AICHI STEEL REPORT 2018

AICHI STEEL REPORT2018

FSC-certified paper, with the

100% vegetable oil non-VOC

Waterless printing without

proof of wood product fromink (not containing volatile

the use of damping water

appropriately managed

organic compounds) is used.

containing harmful

forests, is used.

substances is employed.

Primary contact: Corporate Communications Div.

Released: September 2018

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

The idea expressed

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

by the cover

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

Editorial Policy

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

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

CSR Policy

We will contribute to the sustainable progress of society and the Earth through oursound corporate activities.

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

Aichi Way (Common values and codes of conduct to be followed by all
employees of the Aichi Steel Group)

Noble ambitions
Sincerity
Genba-ism

Readers

Happiness for everyone

Aichi Steel Report (this report)

Reference Guidelines
GRI Standards
ISO 26000 (Corporate Social Responsibility)

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

Information Available on Our Website

The Report covers activities conducted by the Aichi Steel Group duringﬁscal 2017 (April 2017 to March 2018). However, some activities conducted
before or after ﬁscal 2017 are also explained where necessary.

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

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

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

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

1

Aichi Steel Group’s Engagement with Society……………………………………………………………………………………………………

3

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

5……………………………………………………………………………………………………………………

9……………………………………………………………………………………………………………

11……………………………………………………………………………………

13

Special Feature 2: Workstyle Reform at Aichi Steel……………………………………………………………………………………………

19

Special Feature 3: Initiatives for the Next Generation…………………………………………………………………………………………

21……………………………………………………………………………………………………………

23…………………………………………………………………………………………………………………………………………

25…………………………

27………………

31

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

33………………………

35

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

37……………………………

39

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

41

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

42

Our Vision/Editorial Policy

Value Creation Model2020 Medium-term Management Plan

Special Feature 1: Start of an In-house Company System

Financial and Non-financial Highlights

Customers andteam members

Website: Environmental
and CSR information

Importance to Aichi Steel Group and stakeholders

Report Period and Scope

CSR Vision

Founding spirit

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

Selected topics

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

The Aichi Steel Report 2018 was prepared to assist
understanding among our many stakeholders of the approaches
taken by Aichi Steel and the Aichi Steel Group in ﬁscal 2017,
ended March 31, 2018. Besides describing these approacheswith speciﬁc examples, it sets forth as much as possible thecauses and future initiatives concerning items for which targets
have not yet been met.
This ﬁscal year, as detailed in our new 2020 Medium-termManagement Plan, we have written our report with a focus on
clear communication of growth strategies for achieving our
vision, and on what value we will contribute to society and how
we will provide it.
As before, this report was prepared using a Universal Design*1(UD) font,*2 and use of color, volume of text, text size and otherfactors were also taken into consideration to create a more easilyreadable report.

Complete overview

Our Vision

Reporting MediaCSR Management

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

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

Good thinking
Good products
Heading to a bright future

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

Priority Issue 6 Establish a Solid Financial Foundation to Support Stable and Sustainable Growth01

AICHI STEEL REPORTAICHI STEEL REPORT

02

Aichi Steel Group’s Engagement with Society

Car

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

We are contributing
to lower fuel consumption
and higher performance.

[Forged Products]

Hybrid vehicles (HV/PHV)

Fuel cell vehicles (FCV)

We are supporting theelectrification of environmentallyfriendly vehicles.

Hydrogen stations

Crankshaft

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

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

Cold platethus ensuring a more comfortable life for people.
Differential ring gear

Aichi Steel’s technologies are
utilized not only in modernbuildings, but in preserving
historical heritage.

Farm, vegetable garden

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

Counter driven gear

[Electro-Magnetic
Products]

Healthcare
Historical buildings

Tunnels

CVT shaft
MAGFINE®
seat motor

Dentistry

MRI

World-first attachment that uses
magnets to affix false teeth, developedby Aichi Steel. These are usedworldwide.

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

Power card lead frame

Attachment in the tunnel ofcapital expressway

Hydrogen station

TunnelRailway

Dental magnetic attachment
Seismic strengthening works ofa five-story pagoda

Building

Water gate
Station

Safety first

Hydrogen station

Farmings, greenings

AirportCar“TetsuRiki” Iron Fertilizer and “TetsuRiki Aqua” activate
plant photosynthesis by using ferrous ion. Ensuring
stable supply of ferrous ion essential for plant growth.

HospitalseriesStorage tankDentistry

BridgeChemical tanker

Crane

Home gardening

Farming

Power shovel

Wind power

Energies

Dump truck

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

PCs, smart watches
We are supporting the evolutionof information terminals thatare increasingly becoming morecompact with higher performance.

Stations, airports

Construction machineries

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

Stainless steel is also used forconstruction machinerythat requires strength anddurability.

Electromagnetic
compass for
smart watches

SUSCOn®

03

AICHI STEEL REPORT

Entrance eave, curtain wall

High-sensitive MI sensor

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

Ships, water gates, bridges, plants
Wide application
for its rust-resistantproperties, including
dams, water gates andplants.

Propeller shaft for ship
Dam

Boss

Stainless steel concrete bar

Roads

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

Station skywalk

Handrail

Front idler

Propeller shaft

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

Water gate

BridgeAICHI STEEL REPORT

04

Message of Commitment from the President

Part 1.

Modern Society in a Period of Great Transformation
Basic approach of management toperiods of great transformation

Contributing to a smart society
through materials

The world is rapidly changing into a smart society,as typified by the once-in-a-century paradigm shift
being experienced in the automotive industry. The
progress of electrification of vehicles in particularis having a negative influence on demand forspecialty steels, which are our core products.
However, regardless of the era we are in, as
shown in our value creation model, we will
respond flexibly to challenges related to theenvironment, society, and governance; we willcontinue to contribute value to society; and wewill continue to grow steadily, like the annual
growth rings of a tree.

By 2040, it is inevitable that increased use ofelectrified vehicles such as EVs and FCVs will bean essential part of maintaining a sustainableglobal environment, and there will be a significant
increase in demand for motors and batteries. We
will also see many projects that we are alreadyworking on taking shape and flourishing. They
include more advanced sensing technologies tied
to the popularization of autonomous driving
systems that will help create safer and moresecure communities, and expanded applications
for stainless steel through expansion of ahydrogen-based society.
For a long time, I have searched for ways tocontribute to society through provision of steel
and other materials. I am now confident that thearrival of the smart society will create
opportunities for businesses in many different
fields that require our technologies. For thisreason, we established the Frontier Research andDevelopment Division in January 2018 toaccelerate the pace of research and developmentwith the aim of creating new businesses.
Development focuses on areas that contributethe most to society, that have the greatest impact
on our business, and that our employees canembrace wholeheartedly. We also prioritize fields
with potential for new business development
based on our superior materials technologies.
Of course, advanced technical capabilities areimportant for us to convert this research into
profits. We are currently working on autonomous
driving support systems together with Advanced
Smart Mobility Co., Ltd., a company in which weinvested in February 2018. I expect that working
with such an advanced company will guide andimprove our technical strengths, and will enable
us to demonstrate these capabilities even more.
Our founder Kiichiro Toyoda had the noble
ambition of contributing to the production ofJapan’s first domestic automobiles using specialty
steels. In the same way, we take pride in being theonly materials manufacturer in the Toyota Group
as we work to contribute toward materializationof a smart society through the power of materials.

Establishing a new medium-term
management plan

Realization of the 2020 Medium-termManagement Plan
Laying theFoundation
for a Smart
Society

Takahiro Fujioka

Enhancing
Profit-earning

President

2040: Anticipation of a Paradigm Change“Reinforcing Business Foundations & Creating New Businesses”

Strengthening
Business
Foundation

New Aichi Steel—Contributing to
Smart Society
through Materials

With this in mind, we have established our 2020
Medium-term Management Plan to depict our
vision for the future with a focus on theenvironment of 2040, to align all Group employees
toward achieving this goal, and to establish
unshakable Group management foundations.
Through this new management plan, we aim to
manufacture ever-better products, develop better
structures, and build a company of contented
employees by implementing the following priority
measures.
In other words, on the base of compliance andgovernance, we will build a robust businessfoundation that ensures safety, quality, production,and costs, in that order, we will look ahead to2040 to accelerate proposals for new products
and services for a smart society, and we willachieve solid profits through existing businesses
that are currently experiencing high demand.

Compliance & Governance

05

AICHI STEEL REPORT◀Priority measures in the medium-term management plan
AICHI STEEL REPORT

06

Message of Commitment from the President

Part 2.

Addressing Immediate Issues as well
Increasing production volumes andimproving cost competitivenessTwo immediate issues we are facing as the cost of
raw materials and energy trend upward are how
to improve our cost competitiveness, and how tomeet the high demand we expect to continue
growing until around 2020.
While systematically implementing its planned
4S Re-Engineering*1 initiatives, our Hagane
Company has been thinking as a whole about
how it can increase production in response to thecurrent high rate of orders. Meanwhile, our Kitaeru
Company is building a rolling mill line using newbuilding methods, with a view to global expansion
in the future as well as to strengthen its
competitiveness in gear products for which
demand is forecast to expand globally inapplications such as next-generation vehicles.
Finally, our Smart Company is building a new
production building at our Gifu Plant to increase

Part 3.

production
capacityforheat-dissipating
components (power card lead frames for hybrid
and electric vehicles), for which we already hold asignificant market share, and to create a second
production site for BCM and BAP*2 purposes. The
new building is expected to be operational by
October this year.

Providing high additional value
through new technologies
As we grow the profitability of our existing
businesses going forward, high additional value
will be critical. We can make our customers evenhappier by adding value to our work. For
example, we could conduct post-forging
processes like cold forging and machining
in-house, or we could even assemble rotors using
magnets. In fact, preparations for these initiatives
are already underway.
*1*2

4S Re-Engineering: Simple, Slim, Short and Straight production process innovations toraise productivity and achieve energy savings.
BAP: Backup Action Plan, enables the securing of facilities, procedures and spare parts
to allow for production at alternative locations if production at Group facilities becomes
impossible.

Transformation into the New Aichi Steel
Swinging the pendulum higher
With the January 8, 2016, accident* andcompletion of our new administration building,
we are taking the opportunity to transform ourcompany into the New Aichi Steel with a focus on
the key phrase of “Change itself and the world.”
I usually walk around carrying a pendulum.
When we first became operational again after theJanuary 8 accident, I used the first steel from our
first rolled product to make paperweights that I
distributed to employees in management positions
so that the lessons we learned will never be
forgotten. I attached a chain to one and made apendulum that I use to illustrate the act of swinging
the pendulum higher to convey my desire for themto think about things with greater amplitude.
In the middle of great changes, it is not possible
to get beyond conventional methods if theamplitude is low. I want them to look at things

07

AICHI STEEL REPORT

from a completely new perspective, to breakthrough and make drastic changes. If we can raiseawareness among everyone, we will change Aichi
Steel, and make it stronger. It is important that weapproach our jobs with the attitude that if wepush the pendulum too far, it can always be reset.
* On January 8, 2016, an explosion occurred in the No. 2 Bar Mill Shop at Aichi Steel’s
Chita Plant.

Measures to change workstyles
I am also focusing on workstyle reform. As theirleader, I have instructed employees in key
management positions on my basic approach andhave suggested how to communicate with theirsubordinates, within the PDCA cycle of businessexecution, in a way that will encourage a vibrantworkplace and workstyle reform. I am also focusing
on the participation of women in the workplace,and have presented an award to a Women’s QC
Team at the national presentations. Women are an
essential part of our growth as a company. We are
currently implementing a teleworking system andestablishing a company nursery to make workeasier for our employees with families. By
November next year, we will also have completed
construction of a recreation hall with facilities
including a convenience store and restaurant. I
want our employees to see we have changed. Ifthey see the company has changed then they will
think they have to change themselves as well. I
want this to lead to a happier workforce.

