ………………………………………………… 15
Human Rights and Working Practices ……………… 21
Quality Improvement ……………………………………… 25
With Community and Society ………………………… 27
Environment ………………………………………………… 29
Financial Section …………………………………………… 38
GRI Guideline Comparison Table …………………… 47
Third-Party View …………………………………………… 48

Corporate Profile
Establishment

March 8, 1940

Capital25,016 million yen (as of March 31, 2015)

Offices Head Office: Tokai City, Aichi Pref., Japan
Sales Offices: Tokyo/Osaka/Fukuoka

Representative

Takahiro Fujioka, President

Overseas Offices: Shanghai/Silicon Valley

Employees

4,617 (Consolidated)/2,409 (Non-Consolidated)

Plants: Chita/Kariya/Forging/Higashiura/Gifu/Seki(as of March 31, 2015)
Business Description Production and sale of specialty steel products,
forgings and electromagnetic products

Major Products
Specialty steel

Stainless steel

Forgings

Specialty steel is manufactured
by adding alloys and metallic
elements to iron to improvematerial properties, such as
strength, hardness, toughness,wear resistance, and corrosion
resistance.

Tough and corrosion-resistant
stainless steel is used in applications relating to water, such as
dams, sluices, and ships. It isalso used in chemical andnuclear power plants, as well as
in construction materials andeveryday utensils.

Forgings, produced by pressing
and forging specialty steel, areused in automobiles, construction machines and manufacturing machines that require
strength and durability.

[Example products]
structural steel, free-cutting steel,spring steel, etc.

[Example products]
stainless steel shapes, round bars, etc.

[Example products]
crankshafts, differential ring gears,
rear axle shafts, etc.

Electromagnetic products/
TetsuRiki-AgriUsing our know-how in specialty
steel manufacturing, we develop
electronic components, magnets
and sensors. In addition, “TetsuRikiAgri,” which promotes plant growththrough the latent power of iron,has also been developed.
[Example products]
MAGFINE, MI sensors, TetsuRiki-Agri,
TetsuRiki-Aqua, etc.

Aichi Steel Group
9 companies in Japan
Aiko Corporation
Aichi Ceratec Corporation
Omi Mining Co., Ltd.
Aichi Techno Metal Fukaumi Company
Aichi Steel Logistics Co., Ltd.
Aichi Information System Company
Aiko Service Co., Ltd.
Aichi Micro Intelligent Corporation
Asdex Corporation

10 companies in overseas

Sales Mix

Aichi Forging Company of Asia, Inc. (AFC)Aichi Forge USA, Inc. (AFU)
Aichi Europe GmbH (Ae)Aichi International (Thailand) Co., Ltd. (AIT)Shanghai Aichi Forging Co., Ltd. (SAFC)
PT. Aichi Forging Indonesia (AFI)
Aichi Magfine Czech s.r.o. (AMC)
AMIT, Inc.
Aichi Korea Corporation (AKC)
Aichi Magfine Technology (Pinghu) Co., Ltd. (AMT)Electromagnetic
5.3%

Forgings
45.3%

Others
1.7%

Steel
47.7%

AICHI STEEL REPORT 20152

Message from the President

President

Takahiro Fujioka

Interview“We will reinforce our manufacturing and maximize
our strengths as a materials manufacturer as wework to become a company of choice globally.”
Could you provide an overview of fiscal 2014 and describe what the year was likeamid a difficult operating environment characterized by ongoing yen depreciation?
Taking Advantage of Opportunities in a Difficult Environment
In fiscal 2014, ending on March 31, 2015, Aichi Steel’s
operating environment remained difficult, characterized
by ongoing yen depreciation.
Stable low prices for steel scrap, our primary material,
were a positive factor. However, as Aichi Steel requires a
substantial amount of energy, the effect of the yen depreciation on raising energy and raw materials prices had amajor management impact. All in all, it was a difficult

year.
Under these conditions, as the result of several decadesof collaborating with Toyota Motor Corporation on thedevelopment of materials for fuel cell vehicles (FCVs), we
see a major opportunity in promoting the use of our
products to help realize a hydrogen-based society involving such items as FCVs and hydrogen stations. We also
foresee opportunity in the development of infrastructure
toward the Tokyo Olympics. We believe we have an
extremely large chance to contribute by providing
stainless steel, one of our strengths.

Wouldn’t you agree that managing to achieve sales and income increases despite theproblematic operating environment has led to a solid assessment of the Company?
Lowering Cost of Sales as We Move Toward“ZZZ200”
A major factor behind this achievement is the success of
our efforts to lower the cost of sales under “ZZ1001,” anactivity we have been pursuing companywide since fiscal
2012. Ultimately, in three years we succeeded in generating earnings of approximately ¥10 billion. However, rather
than ending the initiative there, in fiscal 2015 we launched“ZZZ (tri-zed) 2002.” This new activity, under Vision 2020,
calls for us to achieve net sales of ¥300 billion and operating income of ¥20 billion.
The ZZZ200 effort embraces the philosophy of “fractional
management.” Under this concept, cost of sales is thedenominator. Important to this figure is the extent towhich we can conduct production and sales efficiently
without waste or loss. The key to the numerator, which is3sales and profits, is to strengthen our core business byworking with development departments to continue
cultivating of new business, new products and newmarkets, thereby bolstering our sales capabilities. In short,
we are working to decrease the denominator (cost of
sales) and increase the numerator (sales and profits).
The ZZZ200 initiative defines 13 categories, and we will
promote activities throughout the organization, focusing
on being the sales and profit leader in each segment.

1.

2.

ZZ100……This activity, named to encapsulate the ideas of zenryoku dezennshin (moving forward with full power) and zettai yarinuku (definitely
prevail), was aimed at ensuring profits of ¥10 billion even in the face ofa difficult operating environment.
ZZZ (tri-zed) 200……Named to incorporate the ideas of zenin sanka(participation by all), zenryoku (full power) and zettai yarinuku (definitely
prevail), this activity sets the target of achieving consolidated operating
income of at least ¥20 billion by fiscal 2020.

One and a half years have passed since the formulation of Vision 2020.
What specific measures are you currently engaged in?
2020 Company of Choice Globally

Making Aichi Steel the Company of Choice Globally
The central initiatives for achieving Vision 2020 involve
bolstering competitiveness in our core businesses andfurther reinforcing our unique capabilities. To respond torising global automotive demand, we will need to reform
our production process to bolster our competitiveness inthe forging and steel materials segments. We will need tocreate a management structure that is robust in the faceof changes in the operating environment.

Using the Aichi Steel Group’s products
ensures global security and safety
Slogan for
2015

First, let’s give it a try! Change ourselves! Persevere!

Forgings Category: Responding to TNGA3
and Global Production Process Reform
To realize TNGA, we hold regular technical liaison meetings with our customers and are involved in collaborative
manufacturing, working together from the initial development stages. Also, Thailand has become an important
supply base for IMV4 products. In the past, Group
company Aichi International (Thailand) Co., Ltd. (AIT)
performed the central functions of finishing, inspecting
and shipping forgings imported from the Philippines,
Shanghai and Japan. By introducing new forging equipment at AIT, we are augmenting our market competitiveness and establishing an optimal supply chain, includingfrom the BCM5 and BAP6 perspectives. In this manner, weare creating a robust global manufacturing system andproviding peace of mind to our customers.

Steel Category: Production
Energy Reforms

ProcessandWe are making steady inroads with 4S reengineering, with
4S being an acronym for simple, slim, short and straight.
Currently, we are launching rolling process reforms aimed
at augmenting productivity by 10% or more. We have also
begun 4S reengineering on finishing (inspections) tosteadily alleviate bottlenecked areas, putting in place afirm structure that we believe should be able to respondto customers’ demands. Another important focus is on

I will/rebuilding our business by changing
ourselves: From awareness to practiceBoldly working to achieve our targets

2008–

Corporate activities
based on “1S Culture”

1940–

Principle of fonder Kiichiro Toyoda“Great cars are made with great steel”

reducing the amount of energy we use. Initiatives in thisarea include making visible the makeup of electric furnace
exhaust gases and controlling them to avoid incomplete
combustion. We have also completed a management
system to optimize gas burner temperatures. We arestarting to put this system in operation, aiming to achieve
substantial improvements in combustion efficiency.
Furthermore, we are collaborating with Usha Martin Ltd. ofIndia in efforts to procure steel materials globally. We are
currently able to procure in India the steel materials used
at our bases in the ASEAN region. We are moving forwardwith this project with the objective of putting in place a
globally integrated forging and steelmaking system.
3.

4.

5.
6.

TNGA……An acronym for Toyota New Global Architecture, TNGA is a
new development method launched by Toyota in April 2012 that aims
to achieve both stronger product development power and reduced
development cost by using common parts and units for different models
of cars from development stages.
IMV……An acronym for Innovative International Multi-purpose Vehicle,
an IMV is a globally strategic vehicle aimed specifically at emerging
markets that is produced to target diverse needs.
BCM……An acronym for business continuity management plan
BAP……An acronym for backup action plan, a BAP allows for the
securing of facilities, procedures and spare parts to allow for production
at alternative locations if production at facilities becomes impossible.

Please describe some of the areas of business in which Aichi Steel is unique.
Providing Stainless Steel That Contributes toa Changing Infrastructure
In addition to being the leader in our core business areas,
we consider increasing our number of proprietary anddistinctive technologies and projects to be essential.
Specifically, we plan to further raise our number ofstainless steel and electro-magnetic products. Our
stainless steel is used in the Mirai, an FCV produced by
Toyota Motors. Going forward, we plan to expand ourrepertoire of technologies, including through the development of derivative products that are of good quality andmoderately priced. It is estimated that by 2030, 65% ormore of the bridges in Japan will have become decrepit;
we expect demand to rebuild such infrastructure to grow.
We believe demand for stainless steel is certain to expand
to meet such needs for infrastructure repair, renovation andrenewal. Accordingly, we will work to boost our sales bymaking proactive appeals based on the distinctivenessand attractiveness of our stainless steel.

By Moving Steadily into the Black, Positioning
Electro-Magnetic Products as Our Fourth
Pillar of Earnings
Another category in which we are unique is electro-

magnetic products. In fiscal 2014, we succeeded in securing profits of approximately ¥600 million in this area. First,
in the electro-magnetic business we plan to develop
compact motors for use in home appliances and automobiles, expanding their application by leveraging features
such as their freedom of configuration. In the sensor
business, we are reinforcing our development and sales ofmagnetic sensors, an area where we have historically been
competitive, including through synergies based on analliance with ROHM Co., Ltd. In the future, we plan to rollout products in high-value-added fields, including amusement, healthcare and foreign matter detection. As the IoT7
concept becomes mainstream, we expect to develop ourbusiness in this area. In the business of electronic components, we have a major share of the market for components for cooling the inverters on hybrid units. Our superior
plating technology is one reason for our prowess in thiscategory. As hybrid vehicles and plug-in hybrid vehicles(PHVs) become more prevalent, we expect the needdemand for these components to continue growing. In thedental business, sales of mini implants in South Korea arefavorable, and we are preparing for a global rollout, including in China and the United States.
7.

IoT……An acronym for the Internet of things, IoT describes a future inwhich diverse items are equipped with communication functions and cancommunicate with each other over the Internet, allowing for automatic
recognition, automatic control and remote measurement.

AICHI STEEL REPORT 20154

Message from the President
What are the objectives behind the organizational reforms?
Creating an Organization Where Ideas Flow
Smoothly and Efficiently
We are pursuing revisions from two perspectives: theexecutive structure and the organizational structure.
Regarding the executive structure, we are clarifying theroles of management (directors) and operations(executive officers).
In terms of the organizational structure, we are pursuingorganizational restructuring along product lines rather
than by divisions, forming a group to cultivate the stainlesssteel market and a leading-edge and functional productdevelopment department. We believe this approach will
result in smoother communication of decisions, allowing
for swifter organizational activity.
In the interest of reinforcing manufacturing throughout thevalue chain, we have created a business partner support
group within our procurement department. By working
with our suppliers to build a more robust structure, we are
creating win–win relationships and taking specific steps to
support their realization.

Wherever will be proactive in communicating withlocal communities to ensure that the people want
us to remain in business.
Would you please describe the CSR management policy at Aichi Steel?
Being a Company That Society Considers
Necessary
We strive, wherever we operate to be a company that
local peoples want to stay in business, I believe it is important to sincerely address the issues and needs society
faces, resolve them in a timely manner and pursue
initiatives to engage in dialog with local communities.
Diligently and honestly undertaking efforts to addressthese issue leads to individual employee growth andincreased awareness of society at large. These attributes
are part of our corporate culture, of “1S Culture8.”
In fiscal 2014, we instilled this culture at Group companies, including at overseas bases. As a result, internal
awareness of 1S Culture reached 98.6%, a result that I am
proud of.
I also pay a great deal of attention to the results of
employee satisfaction surveys. Unless our employees are
satisfied, we cannot provide satisfaction to society atlarge. We conduct these surveys regularly, and always
take them into consideration when developing individual
departments’ annual plans in a process of ongoing
improvement.
We are a resource-recycling corporation in the sense that
our manufacturing uses as a material the steel scrap
generated from dismantling automobiles and pieces ofinfrastructure. In this manner, we strive to contribute to
the global environment through further efforts at CO2
reduction, resource recycling and material development
toward the realization of a hydrogen-oriented society.
The environment in which the Company operates changes
significantly with the times. Like the growth recorded in
the rings of a tree, we aspire to develop our operations

5

regardless of the environment by being robust enough toweather these changes. To achieve this, I believe we must
reinforce our foundations and bolster our profitability. We
need to make steady progress on both fronts to achieve
real permanent growth.

Continuing to Contribute to Society Througha Spirit of Co-Existence and Co-Prosperity
Our social contribution activities include a “Lessons about
Iron,” through which we endeavor to communicate thejoys of manufacturing to elementary school students. We
are also proactively undertaking “Forestation to Create a
Forest for Beetles,” an industry–academia–government
effort to contribute to biodiversity.
Among various other initiatives, our employees serve as“forest-developing volunteers,” and we conduct a “onecoin” donation program to raise awareness of contributing
to society among each of our employees.
We work to achieve success in our core businesses andreturn the results to the societies in which we operate.
Going forward, we will aim to retain this spirit ofco-existence and co-prosperity throughout the Group as
we endeavor to contribute to society.
8.

1S Culture……The concept of putting shojiki (honesty), seiso (cleanliness)and safety first, “1S” forms the basis of our corporate culture.

At a time when a well trained workforce and diversity are necessary for any company
hoping to compete on a global scale, what are your thoughts on creating an amenable
working environment at Aichi Steel?
Nurturing personnel Who Can Be Active Globally
I see the cultivation of employees who can be active on a
global stage as an urgent issue for our global development.
As part of our new employee training, I take the opportunity to conduct a lecture myself. One of the points I
emphasize strongly is that it takes three years to build up
a base. For example, performing the same measurements
and accumulating the same data repeatedly for three
years enables a person to accumulate experience that willcertainly contribute to future success. I do my best to
thoroughly instill this concept.
We trained personnel who can work in a global settingwith international companies are vital for our global
growth. To address this situation, we invite employees intheir third year with the Company to join in our Group“Global Meeting.” We also have educational programs tohelp employees acquire language skills, and we dispatchyoung employees for training at overseas subsidiaries.
These programs provide opportunities that allow employees to grow in global fields.

Fostering Diverse Working Styles
By fiscal 2020, we aim to at least double our number offemale managers from 2014 levels, but we have highexpectations for female employees in all positions, notonly in management. To reach these aims, we will increase
our recruitment of women. We are also putting in place
programs aimed at making the workplace more amenable
to women, such as introducing child-care support andfacilitating shorter working hours.
Another important topic is creating an environment inwhich seniors can work efficiently. To this end, we are
creating production lines tailored to senior employees,
putting in place support equipment and tools that will
enable them to work safely and comfortably. We conducthearings of individual employees once they have reacheda certain age to determine early on if they are interested
in continuing to work post-retirement we are also considering a variety of initiatives to support diverse working
styles.
We also consider the employment of people with disabilities an important topic. Each year, we recruit a certain
number of new employees who have various disabilities.
We collaborate with special needs schools and aremaking our workplaces barrier-free. Through these ongoing efforts, we aim to create a workplace where various
types of people can make full use of their skills. As part ofthese efforts, I believe it is important to cultivate an understanding of people with disabilities so that all employees
can work together efficiently.

I understand that you are planning to rebuild your corporate headquarters to mark theCompany’s 75th anniversary of establishment. Please describe your feelings on this,including aspirations for the future.
Setting the Stage to Become an Energetic
Company with a New Headquarters Building
We have decided to reconstruct our facilities, building a
new headquarters building and visitor center on our
existing corporate site. The designs are disaster resilient
and are making worker safety a topmost priority. The
structures will also facilitate workstyle reform, high levelsof efficiency and serve as places that encourage communication. When the employees working here view the newbuildings, we want them to think of them as symbols of
Aichi Steel and see the evidence of our growth.
Above all else, I want our corporate group to be one thatencourages active thinking, in which each employee feels
a sense of ownership and thinks for themselves as theywork. Also, we will carry forward the spirit of our founder,
Kiichiro Toyoda, with the phrase “I will/rebuilding ourbusiness by changing ourselves.” In these ways, we intend
to become a company that contributes to society byproviding materials.
Artist's concept of the completed building

AICHI STEEL REPORT 20156

Special
Content

The Aichi Steel Group’s Engagement with Society

Summary of major issues in the
Aichi Steel Group
Aichi Steel is identifying important issues to be addressed through the business activities of its Group for conformance with the fourth edition of the
Global Reporting Initiative (GRI) guidelines (G4).
This section sets forth these issues with an awareness of the value chain
encompassing Aichi Steel and engagement with stakeholders.