Establishing the Aichi Way

believe that the entire Aichi Steel Group, even our
expanding global operations, should follow
common values and codes of conduct, such as
Kiichiro’s noble ambitions. That is why weestablished the new Aichi Way, as inspiration forour employees in an easy-to-understand form.
The Aichi Way documents our universal spiritual
guide to making decisions and implementing
actions at work, regardless of nationality or
location.
I believe that if top management continues todiscuss topics like the Aichi Way and thependulum, it will lead to transformation of ourcorporate culture.
Rather than just increasing the number ofsystems and rules, it is the spread of ideas thatenables cultural reform. For this reason, the role of
the Aichi Way is enormous.

Toward a New Aichi Steel
Through these measures, and while maintaining
good communications with stakeholders, I hope
to continue contributing to the new society,through the starting point of materials, and tobuilding a company of eager employees.

While implementing measures focused on the key
phase of “Change itself and the world,” to respondto this new age, Aichi Steel has a set of values topass down through the generations, starting fromthe spirit of our founder Kiichiro Toyoda. We

AICHI STEEL REPORT

08

Value Creation Model

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

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

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

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

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

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

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

09

AICHI STEEL REPORT

Value for Society

Existing
businesses
HaganeCompany

Kitaeru
Company

Smart
Company

Forged productsElectro-magnetic
products

Development and manufacturing
capabilities

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

Businesses

Specialty Steel

Expandedfurther

Laying the foundation
for new businesses

Identity

Batteries

Stainless Steel / Titanium

Motors andmagnets

Smart
Transportation
Systems

Advancedfunctional
materials

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

New value

Business foundation that
supports steady growth

HVs, EVs, FCVs

EVs

Autonomous
driving

Sensing andmedical■ Autonomous driving support■ High strength, highperformance materials to
support running, turning andstopping■ Support for vehicle
electrification

Maintaining human andglobal healthvalue through creativity andleveraging of existing strengths

Electronic
components

Supporting safe andconvenient mobility

Environment
and energy

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

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

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

Co-creating a new smart society through materials

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

AICHI STEEL REPORT

10

2020

Medium-termManagement Plan
Aichi Steel has created a medium-term management
plan to cover the years from fiscal 2017 through fiscal
2020. Situated at the core of our business, we will
execute this plan to achieve the goals of
manufacturing ever-better products, developing

Laying the Foundation for a Smart Society

better structures, and building a company ofcontented employees. As we further strengthen our
global business foundation, we will grow steadily as
a valued business group, like the growth recorded in
the rings of a tree.

Background■Arrival of the smart society, with global acceleration of EV, FCV andother next-generation vehicle development, and expansion ofautonomous driving technologies and car sharing schemes, etc.

Medium-termManagement
Plan

Exis tingbus ines s es

■Steady growth leveraging the DNA of the materials business, evenas our environment undergoes drastic changes■A need to present a future-focused vision, align our Group
employees toward achieving that goal, and establish an unshakableconsolidated business foundation■FY2020 Business Targets

Consolidated
net sales

250¥

billion(¥236.2 billion in FY2017)■Basic Policies

Consolidated
operatingprofitCreativity applied
to exis tingbus ines s es

New bus ines s es

2017

2020

20

¥

2

3

Conserve local andglobal environments,
and contribute to all
stakeholders throughsafety and security

Develop technologies,
open markets and evolve
manufacturing to meet
diverse needs

Always overcome
environmental changes,
and build a flexible
consolidated
income/financial
foundation

billion(Operating profit margin: 8%) (¥11.8 billion in FY2017)

Developing better
structures

profit-earning, strengthening business foundation, and laying thefoundation for a smart society in order to support our medium-term
management plan. From there, we are reinforcing business foundations

Business enhancement across the whole company
11

AICHI STEEL REPORT

Hydrogen-based society

Example of soil
improvement agent

Enhancing Profit-earning
1. Enhanced traction toward
speedy management throughadoption of an internal
company system
2. Execution of strategic
high-level investments
3. Building manufacturing
infrastructure and achieving astable profit base
4. Leveraging the DNA of ourmaterials business to develop
and expand new applications
and products for existing
businesses

Re-engineered steel billet
rolling line

Expanded production line for CVT components
Expanded production line for
HV components

Strengthening Business Foundationand creating new businesses.

2040: Anticipation of a Paradigm Change

Laying theFoundation
for a Smart
SocietyEnhancing
Profit-earning

Strengthening
Business
Foundation

Building acompany ofcontented
employees

Environment, medical,
energy, etc.

this base, we have established the three pillars of enhancing

Realization of the 2020 Medium-termManagement Plan

Manufacturing
ever-better products

EVs and FCVs

Compliance and governance form the cornerstone of the company. On“Reinforcing Business Foundations & Creating New Businesses”■Vision

1. Research into components and materials
for EV/FCV motors, batteries andinverters
2. Contributions to autonomous driving
support systems
3. Development of materials for ahydrogen-based society: FCV refuelingstation materials
4. Development of demand for a diverse
range of businesses, including
environment, medical and energy

2040■Priority Measures—Three Pillars

1

Autonomous
driving

Steady development and enhancementof next-generation businesses

Compliance & Governance

1. Successful completion andfurther deepening of Step Up
Plan, a project based on lessons
learned from the January 8,
2016, explosion
2. Penetration of the Aichi Way andenhancement of a global
business foundation
3. Ensuring prioritization ofworkstyles,
safety/environment/quality,
production, and costs, andbuilding a robust businessfoundation

Ensuring order of prioritization
Costs: Steadfast knowledge and improvement, Genchi Genbutsu(go to the workplace and see for yourself) and Genri Gensoku(fundamental principle)
Production: Creating an ever-better society through materials
Safety/environment/quality: Providing safety and security to
all stakeholders
Workstyles: Exciting and vibrant workplaces, creating an organization that is
passionate about work

EnhancedFoundations(Fundamental androbus t s trength)■ From the January 8 explosion to completion of theStep Up Plan
(1) Safety and security, (2) Management systems, (3) BCP/BAP, (4) Culture, awareness and branding■ Penetration of the Aichi Way and enhancement of a
global business foundation

AICHI STEEL REPORT

12

Special Feature 1 Start of an In-house Company System

Individual Companies
Applying Themselves toCreating an Ever-better
Aichi Steel

Aichi Steel introduced an in-house company
system in April 2017 to improve the speed ofdecision-making in business operations andto create more competitive businesses. Threecompanies—Hagane
Company,
Kitaeru
CompanyandSmart
Company—werecreated around the core products of steel
products,
forgedproducts
andelectro-magnetic products. The enhancedplanning and product capabilities that thishas achieved are giving further traction
toward increased profitability. The addition ofthree
headquarters—Corporate
Planning
Headquarters,
Marketing&
Sales
Headquarters and Manufacturing and Future
Planning Headquarters—as well will provide
groupwide checks and balances of the threeCompanies. In this way, we are strengthening
corporate functions and providing support to
manufacturing.

President
Directly reporting divisions

Enhancing quality
assurance,
health and safety,
and governance

Companies
Hagane Company
Corporate Office

From development tomanufacture of steel products

Kitaeru Company

Smart Company

From development tomanufacture of forged products

From development to manufactureof electro-magnetic products andother advanced functional products

Corporate Planning
Headquarters
Enhancing corporate functions,
optimizing management resources
and improving brand strength

Marketing & Sales
Headquarters
Enhancing marketing throughcustomer and product focuses

Manufacturing and Future
Planning Headquarters
Planning, procurement andproduction support for
manufacturing

Aims of adopting an in-house company system

4

5

1

13

AICHI STEEL REPORT

6

2

3

1

Naohiro Yasunaga
Managing Executive Officer and Hagane Company President

2

Katsunori Kojima
Managing Executive Officer and Kitaeru Company President

3

Takashi Ishigami
Managing Executive Officer and Smart Company President

4

Hiroaki Chino
Managing Executive Officer and Corporate Planning Headquarters General Manager

5

Toshiyuki Yamanaka
Managing Executive Officer and Marketing & Sales Headquarters General Manager

6

Hiroaki Asano
Executive Vice President and Manufacturing and Future Planning Headquarters General Manager

1

2

3

Manufacturing
ever-better
products

Developing
betterstructures

Building acompany ofcontented
employees

We are meeting customer needs throughan integrated system from development
to sale, and through enhanced businessplanning and operation supported by thedrive of our leaders and faster
decision-making capabilities.

Our domestic and overseas subsidiaries,
engaged in a variety of businesses, werealso reorganized into the in-housecompany
structure.
Our
powerfulleadership is improving traction of ourbusinesses and strengthening our businessfoundations across the whole of Aichi Steel.

We are creating organizations andworkplaces where our employees areproud to work, and where they can be
happy and can grow though their jobs,
and at the same time we are developing
talented people with leadership qualities.

AICHI STEEL REPORT

14

Special Feature 1 Start of an In-house Company System

Hagane Company

Kitaeru Company

Smart Company

Naohiro Yasunaga

Katsunori Kojima

Takashi Ishigami

Managing Executive Officer and Hagane Company PresidentManaging Executive Officer and Kitaeru Company PresidentManaging Executive Officer and Smart Company President

Sustain, Appreciate, Create—
in practice daily throughthe Aichi Way

Delivering high quality, affordable
products to customers globallyfrom the world’s safest andcleanest plant

From “dreams andchallenges” to “realizing
dreams”

Right now, it is important that we put the words “IWill” into practice through our noble ambitions, andcreate the required Aichi brand, in order torestructure with safety, security, and stability at thecompletion of the Step Up Plan, and to respond tothe current high rate of orders. Through the 2020
Medium-term Management Plan, we will ensure full
penetration of our founding spirit, challenge
ourselves by setting high targets, and achieve
profitability by maximizing the capacity of ourexisting facilities. Thereafter, we hope to replace ouriron and steel facilities to be able to adapt tochanges in the business environment, such as aonce-in-a-century transformation of automobiles.
We also aim to become valued as the world’s
leading manufacturer of specialty steels and as apassionate organization putting the Aichi Way into
practice every day.

Within the Kitaeru Company, our keyword is“change.” Against the backdrop of a dramaticallychanging business environment, we are changing
our business planning to anticipate customer trends,
changing the way forging is normally done, changing
into a safe and clean workplace, and transforming
into a global-level forging business. We arestrengthening our domestic base by “manufacturing
ever-better products” through selection andgrouping of products and reallocation of production
facilities, and by “building a company of contented
employees”
throughHRdevelopment
withenhanced education and a sense of unity cultivatedwith Company events, etc. At the same time, we areleading consolidated growth by supporting
autonomous operations of our overseas facilities.

A shift to electrification of vehicles is taking over theworld, and this next-generation mobility is helping
create a smart society. Our goal is to ensure we playa part in this. The Smart Company approaches
challenges steadily, quickly and without hesitation,and develops products that are appealing to the
new smart society.
The 2020 Medium-term Management Plan
represents our “dreams and challenges” stage, which
will then pass the baton to our “realizing dreams”
stage. The Smart Company is a collection of mini
businesses, such as electronic components andmagnets. That is why we are working together toincrease
profitabilitybystrengthening
thefoundations of each of these businesses, and to takeon future challenges by focusing on the key phraseof “Change itself and the world.”

Companies■ Hagane Company
From development to manufacture of steel products
Hagane Business Management Div., Hagane Products D evelopment Div.,
Hagane Production Engineering Div.
Chita Plant, Kariya Plant◆Main subsidiaries

Aiko Corporation, Aichi Ceratec Corporation, Omi Mining Co., Ltd.
Aichi Techno Metal Fukaumi Co., Ltd., Aichi Steel Logistics Co., Ltd.
Example of products

Specialty steel

Stainless steel■ Kitaeru Company
From development to manufacture of forged products
Kitaeru Business Management Div., Kitaeru Production Engineering Div., Kitaeru Plant◆Main subsidiaries

Asdex Corporation, Aichi Forge Philippines, Inc. (Philippines), Aichi Forge USA, Inc.
(USA), Aichi International (Thailand) Co., Ltd. (Thailand),
Shanghai Aichi Forging Co., Ltd. (China), PT. Aichi Forging Indonesia (Indonesia)
Example ofproducts

CVT shaf t

Crankshaf t■ Smart Company
From development to manufacture of electro-magnetic
products and other advanced functional products
Smart Business Management Div., Sensor Business D ept.,
Magnet Business D ept., Electronic Components Business D ept.,
Smart Production Engineering Div., Higashiura Plant, Gifu Plant, Seki Plant,
Electronic Components Plant◆Main subsidiaries

Aichi Micro Intelligent Corporation, Aichi
Magfine Czech s.r.o. (Czech Republic),
Aichi Magfine Technology (Pinghu) Co., Ltd.
(China), Aichi Europe GmbH (Germany),
Aichi Korea Corporation (Korea)
Example of productsElectric compass for
smart watches

15

AICHI STEEL REPORTPower card lead frame

TOPICSTOPICSTOPICS

Aichi Steel awarded Best New Technology
Award at International Stainless Steel Forum (ISSF)

Completion of construction of servo press line for
R&D of next-generation forged products

Aichi Steel exhibits for the first time at the24th ITS World Congress 2017 Montreal

Aichi Steel’s stainless steel for high-pressure hydrogen applications
received the Bronze Award for Best New Technology Award at theInternational Stainless Steel Forum held in Shanghai, People's
Republic of China. The stainless steel we developed has highstrength and shows exceptional ductility in high-pressurehydrogen environments. It wasrecognized for its contribution to
improving safety and reliability offuel cell vehicles.

Aichi Steel has completed construction of a servo press line
designed to promote the development of innovative forging
technologies to positively respond to structural changes due toelectrification of automobiles, such as hybrid vehicles and plug-in
hybrid vehicles. With a double-action molding mechanism built
into the servo press, the first ever foraJapanese
forgedproducts
manufacturer,
the
press
will
accelerate the development of moreadvanced forged products including
new products and techniques thatmaximize the benefits of the system.

Aichi Steel Corporation participated for the first time as an
exhibitor in the 24th ITS World Congress 2017 held in Montreal,
Quebec, Canada. It introduced its magnetic marker-based
autonomous driving support system, which utilizes its MI sensors,
to help realize the smart city concept.

AICHI STEEL REPORT

16

Special Feature 1 Start of an In-house Company System

Corporate Planning
Headquarters

Marketing & Sales
Headquarters

Manufacturing and Future
Planning Headquarters

Hiroaki Chino

Toshiyuki Yamanaka

Hiroaki AsanoManaging Executive Officer and Corporate Planning Headquarters
General Manager

Managing Executive Officer and Marketing & Sales Headquarters
General Manager

Executive Vice President and Manufacturing and Future Planning
Headquarters General Manager

Supporting autonomous
Company operations, setting
directions ahead to 2040, andsecuring resources

Growing value for customers
and maximizing Company
profits

Enhancing the manufacturingbase and steadily laying thefoundation for the future toachieve steady growth

In our corporate function, the Corporate Planning
Headquarters supports the autonomous operationof our Companies. While strengthening our planningcapabilities, we communicate directions Aichi Steelshould take out to 2040, as well as which initiatives
to prioritize, and how to secure and distribute thenecessary resources (people, things and funds). In
addition, each of us is responsible for leading thepush toward transformation and spearheading
penetration and application of the Aichi Way. We
also promote company-wide activities to achieve
our medium-term CSR targets, and work to promotehealthy employees and a healthy company bypursuing variable and worthwhile workstyles.

The Marketing & Sales Headquarters has
responsibility for sales (volumes and sale prices) tohelp each Company reach its business plan.
To achieve this goal, we exercise ourcross-organizational
functiontoestablish
customer-oriented sales strategies through acommitment to incorporating market needs. We
then apply those strategies to our products andreflect them in each Company business plan as wework to optimize all our businesses. We also aim to
maximize profits by ensuring cost fluctuations areproperly passed on and making most efficient use oflimited production capacity. We also share ourvision for future sales and workmanship with each
Company, and participate in their business planning.

The arrival of next-generation mobility and thesmart society poses a serious threat to the futureof our core businesses—specialty steels andforged products. On the other hand, periods ofgreat change like this also present the perfectopportunity for creating new businesses thatutilize our materials, which are the DNA of Aichi
Steel. While ensuring proper completion andimplementation of the Step Up Plan, theManufacturing and Future Planning Headquarters
is working to build a robust and competitive
manufacturing foundation that incorporates IoT
and other technologies.
We are also steadily laying the foundation for
product development that merges our integrated
forgingandsteelmaking
processwithelectro-magnetics
in
responsetotheelectrification of automobiles, and the creation of
new businesses in areas such as autonomous
driving, medical and environment that willcontribute to a smart society.

Corporate
Office■ Corporate Planning
Headquarters

Enhancing corporate functions, optimizing management
resources and improving brand strength
Corporate Planning Div.

Corporate Communications Div.

IT Management Div.

Human Resources Div.

General Affairs Div.

Finance & Accounting Div.

■ Marketing & Sales
Headquarters

Enhancing marketing through customer andproduct focuses
Sales Planning Div.

Tokyo Office

Toyota Sales Div.

Osaka Office

Chubu Sales Div.

■ Manufacturing andFuture Planning
Headquarters

Planning, procurement and production
support for manufacturing
Silicon Valley Office
Technical Planning Div.
Process Engineering
Development Div.
Frontier Research andDevelopment Div.

Purchasing Div.
Production Control Div.
Facility Engineering Div.
Analysis & Testing Dept.

TOPICS
Construction completed for new administrationbuilding
Construction of Aichi Steel’s new administration building, a 75th
anniversary project, has now been completed. The main building
where our business is conducted became operational in January
2017, but the hall building marks the completion of our new
administration building.
The new hall building contains a large hall and a Visitor Centerwith display rooms and guidance hall that will be used for plant
tours. With a stainless steel staircase made from Aichi Steel formed
stainless steel, this hall and the main building will together serve as
the face of the company, and a symbol for our region.

▲Exterior of new administration building

17

AICHI STEEL REPORT▲Staircase made from Aichi Steel’s formed
stainless steel▲Visitor Center display room

AICHI STEEL REPORT

18

Special Feature 2

Developing environments (HR and support systems, etc.)

Workstyle Reform at Aichi Steel
Making serious changes to the way we think
Along with construction of the new administration building, Aichi Steel began to focus on workstyle reform.
We aim to raise awareness of every employee to enable them to complete their tasks and achieve results withintime limits and deadlines. We will also respect work-life balance as we support balance in the ways they workand rest.

Background/Environment■ Changes in the people we need

• People able to flexibly respond tochanging environments• People able to achieve breakthroughsrather than just extending existing practices• People able to achieve results withintime limits• Essential goals of the 2020 Medium-term Management Plan
• Steady growth out toward Aichi Steel’s 100th anniversary in 2040
• Drastic changes in the business environment→ Arrival of the smart society, electrification of automobiles (EVs, FCVs),
utilization of AI and IoT, etc.

• Aging populations, declining birthrates and shrinking workforces
require every employee to improve productivity and work quality• Prioritizing the work-life balance of each individual

Respect and support the work-life balanceof each individual

Changing individual awareness to change workstyles

Work(in balance)Rest(in balance)• Each employee managing their own work with the understanding that time is limited• Supervisors supporting the work-life balance of the workers
Individual life design

Workstyle reform process
Developing environments (HR and support systems, etc.)

1st floor

Foundations• Support maximum ability and performance• Impartial and fair evaluation of ability and performance• Support from time, place and tool perspectives

As part of our efforts to maximize ability and performance, weare conducting “Ji-kotei-Kanketsu” (built-in quality with ownership)training for team leaders.
Teaching the appropriate approach and concrete steps, thetraining aims to increase motivation among team members andmaximize performance through efficient work practices without
having to redo tasks.

VOICE Working from Home

What is “Ji-kotei-Kanketsu”?

ProcedureWorking while raising children, andimproving management awarenessBecause I am able to work at home in the free time I have
between caring for sick children and other tasks, I am able tokeep up with my work schedule.
It is important that I am personally aware oftime management, so I set and work toward
deadlines for completing various work andchild-raising tasks.

Chihiro Ota

This
work
approachemphasizes
high-quality
work with an efficientarrangement of steps toprevent errors and avoid
redos.

Corporate Branding Group
Corporate Communications Div.

Ｐ

Plan (steps)D

Do (at every important
point, check, confidently call“Done!” and proceed)

C

Check (reflect on workA

Act (pass on yourknowledge to the next
person)process and look forproblems)

Workstyle reform for managers

Team leader training

As part of our efforts to promote workstyle reform, ouremployees in management positions, who are leading workplace
management, are changing awareness and actions.

In 2016, we introduced a team system at Aichi Steel. We
introduced a new training program to improve the management
skills of team leaders and improve the quality of work conductedby each team.

Continuous
improvements
to work quality“Strike while
the iron is hot”

Daily

Post planned finish times to raise awarenessof the need to complete tasks within theallotted time

Time management duty
personPerson on duty reminds people about time
management to improve time awarenessacross the entire workplace

Pursuit of work
quality improvements
and efficiency,
and worker
development• Clarification and understanding of team leader roles and ideals• Raising awareness through direct instructions from the president(lectures)• Creation and distribution of a file depicting concrete examples ofteam leader actions• Understanding one’s own management characteristics• Practical training through role-play• “Ji-kotei-Kanketsu” training, etc.

C

Consecutive days of paid vacationencouraged
Balance rest time to do all the non-work-related things you
want to do and need to do● “Refresh” Vacation System

Up to five days consecutive vacation for employees
whose age is a multiple of 5

93.9%

Details:“ACTION! For the team” folder ▶

Awareness and culture reform

Work finish time boards

P* Teams are the smallest management units, of up to seven members,
situated within departments.
* Approximately half the team leaders are younger members of staff(assistant manager level employees aged up to and including in their 30s).

Precise instructions
to eliminate
redos

A Communications D• Workplace management reform

Awareness and culture reform

AICHI STEEL REPORTAs part of our efforts to support work-life balance, we havedeveloped a system and environment that offers the choiceof working from home to employees who work shorter hours
because they are raising children, or who have family members inneed of constant care.
To support the combination of work and child-raising/care-giving,
we are promoting workstyles without time restrictions to increase
opportunities for employee participation.

Management reform for supervisors• Transforming your own work/time management

19“Ji-kotei-Kanketsu” training

Management reform for supervisors■ Changes in workstyle values

2nd floor

Working from Home System adoptionof eligible employees took this vacation in fiscal 2017

● “Memorial” Vacation System

Up to three days consecutive vacation for employees on theirbirthday, day prior and day after

Execution of management
responsibility, andappreciation of workers
Workstyle reform declarationfrom managers“Yarikiri 3W”
communication notepad
When supervisors provide
work instructions to theirworkers, they can use
this notepad to clarify
objectives, deadlines, andquality, to ensure work
carried out and avoids
redos. Exchanging thesenotes is a way of improving
communication
betweensupervisors and workers.

◀Examples of concrete actions
for team leaders always
available for review

VOICE Team leader training
Approaches and techniques learned throughtraining can be passed on to workers

The training was great because we learned the main causes, andtheir solutions, when having to redo experiments. We learned to look
for problems in actions we normally take without thinking, and thenlearned the techniques for resolving those issues. I will pass on thisknowledge to my subordinates.

Akihiro Matsuyama

Batteries Research Dept.
Frontier Research and Development Div.