Engagement with stakeholders in the value chain

Suppliers

Head office building
Scrap iron and iron alloy manufacturers

EnergyProcurement (maritime transport)

Steelmaking plant

Procurement (overland transport)

Major issues in each phase

Issues in the environmental aspect

Procurement

ProductionMore efficient transport and green procurement

Reduction of energy
consumption by facilities
Increase in efficiency
in work processes

Decrease in CO2emissions
Promotion of zero
emissionsThorough compliancePreparation of business continuity plans(BCP) & back-up action plans (BAP)
Information security

Effective use of diverse
human resources
Good work-life balance

Natural resources, decrease in amount of use
Extensive use of clean energy
Thorough complianceManagement of labor health and safety
Respect for human rights

7

Issues in the social aspect

Human resource development

Customers

Employees

Sales activities
Supplier groups, Kyohokai, etc.
Customer groups(Aikokai, Aishinkai)
Corporate website
Aichi Steel Report (this report)

Labor-management negotiations and explanatory meetings
Various discussions
Various seminars
Portals for consultation and communication Corporate website and intranet
Aichi Steel Report (this report)
In-house report
Stable management and return of profit
Improvement of labor conditions and creation of opportunities
Promotion of a good work-life balance Human resource development
Management of labor health and safety
Fair assessment

Stable supply of products
Improvement in productquality and added value
Improvement in economic merit
Improvement inenvironmental performance

Shareholders/Investors

Aichi Steel Group as a whole

General meetings ofshareholders
Meetings for presentation
to investors
Various IR tools
Aichi Steel Report (this report)
IR website

Main stakeholders
and their estimated wishes

Stable management andreturn of profit
Information disclosure

Conference for promotion of
consolidated management
Global meeting
Meetings for discussion by
top-level executives
Provision of technology and know-how
Support for human resource development
Conditioning of production
facilities and infrastructure

Local community

Suppliers

Main engagement
opportunities
Estimated expectations
and wishes

Procurement activities
Meetings for descriptionof procurement policy
Supplier groups (Hokokai)Community meetings
Participation in local community events
Social contribution activities
Information disclosure
Promotion of social contribution activities
Contribution to local communities
Environmental contribution
Maintenance and improvementof biodiversity

Equal and fair transactions
Management of labor safety

Public administrative authorities
Meetings for discussion
with authorities
Contribution toeducational activities

Promotion of employment
Payment of taxes
Contribution to theregion and education

Various supporting groups (cooperation with NPOs, NGOs, etc.)
Communication with various groups
Support of activities
Promotion of social contribution activities

Aichi Steel Group
Customers

Technical center

Group companies

Trading firms

Shareholders/Investors
Local community

Wholesalers
Forging plants

Component manufacturers
Automotive plants

Logistics (physical distribution)

Products

Curtailment of environmentburdening substances
Preservation of water
quality

Increase in transport efficiency
Decrease in crating materials
Curtailment of environmentburdening substances

Development of energysaving productsManagement of labor
health and safety
Creation of employment

Thorough compliance
Stable supply
Alleviation of impact ontransportation

Improvement of product quality
Product safety
Heightening of customer
satisfaction

Regional contribution

Contribution to emergence of theresource-recycling society

AICHI STEEL REPORT 20158

Special
Content

The Aichi Steel Group’s Engagement with Society

The Aichi Steel Group is committed to pursuing the infinite
possibilities of materials and creating new values.
We are contributing to various aspects of society by providing products thatmatch the needs of our customers to ensure a comfortable life for people.

Historical building
Aichi Steel's technologies
are utilized not only formodern buildings but also
for historical heritages.

Farm, vegetable garden

StationSeismic strengthening works of afive-story pagoda

Building

Safety first

Farming, greening

Airport“Tetsuriki-Agri” and “TetsurikiAqua” activate plant photosynthesis by using ferrous ion.
Ensuring stable suppy of ferrous
ion essencial for plant growth.

Home gardening

Farming

PC, smart phone
We are supporting the evolutionof information terminals thatare increasingly becoming
more compact with higher
performance.

Building, store

Station, airport

Stainless steel is used for diverse applications
for its design and corrosion resistance, contributing to extended life of building appearancesand concrete structures.

Our stainless steel is also used in stations andairports used by thousands of people everyday.

Electromagnetic
compass for
smart phone

High-sensitive MI sensor

9

Stainless steel concrete bar“SUSCON”

Entrance eave, curtain wall

Station skywalk

HandrailCar
We are contributing to lower fuelconsumption and higher performance.

Hybrid vehicles

Fuel-cell vehicles

We are supporting theelectrification of environmentally friendly vehicles.

Hydrogen station

Cold plate

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

Power cards

Hydrogen station[Forging]
Crank shaft

Input shaft

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

Counter driven gear

[Electromagnetic]
Magfine seat motor

Attachment in the tunnel ofcapital expressway

TunnelBridgeRailways

Water gate

Hydrogen station

Hydrogen station

Hybrid vehicles

Fuel-cell vehicles

Car

DentistStorage tank

Chemical tanker

CranePower shovel

Ship, water gate, bridge, plant

Dump truck

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

Dentistry
Small magnet developed by Aichi
Steel and used worldwide to affix
false teeth.

Wideapplication
for its rust-resistantproperties, including
dams, water gatesand plant.

Propeller shaft for ship

Boss

Front idler

Propeller shaft

Dental magnetic attachment

Water gate

Irabu Bridge

AICHI STEEL REPORT 201510

Special
Content

Highlights of activities in FY2014

Production starts on stainless steel for
Toyota’s new fuel-cell vehicle the MIRAI
Aichi Steel has started production of AUS316L-H2
stainless steel for parts in the high-pressure hydrogentrain of the MIRAI, the fuel-cell vehicle to be sold by
Toyota Motor.
This steel was made by applying a cold-forming
process to AUS316L-H2 (announced in November2013), to increase its strength. It will be applied toseveral parts in the high-pressure hydrogen train. The
steel is characterized by the high ductility (malleability)
it exhibits in a high-pressure hydrogen gas
environment as compared to conventional steel.
This is due to the original design of its constituents. It
will help to improve the safety and reliability of partsand devices in fuel-cell vehicles and hydrogen stations.
In addition, it has been adopted by several
manufacturers of high-pressure hydrogen equipment for
use in hydrogen stations. The adoption of its
high-strength specifications for the MIRAI fuel-cellvehicle will widen our product repertory and allow us toassist in the emergence of repertoire hydrogen society
as a manufacturer of vehicle and infrastucture, materials.

Announced this time

Strength property: highNewlydeveloped steel
High-strength
specifications

Cold-forming process

Conventional
steel

Original constituent
Announced indesignNovember 2013

Newly developed
steel

Ductility in a high-pressure hydrogen gas environment: high

The Toyota model MIRAI− Launch of blooming re-engineering −Innovation in steel manufacturing
Aichi Steel is promoting an original program titled “4S
Re-Engineering*” whose intention is to innovate the
manufacturing process for steel materials. As a part ofthis program, it has launched work on “blooming
re-engineering,” i.e., innovation of the blooming process
whose facilities roll 95% of our custom steel. This
re-engineering is grounded in the key pillars of process
streamlining, reform of yield, and improvement of quality
and the first-run rate. Its ultimate aim is total direct
linkage with the steelmaking process.
As a first step to this end, we separated the conveyor
lines for steel materials and billet, which had been mixed
together, and set up a new conveyor line exclusively forthe former. We also unified the sizes of steelmaking basematerials and billet. These steps improved productivity andyield.
Basides stream living processes and improving first-run
rates, future objectives. include a further increase incompetitiveness of our steel materials and forged products,
which constitute our main line, and substantial reduction in
CO2 emissions for linkage with contribution to the global
environment.

*4S Re-Engineering: process innovation keyed by the watchwords “simple, slim, short, and straight.”

11

Light-weight, strength connecting rods
improve automobile fuel efficiency
Collaborating with TOYOTA MOTORS, Aichi Steel has
developed a new type of steel for making
high-strength, light-weight connecting rods. This steel
was adopted for a new turbo engine manufactured by
Toyota.
Reducing the weight of connecting rods, one of themoving parts in an engine, can be expected to havebeneficial ripple-effects for peripheral parts. There isconsequently a strong need for a reduction in theirweight. So far, the problem has been that the increasein strength required for weight reduction had theeffect of making the steel harder to cut. In thisproject, Aichi Steel used it’s expertise in integrated

forging and steelmaking to produce a steel as strong
as any world wide, but as easy to cut asconventional steel.
The adoption of this new steel will bring about a weight
reduction of around 15% as compared to the ordinaryconnecting rods in engines in the same displacementclass, and therefore improve the automobile’s fuelefficiency.

StrongConventional
Strengthening is based on a hard pearlite
structure1. This makes the steel hard anddifficult to process.

15% weight reduction

Newly developed
steel

Conventional
technology

Newly developed productOptimization of the proportion of ferrite structure2
Maximization of the amount of strengthening through control of the eduction3of vanadium (V)carbonitrides

1 Pearlite structure: a stratified structure of cementite,which is a chemical compound of iron and carbon,
and ferrite. It is a hard structure.
2 Ferrite structure: a type of steel metallic structure. It
is often observed when the carbon content is low.
3 Formation when solids are separated out of asolution (liquid) of a certain substance.

Weak

Both high strength and easeof cutting achieved!

Steel currently
in useNewly developed
steelWhite: ferrite structure
Grey: pearlite structure

Steel currently
in useEasy to cut

Hard to cut

Outline of the steel materials manufacturing process

Steelmaking[Smelting & hardening]

Scrap yard

Electric furnace(EF)

Refining(LH/RHdegasification)

Large-section
continuous casting
(3CC)

Bloom

[Rolling & half-finished products]

Rolling[Rolling & finished products]

Bloom/large-size
Rolling

Product rolling

FinishingForging[Inspection]

Product finishing[Striking]

Secondary finishing(heat treatment &secondary processing)Forging

Main features
1) Improvement of productivity and yield through installation of a new conveyor line
and unification of the sizes of base metal and billet for steel materials
2) Achievement of energy cost minimization by synchronization with steelmaking
3) Improvement of appearance and quality through optimization of thermal history and rolling

Effects

Direct link between steelmaking & streamlining
Decrease in CO2 emissions by improving of yield, andquality

AICHI STEEL REPORT 201512

Special
Content

Highlights of activities in FY2014

4,500 ton crankshaft forging press starts
operation in Thailand
and Japan
Aichi Steel has started operation of new 4,500-ton
presses for forging crankshafts at its head-office forging
plant in Japan and its Group company Aichi
International (Thailand) Co., Ltd. The presses wereintroduced in response to needs for more compact,
lightweight, and fuel-efficient automobiles. These
presses are used for producing of crankshafts for thediesel engine mounted in the IMV, Toyota’s model
directed at newly emerging economies. It can also copewith the needs of a wide range of customers, meaning
not only major automobiles clients in these markets but
also manufacturers of agricultural and construction
machinery.
Regional production for consumption in the same
region is spreading along with the globalization of
automotive production. Under these circumstances,
Aichi Steel is striving to set up a stable supply chainthat can ensure that customers around the world can
expect the same quality in their country as is expected
in Japan.
Our hope is to establish Aichi Steel as a universallytrusted brand.

Toyota’s Hilux REVO model

A 4,500-ton press at our forging plant

New products developed using
our ironmaking experties
Liquid fertilizer for agricultural use
ALA-FeSTA
Vendor: Sakata Seed Corporation* A product developed jointly by three companies:
Sakata Seed Corporation; Seiwa Co., Ltd.; andAichi Steel Corporation

Earth Garden Rich Series, a solid fertilizer for home gardening
Vendor: Earth Chemical Co., Ltd.

13

Iron plays a very important role in the growth ofplants. Aichi Steel drew on its ironmaking know-how
to independently develop a type of ferrous oxide(FeO). The ferrous ions in it leach steadily and slowly
into the ground, making it easy for plants to absorb
iron and promoting their growth.
Recently, Aichi Steel jointly developed products
containing its ferrous oxide (FeO). The results weremarketed under the brand Earth Garden Rich Series by
Earth Chemical Co., Ltd. and ALA-FeSTA by Sakata
Seed Corporation. The former is aimed at homegardeners, and the latter, at farmers. We arecommitted to continued cultivation of new markets
and development of new products by actively
pursuing joint development with other firms and not
restricting our provision of products to our own brand.
Our aspiration is to produce a diverse repertoire oforiginal steel products.

Sales launch for
PalmGauss-S, a magnetic
field simulator for magnetic
senser evaluation
PalmGauss-S utilized technology learned by Aichi Steelwhile developing the MI sensor.
The MI sensor is an amorphous wire magnetic sensor.
The first of its kind that has been whidely lauded for
its high performance and compact size.
Recent years have seen a rapid expansion of thesmartphone market, and magnetic sensors are being
mounted in the devices as electronic compasses. This
product enables magnetic field simulation that
anticipates use of smartphones in various positions. It
is expected to contribute to the development andproduction of new smartphone models.

Generation of the desired magnetic force by
combination of three sets of coils.
Ability to simulate diverse magnetic field states.

Magneticorientation

MIZUNO Corporation adopts steel developedby Aichi Steel for its JPX E and JPX 850 golfclubs
Soft-iron boron steel has excellent hardenability* due tothe heat treatment of the steel.
This steel when used in the head of a golf club, allows
for the benefits of a hard club, while still utilizing all theadvantages of conventional soft-iron club. This technology allowed MIZUNO to create a golf club with a verythin forged soft-iron face. Therefore these clubs aredeliver the soft sensation and exhilarating impact distinctive to forged soft iron, while lengthening the distance ofshots.
* Hardenability: a property indicating the depth of firing and distribution of
hardness when quenching and hardening steel through heat treatment

Strength of materials
Provided by MIZUNO Corporation
JPX 850

Conventional product(S25C)JPX EIII, JPX 850(soft-iron boron steel)

AICHI STEEL REPORT 201514

Governance
Striving to contribute to sustainable developmentof society and the Earth through healthy corporate
activities

CSR Management
Basic policy

CSR system

We at Aichi Steel strive to pursue a business that places value on social morality

With our president as the chairperson, the CSR Committee meets once aand relations with local communities in order to fulfill our obligations in complianceyear (in March) to report on and check the progress of our CSR manage-with laws and regulations, as a good global corporate citizen. We practice CSR

ment efforts. Including those of the Aichi Steel Group companies.

management to gain trust from all our stakeholders through the establishment of

CSR committee

our Long-term CSR Vision and the implementation of our Medium-term CSR Plan.

Chairperson: President
Members: Standing Directors,
CSR
Executive Officer,
committee
Officer,
Audit & Supervisory Board Member,
Secretariat: Corporate Planning Div.,
General Affairs Div.

CSR guidelines
In 2007, we revised the “Aichi Steel Action Guidelines” established in 1998
into the “Aichi Group Action Guidelines,” which are practical guidelines thatmust be followed whenever global business activities are conducted. (SeeWEB.) The Guidelines have served as a basis for the CSR management of
the Aichi Steel Group as a whole. We have also established the BasicManagement Rules (4 items in 2 categories), the Rules of Employment (15items in 2 categories), the Organization Rules (7 items in 2 categories), andRelevant parties
Our Company GroupOur major suppliers
Subjects discussed
1) Annual policy andits progress2) Compliance3) Risk management
4) Social contribution5) Other CSR-related
matters1) CSR education
For our directors and employees, directors of
our Group companies, executives of our major suppliers
Education2) Education regarding Action Guidelines(Mission statement, CSR Policy, compliance, risk management, etc.)
Education is provided commensurate with thepromotion to each new job ladder (eight ladders).

the Business Administration Rules (309 items in 10 categories). These rules
are revised whenever any changes are made to related laws and regulations
or environmental conditions, and they are also checked, audited andrevised on a regular basis.