AICHI STEEL REPORT20

MI sensor example application #2

Special Feature 3

Initiatives for the Next Generation

Autonomous Driving Support Using a Magnetic
Marker System

Co-creating a new smart society through materials

Magnetic marker system

In January 2018, Aichi Steel established the new Frontier Research and Development Division toclarify internally and externally our stance to next-generation businesses, and to enhance our R&D
capabilities with the aim of creating new businesses.
We are focusing on initiatives in six fields while leveraging our superior materials technologies.

The magnetic marker system is an autonomous driving support system comprising MI sensors affixed to the base of a vehicle that
use the magnetic force of magnetic markers embedded in the road to measure vehicle position with a high degree of precision,and steer the vehicle. The system uses ultra-sensitive MI sensors, which can detect very weak magnetic fields, together withembedded ferrite plastic magnets, which are low cost and kind to the environment.
Compared to existing systems that use GPS and image processing technologies, this system can reliably identify vehicle positioneven in mountainous regions or tunnels where GPS signals cannot reach, or at nighttime or in poor weather conditions whereimage acquisition is difficult. The system can increase reliability of autonomous driving systems when used to complement othersystems.
◀MI sensor

Corporate
OfficePositioning and R&D fields of the Frontier Research and Development DivisionCorporate Planning Headquarters

Silicon Valley OfficeMarketing & Sales Headquarters

Technical Planning Div.

Manufacturing and Future
Planning Headquarters

Batteries

Electronic
components

Magnetic markers
embedded atintervals of two
meters

HVs, EVs, FCVs

▲Sensor array unit
affixed to base of vehicle

Frontier Research and Development Div.

Motorsand magnets

Smart
Transportation
Systems

Advancedfunctional
materials

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

EVs

Autonomous
driving

EVs

Healthcare,sensing

Environment
and energy

Globalenvironment,
agriculture andbiotechnology

MI sensor example application #1

Joint Development with Mizuno of an Internal
Baseball Sensor Module for MAQ System
Aichi Steel and Mizuno Corporation jointly developed a sensor
module for Mizuno’s MAQ baseball rotation analysis system.
The MAQ is a system that coordinates data acquired througha sensor module contained in a baseball with a specialized
application so as to analyze the rotational frequency and speed etc.
of the ball when thrown by a pitcher.
MI sensors are ultra-high response, ultra-sensitive, ultra-compact,and have ultra-low power consumption. Leveraging these four
“ultras,” the compact sensor module is able to reproduce thespecifications (mass and balance) of the hard baseball so that
pitching feels the same as normal.

◀Magnetic markers:
30 mm (dia.) × 35 mm(image shows comparison
with 500 yen coin)Japan’s first level 4 autonomous driving trials begun atMichi-no-Eki Minami Alpsmura Hase
As a participant in the autonomous driving service trials being conducted by the Ministry of Land, Infrastructure, Transport andTourism, Aichi Steel used the magnetic marker system to conduct Japan’s first level 4 trials.
From last year, we have conducted a series of trials across Japan, from Okinawa to Shiga and Hokkaido, with the aim of
implementing practical applications of autonomous driving technologies. This level 4 trial entails full automation of the vehicle’s
acceleration, steering and braking functions with no-one in the driver seat.
Implementation of driverless technologies will provide safe, convenient, and affordable mobility options to suit various needs,
such as areas with aging and declining populations. Going forward, we will contribute to realizing safe and secure next-generationtransportation systems through further trials, while at the same time driving strategic development of new applications for our MI
sensors in order to contribute to next-generation mobility and the smart society.

Michi-no-Eki(roadside rest area)
Minami Alpsmura Hase

Driverless autonomous driving
Miwa Medical
Clinic152

Magnetic marker
section (0.2 km)▲Driving route

21

AICHI STEEL REPORT

Sensor array units
comprising 24 individual
MI sensors are affixed tothe underside of vehicles(Level 4 autonomous driving)¡ Person in passenger seat in case of
emergency¡ Travel along a dedicated route[0.4 km]* Level 4 autonomous driving on designateddays only(Normally level 2 autonomous driving)▲Driverless bus in operation
AICHI STEEL REPORT

22

Financial and Non-financial Highlights
FinancialSocial■ Sales volume (non-consolidated
basis)

1,130 thousand tons

(Thousand tons)

236.2 billion yen(Billion yen)

1,500

1,108
970

1,000

1,057

1,130
293

240.6

237.4

250

1,130

■ Operating profit■ Net sales

214.1

200

15

212.8
10

150

Kitaeru
Company

836 Hagane

Mar.
2014

Mar.
2015

Mar.
2016

Mar.
2017

9.6

Changes in childcare leave

Changes in employment of persons
with disabilities■■ Male ■■ Female■■ Employees who tookchildcare leave■■ Number of persons withdisabilities employed(Persons)(%)(Persons)

3,000

11

12

1,500
1,000

Mar.
2014

Mar.
2015

Mar.
2016

Mar.
2017

0

Mar. (FY)
2018

Mar.
2014

Mar.
2015

Mar.
2016

Mar. (FY)
2018

Mar.
2017

■ Net assets, capital adequacy ratio■ ROE

8.1 billion yen

5.5%%(Billion yen)

10

5

5.0

5

250

5.5

200

4.1

4

6.0

5.5

160.8 billion yen 54.7%(Billion yen)

6

8.1

4.2

150

3.6

3

0
Mar.
2015

Mar.
2016

Mar.
2017

0.0

0

Mar. (FY)
2018

161.6

55.3
147.5

52.4

54.7

151.2

160.8

Mar.
2014

Mar.
2015

Mar.
2016

Mar.
2017

Mar. (FY)
2018

0

60 %

Mar.
2016

45

■ Companywide material balance of
PRTR substances

Production volume

1,600

1,450

1,454

1,366

680.3
1,176

653.6

651.1

650

2005
Base year

2013

2014

2015

Waste sent directly to landfill

1,200

6

7

4

6

2

0

0

4

60

80

50

8

30
40

2015

2016

2017

48

6

52

48

5
4

40

60

6

(Proportionof all managers

2.3

2.5

2.4

20

20

10

0

0

(FY)

3
2

Statutory
employment rate

1

2015

2016

2017

0
(FY)

1%)
Social contribution■■ Days of paid leave taken

2,500

14

2,219

Social contribution expenditure andnumber of volunteers

Changes in days of paid leave taken(Days)

2,174(Persons)

10

(FY)

(Hours)

2,177

12

2,000

10.5

1,500

8

52.5

■■ Social contribution
expenditure

Usage rate of paid leave

12.7

(%)

(Million yen)

100

100

86.49

11.1

63.5

10

0

55.5

80

80

60

60

Number of volunteers

93.01

93.54

(Persons)

8,000
7,000

7,276
6,629

6,000

5,914

6

40

40

5,000

2

20

20

4,000

2015

2016

2017

0
(FY)

2015

2016

2017

0

0

(FY)

2015

2016

2017

3,000
(FY)

Chemicals in
raw materials
and secondary
materials

2016

2017

(FY)

8t

10,485 t

Waste recycling rate

20

5.1

4.7

5.3

3.4

2000 2013 2014 2015 2016 2017
Base year

AICHI STEEL REPORT

10

0
(FY)

3.7

3.0

3.3

3.2

2000 2013 2014 2015 2016 2017
Base year

(FY)

867 t

Steel andother products(consumed)

Decomposition
Discharge
Waste
and
to
(transferred)
neutralizationwaters(elimination)

25.5

5.3

Governance

61,688 t

1,000

Waste sent indirectly to landfill

13.2

Atmosphericemissions

73,063 t

30

2.4

23

2017

8

■■ Employee annual working hours

669.2
636.0

(Thousand tons)

10

0

2016

Women inmanagement positions

1,400

800

(Thousand tons)

5

16 t

1,447

603.0

600

15

2015

191

8

(%)

100

Employment rateof persons withdisabilities (%)(Thousand tons)

1,520

550

180

163

100

100

10

9

500

(t-CO2/year)

700

7.1

7.3

100

Employees who returned towork after childcare leave4

Total CO2 emissions

750

2,401

10

1,000

Environmental■■ Total CO2 emissions

6.6

2,341

Changes in employee annual
working hours

Mar. (FY)
2018

Mar.
2017

2,314

50

30

Mar.
2015

2,592

Workstyles

35
Mar.
2014

2,521

55

40

50

1
Mar.
2014

144.9

57.2

100

2

0

53.9

2,477

500
0

■ Profit attributable to ownersof parent

Percentage offemale employees

2,000

5

0

Mar. (FY)2018

Changes in number of employees

2,500

7.2

50

Company

0

11.8

10.6

5.8

100

500

11.8 billion yen(Billion yen)

236.2

Diversity

Percentage ofISO 14001-certified
subsidiaries

97.4

Governance
Number of directors

Number of meetingsof the Board of Directors%

10

Number ofoutside directors

2

13

Attendance rate at
meetings of the Boardof Directors

95.1

Security

91%

Number of times
security training
held(incl.
1 woman)Number of Audit& Supervisory
Board Members

5(of which, 3 outside
Audit & Supervisory
Board Members)%

Compliance13

Number of serious
information security
incidents

0

Number of compliancetraining classes

19

10

Number ofreporting andconsultation incidents

AICHI STEEL REPORT24

CSR Management
The Aichi Steel Group approaches Corporate Social Responsibility as a prerequisite for good
governance, and as the foundations for long-term stable growth. We practice CSR management togain trust from all our stakeholders, and to contribute to sustainable development of society andthe planet, through the establishment of our Long-term CSR Vision and the implementation of our
Annual CSR Plan.
The “Aichi Steel Action Guidelines” were established in 1998, and then in order to expand themto the entire Aichi Steel Group in 2007, the “Aichi Steel Group Action Guidelines” for global
management were defined and became the foundation for the CSR management of the Aichi
Steel Group as a whole.

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

Items selected as priority issues
Items selected aspriority issues

1

CSR promotion system
In March 2018, the CSR Committee was abolished. CSR activities are considered a natural part of management, so theBoard of Directors, the Management Committee, the Corporate Planning Committee, and other committees discuss CSR
activity policies, define CSR objectives, and review CSR activities.

2

CSR approach3

Customers

Society/
Earth

Suppliers
Improved corporate value

CSR management
Realization of Our Vision

Shareholders

Contributing to local communities and society /Contributing to environmental preservation(Contribution through business activities)

Continuous growth through business activities(Sound corporate management)
Corporate ethics / Compliance

Risk management Corporate governance

Employees

45Sound corporate culture that is brimming with a desire to take on new challenges
Aichi Way*1 / Aichi Steel Group Action Guidelines*2*1 Aichi Way: Common values and codes of conduct to be followed by all employees of the Aichi Steel Group.
*2 Aichi Steel Group Action Guidelines: Practical guidelines that must be followed during business activities (revised in October 2013).

25

AICHI STEEL REPORT

6

Increase complianceawareness globally,and strengthen
corporate
sustainability

Component identified in theanalysis map

Compliance (environment)
Compliance (society)Compliance (product responsibility)

Occupational health and safety

Encourage thecreation of
workplaces thatare safe andcomfortable for all
employees

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

Strengthen
relationships withlocal communities,
and actively
contribute to society

Key performance indicators (KPIs)

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

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

Mechanism for handling grievances
regarding labor practices

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

Diversity and equal opportunity

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

Products and services

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

Training and education

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

Marketing and communications

Presence in the community

Local communities

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

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

Energy consumption

Strengthen
initiatives toward
manufacturing inharmony with theglobal environment

Establish a solid
financial foundation
to support stable
and sustainablegrowthBreakdown of energy use (CO2 emissions)

Atmospheric emissions
Wastewater and waste

Volume of direct and indirect landfill waste

Biodiversity

Status of efforts to preserve biodiversity(reforesting, number of volunteer activities,
etc.)

Applicable section

Web（

Environmental audit
results（

Compliance promotion
system

p. 28
p. 33

（
（

(Third-party certifications)

p. 32

（

（

Frequency rate andnumber of accidents
resulting in lost work timep. 28, p. 31, p. 32（（

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

p. 31(Initiatives toward diversity)

p. 34

（

Awards for Group
companies（

Training programs forsales staff（

Collection of customer
evaluations

p. 34
p. 34

p. 35

（

Annual number ofvolunteers

p. 36

（

Interaction with thecommunity

（
（
（

（
（

p. 23, p. 38(Total CO2 emissions)

p. 23

（

Volume of direct andindirect landfill waste

p. 38

（

(Coexistence with nature)

Profitability (operating profit, ROE, etc.)

p. 23

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

（

Financial andnon-financial highlights（

AICHI STEEL REPORT

26

Priority Issue

1
Materiality

Increase Compliance AwarenessGlobally, and Strengthen
Corporate Sustainability
ISO 26000
relevance

6.2 Organizational governance
6.6 Fair operating practices

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

SDGs
relevance

Corporate governance● Corporate governance policy● Compliance with the Corporate

With a basic CSR policy of "striving to contribute tosustainable development of society and the Earth throughsound corporate activities," we are managing our company ina way that enjoys extensive trust of society by establishingand maintaining an organization capable of responding
swiftly to changes in business environments and a fair andtransparent management system.
As common values and codes of conduct to be followed by
all employees of the Aichi Steel Group, we are committed toadopting the Aichi Way as a spiritual guide to achieving Our
Vision.

We fully comply with the Corporate Governance Code, andsubmit a corporate governance report regarding disclosure to
the Tokyo Stock Exchange. We review our compliance statusonce a year and make amendments or changes as required.
(We made changes in November 2017.)
We are also currently responding to the June 2018 revisionof Japan’s Corporate Governance Code. We will continue
with efforts to strengthen and expand corporate governance,and observe the content of the code.

Governance CodeWe aim to be a trusted company through the protection ofhuman rights and compliance with laws and regulations, andby respecting public decency. To enhance the overall
compliance of our Group, the Corporate Planning
Committee—headedbytheCorporate
Planning
Headquarters
GeneralManager—sets
andreviews
compliance policies on a regular basis.
Based on our internal rules and the Aichi Steel Group Action
Guidelines, we strive to improve our compliance with laws
and regulations as well as our social common sense. We
enhance employee awareness by distributing compliancemanuals, and the Aichi Steel Group Action Guidelines.

In fiscal 2017, a total of 10 cases were reported to the
Aichi Steel Group Compliance Hotline, the company's
whistle-blowing 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 suchmeasures are carried out. We will also lay out how thesystem is operated and protection of whistle-blowers toensure whistle-blowers are protected.

We have adopted an in-house company system comprising
our Hagane Company, Kitaeru Company, and Smart
Company to make operational decision-making faster andcreate more competitive businesses. Each company also has
its own president and business management division to
responsibly drive each business.
We have established a Corporate Office with three separate
headquarters as well to provide groupwide support andchecks and balances for each company.

In line with the Internal Control System Basic Policy, wedevelop and properly operate systems to ensure theappropriateness of our operations.
We review the basic policy annually to determine if any
revisions or changes are required. We also check operational
status, report to the Board of Directors, and make disclosuresin our business report.
In the April 2018 review, we reflected changes in internal
systems through revisions to this basic policy.

■ Changes in whistle-blowing cases(Cases)Corporate
Planning Committee
Chair: Corporate
Planning Headquarters
General Manager

Person responsible forlegal complianceDirector in charge ofGeneral Affairs Div.

Members:
Directors, executive
officers, Audit & Supervisory
Board Members■General Affairs Div. ■Audit & Supervisory Board Member ■Lawyer

14

Each division
Departmental person
responsible for legal
compliance

Persons in charge ofcompliance

12

12

10

10
8
6

6

6

2013

2014

5

4

Variousdepartments

2

General Affairs Div.

■ Corporate governance system diagram

10 cases

Contact point

General Legal
Compliance Site

● Internal control system

0

2015

2016

2017

(FY)

● Compliance promotion activities● Fair transactions with suppliers

To enhance the compliance awareness of employees, we provide
education on compliance to all employees. The importance of complianceis also covered in the Action Guidelines workshop held for those promoted
to each level within the organization. In addition, other corporate scandalcase studies are reported to the Compliance Liaison Meeting to help
prevent the recurrence of similar compliance incidents.
We also hold director workshops on director responsibilities, and CSR
seminars on confidentiality management and corporate scandals.

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

Shareholder's Meeting
Appoints/Dismisses

Appoints/Dismisses

Appoints/Dismisses

Audit &
Supervisory Board

AuditsAppoints/
Dismisses

Accounting
Audit Team

Level-based training

Evaluates the appropriateness of the account audit

AuditsPresident
Reports toReports toReports toBoard of Directors
Makes decisions / Supervises

Management Committee

Audits(Deliberation of critical issues, etc.)
Makes proposals to/Reports to

Executive committees
AuditsMakes decisions / Approves
Makes proposals to / Reports toCompanies/Headquarters/Departments
Reports toAdvises/Aids

Group Companies

301
1

CSR workshops

participants

Instructs/Supervises

Audit Dept.
AuditsAICHI STEEL REPORT● Whistle-blowing system

Compliance Liaison Meeting● Corporate governance system

27● Compliance promotion system■ Compliance promotion system● Adoption of in-house company system

The Board of Directors, comprising
Directors appointed by shareholders,makes decisions regarding material
matters affecting the Company throughdiscussion and mutual supervision
regarding such aspects as necessity,
legality, and efficiency. Auditors andthe Audit & Supervisory Board examine
these decisions for legal violations andother compliance matters.

Compliance

CSR Seminartime (Jan)4times (Feb, Apr, Jul, Oct)

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

Director workshops (director responsibilities)

1

time (Oct)AICHI STEEL REPORT28

Priority Issue

1

Risk management system

Information security● Risk management system● Disaster prevention measures● Information security promotion system● Information security guidelines

We have established internal rules, such as risk management
rules and disaster prevention rules, and have establisheda risk management system, so that if we face or predict a
serious risk, we can take prompt and appropriate action andensure sound business operation.
We have reviewed our management structure in line with
the in-house company system we adopted in April 2017.
As part of the review, in May 2017, we changed the nameof our organization that considers matters related to large
earthquakes, from the Earthquake Preparedness Committee
to the Earthquake Preparedness Promotion Committee, andwe improved the level of practice and implementation.
We
also
reviewed
ourCompanywide
DisasterPreparedness Organization and clarified its activities inchronological order, from (1) Earthquake occurrence to initial
response, to (2) After initial response to recovery.

The Earthquake Preparedness Promotion Committee(name changed May 2017) has systematically implemented
disaster prevention measures based on the action roadmap
established in March 2012, and from the key perspectives of (1)prioritizing human life, and (2) business continuity (BCM). The
committee also considered damage that occurred as a resultof the April 2016 Kumamoto earthquakes, identified some newconcerns, and reviewed its disaster prevention plan.
The main actions implemented by each subcommittee
during fiscal 2017 are detailed below.

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

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

■ Information security promotion system

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

■ Review of earthquake preparedness committee
Earthquake Preparedness Promotion Committee(General administration office: General Affairs Div.)
Human Safety
Subcommittee(Office: Human Resources Div.)

Role
MissionSpecify actions toprotect lives* Name changed May 2017

Facility Safety
Subcommittee(Office: Facility Engineering Div.)

Production Recovery
Subcommittee(Office: Production Control Div.)* Functions transferred from April 2018

Role
Mission

Maintain buildings
and facilities toprotect lives

Role
MissionDevelopenvironments andprepares for early
production recovery● Risk management education
We have newly developed a curriculum for "riskmanagement" 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 to heighten employees' risk awareness andensure they understand what to do to prevent crisis
occurrence/recurrence and initial actions to take when acrisis occurs.
As a result of the accident on January 8, 2016, we havedeclared January 8 to be Start Over Day at Aichi Steel to raiseawareness of our commitment, confirmed by everyone at
Aichi Steel, to preventing such an accident from recurring.

■ Human Safety Subcommittee
1. Measures to ensure food, clothing and shelter forevacuees(1) Securing food, clothing and shelter for persons helping with recovery efforts• Adoption of water purification system using motorized pump: Chita Plant(securing water for daily living from company water tanks, etc.)• Installation of manual water purification system: Kariya, Higashiura, Gifuand Seki plants (as above)• Installation of cooking appliances: Canteens and dormitories at eachplant

■ Facility Safety Subcommittee
1. Measures to ensure safety of escape routes(1) Implementation of safety measures• Attachment of bolsters to shelving: Forging Plant (planned forcompletion in September 2018)• Installation of crane escape equipment (as above)• Stabilizing equipment: Kariya, Higashiura, Gifu and Seki plants(completed)Management system and roles of each department
Overall control

Administrative Depts.

2. Measures to minimize damage to buildings andequipment, etc.
(1) Additional considerations after Kumamoto earthquakes (April 2016)• Identification of new potential risks (crane running off its tracks, sliding
shelves falling from racks)• Clarification of equipment requiring emergency stop systems(confirmation of emergency stop procedures and times required)→ Additional automatic shut-down mechanism to speed up stop times(1 unit)■ Production Recovery Subcommittee
1. Liquefaction measures(1) Measures implemented, with one remaining (coordination withneighboring company completed, with full implementation planned
for October 2018)■ Other actions

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

Role

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

Representative
managers, etc.

•Acts under the authority of the confidentiality
management supervisor(Designates confidentiality classification and sets
the operating rules within the division)•Works to promote and fully establish
confidentiality management in the division•Complies with laws, regulations, and company
rules related to confidentiality management•Gives approval, instructions, and guidance related
to confidential information used in their location

1. Cooperation with domestic subsidiaries(1) Aichi Steel Group Disaster Prevention Liaison Committee (meeting held
July 2017)(2) Multiple contact methods acquired (4 companies installed
teleconferencing systems)

2. Cooperation with domestic sites(1) Installation of teleconferencing systems with all domestic sites completed(all plants and offices)

3. Identification of issues through companywide
emergency drills

Employees

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

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

In each department

Acts under the authorityof the confidentiality
management supervisor(Designates confidentiality
classification and sets theoperating rules within thedivision)

Examples of rules:• Document control rules• Information security control rules• Information disclosure rules• Private information protection rules, etc.

•Complies with laws, regulations, and company
rules related to confidentiality management•Reports accidents, damage, illegal acts andwrongdoing to his/her superior● Information security awareness andeducation

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

Number of times
security training held

13(1) Planning improvements during fiscal 201829

AICHI STEEL REPORTAICHI STEEL REPORT

30

Priority Issue

2

Encourage the Creation ofWorkplaces That Are Safe andComfortable for All Employees
ISO 26000
relevance

6.3 Human rights
6.4 Labor practices

Materiality
The Aichi Steel Group is working to createa strong organization by maximizing thepotential of individuals through the creationof environments in which diverse humanresources can play an active role. This
includes not only consideration of a wide
variety of human rights involving nationality,
language, culture, age, gender and values, butalso encompasses women, seniors, people
with disabilities, and those combining workwith child-raising or care-giving.

SDGs
relevance

Human resources development● Global human resources development
In April 2017, we relaunched our Overseas Trainee (OT) program,
and we have stationed one young employee in Thailand.
In this new program, we are focusing on providing real work
experiences at overseas affiliates, and on language studies
to enable trainees to work alongside local employees using
the local language. The trainees in Thailand attend language
school to learn Thai while working on specific training topics.
We believe this system will improve understanding of the local
languages and cultures, and enhance relationships with local staff.