Customers
Society, Earth

Suppliers
Improved corporate value

CSR management
Realization of mission statement
Corporate governance

Shareholders

Companies Act
Financial Instrumentand Exchange Law (J-SOX)1

Disclosure of
information(Accountability)

Shareholders Meeting
Board of Directors

Report toExternal Accounting Auditor

Audit & Supervisory Board

Controls based on the “Basic policy on internal control2 systems”
Contributing to local communities and society/ Contributing to environmental preservation
Contribution through business activities
Sound corporate management
Labor Standards Act
Industrial Safety and Health Act
Worker Dispatching Act

Continuous growth throughbusiness activities
Corporate ethics/Compliance

Civil CodePharmaceutical Affairs Law
Antitrust Law
Other regulations

Risk management
Sound corporate culture that is brimming with a desire to take on new challenges“1S” Culture/AICHI Spirit3/Action Guidelines4

15

Employees
1. J-SOX: The Japanese version of the U.S. SOX(Sarbanes-Oxley Act). This Act was created using
SOX as a model and was designed to improve theaccounting auditing system and internal control
of companies in Japan.
2. Internal control: Activities and systems to control,
monitor, and secure the soundness and efficiency
of operations, as part of corporate governance,byfollowingstandards
andprocedures
established for individual operations.
In particular, standards and systems to prevent
improper financial accounting should beestablished, and auditing should be conducted toverify that they are operated properly.
3. AICHI Spirit: A slogan presenting, in aneasy-to-understand manner, the management
philosophy, sense of value, and other basic ideas
upheld by Aichi Steel as the corporate genes
inherited from its predecessors (established inJuly 2006).
4. Aichi Steel Group Action Guidelines: Practicalguidelines that must be followed during businessactivities (revised in October 2013)

Governance: Target or significant result achieved: Target not achieved or poor activity result: Serious problems or important improvement suggested

Human resources development/corporate culture

Risk Management/Compliance

Social contribution/business activities

Midium-term CSR Plan Achievements
Priority items

Actions taken for priority issues

Targets

1. Community
activities
resulting inenvironmental/socialcontribution

Enhancement of ability to transmit information to society(all business)
Review/implementation of more attractive plant development
Participating in activities to preserve biodiversity in the
Chita Peninsula
Review and planning draft concept of 20-year plan for
Nakashinden reforestation
Continuing to hold “Lessons about Iron” workshops forelementary school children in Tokai City
Revitalizing volunteer fund activities
Ongoing assistance for reconstruction and recovery fromthe Great East Japan Earthquake
Consideration of proactive purchase and use of products
from the Tohoku region to support those affected
Increasing the number of participants in ¥100 donation
program through payroll deductionMore than 20/year

2. Development andprovision of
products/technologies
that can satisfy
eco-minded customers

Individual
implementation plan
September 2014
Target: All schools
Individual
implementation plan
September 2014
Target: 500 people

Achievements/challenges
Goal of 28 press releases achieved, work to continue on
improving public relations tools
Long-term creation of blueprints in collaboration with theUnification Dept of Chita plant
Held meeting to observe one-year tree-planting progress (50participants)
Held at all 12 Tokai City elementary schools, to continue infiscal 2015
PR activities targeting divisions and informal organizations,requests for donations
Product sales booth set up at internal events to advertiseongoing assistance
Requested workplaces to encourage further participation

Development and sales of SUS steel for use in high pressurehydrogen equipment
Installation of high-speed oxygen burner to improve melting
speed in electric furnaces

Individual
implementation plan
380 kwh/t

Use of AUS316L-H2 drawn steel in fuel cell vehicles

3. Response to risk factors
beyond the company's
control, such as natural
disasters and changes
in the external
environment

Updating disaster BCM policy and creating early recovery
framework
Enhancement of safe evacuation and rescue action plans
Promotion of measures to reduce damage tomanufacturing equipment, etc. (linked with BAP)

Individual
implementation plan

Developing plan for construction of new head office to serveas business continuity site (safe, seismically isolated structure,
prevention of damage to IT facilities, etc.)
Determining measures to address weak points that could
significantly affect production recovery (Liquefaction
countermeasures east substation, industrial water intake
pipes, gantry cranes)

4. Response torisk/compliancefactors
controllable by
the company

Risk management
Strengthening risk management of Aichi-GroupStrengthening risk/compliance incidence response
capability
Information security control
ATSG* response, strengthening subsidiaries, awarenessprograms, crisis response
Compliance
Ensuring true complianceIndividual
implementation plan

Enhancing risk map, strengthening preventative action andawareness programs
Enhancing media relations training for serious incidents
Establishing rules and regulations, individual instruction,
baggage inspections, creating tools (inadequate efforts insome areas to insure employees are informed)

Individual
implementation plan

Building and promotion of an optimal corporate governancestructure, activities to inform subsidiaries of complianceissues, review of plans for implementing survey of overseas
Group companies (inadequate efforts in some areas to ensure
employees are informed)
4 employees dispatch to OT training: offered opportunity to gain
experience overseas
Developing technology professionals: renewal of technology
courses (for new hires)
Launch of one-month introductory technology course (previous: 3days total)
Completed for fiscal 2014, planned for continuation in fiscal 2015
Completed for fiscal 2014, planned for continuation in fiscal 2015

*ATSG…All Toyota
Security Guideline

5. Human resources
development toimprove job
quality and in
response to global
business activities

Stimulating interest in overseas assignments by raisinglanguage ability and through use of OT training and otherprograms
Enhancing planning and proposal skills throughnext-generation business proposal contest
Continued reporting at inter-departmental policy meetingsof initiatives based on employee satisfaction survey results

Establishing call forparticipation

6. Creating a safe
andcomfortableworkplaceenvironment

Ensuring safety O-CA/PD (Full employee participation toensure prevention of recurrence and horizontal deployment)
Development of safety-conscious human resources
Ensuring compliance with basic rules (nurturing a cultureof complying and ensuring others comply with the rules)
Improving the safety awareness and knowledge of thosewith weak understanding of safety; establishingsupervisory staff
Improving supervisory capabilities
Ensuring standardized work
Put MTA work procedural manual and manual for
handling irregularities and provide education and training
Creating a safe workplace environment
Preventative activities based on mid-term plan for
creating a safe workplace
Speeding up and getting through lockouts
Creation of rules and manners for footwear and clothing

Seriousaccidents/accidents
resulting in lostwork time: 0

Once a year
April 2014

Semi-serious
accidents: Less
than 4
Occupational
diseases: 0

April 2014

Assessmen

Effective in reducing power needed for melting in electric
furnaces

Internal: 1 accident resulting in lost work time; At plants:
1 serious accident, 1 accident resulting in lost work time
Company-wide special safety activity roll-out:
Action to eliminate unacceptable accidents
Identifying and improving workplace issues, implementing
review of procedural manuals
Implementing KY (short for “KikenYochi,” or risk prediction) at
the beginning and end of work to protect lives
Support for in-plant business operators
Brainstorming seminars by leaders of in-plant business
operators
Creating safe worksites (explosions, separation of people andvehicles, risk of getting caught in equipment, etc.)

Creating rules and manners for commuting and work,
deploying Company-wide

Review of CSR activities in fiscal 2014 and identifying issues
4. Response to risk/compliance factors controllable by the company

6. Creating a safe and comfortable workplace environment

Further enhancement of Group-wide risk
management capabilities

Strengthening efforts to eliminate accidents

Improvement of risk management levels andappropriate follow-up, including risk maps andinformation security, etc.
Further ensuring compliance

Activities to eliminate unacceptable accidentsI) Developing safety-conscious human resources
II) Developing safety standards
III) Developing safe worksites

Support for in-plant business operators
Work environment improvements (handling diversity)

AICHI STEEL REPORT 201516

GovernanceCorporate Governance
Basic policy

Meetings of the Board of Directors and the Audit & Supervisory Board

With a basic CSR policy of "striving to contribute to sustainable

The Board of Directors, consisting of Directors appointed by sharehold-development of society and the Earth through sound corporate

ers, makes decisions concerning the Company’s critical issues from theactivities," we are managing our company in a way that enjoys

viewpoints of necessity, legality, efficiency, etc., after engaging in

extensive trust of society by establishing and maintaining an

discussions and mutual monitoring. Audit & Supervisory Board

organization capable of responding swiftly to changes inMembers, consisting of Audit & Supervisory Shareholders examine

business environments and a fair and transparent management

whether such decisions involve any violations of laws/regulations.

system.

Attendance rates in fiscal 2014

We also have "1S Culture" in place as part of our corporate

Audit & Supervisory Board
Members attendance rate
Director
Meetings attendance Full-time standing Outside Audit &Audit & Supervisory Supervisory
rate

culture that puts first priority on and acts act on the principles of
3 Ss, namely Shojiki (honesty), Seiso (cleanliness) and Safety.

Corporate governance guidelines

Board ofdirectors

We have published two types of codes of conduct: the “Action

Audit &
Supervisory 12 times
Board

Guidebook for Directors and Audit & Supervisory Board
Members,” and the “Aichi Steel Group Action Guidelines for
employees,” We review and revise them to match changes in thelaw and in social trends.
The “Action Guidebook for Directors” and the “Aichi Steel Group
Action Guidelines for employees” are distributed to all of ourcompany employees, and we provide related training to
freshman employees and those promoted to new job levels.
A CSR card that employees can carry with them is also distributed to everyone, part of our efforts to ensure employees remain
constantly aware of our Code of Conduct.

14 times98%

Board Members

Board Members

100%

95%

100%

100%

Internal control system
The Internal Control System Basic Policy is reviewed annually todetermine if any revisions are required, and the status of its operationis reported to the Board of Directors. Given changes in the Companies
Act, In April 2015 a resolution was passed to revise the policy and thecontents disclosed. In April 2015, we also introduced a new board of
directors system, with the goal of further separating and strengthening management decision-making by the Board, and supervisory andbusiness execution functions. At the general meeting of shareholders
held in June 2015, we also appointed one outside director as part ofour efforts to further strengthen corporate governance.

Corporate governance system

Boerd ofSupervisory

Management Committee(Deliberation ofcritical issues, etc.)

17

Evaluates the appropriateness of the accout audit

GovernanceCompliance
Basic policy

Whistle-blowing system

We aim to be a trusted company through the protection ofhuman rights and compliance with laws and regulations,and by respecting public decency. To enhance the overall
compliance of our Group, the CSR Committee—headed by
the President–sets and reviews compliance policies on aregular basis.

In fiscal 2014, a total of 6 cases were reported to the Aichi
Steel Group Compliance Hotline, the company's whistleblowing system.
We will continue promoting recognition and awareness of
our whistle-blowing system to further improve our internalability to govern ourselves. Necessary measures will betaken for improper actions reported, and the president will
be informed to the president for confirmation while saidmeasures are carried out. We will also lay out how thesystem is operated and protection of whistle-blowers toensure whistle-blowers are protected.

Compliance guidelines
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. To
enhance employee awareness of compliance, various
workshops and training sessions are held at every opportunity, using compliance manuals, the Aichi Steel Group Action
Guidelines and the 1S Guidebook.

Compliance promotion system

Director,
Executive
officer,Supervisoryboard member

Compliance officer
General Legal
Compliance Site
General Affairs Div.

Various department

Compliance education program
To enhance the compliance awareness of employees, we
provide education on compliance to all employees. Compliance education is also covered in the Action Guidelines
workshop held for thosepromoted to each new job ladder. Moreover, we issue “Legal
Affairs News” to deliver information about complianceissues closely related to our daily lives, which enables
employees to check such information on our intranet.

Fiscal year

2010

2011

2012

2013

2014

Number of calls

9

6

3

6

6

Promotion of CSR activities throughout the supply chain
As part of efforts to support our suppliers’ compliance activities, we have developed a CSR program for our supply chain.
(See page 26.) In fiscal 2014, CSR seminars for suppliers
were held (in May, October) to raise their awareness of ourcompliance. We will make continuous efforts to promote
CSR throughout our supply chain.

Compliance workshop
A compliance workshop with a prominent lawyer as guest
speaker was held for directors, officers, executive advisory
engineers and division general managers to heighten theirawareness and understanding of prevent compliance deviations and how to respond if such a case happens. We will
actively and continuously promote compliance activities tofurther ensure employees' compliance and prevent theoccurrence of compliance deviations.

Stratified training

246 participants

Seminar for newly appointed directors

SeptemberCompliance workshop for directors

March

CSR lecture

October

1S workshop

4 times (April, July, October, February)

In fiscal 2014, there were no complaints or comments
concerning intellectual property.

Compliance Liaison Meeting

4 times (July, October, December, March)

Number of applications

Legal Affairs News

3 times (July, October, January)
Theme: Learning from other companies’
law violation cases (2 times)
Legal changes (2 time)

Number of our patentapplications in fiscal 2014

Intellectual property protection

Japan

Overseas

28

12

AICHI STEEL REPORT 201518

GovernanceRisk Management System
Basic policy

Risk management promotion system

We have established a risk management system led by the
CSR Committee, so that in the case that we face/predict a
serious risk, we can take prompt and appropriate actionand ensure sound business operation.

Risk management issues are delivered and discussed by the
CSR Committee. We have prepared a risk map, in which risk
items for each job ladder are organized according to thedegree of importance and urgency. The development of adisaster prevention/reduction scheme that enables a quick
response to emergencies is underway, including the setup
of emergency Company headquarters in the case of earthquakes or other disasters.

Risk management guidelines

Education/Awareness-raising

We have established risk management rules and othervarious rules that set forth the responses to be taken
depending on the type/level of risk. To secure a reliable risk
management system, these rules are reviewed on a regularbasis and revised whenever necessary to respond tochanges in the business environment and new potential
risks.

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 and actual cases of crisis at Aichi Steel toheighten employees' risk awareness and ensure they understand what to do to prevent crisis occurrence/recurrence
and initial actions to take when a crisis occurs.

Disaster prevention measures

Human Safety Subcommittee
Ensuring safer evacuation
1) Creating a two-point safety confirmation system to further
ensure functioning during an emergency2) Educating employees through ongoing publication of “Disaster
Prevention News”
3) Regular implementation of practical evacuation drills, includingtransport of the injured, etc.
4) Building of a framework for distribution of emergency relief
supplies within the Toyota Group, etc.

Facility Safety Subcommittee
Preventing injury due to the effect of tremors on buildings
and other structures
1) Reinforcing chimneys and pipe racks where there are concerns
about earthquake resistance2) Installation of emergency lighting, etc.

Production Recovery Subcommittee
Ensuring early delivery of products to customers
1) Reinforcing facilities to prevent fatal damage due to earthquakes
and liquefaction, and ensuring alternative facilities andequipment are available.
2) Identifying weaknesses across the entire supply chain, andclarifying recovery priorities.
3) Considering extensive cooperation in securing alternative
production facilities within the Group, and among suppliers andcompetitors.
4) Developing elemental technologies and key personnel to allow
operation of essential production with a minimum number of
employees.
5) Ensuring back-up of information systems and data, etc.

19

Disaster Prevention System
Earthquake Preparedness Committee

Following the Great East Japan Earthquake, we establishedthe Earthquake Preparedness Committee, under which
three subcommittees—the Human Safety, Facility Safety,
and Production Recovery Subcommittees—were set up toenhance our earthquake preparedness. We are also working to improve our BCM (Business Continuity Management)
plans. In fiscal 2014, following measures were taken by eachsubcommittee.

Human Safety
Specify actions to
Subcommittee
protect lives(Human Resources Div.)
Facility Safety
Maintain buildings
and facilities to
Subcommittee(Facility Engineering Div.) protect lives
Production Recovery
Ensure environment/
arrangement to allow for
Subcommittee(Production Control Div.) early production recovery

Secretariat General Affairs Div.

Governance

Information Security
Basic policy

Information security

Confidential materials shall mean any and all information,
products and facilities that may cause a disadvantage to theCompany or benefit a third party if made known to the
public or if leaked out, and the use and disclosure of whichis controlled by people in charge of confidentiality management, who are designated under the information security
promotion system. Confidential materials also include othercompanies’ confidential materials obtained by fair means.

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 andeducation on rules and regulations, and conduct inspections and so on.
The Risk Management Department conducts strict audits ofe-mails and baggage inspections to check whether internal
information has been carelessly leaked outside.
The ATSG have also been rolled out to Group companies,
and efforts made to enhance information security acrossthe entire Aichi Group.

Information security guidelines
We have established the following rules to control confidentiality and prevent leakages of personal information.

Information audit results

Document control rules
Information security control rules
Information disclosure rules
Private information protection rules, etc.

Failure to set a
password for a file
Auditing of e-mails Cases detected: 7 Inclusion of a password
in an e-mail message
E-mailing to a terminal
unit for private use

We carefully handle and strictly control any information heldby the Company or by any Group company, and any information obtained from our customers, suppliers or employees,
etc., in accordance with our internal rules.

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

Director in charge of General Affairs Div.
Person responsible for confidentiality
management

Administrative General Affairs Div. and IT Management Div.
Creates and revises measures related to thedepartments
management of confidential information
Audits and provides guidance according to theconfidentiality management status across theentire company
Manages systems (both technical and human aspects)
In each department

Role

Confidentiality
management supervisor(General managers ofindividual divisions)

Assumes all responsibility for confidential
information within the division
Designates people in charge of confidentiality
management
Has the final say in confidentiality classification
Designates employees authorized to create
top-secret documents
Implements voluntary auditing of confidentiality
management status
Establishes rules for the division

Person in charge ofconfidentiality management(Manager or supervisor
named by the division
manager = Key person
in laws/regulations

Acts under the authority of the confidentiality
management supervisor(Designates confidentiality classification and sets theoperating rules within the division)Works to promote and fully establish confidentiality
management in the division

Representative
managers, etc.

Follows laws, regulations, and company rules
related to confidentiality management
Gives approval, instructions, and guidance related toconfidential information used in their location

Department
employees

Follows laws, regulations and company rules
related to confidentiality management
Reports accidents, damage, illegal acts andwrongdoing to his/her superior

Baggage inspection Cases detected: 6

Incomplete permit application

Education on information security
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
those results, staff responsible for education in each department, along with department heads, provide individual
instruction.
Incidents involving information leaks occurring in society atlarge have also been categorized into specific patterns, andtheir respective risks outlined in legal news distributed to
employees as a way of educating them about how toprevent similar incidents.

Pattern of Information Security Incidents
Malicious conduct
ExternalfactorUnauthorized access (hacking)Computer virus infection
Theft
Spying
Corrupt practiceInternalfactorIllegal acquisition
Information trading

Violation of rule

Negligence
Negligence byclients to which
information has
been disclosed

Home PC virus infection
Theft during business trip
Loss andmisplacement
Erroneoustransmission

AICHI STEEL REPORT 201520

Human Rights and Working Practices
We respect the rights of each one of our employees sothat diverse ranges of people can maximize their capabilities
in their work, regardless of their nationality, age and sex.

Respecting human rights
Basic policy

Respecting human rights/
Prohibition of discrimination

Aichi Steel is working to promote measures designed to raise

The Aichi Steel Group announced in the "Aichi Steel Group

employees' motivation and morale to encourage the creation of

Action Guidelines" and the "Guidebook of Corporate Action

a workplace environment that enables employees to get

Guidelines" that it will comply with laws and regulations both infulfillment from their work and bring out their individual abilities

letter and spirit, and that it will respect human rights. The

to the utmost through the planning, development and imple-

diversity, personality, and character of employees must be

mentation of various measures aimed to secure and develop

respected, and discriminatory words and actions, harassment,

human resources who can contribute to the global management

and slander are strictly prohibited. A "Hotto (hot)" line is in place,of our company and ensure they are allocated in the right

ready for use by employees for consultation concerning humanpositions and utilized effectively.

rights.

Employment guidelines

Efforts to reduce total working hours

Basic matters concerning employment are set out in the

Dialogue and cooperation have been promoted between labor

Company's Rules of Employment, as well as in laws and regula-and management to create a working environment that is friend-

tions or a collective agreement, to establish fair labor condi-

lier to workers and helps enrich their lives. In labor- management

tions, to promote and maintain order in the workplace, and to

discussions in fiscal 2014, we confirmed efforts to reduceenhance the productivity of the Company. We clarify and imple-

overtime hours and increase the usage of paid vacation days.

ment our recruitment standards in conformity with the Equal

Changes in total working hours(hours worked per person per year)

Employment Opportunity Law, the Corporate Code of Conduct
set forth by the Japan Economic Federation, and the Aichi Steel

21

Group Action Guidelines.