As we increase our physical presence around the world, weare providing more opportunities for our young employees towork overseas.
The real-life experiences provided in this training system
help participants understand the significance of working
overseas and the importance of communicating in the local
languages, and through that we hope to help them growinto globally-active employees of Aichi Steel.

Respect for human rights and creation of comfortable workplaces● Initiatives toward respect for human rights

Aichi Steel Group employees

Suppliers

Report(can be anonymous)

Contact point
GeneralInternal
Affairs Div.

AuditorFeedback ofoutcome

Legal

External representatives

Collaboration

Investigation team

(Investigation/Interviews)

ReportPerson/division concerned
Correction/management

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

■ Aichi Steel Group Compliance Hotline flowchart

President/Committees● Specialized technical training
Since August 2016, we have been providing specialized
technical training for all skilled workers in forging plants
to provide systematic training on the knowledge and skills
needed at those plants.
To raise understanding and lead to improvements in the
purposes and “why” of each task, the roles of skilled workers,
from the fundamentals of manufacturing to the essentials of the
facilities that create products and measures for dealing withabnormalities, are divided into three ranks (Rank C, Rank B, andRank A), and the training is organized so that workers learn insteps (Rank C: five years after joining the company; Rank B: 10
years after joining the company; Rank A: first-level supervisor).

Initiatives toward diversity● Promotion of employment for people

Aichi Steel considers the promotion of diversity to be an
important part of its management strategy. As part ofcreating a more comfortable environment for women, weare strengthening measures to promote more active roles
for women and have established a system for this. We
proactively hire more female employees, setting goals for thepercentage of female hires among regular university hires.
We also run seminars aiming to spread understanding of how
to promote active roles for women, as well as career design
training for female employees and their bosses. In this way,
we are advancing initiatives to support women in developing
their skills.

We have employees with disabilities working in a range of
workplaces, from our manufacturing sites to administrative
divisions. We focus on providing support for continuous
employment because it is important that they are able
to continue working. Specifically, we are systematicallytraining and allocating Vocational Life Consultants for
Persons with Disabilities to provide general work advice toemployees with disabilities, and Job Coaches to provide
work-related coaching. In addition, we have also employed
Certified Social Workers from fiscal 2017. With regular internallessons aimed at developing the capabilities of people withintellectual disabilities as well, we are continuing our efforts
to develop workplaces that suit individual capabilities, where
all employees can enjoy working together.

women in the workplacewith disabilities▲Yuko Arai, Outside Director at Aichi Steel, giving a diversity seminaron promoting the participation of women, in front of an audienceof many female employees, managers and directors

31

AICHI STEEL REPORT

We have in place a Nice Senior System, which in principle
allows all employees who wish to work after retirement tocontinue working until they begin receiving their pensions.
We also offer a career path, for those employees withadvanced skills and a desire to work, to pass on theirskills and offer guidance to younger employees. We arealso implementing other measures to make Aichi Steel agreat place for older workers, including the creation ofwork environments friendlier to senior employees and thereevaluation of compensation.

● Initiatives toward elimination of● Health promotion efforts

accidents resulting in lost work time

We are transforming our safety culture and creating safe
workplaces to eliminate accidents that result in lost work
time and to ensure we never forget the lessons learned fromthe January 8 explosion. We are restructuring our workplacesafety by preventing recurrence of fires and explosions,and improving workplaces that have high risk of serious
accidents. We have also improved communication with
in-plant operators, and have enhanced support systems bylistening to any issues about work difficulties.

■ Frequency rate and number of accidents resulting
in lost work time
(Cases)

(%)
1.00

5
4

0.68

0.66

0.75

3

0.45

2
1
0

0.16

0.16

0.15

0.15

2013

2014

2015

2016

0.50
0.25
0.00

2011

2012

2017

Number of accidents resulting in work time loss
Work time loss frequency rate

(FY)

Work time loss frequency rate

● Post-retirement reemployment system

Employee health and safety

Number of accidents resulting
in work time loss

● Promotion of more active roles for

The hands-on training combines knowledge learning andpractical skills acquisition. Trainee proficiency is confirmed
through written tests, and determinations of whether
trainees have reached a level that can be used in practicalwork are confirmed through presentations on examples ofimprovements and on-site monitoring. Trainees who passreceive ranked certification. We started Rank C training infiscal 2016, and Rank B training in fiscal 2017.
By having all skilled workers undergo this training, a cultureof asking “why?” will be created and the handing down oftechnology and skills to successors will be encouraged.

We prioritize mental health, lifestyle-related disease
prevention and health management support for employees
assigned overseas, and systematically implement relevant
initiatives. As a result, we were recognized as a Health andProductivity Management Outstanding Organization (White
500 category), in a program adopted by the Ministry of
Economy, Trade and Industry and Nippon Kenko Kaigi. We
work to maintain and promote the health of our employees,
which is a priority issue for the company.
● Mental health activities
The Aichi Steel Group is working to maintain the mental
health of its employees and prevent the development of
mental issues, through various educational programs andindividualized mental health care based on the results ofstress check tests.
During fiscal 2017, we also provided advice to workplaces
that rated a high risk for mental health based on the resultsof these stress tests. We also collaborate with mental healthconsultants to offer ongoing on-site consultation* to ensure
early detection and treatment of employees with mental
health issues.
* Mental health consultants visit our company once a month toprovide two-hour consultations to interested employees who areexperiencing mental health issues. The system we developed
enables employees to discuss their concerns face-to-face withprofessionals.
AICHI STEEL REPORT

32

Priority Issue

3

Provide Highly Competitive
Products That Are Safe and Secureand Offer New Value Globally
ISO 26000
relevance

6.7 Consumer issues

SDGs
relevance

Quality improvement initiatives

Materiality
Products provided by the Aichi Steel Groupare important parts directly related toautomobile running, turning and stopping.
To offer customers greater peace of mind
in using our products, it is essential that
we provide a stable supply of high quality
products. To ensure our products gain thetrust of our customers around the world, weare aiming to become an integrated forging
and steelmaking company that provides theworld’s finest quality, and we are working as
one to build a globally competitive, leading
quality assurance system.

● Quality Learning Center● Awards for Group companies

November has been designated Quality Month. We
have opened a Quality Learning Center as a learningplace for improving the quality of our work based on
the concepts of “Customer First” and “Quality First.”
We want every employee to be more conscious about
quality, and to reconfirm the customer-first approachand the importance of observing rules, using failurecase studies, actual experience and other methods
to understand how quality problems impact ourcustomers.

Shanghai Aichi Forging Co., Ltd. (Headquarters: Shanghai, China),
an overseas subsidiary of Aichi Steel that produces a wide rangeof forged products, received both the 2015 Bronze Excellent
Service Award and the 2016 Gold Excellent Service Award (topprize in the service category) from Shanghai Volkswagen. In 2017,it also received the Outstanding Quality Award from Shanghai
Volkswagen for coming sixth in a field of 400 companies. Throughthese awards, the customer has recognized Shanghai Aichi Forging
for its rapid and sincere after-sales service, its ability to flexibly meetlogistics demands, and to meeturgent demands for increased
production, the high net shaping
rate and quality of its designs,
and quality initiatives that haveproduced zero quality claims.

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

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

▲A Volkswagen Polo GTI received asa supplementary prize in 2016

Quality Function Board(Quality &Technology Committee)

Quality Assurance Div.

(ISO Review Committee)

Quality Control Dept.
for each plant

Plant sections

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

Overseas Support
Dept.

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

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

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

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

2. Electro-magnetic
products

Passed revision approval and surveillance audit forISO 9001(March)Passed surveillance audit for ISO 13485(February)

3. Analysis andtesting

33

AICHI STEEL REPORT■ Training programs for sales staff

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

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

78

Number ofcustomers surveyed

offices(All customers who were supplied with

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

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

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

European Construction Products Regulation (CPR)● European Medical Devices Directive

above a certain amount of steel materials and forged products)

Promotion of CSR procurement

5 programs
22 persons

per year

Total numbers ofparticipants(All new and younger staff members)● Global, open and fair transactions● Legal compliance

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

We comply with all relevant laws and regulations related
to our purchasing activities, and also carefully control theconfidential information of our suppliers in accordance withour company rules.

● Mutual growth based on mutual trust
Our relationships with our suppliers based on building
and maintaining relationships of trust through close
communication, and a basic approach that calls for us togrow together with our business partners and share the fruitsof our mutual efforts.

● Green procurement efforts
Since formulating the Aichi Steel Environmental Charter in
1996, we consider environmental conservation in all phasesof our business activities, and work to achieve continuous
improvements. In March 2017, we revised our Green
Procurement Guidelines, which were established in 2003, toreflect changes in environmental laws and regulations, andcustomer demands and regulatory trends. We also work topurchase products with minimal environmental impact andprioritize purchases from suppliers engaged in proactive
environmental conservation efforts.

(MDD Annex v.3.2)

AICHI STEEL REPORT

34

Priority Issue

4
Materiality

Strengthen Relationships with
Local Communities, andActively Contribute to Society
ISO 26000
relevance

6.8 Community
involvement anddevelopment

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

SDGs
relevance

Creative (education, culture)

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

Aichi Steel conducts traffic safety awareness activities asa responsible manufacturer in the automobile industry.
One
of
those
activities is “Zero Day”
safety patrols thateach site continues to
conduct.

Creative lessons

12 schools, 36 classes

Social contribution policy

2,325 volunteers

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

In pursuit of harmonious coexistence and co-prosperity, Aichi Steelpromotes community-oriented activities focused around four key words:“clean,” “green,” “creative” and “volunteerism.”
The Volunteer Center, located in the General Affairs Division, provides
information and promotes educational activities with the aim ofsupporting employee volunteer activities. It also plans smaller-scale
volunteer activities which employees can participate in, and encourages
them to experience volunteering for themselves.
During fiscal 2017, we increased participation in activities through efforts
such as an increased number of activities to promote coexistence withnature, starting the collection of used books, and introducing a canteen
menu that supports regional recovery. We also set a record with a totalof 7,276 volunteers, which was 647 more people than last year.

Number of volunteers in FY2017

8,000

7,276
6,629

7,000
Number of volunteers● Activity promotion system

5,914

6,000

Established in 1993, the Aichi Steel Volunteer Fund continues to donate to local social
welfare organizations and others and to provide support to disaster-affected areas,
including after the Kumamoto Earthquake. Another voluntary and ongoing programthat employees can participate in is the “one-coin” donation program, where they
donate 100 yen from their pays every month.
In fiscal 2017, we started a new initiative to support welfare facilities for disabled
persons, with the installation of collection boxes for used books, CDs and DVDs
at four locations around the company. We also introduced a canteen menu that
supports regional recovery as a new initiative to support disaster-affected areas.

“One-coin” donation

544 volunteers

5,000■ Support for disaster-affected areas■ Recycled books, CDs and DVDs

As part of our efforts to support disaster-affected

We have started a collection drive as a support

areas, after events like the Great East Japan

activity for welfare facilities for disabled persons.

Earthquake, the Kumamoto earthquakes or the

The used books we collect are fixed up for resale

2017

heavy rains in northern Kyushu, we hold sales ofby persons with disabilities, with profits going to(FY)local produce at plant open days and otherthe workers involved.

4,000
3,000
2,000

3,837
3,146
2013

7,276

2014

2015

2016

events, and every year we collect goods to be
used for disaster recovery.

(647 person increase year-on-year)

Clean (beautification, safety, security)
In addition to holding the “Nearby roads clean-up campaign” every two months
to help clean our neighborhoods, we have been holding Clean Aichi Day
every October since 2009, together with employees of domestic and overseas
subsidiaries, as one of Aichi Steel’s CSR Enhancement Month activities.

Nearby roads clean-up campaign

AICHI STEEL REPORTTwice every year, students of the Aichi
Steel Technical Training Institute plant
flowers in the roundabout in front of
Meitetsu Shurakuen Station, the station
nearest our offices, as one of ouractivities to clean the neighborhood.