Fiscal year

2010

2011

2012

2013

2014

Labor composition (fiscal year)

Hours

1,948

2,124

2,145

2,180

2,195

Fiscal year

2010

2011

2012

2013

2014

Total workers (persons)

2,360

2,367

2,369

2,383

2409

Managers (persons)

269

268

286

279

284

Male (persons)

2,244

2,243

2,236

2,239

2256

Female (persons)

116

124

133

144

153

Foreign workers (female) (persons)

9(3)

10(3)

10(3)

10(3)

10(3)

Average age (years)

39.7

39.9

39.8

39.7

39.6

Average service (years)

20.1

20.3

20.1

19.7

19.4

Turnover rate (%)

0.3

0.8

0.4

0.8

0.4

Voluntary resignation for personal reasons (persons)

8

10

12

20

12

New graduates employed (female) (persons)

53(3)

61(5)

66(5)

66(10)

69(12)

Usage of annual paid vacations
Fiscal year

2010

2011

2012

2013

2014

Usage rate
(%)

46.0

48.5

48.8

47.0

50.0

Usage rate against the standard 20 days granted

Human Rights and Working Practices

Efforts for diversity
Promoting more active roles for women in the workplace
Since fiscal 2010, Aichi Steel has been working to expand theavailability of workplaces in which female technicians can play amore active role. By improving workplaces through the additionof company facilities that benefits employees and so on, we are
improving our normally male-dominated plants to make themmore comfortable environments for women, and expanding thenumber of women hired for and assigned to professional
positions.

Usage of the Nice Family System
Fiscal year

2010

2011

2012

2013

2014

Child care leave(male) (persons)

4(1)

5

9

10

5

Shorter work hours(male) (persons)

10(1)

5

4

5

10

Number of persons who started using the system per year

Post-retirement reemployment system
We have in place a Nice Senior System, which allows employees
who are willing to work after retirement to continue working until
they begin receiving their pensions. As of the end of March 2015, a
total of 99 reemployed staff are working at Aichi Steel, contributing
their advanced skills in various workplaces while working to pass ontheir skills to help improve younger employees.
We will work to further improve working conditions for reemployedindividuals, while encouraging our young employees to build healthy
bodies so they can continue to be strong workers until aged 65.

Registrants for the Nice Senior System
Fiscal year

2010

2011

2012

2013

2014

Nice Seniors(persons)

51

49

47

101

99

Those who are reemployed between the ages of 60 and 64 (as of theend of each fiscal year)

Promoting employment of the disabled
We have employees with disabilities working in various
positions in our manufacturing and administrative divisions. To
ensure they are assigned to workplaces that suit their individual
capabilities, we encourage more workplaces to be open to
employing disabled persons, and welcome them to visit
prospective workplaces for orientation. In fiscal 2014, we
conducted regular recruitment of three individuals, and invited
teachers from special needs schools to hold a workshop for the
workplaces accepting those individuals.
While we have already achieved the 2.0% statutory employment
rate for the disabled, we continue our efforts to develop

Employment of persons with disabilities
Fiscal year

2010

2011

2012

2013

2014

Employees withdisabilities (persons)

35

40

50

44

47

Employment rate (%)

1.6*

1.8

2.1

2.3

2.3

Achievement statusof the statutory
employment rate (%)

92.1

100

100

100

100

* The employment rate decreased in fiscal 2010 following thelowering of the exclusion rate by 10%.

workplaces capable of accepting more disabled individuals.

AICHI STEEL REPORT 201522

Human Rights and Working Practices

Human resources development
Efforts for global human resources development
Aichi Steel focuses on the development of human resources

Trainee (OT) program. In fiscal 2014, we offered three types ofcapable of playing active roles globally as well as development

OT courses with durations of six months, three months and twoof local staff overseas where Aichi Steel operates. We encourage

weeks, through which we decided to dispatch six young employ-mainly young employees to improve their language skills,

ees overseas.

through such initiatives as our annual dispatch of two or three

We will continue to seek more participants from a wider range

junior employees to overseas subsidiaries as part of our Overseasof jobs for our overseas program for young employees.

VOICE
Voice from OT participant (who had training at AFU)
Engineering Office, Forging Plant Masaya Matsukawa
As this was my first time living overseas, I was endlessly worried andnervous, but thanks to the support of many people, I was able to learn thevalue-and the fun-of working overseas through my training in the U.S.
Language problems made things difficult at first, but as I gradually
improved, I was able to communicate with the local staff. As forging plant
operations expand globally, I hope to take advantage of my OT training
experience in a broad range of endeavors.

Global meeting

Global seminar

Since fiscal 2012, the Aichi Steel Group has held an annual “Aichi

Aichi Steel offers a continuing series of global seminars, led by

Global Meeting,” with the goal of further strengthening ties

officers and employees with overseas experience. These

between our domestic and overseas group companies andseminars offer participants an opportunity to learn from theirpromoting their autonomy. These meetings, where Aichi Steelseniors the appeal of working with colleagues from overseas,

Group company presidents and local employees from within

and the skills they will need to acquire while they are young. At

Japan and abroad can get together and exchange ideas, are part

each session, a specific site is covered by a selected instructor,of our effort towards globalization on both the hard (things) andensuring that participants gain an understanding of the kind ofsoft (people) sides of our business.

work done by each overseas site and their respective cultural

At the fiscal 2014 meeting, we shared the Aichi Group Vision

characteristics. Everyone learns together, and the seminars are

2020, formulated in February 2014, and held group discussions

designed to give participants an increasingly global understand-concerning the vision proposals from each of our overseas sites.

ing with each session they attend.

Other lively talks covered new concerns, issues and the
direction we should be taking, as participants worked not only
to deepen their mutual understanding, but to cultivate a senseof solidarity.
By raising the level of these discussions each year, further
enhancing cohesion within the Group, and by further revitalizing
human resource development and exchange, we will work tostrengthen our consolidated management capabilities.

23

With a local supervisor at AFU.

Human Rights and Working Practices

Employee health & safety
Basic policy

Follow-up meetings by top-levelsafety managers

Basic labor safety/ health conceptWe

conductmonthly

follow-up

meetings to assess the status of our

1. Strengthening of "heart, mind, and body"

workplace safety policies, working toHeart: Strong belief in and awareness of
pursuing safety

eliminate

Mind: Careful observation and thoroughinvestigation of true causes

expanding those efforts company-wide

Body: Powerful actions, dedicated efforts

2. Clarification

seriousaccidents

andaccidents resulting in lost work time,to include in-plant business operators.

Frequency of accidents and work time loss

Clarifying problems (negative issues, poor conditions)

Special safety activities are now underway company-wide following

Clarifying good points (improvement cases, knowledge,
experiences)

two serious accidents that occurred in our plants in March and April

Clarifying standards, changes, or other status

could lead to a serious accident, and procedural manuals (rules)

Basis of activities
Consistently focusing on comprehensive safety
and health management, aiming to achieve"zero accidents in all workplaces throughout Aichi."of last year. Improvements have been made to highly risky work thathave been created and reviewed. We have strengthened communication with in-plant operators, and reviewed support systems to
make it easier for any issues to be brought up. In addition, top
managers of in-plant operators hold monthly Safety Brush-up
Seminars as they work to improve safety levels.

With the slogan “Strengthening of heart, mind and body,” Aichi
Steel Group is focused on maintaining and promoting the healthof the entire Group workforce with concerted efforts byindustrial physicians, public health nurses, nurses and healthmanagement staff. In fiscal 2014, we promoted systematicefforts with a priority on mental health, lifestyle-related disease
prevention and health management support for employees
dispatched overseas, along with new activities to help build
physical strength.

Number of accidents resulting
in work time loss

Health-promotion efforts

(%)
1.00

5
4

0.68

3
2
1
0

0.66

0.75
0.50

0.36
0.20

2009

2010

2011

2012

Number of accidents resulting
in work time loss

Work time loss frequency rate

Frequency of accidents and work time loss
(Cases)

0.16

0.16

0.25

2013

2014

(Fiscal year)

0.00

Work time loss frequency rate

Creation of safe worksites
We continued our efforts to create safe worksites, working to ensure
safety in the workplace by ranking worksites according to risk assess-

Mental health activities(Promotion of measures to improve
communication skills)
Mental health risks are growing as our work becomes increasingly sophisticated and detailed. In this environment, Aichi SteelGroup is working to maintain the mental health of its employees
and prevent the development of mental issues, through various
educational programs and individualized mental health carebased on the results of stress checks. In fiscal 2014, we implemented the first workplace diagnoses based on stress checks,
and in workplaces with a higher risk, offered advice on improvements. We also collaborated with mental health consultants tooffer ongoing on-site consultation to ensure early detection andcare of employees with mental issues. We will continue working
with mental health managers to promote the creation of open,
candid workplace environments, helping to prevent mental
health issues and ensure their early detection and care when
they do arise.

ments, and attempting to eliminate C and D rankings, the highest danger
levels. We have developed and are implementing a three-year plan toaddress individual accident factors, and in fiscal 2014, as in the previous
year, we tackled risks of being trapped or caught in equipment, theseparation of people and vehicles, and prevention of electric shocks. We
have also added prevention of explosions, based on disasters atcompetitors, and are moving forward with improvements to equipment
to enable detection of abnormalities and remote operation.

Creation of safety-conscious humanresources through hands-on training
As part of our efforts to enhance employee awareness of labor safety, we
have created a facility for simulating danger, where employees can gain
firsthand experience with the potential risks of day-to-day operations.
Using dummy equipment to demonstrate the variety of dangers that canarise in the workplace, we work to enhance employee sensitivity todanger. About 700 employees took underwent this training in fiscal 2014,
but we are working to increase that rate by establishing a gradedcertification system. We have also begun offering an on-site “travelingfacility” to bring the same experience to plants in more distant locations.
AICHI STEEL REPORT 201524

Quality Improvement
Aiming to be an integrated forging and steelmaking company that provides
the world's best quality, Aichi Steel works closely with its business partners
to pursue high quality and gain our clients' trust in our products globally.

Quality management system (QMS)
Basic stance

Certification by third-party organizations<Basic Policy>

Acquisition status of Quality ISO certification

In accordance with our policy of "Quality First," we will strive to

Under our long-term Quality Vision 2017, we will strive for a united

1) Steel materials and forgings
16th periodic review for ISO 9001 certification (September)2) Electromagnetic products
Periodic review for ISO 9001 certification (February)
Periodic review for ISO 13485 (medical devices) certification (February)

company-wide effort to maintain a quality assurance system thatISO certification acquisition

maintain a business structure based on ISO 9001 that gains
customer trust and enables us to deliver attractive products thatmeet expectations and needs.

keeps us in the lead over other companies in quality competition.

Long-term Quality Vision 2017
Becoming an integrated forging and steelmaking
company that provides the world's best quality- Gaining customer’s trusts on a global scale 1) Achieving a higher level of quality assurance
by improving company-wide quality
awareness
2) Strengthening global quality assurance system
3) Promoting Total Quality Management (TQM) tobuild personnel familiar with quality

Kariya Plant

ISO9001

April 1993

Chita Plant

ISO9001

December 1995

Forging Plant

ISO9001

November 1997

Electromagnetic products

ISO9001

March 1998

Dental materials

ISO13485

July 1999

Dental materials

EC Directive

July 1999

Analysis & Testing Dept.

ISO17025

September 2007

Consolidated subsidiaries
Omi Mining

ISO9001

May 2002

Aiko

ISO9001

April 2005

Asdex

ISO9001

June 2008

Aichi Techno Metal Fukaumi

ISO9001

March 2013

AFC

ISO9001

April 2003

SAFC

ISO/TS16949

August 2006

AIT

ISO/TS16949

March 2008

AFI

ISO9001

November 2008

AFU

ISO/TS16949

September 2009

Quality Assurance System
Board of Directors, Management Committee

In addition to ISO 9001 certification, we have also obtained(Quality Technology Committee, etc.)

Quality Assurance Div.

(ISO Review Committee)

Quality Control Department
for each plant

Plant
Departments

Development and Production
Engineering Department
Other related departments(Sales, Purchasing, Human Resouces etc.)

Overseas Support Department

other third-party quality certifications based on our QMS. We
are assessed on an annual or three-year basis for review of thesecertifications.

New JIS mark (by JICQA)
Marks issued by shipping classification associations:NK, LR, GL, DNV, KR, CCS (recertified in December), CR
TÜV (Mark issued by Germany’s Technical Inspection
Association, recertified in May)
Medical Devices Directives [MDD Annex v.3.2](recertified in February)

VOICEWorking together to build “Made in Japan” quality
NHK SPRING Co., Ltd. is Japan’s largest manufacturer and supplier of leaf springs. We share a common destiny
with Aichi Steel, which supplies the specialized flat spring steel that goes into our products. We are constantly
grateful for their willingness to develop superior leaf spring materials, their detailed response to our production needs, their ability to offer a steady supply of material and their positive approach to quality assurance.
We also look forward to their support for both quality and pricing for the growing overseas market, and tocontinuing to further strengthen our relationship as we work to make “Made in Japan” quality number one in
the world.

25

Hideto Enomoto, Corporate Officer
Vice President, Suspension Spring Div.
NHK SPRING Co.,LTD.

Quality Improvement

Quality month activities

Aichi Steel purchasing policy

November in Japan has been designated Quality Month. To

Purchasing through sound corporate activities

deliver outstanding quality to customers at the next process,we have established a Quality Rally (to share quality cases
among departments), events and exhibitions. We also have a

Global, open and fair transactions

QC Circle Convention to nurture quality consciousness.

Mutual growth based on mutual trust

Global quality assurance activities

Legal compliance

Auditors specializing in quality assurance are regularly sent toGreen Procurement Activities

overseas sites to strengthen quality assurance systems at overseas
plants. They provide overseas sites and contract manufacturing sites
with auditing and guidance regarding quality assurance systems,
train quality assurance for people in charge, and share examples ofFair transactions

quality improvements made by Group companies in Japan.

To promote fair and proper transactions and ensure stable

Aichi Steel receives Outstanding Supplier Award

supply, we will strive to proactively make improvements using

Aichi Steel’s Electronic Components plant received the Best
Supplier Award at the 19th Supplier Quality Improvement
Liaison Council sponsored by Toyota Motor Corporation’s
Hirose Plant. The award was recognized two products wedeliver to the Hirose Plant: cold plate and alloy pads. The Best
Supplier Award is given to suppliers who go an entire year withzero defective products at the Hirose Plant, and takes us a rank
above the award of excellence we received in fiscal 2013 fromToyota Motor Corporation, awarded to suppliers who produce
defects below a targeted number. We will continue to work to
improve quality, with the goal of winning the Best SupplierAward (three consecutive years with zero defects) and the
Quality Honor Award (four or more consecutive years).

internal and external audit systems. We purchase mineral
resources after investigating whether they are target conflictminerals, and confirm that our purchases do not include conflictminerals.

Green purchasing
We actively pursue green purchasing by employing our own
Green Purchasing Guidelines to purchase environmentallyfriendly products and services from suppliers who pay attention
to global environmental protection. We have recently promoted
green purchasing with a special emphasis on the 3Rs (reduce,reuse and recycle) of resources and the reduction of CO2
emissions.

Gathering evaluations from customers

Supply chain CSR

We keep and manage a database in which reports of productWe have been promoting CSR activities with our suppliers, using

defects or requests from customers, status of investigations andfeedbacks to relevant customers are stored. This database not
only prevents repeated complaints, but also enables us to identify
the true cause of those complaints (trouble arising from unsuitable products within contracted specifications), and helps us
work to quickly discover areas where we can improve internally.

Training programs for sales staff
Primarily focusing on newly-assigned and younger/mid-level
employees, we have expanded curriculum aimed at further
enhancement of skills, and strengthened our educational
offerings from outside lecturers. Furthermore the branch offices
and the Sales Division are working toward our stated goal ofstrengthening individuals and strengthening our systems.

the "supplier diagnosis sheet" program launched in Fiscal 2009.
Our suppliers conduct self-diagnosis concerning the items
below.
1. Compliance (legal compliance, confidentiality, personal
information protection, etc.)
2. Safety/quality (provision of product information, productsafety, quality assurance, etc.)
3. Human rights of workers (affirmative action, respect for humanrights, prohibition of the use of forced labor/child labor, etc.)
4. Environmental protection (establishment/operation of EMS[Environmental Management System], greenhouse gas reduction, etc.)
5. Social action (contribution to the local community)
6. Information disclosure (provision of information/dialogue)
7. Risk management (establishment/operation of a risk
management system, BCP, etc.)

VOICE
Corporate Social Responsibility (CSR) across the entire supply chain
We look forward to Aichi Steel continuing to provide us, its suppliers, with information
about and appropriate guidance regarding its CSR initiatives. We believe that working as
one with suppliers on CSR efforts enables sharing of a healthy corporate culture, andensures the fulfillment of corporate social responsibilities across the entire supply chain.

Masaharu Noguchi President,
AIHO SHOJI Co., LTD.
The president of “Houkoukai”,
the suppliers association.

AICHI STEEL REPORT 201526

With Community and Society
Being conscious of our role as a "good corporate citizen," we will
positively participate in social contribution activities and continue toplace increasing emphasis on interacting with local communities.

Social contribution policy
Basic Policy
Steel promotes community-oriented activities focused aroundfour key words: “clean,” “green,” “creative” and “volunteerism.”

Promotion System
The Volunteer Center, located in the General Affairs Division,
provides information and promotes educational activities with

Number of participants in volunteer activities(Num)
Number of participantsin volunteer activities

In pursuit of harmonious coexistence and co-prosperity, Aichi

3,837

4,000
3,500
3,000

2,972
2,964

2,500

3,146

2,000

1,843

1,500

the aim of supporting employee volunteer activities. It also

1,000

plans and offers smaller-scale volunteer opportunities which0employees can participate in, and encourages them to experi-

2010

2011

2012

2013

2014
(Fiscal year)*In Fiscal 2010, single-year charity events were held.

ence volunteering for themselves.