Clean Aichi Day

5 events, 125 volunteers 800 volunteers

35▲Canteen menu in support of regional
recovery: Yogurt by Yuda Milk Corporation,
Iwate Prefecture

Green (planting andenvironmental conservation)▲Student planting of flowers in front of
Meitetsu Shurakuen Station◀Produce stalls at a company event▲Collection box for used books, CDs and
DVDsInteraction with the community◀Community meeting● Events and participation
We hold community meetings once a year in the cities ofTokai and Kariya, where we promote exchanges withresidents of the local communities and actively participate
in a variety of local volunteer activities. We also support
activities involving festivals, sports days and other local
events in the communities surrounding our sites, anddispatch employees to assist with the operation of those
events.
We also invite local residents to events held at ourheadquarters and plants, and work to encourageinteraction with our employees.

▶Shiawase Mura: Support
for production workshops
for parents and children at
Momiji Matsuri

AICHI STEEL REPORT

36

Priority Issue

5

Strengthen Initiatives toward
Manufacturing in Harmony with
the Global Environment
ISO 26000
relevance

6.5 Environment

SDGs
relevance

Initiatives toward building a low-carbon society

Materiality
The Aichi Steel Group has establishedmedium- to long-term targets around threeenvironmental issues—building a low-carbon
society, building a resource-recycling society
and coexistence with nature—and is working
to achieve those targets. Through these
efforts, we are achieving effective use ofenergy and resources and, through harmony
between the global environment andmanufacturing and by providing products
and services with low environmental burden,
contribute to the sustainable growth ofsociety and our world.

■ Breakdown of energy usedin fiscal 2017 (CO2 emissions)● Fiscal 2017 targets and results
Based on the Aichi 2020 Environmental Action Plan,
we pursued reductions in carbon dioxide to achieve
the targets of the Japan Iron and Steel Federation’s
Low-carbon Society Plan (Phase 1).
We set our internal targets at even higher levels andtook action, but we were unable to avoid the negative
effects of increased production, and we did notachieve those targets.

Oxygen 1.9%
Heavy oil class A 1%
Coke 7%

669,000

Lowcarbon
society● 2020 Environmental Action Plan
We formulated the Aichi 2020 Environmental Action Plan, a statement ofpolicies and plans for environmental actions from fiscal 2016 to fiscal 2020.
The plan adopts three core themes for the direction of our environmental
action based on environmental management: building a low-carbon society,building a resource-recycling society and coexistence with nature. By reinforcing
management from a global perspective that extends to consolidated subsidiaries,
we are contributing, as a sustainable company, to society and the global
environment.
Theme
Building a low-carbon
society2.

Total CO2
emissions
669,000 t-CO2

3.
4.

Building a resourcerecycling society

AICHI STEEL REPORT

5,900 t-CO2/year

t-CO2/year

City gas

29.1%

Electricity

60.5%

1. Increased emissions due
to increased production
39,100 t-CO2/year
Total

39,100 t-CO2/year

Measures to develop a recycling-based societyManagement

Action item

Major efforts• Trial manufacture of steel for high strength plate springs• Trial manufacture of stainless steel for next-generation high-pressurehydrogen applications
Target: Completion of Japan Iron and Steel Federation’s Low-carbon Society
Plan (Phase 1)• Low-carbon Society Plan (Phase 1) completed• Promote energy conservation in production (on-site inspections by EMS
chief executive, etc.)
Target: 11% reduction from fiscal 2006 for emission volume per transportation unit
• Reduce traffic lines (eliminate backflow and redundant stock points)• Modal shift (from land transport to sea transport)• Improve loading efficiency (Kariya and Forging plants)

Evaluation✔

✔

✔

In accordance with the End-of-Life Vehicle Recycling Act,
which came into effect in 2005, the Toyota Group has beenworking towards total recycling. Aichi Steel is cooperatingwith Toyota Metal Co., Ltd. to improve recycling and develop
recycling technology for glass parts, which have been themost difficult.
We introduced silica sand into steelmaking slag generated
in electric furnaces as a molten slag cooling down material,
but we focused on the similarities between silica sand andthe glass components and made it possible to achieve thesame effects by mixing silica sand with waste glass, and it is

now possible to recycle waste glass as an electric furnace
byproduct.
As a result, the end-of-life vehicle recycling rate increased
to 99.8 %.

▲Waste glass from cars was previously difficult to recycle due toits specialty components and color* Molten slag cooling down material: An electric furnace byproduct that is added to control the slag components, reduce the temperature as acooling material, and curtail explosive boiling.

5.

Í*

Measures to promote coexistence with nature

✔
✔
✔
✔

✔

✔

✔
✔
✔
✔

* Cut-off error with fiscal 2016 and deterioration in slag generation base units

37

Total

● Contributions to end-of-life vehicle recycling

Encourage development of ecoproducts and technologies
Reduce CO2 emissions through theuse of renewable energy
Thorough implementation of energy
conservation practices in production
activities
Seek better transportation efficiency
in logistics

1. Improved insulation on rolling
line furnace
1,000 t-CO2/year

0.5%

Negative factors(+34,000 tons year-over-year)

CoexistencewithnatureReduce by-products during production Target: Emission volume per crude steel unit ≤189.3 kg/t
and continue to utilize resources• Reduce dust intake by electric furnaces
effectively• Some external sale of stainless steel dust
• Internal recycling of debris • External recycling of waste acid and sludge• Promote Dy-free bonded magnets and low-molybdenum steel at
6. Promote projects that benefit
resource-recycling corporations
exhibitions, etc.
7. Reduce and effectively use packaging• Monitor presence of new materials: None foundmaterials in logistics operations
8. Reduce water use in production• Continue managing water use at Forging Plant and Gifu Plant
activities• Participate in formation of a Chita Peninsula Biodiversity Network
Coexistence 9. Promote activities for preservation ofnature and biodiversity
with nature
Target: Zero abnormalities and complaints per year
10. Promote activities for zeroabnormalities and complaints• Implement strict management to achieve 80% or below of regulation
values set by environment-related laws
• Promote prevention activities (enhance GK)
11. Enhance consolidated environmental • Hold ongoing brush-up seminars with domestic affiliates
management• Conduct environment audits of domestic subsidiaries by the generalmanager of the Safety & Environmental Division• Launch companywide chemical substance management system• Monitor the introduction of low-emission vehicles
12. Reduce emissions to contribute toimprovement of urban air quality ineach country and region• Conduct supplier briefings on Green Procurement Guidelines
13. Promote environmental activities incoordination with business partners• Investigate new teaching materials (environmental risk prediction training
14. Further reinforce global employee
training and educational activities
tools)• Continue to issue reports and enhance content
15. Ensure active disclosure ofenvironmental information and• Enhance environmental communication activities (Plant tours for media,
enhanced communication activities
community meetings, Visitor Center exhibitions, etc.)
Environmental management

Three Core Themes

1.

Resource
recycling

Positive improvements

Other

2. Less carburizing material due
to appropriate use of scrap
4,900 t-CO2/year

Total CO2 emissions

Environmental management■ Factors behindchanges since last
fiscal year

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

● Forestation to create a forest for beetles
Since fiscal 2012, we have been helping plant a broadleaf
forest to create an environment in which beetles and othercreatures can live their natural life cycles. We have beenworking with the Chita Peninsula Biodiversity Network
Promotion Council and members of the Student Action
Committee NPO to grow the trees. In fiscal 2017, weplanted saplings provided by Toyoda Gosei as part ofmutual engagement activities. In fall every year, we also
hold a large “Forest 2” event where employees and theirfamilies participate in programs held in collaboration withother organizations and companies, nature craft activities,
collecting acorns and growing seedlings.

▶Student Action
Committee involved innature craft activity

AICHI STEEL REPORT

38

Priority Issue

6
Materiality

Establish a Solid Financial
Foundation to Support Stable
and Sustainable Growth

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

Financial information for fiscal 2017
● Summary● Consolidated cash flows

During the consolidated fiscal year, the Japanese economy drifted
toward a gradual recovery on the economic policies of thegovernment and the Bank of Japan. At the same time, and despite
uncertainties in some economies like China and other emerging
countries in Asia, the global economy was also on the rise.
Net sales stood at 236,237 million yen for the current
consolidated fiscal year, an 11.0% increase from the previous
consolidated fiscal year of 212,837 million yen. Profit also
increased from the previous consolidated fiscal year. The main
factors behind this were increased sales volumes, increased
selling prices, and the fact that compared to the previous
consolidated fiscal year, there were no negative pressures on
prices or supplier logistics charges resulting from the January
8, 2016 explosion. As a result, the Aichi Steel Group posted an
operating profit of 11,813 million yen, a 63.7% increase from theprevious consolidated fiscal year of 7,218 million yen, despite
increased costs of raw materials, energy and other purchased
goods, increased expenses and other negative pressures on
profit. In addition, we posted an ordinary profit of 11,774 million
yen, a 71.6% increase from the previous consolidated fiscal
year of 6,863 million yen, and profit attributable to owners ofparent of 8,182 million yen, a 60.9% increase from the previous
consolidated fiscal year of 5,084 million yen.

Net cash provided by operating activities increased by
186 million yen from the previous consolidated fiscal year
to a total of 13,164 million yen. Profit before income taxes
increased by 4,326 million yen, and cash increased by
2,699 million yen due to an increase in notes and accounts
payable-trade (cash decreased by 3,819 million yen in theprevious consolidated fiscal year due to a decrease in notes
and accounts payable-trade). Despite this, cash decreased
by 3,600 million yen due to an increase in inventories (159
million yen in the previous consolidated fiscal year), and cash
increased by 2,316 million yen due to a decrease in othercurrent liabilities (cash increased by 4,722 million yen in theprevious consolidated fiscal year due to an increase in othercurrent liabilities).
Net cash used in investing activities decreased by 20,954
million yen, which was an increase of 1,277 million yen fromthe previous consolidated fiscal year. The main factor wasa decrease of 1,604 million yen in income due to the sale ofinvestment securities compared to the previous consolidated
fiscal year.
Net cash used in financing activities decreased by 9,509
million yen (cash increased by 15,231 million yen in theprevious consolidated fiscal year). This was due to income of
20,000 million yen through a corporate bond issue in theprevious consolidated fiscal year.
As a result, cash and cash equivalents at the end of thecurrent consolidated fiscal year amounted to 27,439 million
yen, a decrease of 17,292 million yen from the end of theprevious consolidated fiscal year (44,732 million yen).

● Assets, liabilities and net assets
Total assets at the end of the consolidated fiscal year were277,847 million yen, which was an increase of 4,740 million
yen from the previous consolidated fiscal year.
Current assets were 125,740 million yen, which was adecrease of 5,057 million yen.
Property, plant and equipment increased by 4,658 million
yen from the previous consolidated fiscal year. In the current
consolidated fiscal year, we made total capital investmentsof 19,020 million yen. Depreciation and amortization totaled
13,818 million yen.
Current liabilities were 51,300 million yen, which was a
decline of 8,637 million yen from the previous consolidated
fiscal year, mainly because the current portion of long-termloans payable decreased by 8,853 million yen.
Non-current liabilities were 65,741 million yen, which was anincrease of 3,844 million yen from the previous consolidated
fiscal year. Net assets were 160,806 million yen, which
was an increase of 9,533 million yen from the previous
consolidated fiscal year. Also, net assets per share stood at
7,716.77 yen (7,266.42 yen in the previous consolidated fiscal
year), while the capital adequacy ratio was 54.7% (52.4% in
the previous consolidated fiscal year).