Clean (Beautification, safety, security)
Nearby roads clean-up campaign

Clean Aichi Day

The “Nearby roads clean-up campaign,” a social contribution

Hold in Oct since 2009, Clean Aichi Day program is one of Aichi

activity to clean neighborhoods, is held every two months. In

Steel Group’s, CSR Enhancement Month activities, 800 people

fiscal 2014, the campaign was conducted six times. A total ofincluding employees from our subsidiaries in Japan and abroad,

157 people from every worksite and in-plant business operators

cleaned up the neighborhoods around their sites.

participated in the cleaning.

Traffic Safety AwarenessContinuing “Zero Day” patrols
To increase traffic safety awareness, Aichi Steel Group continues to conduct “ZeroDay” safety patrols at each of its sites. In fiscal 2014, these patrols were held 88
times, with a total of 1,925 employees participating prior to starting work.

VOICE

Looking forward toongoing CSR activities

Masashi Hohdatsu,
Business Representative
Tokai Social Welfare Council

27

This council is responsible for developing a community thatoffers social services to enable everyone to lead a secure life,and “connections” are an important asset in promoting thoseefforts. Aichi Steel also places great value on community
connections in its local activities that contribute through donations and volunteering. We hope that we can continue topromote our community development efforts through ourconnection with Aichi Steel.

With Community and Society

Green(greening and environmental conservation)
Planting flowers in front of Meitetsu Shurakuen Station

Creative (education and culture)“Lesson about Iron”

In June and November every year, students of the Aichi SteelIn 2010, we launched a project to visit local schools to give a “lesson about

Technical Training Institute plant flowers in front of Meitetsuiron” to children, marking the 70th anniversary of our founding. In Fiscal

Shurakuen Station, the2014, the lesson was provided to all

closest station to ourthe elementary schools (34 classes

offices. In addition toof 12 schools) in the city of Tokai,

our voluntary clean-up

Aichi Prefecture. (Sep./Oct./Feb.)

activities carried out in

The “lesson about iron” given to fifth

the neighborhoods ofgraders provided local children with

our worksites, seasonalan opportunity to learn about theflowers

local

local industry of Tokai, a city of iron,people feel refreshedand to find pleasure in “monozukuri”

and relaxed.

(manufacturing) through our lessons.

help

Volunteer support
Activities of the Aichi Steel Volunteer Fund

Volunteer work to assist victims of the Great East Japan Earthquake

In Fiscal 2014, the Aichi Steel Volunteer Fund established inSince Fiscal 2011, at the request of Kyohokai, an association

1993, donated charity gifts worth about 2.40 million yen,consisting of suppliers of the Toyota Group and Toyota Group

including those contributed through our Matching Gifts

companies, we have been collecting articles that could be easily

Program, under whichconverted into cash as a volunteer activity to assist victims of

we donate an amountthe Great East Japan Earthquake. The collected articles, includ-

equal to the amounting disused cellular phones and spoiled postcards, will bealready

converted into money to be donated to disaster areas.

collected

forFrom the Aichi Steel Group, 50

the Volunteer Fund.

Activities of the Aichi Steel Volunteer Fund in fiscal 2014

employees
andworkedcollected

62

togetherdisusedOrganizations

Charity gifts

cellular phones, 269 spoiled

Akatsuki Gakuen Children’s
Foster Home (Tokai City)

2 refrigerators, 2 washing machines, 2 cleaners,
2 vacuum cleaners, 2 microwave ovens

postcards,

Chita Social Welfare Organization (Chita City)
Nagomien Welfare Activity Center
Yamamomo No. 1/No. 2 (2 times since fiscal 2009)

11 casquettes, 11 cook’s coats,
7 aprons, 2 cleaners
1 adjustable table

Satsuki Social Welfare Organization (Tokai City)

1 child’s playset, one set of kitchen tools

Kusunoki Workshop for theHandicapped (Higashiura-cho)

7 food trays, 1 sewing machineJapan Blind Tennis Federation (Nagoya City)

Blind tennis balls

Oumei Yonza (Tokai City)

1 set of costumes for choir performances

Tokai Social Welfare Council

1 TV/DVR set for use during disasters

NPO Daikon-no-Hana (Chita City)

1 freezer

The Chunichi Shimbun Community Service Association, others

Donation to the Tohoku Recovery Support Fund

“One-coin” donation

postagestampsworth ¥9,070, prepaid phone
cards

worth

¥12,500,

andBellmarks worth 2,067.3 points.

Interaction with the community
Participation community meetings
Community meetings are held every year in the cities of Tokai and
Kariya (in April and September respectively), and we promoteexchanges with residents of the local communities and proactively

In response to calls by employees who are interested in volunteer

participate in a variety of local volunteer activities.

activities but have no time or chance to join them, we introduced a

We also support activities involving festivals, sports days and other“one-coin” donation program, which enables employees to partici-

local events in the communities surrounding our sites, and dispatch

pate in activities that benefit society voluntarily and continuously.

employees to assist with

Participants in the “one-coin” donation program can contribute one

the operation of thoseor more shares (¥100 a share), which are collected from the payroll,

events. We also invite

to the Aichi Steel Volunteer Fund, from which donations are madelocal residents to events

to organizations that we support.

held at our headquarters

A total of 453 directors and employees who supported theand plants, and work toprogram’s purpose have participated in this donation program (asencourageof March 31, 2015).

with our employees.

interaction

AICHI STEEL REPORT 201528

Environment
As a resource-recycling corporation that effectively uses limited
resources, our entire company participates in environmental
activities to make the most efficient use of limited resources.

Environment Management
Basic approach

Environmental guidelines

We view environmental preservation activities as one of the top

To promote its environmental management activities, Aichi Steelpriority issues in corporate management. The Aichi Steelhas set up the "Environmental Management Rules." These Rules

Environmental Charter was developed in June 1996 to clarify ourprovide for matters concerning; 1) systems to promote environ-

sincere approach in environmental efforts. The Behavior Guide-

mental management; 2) compliance/management of the Basiclines on Environmental Issues (current Environmental Action

Environment Act and other environment-related regulations; 3)Plan) was established in June 1993, and we continuously andadvance assessments of the environmental impacts of products,

actively aim to achieve our goals.

raw materials, secondary materials and equipment; and 4)
support and cooperation for environmental protection in society
and communities.

Environment management
promotion organization

Audit results

Our environmental management structure has been developed

The results of the FY 2014 internal audit and the surveillance

to carry out environmental preservation activities based on theaudit of the environment management system were as follows.

Aichi Steel Environmental Charter. The Environmental Working

There were no major non-conformance issues.

Groupstrongly

promotesallenvironmental

preservation

activities in an organized and systematic manner.
We aim for 100% ISO 14001 certification for consolidated
subsidiaries with manufacturing sites.

Results of internal audits

The Philippine AFC acquired the certification in January 2012.

Classification

With this, all target subsidiaries have now been certified.

Educating internal environment
auditors
Fiscal year 2014 saw the certification of 15 new internal environment auditors who support the efficient operation of theenvironmental management system, making a total of 219. We
also conduct internal environmental auditor education for
employees scheduled for overseas dispatch on an as-neededbasis.

29

Major non-conformance(incidents)
Minor non-conformance(incidents/department)

2010

2011

2012

2013

2014

0

0

0

0

0

0.63

0.47

0.38

0.28

0.17

Results of audits by external auditors
Classification
Minor non-conformance(incidents)
Opportunities for improvement
and incident classifications(incidents/department)

2010

2011

2012

2013

2014

0

1

1

0

1

14

23

32

24

17

0.58

1.1

0.8

1.04

0.81

Environment

Environmental management promotion organizations (FY2014)

ISO certification status

Environmental Conservation
Subcommittee
Resource Recycling
Subcommittee(Chair: President)

January 1997

Aichi Ceratec

March 2003

Aiko

January 2004

Omi Mining

October 2004

Aiko Service

January 2005

Aichi Steel Logistics

March 2005

Asdex

May 2007

Aichi Techno Metal Fukaumi

December 2010

AFU

April 2003

AIT

November 2006

SAFC

December 2009

AFI

May 2010

AFC

January 2012

AMC

Under consideration

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

Environmental
Working Group(Meets twice/year)

Product and Environment
Subcommittee

Aichi Steel

Energy-Saving Production Subcommittee
Process Energy Reforming Subcommittee
Logistics Energy Conservation Subcommittee
Eco Life Subcommittee
Administrative office
Safety &Environmental Div.
Environmental
Management Dept.
Individual sites

Aichi Steel Group Environmental
Committee
Chita Site
Kariya Site

Environmental ISO
Review Committee(Meets twice/year)

Seki Site
Electronic Components Site

Overseas(Chair: Director in
charge of Safety &Environmental Div.)

Forging Site

Gifu site
Other relevant sites
Site environmental meeting(Chair: Head of each site)

Environmental conservation costs
Classification(Unit: Million yen)

Major efforts and their effects

Cost

Environmental conservation costs necessary forcontrolling environmental burdens arising within
our operational areas from production or service
activities (Operational area costs)

Power for dust collectors/repair costs for dust collectors,
wastewater treatment costs, investment and maintenance ofenergy-saving facilities, costs of disposal and recycling of industrial
waste and general waste discharged from business operations

4,670

Costs necessary for controlling environmental
burdens arising upstream or downstream of ouroperational areas in connection with production
or service activities (Upstream/downstream costs)

Simplified packaging(reducing packing materials and reducing packing time)0

Environmental conservation costs arising from
our administrative activities(Administrative costs)

Costs for employee environmental education, and costs
necessary to acquire and maintain ISO certification labor costs
and related costs of environmental action organizations

310

Environmental conservation costs arising from
our R&D activities (R&D costs)

Research costs for environmental conservation

6

Environmental conservation costs arising fromour social-relation activities (Social-relation costs)

Site greening and industrial road cleaning activities

28

Costs directly required for reducing
environmental burdens

Share of cost of pollution levy

41

Total 5,055

AICHI STEEL REPORT 201530

Environment

Environmental Action Plan 2015
The Environmental Action Plan 2015, our plan highlighting our environmen-

management from a global viewpoint involving consolidated subsidiaries.

tal efforts from FY2011 to 2015, was established in March 2011, with thebasic philosophy “to contribute to the sustainable development of society

Specifically, the three pillars of implementation will be “reduction of environ-and the global community” through manufacturing.

mental burdens,” “promotion of a low-carbon society,” and “improvement of
resource recycling,” and our activities will be conducted from many different

To this end, placing “environmental management” as the basis of all environ-directions, including production, technology development, coordination

mental activities, we promote continuous social contributions and enhancewith society, and logistics.

Environmental Action Plan 2015 – Action Items and Results
Action item

Promotion of a low-carbon society

Three Pillars

Products

Reduction ofenvironmental
burdens

Theme

Target(s)Major efforts

Results

1. Promotion of environmental
activities in coordination
with business partners

Promote and adopt proposals forgreen purchasing.
Strengthening efforts at VA Exhibit (October 2014)

Emphasis on 3Rs, logistics improvements
8.4 proposals/month

2. Development of technologies
to reduce substances ofenvironmental concern

Promote environment-related themes in
the medium-term plan for engineering
departments.

Follow-up on theme progress

3. Enhanced control ofenvironmental burdens
for each productFlow of check function when purchasing
environmentally hazardous substances

Ongoing flow of environmental safety check
function for environmentally hazardous
substances in the procurement system

4. Development of eco-friendly
products that reduce CO2
emissions by our customers

Promotion of eco-friendly related
themes in the medium-term plans

Follow-up on theme progress

5. Thorough implementation Based on internalof energy conservation
goals in fiscal
practices in production
2013
activities

Accumulate and execute energy
conservation improvement activities
Promote improvement in thedepartments using large amountsof energy

1,000 t-CO2/year CO2 emissions

Results

Good

797

800
700

681 678654
616 607 643

05

11

600
500
400
300
200
100
0

6. Seeking bettertransportation efficiency
in logistics

8% reduction ofemission volume
per transportation
unit in 2013 fromthe 2006 level

Implementing reduced traffic lines
Eliminating backflow and redundant
stock points

90

07

12

13

14

kg-CO2/t Unit CO2 emissions in logistics

Good

10.0
9.5

Target: 8.8

9.0
8.5

8.4

Social contribution

Environmental management

Improvement of
resource recycling

8.0

7. Reduction of by-products
during production andfurther effective
utilization of resources

Landfill volume incorrespondencewith fluorinecontaining slag
regulations in 2013: Zero
Internal goal
(Based on direct andindirect landfill)

Continue zero landfill volume inaccordance with fluorine-containing
slag regulations
Begin outsourcing of disposal of
hard-to-sort bricks, etc.
Begin developing new outsourcers for
disposal of acid sludge.

06

07

08

09

10

11

12

13

14

1,000 t/year Landfill volume in correspondencewith fluorine-containing slag
regulations Good
50
40
30
20

8. Promotion of projects
that benefit
resource-recycling
corporations

Effective reuse of metal scrap fromToyota Group

9. Promotion of activities for “zero Abnormalities/
abnormalities/complaints”
complaints:
Zero abnormalities/complaints 0/year

Implement strict management to achieve 80% or below
of regulation values set by environment-related laws.
Promote preventive activities (enhance GK).

“Environment Close Call” was adopted.

10. Enhancement ofconsolidated environmental
management

Promote on-site monitoring through Brush-Up Seminars.
Environment audit of domestic affiliates by safety/
environment manager

Ongoing brush-up seminars held withdomestic affiliates.
Continue with environment audits

11. Promotion of global CO2
management

Require all group subsidiaries toreport their energy consumption volume.

Completed, including at overseas offices

12. Promotion of biodiversity

Participate in NPO-led forest preservation
activities and the city of Tokai forestation project.
Promote the "Forestation to Create a
Forest for Beetles"

Participate in forest preservation activities(May, June, September)”Forestation to Create a Forest for Beetles”
event (November)

13. Enhancement and promotionof environmental education
activities

Enhance education programs.
Increase environmental consciousness
through environmental news, etc.

Classified education continued andinternal auditors increased.
Environmental seminars were held.(June)

14. Active disclosure ofenvironmental information andenhanced communication
activities

Demonstrate environmental contributions
through participation in Messe Nagoya,Industrial Festival, etc.
Make the Aichi Steel Report available on the Web.
Hold media meetings, head Office area
meetings, and Kariya regional meetings.

Exhibiting at the "Automotive Engineering Exposition" (May)
English version of Aichi Steel Report:
issued in Nov.
(Disclosed publicly in PDF (on the web))Round-table conferences with the press (4 times)
Head office (October) Kariya (December)

15. Revitalization of regional
contribution activities

Increase participants in Clean Aichi Day.
Demonstrate environmental activities throughin-house publications and News a la carte.

Participants in Expanded Clean Aichi Day: 903
Environment-related information was provided
through in-house publications and News a la carte.

10
0

07

08

09

10

11

12

0

0

13

14

1 Will continue to promote emphasis on CO2 reduction, a priority theme 2 No operational track record, will require ongoing follow-up

31

3 Will work to achieve targets on an energy conservation basis 4 Continuing search for safe, secure outsourcers

Environment

Prevention of Global Warming
FY2014 targets and results

Total CO 2 emissions
1,000t-CO2/year

Based on Environmental Action Plan 2015, we pursued a 10%
reduction compared to 1990 levels until fiscal 2012, a figure
higher than the Kyoto Protocol target. From Fiscal 2013, theinternal goal was set at 1% reduced emission per production
volume from the previous year.
Item

FY 2015 target (internal)

ResultCO2 emissions

629,000 t-CO2/year

654,000 t-CO2/year

Energy conservation in offices
We have promoted energy conservation activities in our offices
since 2008. In fiscal 2014, the following activities were conducted.

1. Summer/winter measures to reduce electricity consumption

Promoting Cool Biz activities (Temperature set to 28°C)
Promoting Warm Biz activities (Temperature set to 19°C)
Shift to LED lighting on second floor of administrative
headquarters and first floor sales office.

1000
800

797

600

514

600

616

607

10

11

12

643

654

13

14 (Fiscal year)

400
200
0

90

09

CO 2 emissions from administrative divisions
t-CO2/year

4,000*Measured since FY2007

3,500

3,456
2,976

3,000

2,613

2,500

2,412 2,419
2,124

2,000

Electricity consumption has
halved and 4.8 tons of CO2
reduction per year is expected.

2. Making electricity use visible

Air conditioners at administrative headquarters offices
automatically shut down at 7:30 p.m.
Monthly energy consumption measured.
Target was a 12/t reduction in CO2/year compared to fiscal
2013, actual reduction was 44/t of CO2/year.

0

Collection of customer evaluations
In accordance with the Energy Saving Act revised in April 20061, we havebeen working on environmental improvement activities through the structur-

07

09

10

11

12

13

14 (Fiscal year)

Breakdown of energy used in FY2014 (CO2 emissions)
Other

Oxygen 1.8%

0.5%

Heavy oil class A

1.4%

Coke 7.2%

City gas

3. Other

Joint energy-conservation patrol by all members of the eco-life
promotion committee (March)
In-house publications for Environment Month (June) and Energy
Conservation Month (February)

1,836

CO2 emissions
Total
654,000 t-CO2

28.0%

Electricity

61.2%

CO 2 Balance
FY2013 emissions

643,000 t-CO2/year

FY2014 emissions

654,000 t-CO2/year

Breakdown of increases versus FY13
Increase due to more production

3,000 t-CO2/year

ing of an efficient environmentally-friendly logistics system after understand-

Areas of improvement (A) –Increasing factors (B)

8,000 t-CO2/year

ing the flow of distribution and reviewing issues. Aichi Steel has establishedTotal

11,000 t-CO2/year

an internal goal of a 15% reduction in specific CO2 emissions during logistics

Improvements (A)from 2006 to 2015.
In "M3 Shipping Cost Activity2," the flow of products after shipment isvisualized to achieve the goal by promoting logistics reform from the perspective of "reverse flow," "double storage" and "two-dimensional distribution."

1. Improved energy efficiency of electric furnaces

9,000 t-CO2/year

2. Energy conservation of hot rolling furnaces

5,000 t-CO2/year

3. Fuel conversion for stainless steel furnaces

3,000 t-CO2/year

4. Efficiency improvements in forging furnaces (IH furnaces)

7,000 t-CO2/year

Total

19,000 t-CO2/year

In fiscal 2014, we achieved a 3% reduction in specific CO2 emissions from

Change Factors (B)the previous year.

1. Change in steelmaking processes(production of purchased slab brought in-house)

11,000 t-CO2/year

2. Change in steelmaking operations (Reduction in melting
times for No.3 electric furnace (rectified with CC)

16,000 t-CO2/year

Total

27,000 t-CO2/year

1. Revised Energy Saving Act: Shippers are obligated to establish plans fora 1% reduction in specific CO2 emissions and the reporting of specificoutput level on a regular basis
2. M3 shipping cost activity: Visualization of product shipping routes andcosts to reduce distribution cost

AICHI STEEL REPORT 201532

Environment

3R (Resource Recycling)
Basic approach

Strengthening management of ironand steel slag products

As a law-abiding member of society, the Company actively

In January 2015, the Nippon Slag Association revised andpromotes 3R activities (reduce, reuse, recycle) for efficient use ofstrengthened its Guidelines for Management of Iron and Steelresources with the aim of achieving "zero emissions," or reducing

Slag Products, and we have completely revised our internal

the waste generated from the Company to as close to zero as

manuals as a result.

possible.

We will continue working to ensure the long-term reliability ofour treatment of slag and all by-products through quality

Fiscal 2014 targets and resultsgoal-keeping and processing capabilities.

In fiscal 2014, we complied with Aichi Prefecture guidelines forthe appropriate use of recyclable resources, and promoted a
reduction in waste and increased recycling. As a result, throughoutsourcing the processing of waste bricks, etc. to a new

Volume of direct landfilled waste (1,000 t/FY)
60

recycler, we were able to reduce direct landfill in comparison to
fiscal 2013, but because of a reduction in the volume of sludge
recycling and other indirect landfill by our recycling outsourcer,
we were unable to meet our target.
We intend to further pursue and strengthen management of thesorting and separating of by-products at the point of origin,
move forward with the development of recycling technology,
and work to make effective use of resources.
Item

FY2014 target

Results

Direct landfill

2,760t or less/year

2,428t or less/year

Indirect landfill

3,600t or less/year

3,704t or less/year

High-strength abrasives from internal by-products:
Construction of an AS Shot production facility

50

52.0
47.3

40
30

26.1

20

14.8

13.2

10
0

7.8
1990

1995

2000

2010

2011

5.3

2012

2013

2.4
2014

Volume of indirect landfilled waste (1,000t/FY)
30

AS Shot is an environmentally friendly abrasive made from25.5

electric furnace slag, a by-product generated by the company.
Compared to conventional products, it generates less dust andcan be used repeatedly. As a high value-added product made20

from slag, it is used in the foundation treatment for coating,removal of rust and die washing, and has received a positive
response.
We expect that its use as a foundation process for blasting, to10

enable long-life coatings and improve durability, will increase. To
respond to that need, we hope to establish mass production
technologies, and expand sales as a result of our recycling
technology.

0

2000

2.4

2.4

2010

2011

3.4
2012

5.3

2013

3.7

2014

VOICE
A strong sense of responsibility in contributing to environmental conservation
Aichi Steel works to ensure promotion of the 3Rs (Reduce, Reuse, Recycle) in handlingby-products generated in-house, as a means of reducing environmental burdens.
By-products are carefully separated before being shipped out, and also undergo strict
inspection to verify that they meet emissions standards. We will continue this strict
management as part of our contribution to environmental conservation.

33

Tsuyoshi Sugihara
Section Chief, Steelmaking
Section 1, Chita Plant

Environment

Biodiversity
Basic policy
We think that preservation of biodiversity, along with the preven-promoting the structuring of an ecosystem network throughtion of global warming, is an important environmental issue thatpublicneeds to be addressed to realize a sustainable society.

next-generation individuals capable of working to preserve theWe understand the concept of COP10 (10th Conference ofearth's environment. We have been working on forestation andParties of United Nations Conventions, Convention on Biologicalvolunteer employee activities, and will continue with projects toDiversity) and participate in activities to preserve biodiversity byprotect the ecosystem.

andprivatesectorcooperation,andfosteringForestation to create a forest for beetles
As part of our activities to promote sustainable biodiversity, we
have established a goal of creating an environment in whichbeetles and other creatures can live in a natural cycle by forminga deciduous broadleaf forest, and have continued this “Forestation to Create a Forest for Beetles” project since 2012.
In fiscal 2014, to nurture the growth of acorn seedlings planted
last year on the company’s green belt, we weeded, fertilized andwatered the plants. To maintain and expand these plantings, we
also continued producing compost and collecting acorns fornext year.
In November 2014, we invited the employees and their families
who had participated in the previous year’s tree planting toobserve the progress in their growth, and they were able to see
for themselves show the seedlings they’d planted with their own
hands were developing.

Forest of Toyota
development volunteers

Forest-developing volunteers(Kiso Village, Nagano Prefecture)

The “Forest of Toyota Development Volunteers,” an event for

Our company uses a large volume of water in the production offorestation experience hosted by the All-Toyota Social Contribu-

steel and supports the NPO "Green Challenger," which works totion Activities Liaison Committee, was held in Toyota City (Aichi).

develop forests in Kiso Village in Nagano, where the headwater

16 members of the Aichi Steel Group participated in the event

for Aichi water originates. Volunteers have been recruitedand experienced forest thinning (May). Through efforts toamong employees to work side-by-side with local residents inimprove the environment and preserve the biodiversity of forests

cutting and thinning work for forest cultivation twice per year

and satoyama (managed woodlands near human settlements),

since 2006.

we will continue to help improve our nearby forests andcultivate employees’ eco-conscious minds.

AICHI STEEL REPORT 201534

Environment

Material Flow

Recycled materials

Raw materials

Scrap iron: 842,000 tons
Internally recycled scrap: 269,000 tons
Primary and secondary materials: 14,000 tons
RP1: 45,000 tons

Iron alloy, etc.: 50,000 tons
Slag flux: 43,000 tons
Reducing agents: 23,000 tons

1,170,000 116,000
tons
tons

Electricity: 1,070 GWh
Fuels: 24,000 kl2
Oxygen: 50,710,000 N
City gas: 86,844,000 N
Utilities

Scrap iron for internal recycling:
269,000 tons
Byproducts 269,000 tons

Industrial water: 4,711,000
Nitrogen: 9,323,000 N
Argon: 1,793,000 N

Melting
Refining

Rolling

Waste
189,000 tons

Rolling
Pickling and heat treatment

Heating

Forging

Scale, etc.

Slag/dust
Headrace sludge

CastingHeating

Forging

Scrap iron

327,000
tons

AICHI STEEL manufacturing process
Steelmaking

EnergyPurchased slab and steel

Reuse outside
the Company(Free assignment
or disposal cost)
171,000 tons

Reuse outside
the Company(Sale to outsidebusiness operators)
67,000 tons

Recycled by outside companies
Landfill: 17,000 tons
Directlandfill

Slag, sludge

IndirectlandfillInternal treatment:
waste acid and dust
Contractor treatment:
waste acid and waste plastic

Industrial waste water
Waste water: 2,741,000

Products

1,108,000 tons
Steel Products: 820,000 tons
Forgings: 288,000 tons

MarketScrap materials(Scrap iron)
842,000 tons

1. RP: Recycled plastics
2. Heavy oil equivalent
3. Emissions from January to December 2014
4. Emissions from April 2013 to March 201435

Atmospheric output
CO2: 654,000 tons-CO2
SOx: 4.71 tons3
NOx: 120 tons4

Environment

PRTR Data
Results for Fiscal 2014

(Unit: tons)

Chita and Forging Plants

Govt.
ordinanceNo

Kariya Plant

Substance nameAtmosphere

Transferred
Outside of premises(as waste, etc)

Water

0.540

1

Water-soluble zinc compound

1.9

-

0.100

80

Xylene

2.4

0.380

-

-

-

2500.000

87

Chromium and trivalent chromium compounds

28000.0

0.170

132

Cobalt and cobalt compounds

140.0

-

-

1.800

243

Dioxins

260.0

260.000--

300

Toluene

4.0

1.100

-

-

304

Lead

93.0

-

-

-

305

Lead compounds

280.0

0.260

-

230.000

308

Nickel5900.0

-

-

-

309

Nickel compounds

830.0

0.034

0.044

41.000374

Hydrogen fluoride and its water-soluble salts

7.6

0.001

7.300

0.220

384

1-bromopropane

7.7

5.500

-

2.100

405

Boron and boron compounds

100.0

-

0.058

20.000412

Manganese and manganese compounds

20000.0

0.630

0.250

5400.000

453

Molybdenum and molybdenum compounds

9200.0

0.007

0.700

0.370

87

Chromium and trivalent chromium compounds

770

-

0.011

61.000309

Nickel compounds

380

-

0.008

33.000374

Hydrogen fluoride and its water-soluble salts

91

0.033

1.200

37.000453

Molybdenum and molybdenum compounds

14

-

0.220

2.100

3

3.000

-

-

Higashiura Plant

Not subject to submission

Gifu Plant

Not subject to submission
392

Seki Plant

Discharged

AmounthandledNormal hexane

A hyphen (-) indicates a quantity of 0 (zero). The volumes were calculated according to the PRTR system.
Unit is tons/year (however, unit for Dioxins is mg-TEQ/year).
Higashiura and Gifu plants not subject to submission

Material balance of PRTR substances in theentire organization of the Company
11 tons

Atmospheric emissions

65,825tons
Chemicals in raw
materials andsecondary materials

56,683tons

10 tons

8,329 tons

791 tons

Steel andother products(consumed)

Discharge
Waste
Decomposition /to waters (transferred) neutralization(elimination)

Breakdown of discharged PRTR substances
Xylene 2%
Molybdenum andmolybdenum
compounds 5%
Manganese andmanganesecompounds 4%

Other 3%
Hydrogen fluoride
and its water-soluble
salts

41%

Toluene5%Normalhexane14%

1-bromopropane

26%

PCB control
Based on the Act on Special Measures concerning Promotion of
Proper Treatment of PCB Wastes, we keep a ledger of alltransformers, condensers, waste oil, etc., that contain PCBs, andimplement strict storage and control measures.

AICHI STEEL REPORT 201536

Environment

Atmospheric Quality Data

Water Quality Data

Chita and Forging Plants (Air Pollution Control Act/local regulations)

Chita and Forging Plants(Water Quality Pollution Control Act/local regulations)

Substance

Facility

BoilerNOx
Heating
furnace

BoilerHeating
furnace
Soot

Limit

Actual level (max)

Item

Limit

Max.

Min.

Average

130

81.3

pH

5.8-8.6

7.7

6.7

7.2

150

26.4

COD

25(20)

12.4

3.6

5.5

180

65.5

SS

40(30)

4.5

Less than 0.5

1.0

130

80.1

Nitrogen120(60)

7.2

0.5

2.3

150

32.4

Phosphorus

16(8)

0.1

Less than 0.1

0.10

170

60.2

180

69.3

200

28.9

Item

Limit

Max.

Min.

Average

0.15

0.001

pH

5.8-8.6

7.3

6.5

6.8

0.08

0.003

BOD

25(20)

3.8

Less than 0.5

1.6

0.10

0.003

SS

40(30)

10.0

Less than 0.5

3.9

0.20

0.003

Nitrogen120(60)

7.9

0.7

4.2

0.25

0.004

Phosphorus

16(8)

0.1

Less than 0.1

0.10

0.30

0.004

0.05

0.001

0.08

0.001

0.10

0.001

32.30

3.52

Kariya Plant (Water Quality Pollution Control Act/local regulations)

Higashiura Plant (Water Quality Pollution Control Act/local regulations)
Item

Limit

Max.

Min.

AveragepH

5.8-8.6

7.1

6.7

6.9

BOD

25(20)

4.8

1.3

3.1

SS

30(20)

2.0

Less than 0.5

0.8

Kariya Plant (Air Pollution Control Act/local regulations)

Nitrogen120(60)

3.3

0.1

2.1

Substance

Phosphorus

16(8)

0.4

0.1

0.27

Electric
furnace
SOx

NOx

SOx

(Total limit)

Facility

Heating
furnace(Total limit)

Limit

Actual level (max)

130

67.6

150

70.1

170

85.1

200

52.8

5.16

0.57

Higashiura Plant (Air Pollution Control Act/local regulations): No regulated facility

Gifu Plant (Water Quality Pollution Control Act/local regulations)
Item

Limit

Max.

Min.

AveragepH

5.8-8.6

7.8

6.0

6.9

BOD

30(20)

1.2

1.1

1.2

SS

60(50)

5.0

Less than 0.5

1.2

Nitrogen120(60)

15.2

0.6

5.0

Phosphorus

16(8)

1.9

Less than 0.1

0.32

Gifu Plant (Air Pollution Control Act/local regulations)
Substance

Facility

Limit

Actual level (max)NOx

Boiler150

79.0

Seki Plant (Air Pollution Control Act/local regulations): No regulated facility
The actual levels of NOx and soot indicate the maximum values actually
measured for each regulated facility.
Units used are as follows. NOx: ppm, soot: g/m3N, SOx: m3N/h (total
volume control as stipulated by the Air Pollution Control Act)

37

Unit: mg/liter (except for pH)
Levels of other regulated substances not shown in these tables were all
below the regulation limits or below the minimum measurable amounts(or not detected at all).
Figures in parentheses ( ) are daily averages.
pH: Hydrogen-ion density
COD: Chemical oxygen demand
BOD: Biochemical oxygen demand
SS: Suspended solids in water

Financial Section

Management’s Discussion and Analysis of Financial
Operations, and Results of Operations
Summary
During the consolidated fiscal year under review, the Japanese

new ideas and working more aggressively to create new

economy remained in a modest recovery phase overall,values.

against the backdrop of government and Bank of Japan

These efforts resulted in consolidated net sales of 240,648

economic policies. However, the outlook for the economic

million yen, a 1.4% increase from the previous fiscal year

environment continued to be opaque, due to factors such as(237,421 million yen).

the impact of the consumption tax hike, higher prices on

On the profit front, we experienced such negative factors asimported raw materials due to steady yen depreciation and a

sharply higher electricity prices and ongoing yen depreciation.

rise in electricity rates.

However, in addition to improved selling prices and lower

Aichi Steel Group’s production and sales volumes for mainstay

costs on steel scrap we reduced cost of sales. Aichi Steelspecialty steel and forgings were down year on year, affectedGroup posted operating income of 10,616 million yen, a 10.3%

by the consumption tax hike and a sluggish recovery inincrease from the previous fiscal year (9,627 million yen).

demand outside the automotive industry, particularly for

Also, ordinary income was 11,141 million yen, a 13.6% increase

specialty steel used in construction equipment.

from the previous fiscal year (9,810 million yen), and net

Under these conditions, we persevered in accordance with theincome was 6,023 million yen, a 9.5% increase from theslogan we introduced in fiscal 2014: “Return to the Basic withprevious fiscal year (5,503 million yen).

Innovative Manner.” This means returning to our roots with

Sales volume (Non-consolidated basis)Thousand tons
1,500

1,000

500

0

248
Specialty
steel

822

250,000

1,119
253

1,043
282

1,130
288

1,109

200,000

289

150,000

761

842

820

Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015 (FY)20,00015,00014,0738,459

0Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015 (FY)14150,000

8

4,247

4,899

5,503

Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015 (FY)

100,000

6
4
2
0

0

200,000

10

6,023

7,332

Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015 (FY)Millions of yen

13.4

12

10,00010,616

Net assets, capital adequacy ratio%

15,205

9,627

5,000

50,000ROE

20,0000Millions of yen

100,000
866

Millions of yen

5,000

215,454

227,478 217,279

237,421 240,648

10,000Net income

15,000Operating income

Millions of yen

Forgings

1,070

Net sales

3.5

4.0

4.2

4.1

Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015 (FY)50,000
0

49.4

49.9

123,671 126,112

53.0
132,43653.9
144,965

57.2

%
60

161,669

50
40
30
20
10

0
Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015 (FY)AICHI STEEL REPORT 201538

Financial Section

Operating Income and Net Income

Financial Position

Consolidated net sales rose 1.4% year on year, to 240,648

Aichi Steel Group’s financial position as at March 31, 2015, wasmillion yen. Cost of sales amounted to 208,023 million yen, with

as follows.

the cost of sales ratio improving 0.9 percentage point, fromTotal assets were 268,064 million yen, up 12,805 million yen

87.3% to 86.4%. Selling, general and administrative expenses

from the end of the previous fiscal year.

came to 22,009 million yen, accounting for 9.1% of net sales,

Current assets decreased 1,829 million yen, to 124,084 million

compared with 8.7% in the previous fiscal year.

yen.

Consequently, operating income for the fiscal year under review

Property, plant and equipment increased 2,451 million yen year

amounted to 10,616 million yen. Net income was 6,023 million

on year. Total capital expenditure during the fiscal year was

yen and ROE was 4.1%.

12,752 million yen, and depreciation and amortization amounted
to 11,833 million yen.
Current liabilities were up 18,851 million yen. The main factor

Sales by Business Segment

behind this rise was a 18,809 million yen increase in the current
portion of long-term loans payable.

Net sales (Consolidated)

Long-term liabilities fell by 22,750 million yen year on year, due

Other businesses
4,197

Electromagnetic
components
12,665Specialty
steel
114,809240,648

primarily to a 25,740 million yen decrease in long-term loans
payable.
Net assets came to 161,669 million yen at the end of the fiscal
year, up 16,704 million yen from one year earlier. Net assets per
share were 779.41 yen, up from 699.58 yen, and the equity ratiorose from 53.9% in the previous fiscal year to 57.2%.

Consolidated Cash Flows

Forgings
108,977(Millions of yen)

Specialty steel
Specialty steel is the mainstay product of Aichi Steel Group. During
the fiscal year, specialty steel sales volume decreased, but thevolume of stainless steel sales increased. In addition, selling prices
on specialty steel and stainless steel improved. Net sales in thissegment saw a 0.1% increase to 114,809 million yen for thisconsolidated fiscal year (114,670 million yen for the previous fiscal
year).