39

AICHI STEEL REPORT● Capital investments
Capital investments totaled 19,000 million yen, mainly forthe purposes of increasing production capacity on steel orelectro-magnetic product manufacturing equipment, and for
streamlining, updating and functionally improving steel andforged product manufacturing equipment.
● Financing
U.S. forging subsidiary Aichi Forge USA repaid a long-termloan of 16 million U.S. dollars (approximately 1,700 million
yen) in September 2017, so in light of forecasts for future
capital investments and cash flow, it received new financing
from a local Japanese bank in December 2017 in the form ofa long-term loan for 23.5 million U.S. dollars (approximately
2,500 million yen).

● Sales by segment
In April 2017, Aichi Steel Group adopted an in-housecompany system and changed its organizational structure
to achieve the steady growth it is targeting. With thischange, we revised the reporting segmentation we usefrom this consolidated fiscal year. Instead of the previous
four categories of Specialty Steel Business, Forged Products
Business, Electro-magnetic Products Business and Other
Businesses, we are now using the categories of Hagane
Company, Kitaeru Company, Smart Company and Other
Businesses.
Hagane Company
As a result of increased sales volumes and sales prices in ourcore product areas of specialty steel and stainless steel, we
achieved net sales of 110,974 million yen during the current
consolidated fiscal year (96,225 million yen in the previous
consolidated fiscal year), which was a 15.3% increase fromlast year.

Smart Company
As a result of increased sales volumes of our electronic
components, we achieved net sales of 14,786 million yen
during the current consolidated fiscal year (13,820 million yen
in the previous consolidated fiscal year), which was a 7.0%
increase from last year.
Other businesses
We achieved net sales of 3,123 million yen during the current
consolidated fiscal year (3,191 million yen in the previous
consolidated fiscal year), which was a 2.1% decrease fromlast year.

■ Net sales breakdown
Smart
Company

Other businesses

3.1 (1.3%)

14.7(6.3%)

Kitaeru Company
As a result of increased sales volumes and sales prices inour core product area of closed-die forged products forautomobiles, we achieved net sales of 107,352 million yen
during the current consolidated fiscal year (99,599 million yen
in the previous consolidated fiscal year), which was a 7.8%
increase from last year.

236.2
Kitaeru
Company(billion yen)

Hagane Company

110.9 (47.0%)

107.3 (45.4%)■ Five-year summary (consolidated)
Term

110th Term

111th Term

112th Term

113th Term

114th Term

Year ending

Mar. 2014

Mar. 2015

Mar. 2016

Mar. 2017

Mar. 2018

Net sales(Billion yen)

237.420240.647214.120212.837236.237

Operating profit(Billion yen)

9.627

10.616

5.883

7.218

11.813

Profit before income taxes(Billion yen)

9.779

10.693

1.409

8.045

12.371

Profit attributable to owners of parent(Billion yen)

5.503

6.023

0.020

5.084

8.182

Property, plant and equipment(Billion yen)

85.84188.29189.62896.310100.968

Total assets(Billion yen)255.259268.064251.760

273.107277.847

Net assets(Billion yen)

144.965

161.669

147.534151.273160.806(Yen)

279.94306.251.02

258.34415.71(Yen)

279.84306.181.02

258.31415.71Per share data:
Net profit: Basic*1
Net profit: Diluted*

1

Cash dividends
Number of employees
Notes:

*2

(Yen)

10.00

10.00

10.00

55.00

120.00(Persons)

4,613

4,617

4,654

4,773

4,847

*1 Every 10 shares in the Company were consolidated into one share effective of October 1, 2016. Net profit per share and net profit per share (diluted) were
calculated in anticipation of this share consolidation at the beginning of the 110th Term.
*2 The cash dividend for the fiscal year ended March 31, 2017 was 55.00 yen per share, comprising an interim dividend of 5.00 yen and a final dividend of 50.00 yen.
Because every 10 shares in the Company were consolidated into one share effective of October 1, 2016, the interim dividend of 5.00 yen was pre-consolidationand the final dividend of 50.00 yen was post-consolidation. When making calculations related to the share consolidation, the full-year dividend is considered tobe 100.00 yen per share, comprising an interim dividend of 50.00 yen and a final dividend of 50.00 yen.

AICHI STEEL REPORT

40Third-party View
Corporate Profile

This year’s Aichi Steel report again accurately describes thecompany’s strategic and proactive CSR management based on
the clear commitment of the president.
Mr. Satoshi Chikami
Executive Officer and Professor, Faculty of International
Welfare Development, Nihon Fukushi University

Clearly taking a proactive stance to changes in the businessenvironment
As the president mentioned at the beginning of his message, there
is a paradigm shift occurring as the environment surrounding theautomotive industry undergoes great change. The in-house company
system adopted in April 2017, consisting of the Hagane Company,
Kitaeru Company, and Smart Company, is a clear example of thisproactive stance. In their messages, Company presidents show
their commitment to generating high profitability on the back of the
exceptional technical capabilities they have built up. The new Corporate
Office as well, consisting of the Corporate Planning Headquarters,
Marketing & Sales Headquarters and Manufacturing and Future Planning
Headquarters, forms a framework providing groupwide checks andbalances of the three Companies, which is a commendable systemassuring reliable governance.
Synergies between company transformation, employee awarenessand workstyle reform
One of the goals of Aichi Steel’s 2020 Medium-term Management Plan
is to build a company of contented employees, while the Aichi Way,established in January 2018, also clearly positions the concepts ofDensho/Sustain, Souzou/Create and Kansha/Appreciate as a spiritual
guide to achieving the goals, which is particularly praiseworthy. In
response to the groupwide transformation that came with adoptionof the in-house company system, and as described in the president’s
message and Special Feature 2, it is clear that the company haslaunched comprehensive efforts toward workstyle reform for its
employees. The report describes implementation of workplace-basedideas for smooth reform of employee workstyles, such as theintroduction of work finish time boards and time management
duty persons, while at the same time making efforts to transformmanagement styles for key managers with the adoption of a teamsystem. Raising awareness among key managers about the need toboth develop and appreciate workers, should also contribute greatly
to improving work-related pride and motivation of every employee.
It is possible that the significant yearly increases in the number ofparticipants in volunteer activities is an outcome of these efforts tochange the way people think.
Clearly setout priority issues (materiality) and systematic descriptions
based on them
The six priority issues (materiality) established in fiscal 2016, the settingof important management indices to resolve them, and a systematic
CSR plan were clearly described. As a result, the contributions that
Aichi Steel is attempting to make toward realizing a sustainable society
were accurately expressed throughout the report, which was highly
commendable.
The report contains three special features in the first half that clearly
describe the areas that Aichi Steel is focusing on, the directions it istaking and how it aims to get there.

Corporate Profile
Establishment
CapitalRepresentative
Employees
Business
Description

March 8, 1940
25,016 million yen (as of March 31, 2018)
Takahiro Fujioka, President and Representative
4,847 (Consolidated)/2,592(Non-consolidated) (as of March 31, 2018)
Production and sale of specialty steel products,
forgings and electromagnetic products

Major Products
Specialty steel

Stainless steel / titanium
Based on our morethan half-century
ofexperience
andtechnology
in specialty steel
manufacturing,
the
Aichi
Steel
Group
continues
to evolve in pursuitof being number
one in quality.

The 2020 Environmental Action Plan included a list of 15 action items.
However, there was a slight deterioration in slag generation baseunits and the company failed to achieve internal targets for reducing
by-products during production and reducing CO2 emissions, which had
been set at higher levels, due to issues such as increased production
volumes over the previous two years. The report shows that despite
this, all other action items were steadily achieving results. Because thecompany is continuing existing efforts to reduce environmental burden,
through initiatives such as 4S Re-Engineering, there might not be much
more room for improvement, but I hope the company will continue
working toward its goals.

This year’s report implements many ideas for improving its appeal toreaders, including ongoing efforts to link to the online version, a much
more detailed examination of each priority issue, an improved layout
and emphasis on important numbers. The result is commendable for its
accurate presentation of information that needs to be conveyed, andthe highly balanced ease of reading and understanding for readers.

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

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

Steady achievements of the 2020 Environmental Action Plan

Easier to read, easier to understand

Offices

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

The durability of stainless steel,which resists the rust that is oneof iron’s weaknesses, has been
demonstrated in dams, floodgates,
ships, bridges, chemical plants
and a wide variety of other fields.
In recent years, stainless steel
has also found many uses inarchitecture. Furthermore, using themetalworking technologies we havedeveloped through stainless steel,
we also develop titanium rods.

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

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

Conclusion
In the company’s 114th Term, operating income made considerable
improvements toward targets in the 2020 Medium-term Management
Plan. I look forward to seeing the further effects that adoption of an
in-house company system has on driving strategic management andworkstyle reform for employees, and seeing the contribution it makes
to further expansion of shared value between the Aichi Steel andsociety.

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

The
Group
is
also
expandingintonewbusinesses extending fromstainless
steel
that
combine technologies inmaterials, magnetics andsurfacetreatment,
including electronic parts,
magnets,
sensors,anddental appliances.

Example products: MAGFINE®, MI sensors, etc.

* This third-party view was written based on interviews withmanagement and related parties.

Aichi Steel Group

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

Response to the Third-party View

Ichiro Murakami
Senior Executive
Officer
Corporate
Communications Div.

41

AICHI STEEL REPORT

Professor Chikami has provided us with valuable insights andproposals since fiscal 2010, and we are extremely grateful for his
support.
This year, we have been implementing new initiatives toward
creating a New Aichi Steel, including strengthening our businesscapabilities through an in-house company system and workstylereform, to help achieve our newly established 2020 Medium-termManagement Plan. In January 2018, we also established the Aichi Way,a spiritual guide shared by all employees of the Aichi Steel Group.
High praise for these initiatives from such an expert encourages
us and gives us confidence in our continuing efforts. To live up tothese expectations, we will further our endeavors and contribute tosociety through the results while working to achieve steady growth
for the company.

Regarding the issues Professor Chikami noted of internal targets in
our Environmental Action Plan for reducing by-products during
production and reducing CO2 emissions, which had been set at
higher levels, we failed to reach those targets this time due toincreased production in response to the current high rate of orders.
However, we will continue to make a concerted effort to reuse steel
scrap as raw materials in our products as a resource-recycling
corporation, and work toward becoming a globally valued enterprise.
Finally, the Visitor Center in our new administration building wascompleted in March 2018. We intend to use the center to welcome
many more people on plant tours and to otherwise strengthencommunications with local residents and other stakeholders. Our
aim is to become a company whose presence is cherished by
locals, and, from a CSV perspective, it is our intention to continue to

9 companies in Japan

9 companies overseas• AIKO CORPORATION• AICHI CERATEC CORPORATION• OMI MINING CO., LTD.
• Aichi Techno Metal Fukaumi Co., Ltd.
• Aichi Steel Logistics co., ltd.
• Aichi Information System Corporation• AIKO SERVICE CO., LTD.
• Aichi Micro Intelligent Corporation• Asdex Corporation• AICHI FORGE PHILIPPINES, INC.(AFP)• Aichi Forge USA, INC. (AFU)• Aichi Europe GmbH (Ae)
• AICHI FORGE (THAILAND) CO., LTD.(AFT)• Shanghai Aichi Forging Co., Ltd. (SAFC)• PT. AICHI FORGING INDONESIA (AFI)• Aichi Magfine Czech s.r.o (AMC)• Aichi Korea Corporation (AKC)• Aichi Magfine Technology (Pinghu) Co., Ltd. (AMT)AICHI STEEL REPORT42

AICHI STEEL REPORT 2018

AICHI STEEL REPORT2018

FSC-certified paper, with the

100% vegetable oil non-VOC

Waterless printing without

proof of wood product fromink (not containing volatile

the use of damping water

appropriately managed

organic compounds) is used.

containing harmful

forests, is used.

substances is employed.

Primary contact: Corporate Communications Div.

Released: September 2018

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

The idea expressed

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

by the cover

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