Forgings
Closed-die forgings for automobiles account for a major part ofthis segment. Although overseas subsidiaries’ sales volumes
declined, sales increased due to the fluctuation of exchange ratetranslations, and selling prices improved. Net sales in this segment
saw a 2.7% increase to 108,977 million yen for this consolidated
fiscal year (106,141 million yen for the previous fiscal year).

Electromagnetic components
Aiming to turn this segment into the Company’s core business inthe future, Aichi Steel Group has been nurturing and promoting

Net cash provided by operating activities increased by 4,345
million yen from the previous fiscal year to 19,337 million yen.
Uses of cash included income taxes, which increased 2,079
million yen compared with in the preceding term, while major
sources of cash were consumption taxes payable, providing a
net 2,134 million yen compared with the previous fiscal year; adecrease in inventories, providing a net 1,904 yen million; andincome before income taxes and minority interests, which
provided 914 yen million more than in the previous fiscal year.
Net cash used in investing activities increased by 1,572 million
yen from the previous fiscal year to 13,565 million yen. The main
factor was payments for purchases of property, plant and equipment, which used 1,269 million yen more than in the previousterm.
Net cash used in financing activities increased by 8,247 million
yen from the previous fiscal year to 10,158 million yen Proceedsfrom long-term loans payable provided 2,310 million yen morethan in the previous fiscal year, but payments of long-term loans
payable used 10,450 million yen more cash year on year.
As a result, cash and cash equivalents totaled 32,505 million yen
at the end of the fiscal year, a decrease of 3,530 million yen fromthe 36,035 million yen at the previous fiscal year-end.

new industrial fields including sensors and magnetic products.
Due to an increase in the sales volume of MAGFINE magnets, net
sales in this segment saw a 0.2% increase to 12,665 million yen forthis consolidated fiscal year (12,645 million yen for the previous
fiscal year).

Other businesses
Aichi Steel’s subsidiaries are involved in such business activities asproviding services and engaging in computer software development. Net sales in this segment saw a 5.8% increase to 4,197
million yen for this consolidated fiscal year (3,966 million yen forthe previous fiscal year).

39

Available-for-Sale Securities
Of the total securities owned by the Company and its consolidated subsidiaries, the historical cost of those reported on the
consolidated balance sheet was 2,612 million yen and the fairmarket value of these securities reported on the consolidatedbalance sheet was 16,327 million yen.

Financial Section

Five–year Summary (Consolidated and Non-Consolidated)
Five–year Summary (Consolidated)
Millions of Yen

Thousands of U.S. Dollars

Mar. 2015

Mar. 2014

Mar. 2013

Mar. 2012

Mar. 2011

Mar. 2015¥240,648¥237,421¥217,279¥227,478¥215,454$2,005,399

Operating income

10,616

9,627

7,332

8,459

14,07388,467

Income before income taxes and minority interests

10,693

9,779

7,769

7,885

11,94989,108Net income

6,023

5,503

4,899

4,247

15,20550,196

Property, plant and equipment

88,292

85,841

83,61885,52889,761

735,764

Total assets

268,064

255,259

238,165

241,952

240,2182,233,870

Net assets

161,669

144,965

132,436

126,112

123,671

1,347,245

Net sales

Yen

Per share data

Net income:Basic

¥

30.62

¥

27.99

¥

U.S. Dollars

24.94

¥

21.62

¥

77.49

Net income:Diluted

30.62

27.98

-

21.61

77.45

Number of employees(Persons)

4,617

4,613

4,504

4,406

4,351

$

0.3
0.3

Notes:
1. Net sales are presented exclusive of consumption taxes.
2. Scope of Consolidation:
The consolidated financial statements include the financial statement of AICHI STEEL CORPORATION and 19 significant subsidiaries.
The 19 subsidiaries are :Aiko Corporation, Aichi Ceratec Corporation, Omi Mining Co., Ltd., Aichi Techno Metal Fukaumi Company, Aichi Steel Logistics Co., Ltd., Aichi Information System Company,
Aiko Service Co., Ltd., Aichi Micro Intelligent Corporation, Asdex Corporation, Aichi Forging Company of Asia, Inc., Aichi Forge USA, Inc., Aichi Europe GmbH,
Aichi International (Thailand) Co., LTD., Shanghai Aichi Forging Co., Ltd., PT. Aichi Forging Indonesia, Aichi Magfine Czech s.r.o., AMIT, Inc. ,Aichi Korea Corporation and Aichi Magfine Technology(Pinghu)Co., Ltd.
3. Net income per share is computed by dividing income available to shareholders of common stock by the weighted-average number of shares of common stock outstanding during the respective years.
4. Diluted net income per share for 2013 is not written because no dilutive shares exist.
5. Each fiscal year end date is March 31.
6. The U.S. dollar amounts above represent translations of yen, for convenience only, at the rate of ¥120=U.S.$1.

Five–year Summary (Non-Consolidated)
Millions of Yen

Thousands of U.S. Dollars

Mar. 2015

Mar. 2014

Mar. 2013

Mar. 2012

Mar. 2011

Mar. 2015¥186,433¥185,764¥173,208¥190,096¥179,183$1,553,609

Operating income

8,241

6,171

4,600

5,481

11,441

68,675

Income before income taxes

8,938

6,915

4,810

5,117

10,04874,481

Net income

5,839

4,738

3,841

2,714

13,181

48,662

Property, plant and equipment

65,136

65,462

67,983

72,68578,200542,799

Total assets

210,845

213,245

210,113217,473

218,974

1,757,040

Net assets

127,940

121,414117,248

114,371

113,097

1,066,165

Net sales

Yen

Per share data

Net income:Basic

¥

29.69

¥

24.10

¥

U.S. Dollars

19.55

¥

13.82

¥

67.17

$

0.2

Net income:Diluted

29.68

24.09

-

13.81

67.14

0.2

Cash dividends

10.00

10.00

10.00

10.00

10.00

0.1

Number of employees(Persons)

2,409

2,383

2,369

2,367

2,360

Notes:
1. Net sales are presented exclusive of consumption taxes.
2. Net income per share is computed by dividing income available to shareholders of common stock by the weighted-average number of shares of common stock outstanding during the respective years.
3. Diluted net income per share for 2013 is not written because no dilutive shares exist.
4. Each fiscal year end date is March 31.
5. The U.S. dollar amounts above represent translations of yen, for convenience only, at the rate of ¥120=U.S.$1.

AICHI STEEL REPORT 201540

Financial Section

Consolidated Balance Sheets
As at March 31, 2015 and 2014
Thousands of U.S. Dollars

Millions of Yen
Mar. 2015

Mar. 2014

Mar. 2015¥ 32,717¥ 36,194$ 272,646

50,13548,080417,791

155

155

1,290

Finished goods

7,663

7,048

63,860Work in process

18,13919,682

151,160

Raw materials and supplies

9,909

8,875

82,575

Deferred tax assets

3,741

3,735

31,179Other assets

1,772

2,305

14,755

Less: allowance for doubtful receivables

(147)

(161)

(1,225)

124,084

125,913

1,034,031

Buildings and structures

68,20364,859568,359

Less: accumulated depreciation(46,706)(44,901)(389,218)

Machinery, equipment and vehicles

277,658

273,2442,313,815

Less: accumulated depreciation(237,695)(230,227)(1,980,795)

AssetsCurrent assets:
Cash and deposits
Notes and accounts receivable
Short-term investments

Total current assets
Fixed Assets:
Property, plant and equipment:

Equipment

13,095

12,829109,122

Less: accumulated depreciation(11,640)(11,383)(96,997)Land

14,216

14,120118,465

Lease assets

402

374

3,353

Less: accumulated depreciation

(192)

(167)

(1,599)Construction in progress

10,951

7,093

91,259Net property, plant and equipment

88,292

85,841

735,764

Telephone rights

12

12

103

Other assets

270

250

2,252

Total intangible fixed assets

282

262

2,355

23,737

20,467

197,806

419

536

3,488

30,154

21,149251,281Deferred tax assets

355

366

2,962

Other assets

802

786

6,693

Intangible fixed assets:

Investments and other assets:
Investment securities
Long-term loans
Net defined benefit asset

Less: allowance for doubtful receivables

(61)

(61)

(510)

Total investments and other assets

55,40643,243

461,720

Total fixed assets

143,980

129,346

1,199,839¥268,064¥255,259$2,233,870

Total Assets

41

Financial Section

Thousands of U.S. Dollars

Millions of Yen
Mar. 2015

Mar. 2014

Mar. 2015¥ 24,931¥ 25,852$ 207,754

Short-term loans payable

1,323

1,522

11,025Current portion of long-term loans payable

30,36011,551

252,997

77

68

643

1,716

2,339

14,303Liabilities and Net Assets
Liabilities
Current liabilities:
Notes and accounts payable

Lease obligations
Income taxes payable

183

175

1,525

Other liabilities

14,791

13,023

123,261

Total current liabilities

73,38154,530611,508

13,23338,973

110,274

140

151

1,164

Deferred tax liabilities

5,959

2,389

49,658Net defined benefit liability

12,18012,733

101,497Retirement benefit obligation for directors and corporate auditors

792

805

6,603

Asset retirement obligations

623

648

5,189

Other liabilities

87

65

732

Accrued bonuses for directors and corporate auditors

Long-term liabilities:
Long-term loans payable
Lease obligations

33,01455,764

275,117106,395

110,294

886,625

25,01725,017

208,473

Capital surplus

27,89927,899232,490

Retained earnings

78,56574,494

654,718

Less, treasury stock, at cost

(1,301)(1,321)(10,845)

130,180

126,089

1,084,836

Net unrealized gains on available-for-sale securities, net of tax

9,548

6,881

79,569Foreign currency translation adjustments

3,595

1,149

29,959Remeasurements of defined benefit plans

9,993

3,473

83,274

Total valuation and translation adjustments

23,136

11,503

192,802

40

77

329

Total long-term liabilities
Total liabilities
Net Assets
Shareholders’ equity:
Common stock, no par value:
Authorized: 476,000,000 shares;
Issued:198,866,751 shares in 2015 and 2014

2,157,793 shares in 2015 and 2,189,898 shares in 2014
Total shareholders’ equity
Valuation and translation adjustments

Subscription rights to shares
Minority interests in subsidiaries
Total Net assets
Total Liabilities and Net assets

8,313

7,296

69,278

161,669

144,965

1,347,245¥268,064¥255,259$2,233,870

AICHI STEEL REPORT 201542

Financial Section

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
For the Years Ended March 31, 2015 and 2014
Consolidated Statements of Income
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses:
Freight expenses
Sales commission
Salaries and allowances and welfare expenses
Retirement benefit expenses
Provision of allowance for directors’ bonuses
Provision of allowance for directors’ retirement benefits
Provision of allowance for doubtful receivables
Depreciation
Research and development expenses
OthersTotal selling, general and administrative expenses
Operating income
Non-operating income:Interest income
Dividend income
Gain on sales of goods
Foreign exchange gain
OthersTotal non-operating income
Non-operating expenses:
Interest expenses
Loss on disposal of property, plant and equipment, net
Loss on valuation of derivatives
OthersTotal non-operating expenses
Ordinary income
Extraordinary expenses:
Impairment loss on fixed assets
Total extraordinary expenses
Income before income taxes and minority interests
Income taxes:
Current
Deferred
Total income taxes
Minority interests in net income of subsidiaries
Net income

Millions of Yen
Mar. 2015
Mar. 2014¥240,648¥237,421
208,023
207,243
32,62530,178¥Per share
Net income:Basic
Net income:Diluted
Cash dividends

2,652
1,350
7,868
362
183
68
561
3,538
5,427
22,00910,616

2,605
1,323
7,432
478
178
103
42
436
3,471
4,483
20,551
9,627

22,096
11,24865,570
3,018
1,525
569
0
4,676
29,48745,220183,40988,467

108
370
85
526
689
1,778

112
363
105
358
507
1,445

902
3,087
712
4,386
5,727
14,814

716
285
38
214
1,253
11,141

684
323
61
194
1,262
9,810

5,967
2,377
318
1,776
10,43892,843448
448
10,693

31
31
9,779

3,735
3,735
89,108

3,900
100
4,000
670
6,023

3,400
217
3,617
659
5,503

32,502830
33,332
5,580$
50,196
U.S. Dollars
2015

2015
¥

Thousands of U.S. Dollars
Mar. 2015$2,005,399
1,733,523
271,876

Yen

30.62
30.62
10.00

¥

2014
¥

27.99
27.98
10.00

$

0.3
0.3
0.1

Consolidated Statements of Comprehensive Income
Net income before minority interests
Other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total of other comprehensive income
Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

43

Millions of Yen
Mar. 2015
Mar. 2014¥ 6,162¥ 6,693

Thousands of U.S. Dollars
Mar. 2015$
55,776

2,675
2,976
6,520
12,171
18,864

1,383
3,520
4,903
11,06522,291
24,79954,331
101,421
157,197

17,656
1,208

9,651
1,414

147,136
10,061

Financial Section

Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2015 and 2014
Thousands of U.S. Dollars

Millions of Yen
Mar. 2015

Mar. 2014

Mar. 2015

Balance at the beginning of year

¥ 25,017¥ 25,017$ 208,473

Balance at the end of year

25,01725,017

208,473

Balance at the beginning of year

27,89927,899232,490

Balance at the end of year

27,89927,899232,490

74,49470,987620,786

18

-

150

74,512-620,936

Cash dividends(1,967)(1,965)(16,390)

Net income for the year

6,023

5,503

50,196

(3)

(31)

(24)

4,053

3,507

33,782

78,56574,494

654,718(1,321)(1,462)(11,010)Purchase of treasury stock and fractional shares

(1)

(1)

(11)

Disposal of treasury stock due to exercise of stock options

21

142

176

Total changes of items during the period

20

141

165

(1,301)(1,321)(10,845)

126,089

122,441

1,050,739

18

-

150

126,107-

1,050,889

Cash dividends(1,967)(1,965)(16,390)

Net income for the year

6,023

5,503

50,196

Purchase of treasury stock and fractional shares

(1)

(1)

(11)

Disposal of treasury stock due to exercise of stock options

18

111

152

4,073

3,648

33,947¥130,180¥126,089$1,084,836

Shareholders’ equity
Common stock:

Capital surplus:

Retained earnings:
Balance at the beginning of year
Cumulative effects of changes in accounting policies
Restated balance
Change of items during the period

Disposal of treasury stock due to exercise of stock options
Total changes of items during the period
Balance at the end of year
Treasury stock:
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Total shareholders’ equity:
Balance at the beginning of year
Cumulative effects of changes in accounting policies
Restated balance
Change of items during the period

Total changes of items during the period
Balance at the end of year

AICHI STEEL REPORT 201544

Financial Section

Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2015 and 2014
Thousands of U.S. Dollars

Millions of Yen
Mar. 2015

Mar. 2014

Mar. 2015¥¥$

Accumulated other comprehensive income
Net unrealized gains on available-for-sale securities, net of tax:
Balance at the beginning of year

6,881

5,501

57,344

Change of items during the period
Net changes of items other than shareholders’ equity

2,667

1,380

22,225

Total changes of items during the period

2,667

1,380

22,225

9,548

6,881

79,5691,149(1,619)9,574

Net changes of items other than shareholders’ equity

2,446

2,768

20,385

Total changes of items during the period

2,446

2,768

20,385

3,595

1,149

29,9593,473-

28,943

Net changes of items other than shareholders’ equity

6,520

3,473

54,331

Total changes of items during the period

6,520

3,473

54,331

9,993

3,473

83,274

11,503

3,882

95,861

Net changes of items other than shareholders’ equity

11,633

7,621

96,941

Total changes of items during the period

11,633

7,621

96,941

23,136

11,503

192,802

77

169

638

Net changes of items other than shareholders’ equity

(37)

(92)

(309)

Total changes of items during the period

(37)

(92)

(309)

40

77

329

7,296

5,944

60,805

Net changes of items other than shareholders’ equity

1,017

1,352

8,473

Total changes of items during the period

1,017

1,352

8,473

8,313

7,296

69,278144,965

132,436

1,208,043

18

-

150

144,983-

1,208,193

Cash dividends(1,967)(1,965)(16,390)

Net income for the year

6,023

5,503

50,196

Purchase of treasury stock and fractional shares

(1)

(1)

(11)

Disposal of treasury stock due to exercise of stock options

18

111

152

Net changes of items other than shareholders’ equity

12,613

8,881

105,105

Total changes of items during the period

16,686

12,529139,052¥161,669¥144,965$1,347,245

Balance at the end of year
Foreign currency translation adjustments:
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Remeasurements of defined benefit plans:
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Total accumulated other comprehensive income:Balance at the beginning of year
Change of items during the period

Balance at the end of year
Subscription rights to shares:
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Minority interests in subsidiaries:
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Total net assets:
Balance at the beginning of year
Cumulative effects of changes in accounting policies
Restated balance
Change of items during the period:

Balance at the end of year

45

Financial Section

Consolidated Statements of Cash Flows
For the Years Ended March 31, 2015 and 2014
Thousands of U.S. Dollars

Millions of Yen
Mar. 2015

Mar. 2014

Mar. 2015¥ 10,693¥$

Cash flows from operating activities:
Income before income taxes and minority interests

9,779

89,108

11,834

12,35598,614

Impairment loss on fixed assets

448

31

3,734

Increase (decrease) of allowance for doubtful receivables

(18)

10

(148)

Decrease(increase)in net defined benefit asset

(516)

(208)

(4,299)Depreciation

Increase(decrease)in net defined benefit liability

262

444

2,187

Interest and dividend income

(479)

(475)

(3,989)Interest expense

716

684

5,967

Foreign exchange (gain) loss

(299)

(265)

(2,492)

Loss (gain) on sale of property, plant and equipment, net

(25)

(25)

(210)

Loss (gain) on disposal of property, plant and equipment

274

298

2,286

Decrease (increase) in notes and accounts receivable-trade(1,191)(368)(9,922)844(1,060)

7,034

Increase (decrease) in notes and accounts payable-trade(1,519)(2,355)(12,662)

Other, net

3,329

(948)

27,734

Subtotal

202,942

Decrease (increase) in inventories

24,353

17,897

Interest and dividend income received

479

475

3,992

Interest expenses paid

(720)

(684)

(6,001)

Income taxes paid

(4,775)(2,696)(39,792)

Net cash provided by operating activities

19,337

14,992

161,141

Cash flows from investing activities:
(50)

(36)

(417)

Payments for purchase of property, plant and equipment(13,478)(12,209)(112,319)

Proceeds from sales of property, plant and equipment

48

311

396

Payments for purchase of investment securities

(1)

(75)

(8)

Payments for loans receivable

(15)

(4)

(125)

Net decrease (increase) in time deposits

Collections of loans receivable

129

170

1,079

Other, net

(198)

(150)

(1,649)(13,565)(11,993)(113,043)

(269)

(386)

(2,241)

Net cash used in investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable

3,893

1,583

32,442

Repayments of long-term loans payable(11,562)(1,112)(96,353)

Payments for refund of lease obligations

(75)

(65)

(623)

Proceeds from minority shareholders of subsidiary
Proceeds from exercise of stock options
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents

-

74

-

15

89

122

(1,969)(1,966)(16,404)

(190)

(122)

(1,582)

(1)

(6)

(12)

(10,158)(1,911)(84,651)

856

1,127

7,138

Net decrease in cash and cash equivalents(3,530)2,215(29,415)

Cash and cash equivalents at beginning of year

36,03533,820300,291¥ 32,505¥ 36,035$ 270,876

Cash and cash equivalents at end of year

AICHI STEEL REPORT 2015

46

GRI Guideline Comparison Table

We are now preparing for core compliance with the Sustainability
Reporting Guidelines Version 4 (G4) (see Pages 7-8).
The table below provides a report on the status of current efforts,
as compared against G4.

General Standard Disclosures*Items in yellow are standard disclosures required in Core-compliant reports.
Strategy and Analysis
a.Provide a statement from the most senior decision-maker of the organization (suchas CEO, chair, or equivalent senior position) about the relevance of sustainability
1to the organization and the organization’s strategy for addressing sustainability.
2
a.Provide a description of key impacts, risks, and opportunities.
Organizational Profile
a.Report the name of the organization.
3
a.Report the primary brands, products, and services.
4
a.Report the location of the organization’s headquarters.
5
a.Report the number of countries where the organization operates, and names of countries where either the organization
6
has significant operations or that are specifically relevant to the sustainability topics covered in the report.
7
a.Report the nature of ownership and legal form.
8
a.Report the markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries).

9

10
11
12
13
14
15

16

a.Report the scale of the organization, including:
Total number of employees
Total number of operations
Net sales (for private sector organizations) or net revenues (for public sector organizations)
Total capitalization broken down in terms of debt and equity (for private sector organizations)
Quantity of products or services provided
a.Report the total number of employees by employment contract and gender.
b.Report the total number of permanent employees by employment type and gender.
c.Report the total workforce by employees and supervised workers and by gender.
d.Report the total workforce by region and gender.
a.Report the percentage of total employees covered by collective bargaining agreements.
a.Describe the organization’s supply chain.
a.Report any significant changes during the reporting period regarding
the organization’s size, structure, ownership, or its supply chain.
a.Report whether and how the precautionary approach or principle isaddressed by the organization.
a.List externally developed economic, environmental and social charters, principles,or other initiatives to which the organization subscribes or which it endorses.
a.List memberships of associations (such as industry associations) andnational or international advocacy organizations in which the organization:
Holds a position on the governance body
Participates in projects or committees
Provides substantive funding beyond routine membership dues
Views membership as strategic
This refers primarily to memberships maintained at the organizational level.

38

39
40

41

47

a.Report whether the Chair of the highest governance body is also an executive officer (and, if so,
his or her function within the organization’s management and the reasons for this arrangement).
a.Report the nomination and selection processes for the highest governance body and its committees,
and the criteria used for nominating and selecting highest governance body members.
a.Report processes for the highest governance body to ensure conflictsof interest are avoided and managed. Report whether conflicts ofinterest are disclosed to stakeholders, including, as a minimum:
Cross-board membership
Cross-shareholding with suppliers and other stakeholders
Existence of controlling shareholder
Related party disclosures

a.Report the highest governance body’s and senior executives’ roles in the development,
approval, and updating of the organization’s purpose, value or mission statements,
strategies, policies, and goals related to economic, environmental and social impacts.

P17

44

a.Report the processes for evaluation of the highest governance body’s
performance with respect to governance of economic, environmental
and social topics. Report whether such evaluation is independent or not,and its frequency. Report whether such evaluation is a self-assessment.
b.Report actions taken in response to evaluation of the highest governance body’s
performance with respect to governance of economic, environmental and social
topics, including, as a minimum, changes in membership and organizational practice.

P15

P3-6,19
P2
P2
P2
P2
P2,17
P2,35
P2,19,
35,36(WEB)P38-46

P21

P26
Not applicableP19-20
P20,25,29

45

a.Report the highest governance body’s role in the identification and management of
economic, environmental and social impacts, risks, and opportunities. Include thehighest governance body’s role in the implementation of due diligence processes.
b.Report whether stakeholder consultation is used to support the highest
governance body’s identification and management of economic, environmental andsocial impacts, risks, and opportunities.

a.Report the highest governance body’s role in reviewing the effectiveness of theorganization’s risk management processes for economic, environmental and social topics.
a.Report the frequency of the highest governance body’s review of47
economic, environmental and social impacts, risks, and opportunities.
a.Report the process for communicating critical concerns to the highest governance body.
49
a.Report the nature and total number of critical concerns that were communicated to the50highest governance body and the mechanism(s) used to address and resolve them.
Ethics and Integrity
a.Describe the organization’s values, principles, standards and norms of56
behavior such as codes of conduct and codes of ethics.
a.Report the internal and external mechanisms for seeking advice on ethical and lawful
57
behavior, and matters related to organizational integrity, such as helplines or advice lines.
a.Report the internal and external mechanisms for reporting concerns about
unethical or unlawful behavior, and matters related to organizational integrity, such58
as escalation through line management, whistleblowing mechanisms or hotlines.
46

P15

P19
P17
P17
P17-18P1,P15
P18
P18

Specific Standard Disclosures
P25

Identified Material Aspects and Boundaries
a.List all entities included in the organization’s consolidated financial statements or equivalent documents.
17
P2
b.Report whether any entity included in the organization’s consolidated
financial statements or equivalent documents is not covered by the report.
a.Explain the process for defining the report content and the Aspect Boundaries.
18
P1
b.Explain how the organization has implemented the Reporting Principles for Defining Report Content.
19
a.List all the material Aspects identified in the process for defining report content.
a.For each material Aspect, report the Aspect Boundary within the organization.
20
a.For each material Aspect, report the Aspect Boundary outside the organization.
21
a.Report the effect of any restatements of information provided in
22
Not applicableprevious reports, and the reasons for such restatements.
23
a.Report significant changes from previous reporting periods in the Scope and Aspect Boundaries. Not applicable
Stakeholder Engagement
24
P15
a.Provide a list of stakeholder groups engaged by the organization.
25
P15
a.Report the basis for identification and selection of stakeholders with whom to engage.
a.Report the organization’s approach to stakeholder engagement, including frequency ofP7-8
26
engagement by type and by stakeholder group, and an indication of whether any of theengagement was undertaken specifically as part of the report preparation process.
a.Report key topics and concerns that have been raised through stakeholder engagement, andP7-8,27
how the organization has responded to those key topics and concerns, including through its
15-16
reporting. Report the stakeholder groups that raised each of the key topics and concerns.
Report Profile
28
P1
a.Reporting period (such as fiscal or calendar year) for information provided.
29
P1
a.Date of most recent previous report (if any).
30
P1
a.Reporting cycle (such as annual, biennial).
31
Back covera.Provide the contact point for questions regarding the report or its contents.
a.Report the ‘in accordance’ option the organization has chosen.
b.Report the GRI Content Index for the chosen option.
32
c.Report the reference to the External Assurance Report, if the report has been externally assured.
a.Report the organization’s policy and current practice with regard to seeking external assurance for the report.
b.If not included in the assurance report accompanying the sustainability
report, report the scope and basis of any external assurance provided.
33
c.Report the relationship between the organization and the assurance providers.
d.Report whether the highest governance body or senior executives are
involved in seeking assurance for the organization’s sustainability report.
Governancea.Report the governance structure of the organization. Identify any committees
34
P17
responsible for decision-making on economic, environmental and social impacts.
a.Report the process for delegating authority for economic, environmental and social
35
P17
topics from the highest governance body to senior executives and other employees.
a.Report whether the organization has appointed an executive-level position or positions with responsibility for
36
P17
economic, environmental and social topics, and whether post holders report directly to the highest governance body.
a.Report processes for consultation between stakeholders and thehighest governance body on economic, environmental and social
37
P17
topics. If consultation is delegated, describe to whom and any
feedback processes to the highest governance body.
a.Report the composition of the highest governance body and its committees by:
Executive or non-executive
Independence
Tenure on the governance body
Number of each individual’s other significant positions and commitments, and the nature of the commitments
GenderMembership of under-represented social groups
Competences relating to economic, environmental and social impacts
Stakeholder representation

42
P3-6

P17

P17
P17

P17

Disclosures on Management Approacha.Report why the Aspect is material. Report the impacts that make this Aspect material.
b.Report how the organization manages the material Aspect or its impacts.
c.Report the evaluation of the management approach, including:
DMA
The mechanisms for evaluating the effectiveness of the management approach
The results of the evaluation of the management approach
Any related adjustments to the management approach

P3-6

Economic
Aspect: Economic Performance
EC1
Direct Economic Value Generated And Distributed
Financial Implications And Other Risks And Opportunities For The
EC2Organization’s Activities Due To Climate Change(WEB)P38-46

EC3

Listed on the annual
securities report

Coverage Of The Organization’s Defined Benefit Plan Obligations

Environmental
Aspect: Materials
EN1
Materials Used By Weight Or Volume
EN2
Percentage Of Materials Used That Are Recycled Input Materials
Aspect: Energy
EN3
Energy Consumption Within The Organization
EN6
Reduction Of Energy Consumption
Aspect: Water
EN8
Total Water Withdrawal By Source
Aspect: Biodiversity
Operational Sites Owned, Leased, Managed In, Or Adjacent To, Protected
EN11
Areas And Areas Of High Biodiversity Value Outside Protected Areas
EN13 Habitats Protected Or Restored
Aspect: Emissions
EN15 Direct Greenhouse Gas Emissions (Scope 1)
EN16 Energy Indirect Greenhouse Gas Emissions (Scope 2)
EN19 Reduction Of Greenhouse Gas Emissions (Ghg)
EN21 Nox, Sox, And Other Significant Air Emissions
Aspect: Effluents And Waste
EN23 Total Weight Of Waste By Type And Disposal Method
Aspect: Products And Services
EN27 Extent Of Impact Mitigation Of Environmental Impacts Of Products And Services
Aspect: Compliance
Monetary Value Of Significant Fines And Total Number Of Non-Monetary
EN29
Sanctions For Non-Compliance With Environmental Laws And Regulations
Aspect: Overall
EN31 Total Environmental Protection Expenditures And Investments By Type
Aspect: Environmental Grievance Mechanisms
Number Of Grievances About Environmental Impacts Filed, Addressed,
EN34
And Resolved Through Formal Grievance Mechanisms
SocialAspect: Employment
Total Number And Rates Of New Employee Hires And Employee
LA1
Turnover By Age Group, Gender And Region
Aspect: Occupational Health And Safety
Type Of Injury And Rates Of Injury, Occupational Diseases, Lost Days, And Absenteeism,
LA6
And Total Number Of Work-Related Fatalities, By Region And By Gender
LA8
Health And Safety Topics Covered In Formal Agreements With Trade Unions
Aspect: Training And Education
Programs For Skills Management And Lifelong Learning That Support The Continued
LA10
Employability Of Employees And Assist Them In Managing Career Endings
Human Rights
Aspect: Non-Discrimination
Total Number Of Incidents Of Discrimination And Corrective Actions Taken
HR3
Aspect: Human Rights Grievance Mechanisms
Number Of Grievances About Human Rights Impacts Filed, Addressed,
HR12
And Resolved Through Formal Grievance Mechanisms
Society
Aspect: Local Communities
Percentage Of Operations With Implemented Local Community
SO1
Engagement, Impact Assessments, And Development Programs
Aspect: Anti-Corruption
SO4
Communication And Training On Anti-Corruption Policies And Procedures
Product Responsibility
Aspect: Product And Service Labeling
PR5
Results Of Surveys Measuring Customer Satisfaction

P19(WEB)P35(WEB)P35(WEB)P35
P31-32(WEB)P35
P34
P34
P32
P32
P32
(WEB)P36-37
P31,33,(WEB)P35
P11-12
P31
P30
P31

P21

P16,24
P24
P16,23

P18
P18

P16,27-28
P18

P26

Third-Party View
This year’s Aichi Steel Report clearly sets forth the stance of remaining solidly aware of environmental management and corporatesocial responsibility while drafting a vision for the next phase ofsociety, even as the company pursued active management onvarious agenda in the harsher business climate induced by the yen’s
depreciation. These agenda include reduction of prime cost andexpansion of earnings based on the perspectives of fractional
management, participation in fuel cell vehicle development plans,and creation of new products drawing on the company’s strengths.

Mr. Satoshi Chikami

Executive Officer and Professor,
Faculty of International
Welfare Development
Nihon Fukushi University

Clear definition of the management stance revolving
around proactivity and steadiness (pp. 3–6)

Clear notation of activity results and issues in theMedium-Term CSR Plan (pp. 15–16)

The interview with the president at the start of the report clearly

Like last year’s edition, this year’s presents a concise summary

sets forth the orientation of organizational management from aof priority agenda items grounded in the CSR Vision, initiatives

wide range of perspectives, including the thinking behind

for attaining them, targets, actual results, and assessments. In

fractional management, introduction of ZZZ200 activities,

the case of items for which targets have not yet been attained,

development of unique products, the further penetration of theit also clearly states shortcomings and issues. I am looking

1S culture, and emphasis on efficiency and flexibility in organiza-

forward to the progress of approaches to certain items, such as

tions. The president applies the metaphor of tree rings for thereinforcement of powers of information provision to society

objective of steady growth in the face of rapid changes in theand preparation of more appealing plants. I also have highbusiness environment while striving to strengthen the company’s

hopes for the full analysis of issues and further reinforcement offoundation and increase its earning power. I think this is anapproaches for target attainment in the case of items carried

important idea for the continuation of sustainable growth andover from previous years whose targets have not yet been

dialogue with society. The president also clearly places

sufficiently attained. These include the preparation of safe andadvancement of the company as an organization and the growthpleasant workplaces, and compliance.

of each and every one of its employees on the same footing, andSteady progress of the Environmental Action Plan (p. 31)

the aspiration to be a “company desired by society.”

Fiscal 2014 is the fourth year of the Environmental Action Plan

Clear indication of issues faced as a corporate
member of society (pp. 7–8)

2015, and progress may be considered basically smooth in it as

The relationship between the company and society is extremely

attainment of targets for improvement of efficiency in physicalmulti-layered and diverse. The special content sets forth issues

distribution, for which its targets were raised in fiscal 2013, andwell. More specifically, the Group deserves high ratings for its

in both the environmental and social aspects for conformance

global CO2 management based on apprehension of CO2

with the GRI sustainability reporting guidelines, in all stages

emission levels at its overseas sites, which it has long beenfrom procurement of raw materials to product use. It also

addressing. Similarly, it managed to halve the amount of direct

outlines opportunities for engagement with various stakehold-landfill (p. 33) from the previous year. In contrast, it was not able

ers as well as their wishes and expectations. It therefore takes a

to attain the target for reduction of CO2 emissions in production

bird’s-eye view of the overall corporate activities in the context

activities. I am hoping it will continue to bolster its approaches.

of the relationship with society. This throws strengths and issues

Conclusion

into focus and makes it possible to see in what fields greater

I understand that a new building is being constructed to houseefforts are required. I believe this kind of sharing of identified

the company with the approach of the 75th anniversary of its

results on important issues with all employees also enables all

establishment.

employees, including those working in plants, to share theI hope that the new building will not only improve the environ-social worth of the company’s activities and the responsibility

ment of work by employees but also provide space that isthey carry. I am looking forward to seeing the results of thisadapted to a new work style, and therefore stand as a fitting

work reflected in the next edition of the report.

symbol for the coming age.
*This Third-Party View was written on the basis of data including
the findings of interviews with concerned parties.

Response to the Third-Party View

Ichiro Murakami
Senior Executive Officer
and General Manager,
General Affairs Div.

Professor Chikami has kindly written a third-party view for thereport since fiscal 2010, and I am grateful for his precious
views and proposals again this year.
We are definitely going to take lessons from his comments as
an expert on the items he indicated, also to continue with oursustainable value creation. At the same time, we will
earnestly strive to make this report even more complete.
To assist the achievement of sustainable growth andemergence of a better society, we intend to make even more
improvements on the agenda for which we were given highratings (management stance and identification of social
issues) as well as the preparation of more appealing plants.

Professor Chikami also encouraged more work on the agenda
of preparing safe and pleasant workplaces, compliance, andreduction of CO2 emissions in production activities. We will
see that these agenda are shared by all concerned divisions
and pursue studies for tackling them through a concerted
companywide effort.
For the future as well, we are committed to strengthening ourmanagement foundation and promoting CSR activities forsustained growth by the Group as a whole. It remains ouraspiration to be a company that is trusted by all of its
stakeholders, who will want it to always be a member of theircommunity.

AICHI STEEL REPORT 2015

48

Answer: 1) greening of the earth, 2) rotation of the earth, and 3) coloring of the illustration.

October 2015