This report presents an overview of Aichi Steel,and its activities as a good corporate citizen.
Introduction

Structure of this report

Contents

The objective of any company is to grow its business・Financial highlights from 2007

■ Business Update

and earn profits. But the growth of a company also・Business description

depends on Corporate Social Responsibility (CSR) –・Message from the President

that is, maintaining the trust of all stakeholders: local

・Corporate governancecommunities, shareholders, investors, customers,

The report also has a 3-part accounts of the

suppliers, our employees and their families, andhighlights that is notable CSR activities during 2007.

others as well.

Our progress in other areas is described in the Social,
Environmental and Financial Sections.

Aichi Steel Corporation (Aichi Steel) started major
CSR activities in 2005 in order to become an even

Editorial policy

more trustworthy company contributing to social
development and environmental protection on a

We have tried to make this report easy to understand.

global scale. A major part of our operations involves

Footnotes have been added to explain specialized

recycling, and to record those activities we changed

terminology, and we have included URLs to help

the Environmental Report that we began issuing inlocate relevant sections on our website.

1998 into the “Aichi Steel CSR Report”, which wereleased in 2006 and 2007.

Intended readership

It is now accepted that CSR is a major factor in global

This report is intended for our shareholders, investors,

investment decisions. Aichi Steel believes that tocustomers, suppliers, employees and affiliates.

present an overall view of our company, when describ-■ Environmental Section

Financial Highlights ...................................... 2

Environmental Policy .................................... 36

Corporate Profile .......................................... 3

2010 Environmental Action Plan ............... 37

Message from the President ...................... 6

Environmental Management ...................... 38

AICHI Spirit .................................................... 10

Environmental Material Flows .................... 40

Corporate Governance ............................... 12

Environmental Preservation Activities

Risk Management ........................................ 14

Global Warming ........................................ 42

Compliance ................................................... 16

Industrial Waste ........................................ 43■ 2007 CSR Highlights

Chemicals .................................................. 44
Air Quality ................................................... 45

1. We Are a Monozukuri Company ........... 18

Water Quality ............................................. 46

2. Developing Individuals to Support Monozukuri ..... 20

In the Office and Other Places .............. 47

3. Contributing to the Environment through Our Business .... 22
CSR Activities: Past and Future ................ 24■ Social Section■ Financial Section

Management’s Discussion and Analysis ...... 48

Five-year Summary ...................................... 52

Improving Quality and Satisfying Customers ...... 26

Consolidated Balance Sheets ................... 54

Human Resources Development .............. 28

Consolidated Statements of Income ........ 56

Labor Health and Safety ............................. 30

Consolidated Statements of Changes in Net Assets ..... 58

Contributing to Society and Local Communities ..... 32

Consolidated Statements of Cash Flows ..... 60

Communicating with Stakeholders ........... 34

Notes to Consolidated Financial Statements ..... 62

Information Security ..................................... 35

ing our business activities and results we must also
report our CSR activities.

Reporting period

This is why we merged our “Annual Report” forThis report covers the fiscal year 2007, from April 1,

overseas investors with our “CSR Report”, making

2007 to March 31, 2008. The performance of compa-

this new “Aichi Steel Report”. This is the first year wenies in the Aichi Steel Group (including consolidated

have issued the report in this format, and we looksubsidiaries) is included where necessary. Some of

forward to your feedback.

the activities described may have taken place before

Report of Independent Auditors ..................... 86

or after fiscal 2007.

1

This report presents an overview of Aichi Steel,and its activities as a good corporate citizen.
Introduction

Structure of this report

Contents

The objective of any company is to grow its business・Financial highlights from 2007

■ Business Update

and earn profits. But the growth of a company also・Business description

depends on Corporate Social Responsibility (CSR) –・Message from the President

that is, maintaining the trust of all stakeholders: local

・Corporate governancecommunities, shareholders, investors, customers,

The report also has a 3-part accounts of the

suppliers, our employees and their families, andhighlights that is notable CSR activities during 2007.

others as well.

Our progress in other areas is described in the Social,
Environmental and Financial Sections.

Aichi Steel Corporation (Aichi Steel) started major
CSR activities in 2005 in order to become an even

Editorial policy

more trustworthy company contributing to social
development and environmental protection on a

We have tried to make this report easy to understand.

global scale. A major part of our operations involves

Footnotes have been added to explain specialized

recycling, and to record those activities we changed

terminology, and we have included URLs to help

the Environmental Report that we began issuing inlocate relevant sections on our website.

1998 into the “Aichi Steel CSR Report”, which wereleased in 2006 and 2007.

Intended readership

It is now accepted that CSR is a major factor in global

This report is intended for our shareholders, investors,

investment decisions. Aichi Steel believes that tocustomers, suppliers, employees and affiliates.

present an overall view of our company, when describ-■ Environmental Section

Financial Highlights ...................................... 2

Environmental Policy .................................... 36

Corporate Profile .......................................... 3

2010 Environmental Action Plan ............... 37

Message from the President ...................... 6

Environmental Management ...................... 38

AICHI Spirit .................................................... 10

Environmental Material Flows .................... 40

Corporate Governance ............................... 12

Environmental Preservation Activities

Risk Management ........................................ 14

Global Warming ........................................ 42

Compliance ................................................... 16

Industrial Waste ........................................ 43■ 2007 CSR Highlights

Chemicals .................................................. 44
Air Quality ................................................... 45

1. We Are a Monozukuri Company ........... 18

Water Quality ............................................. 46

2. Developing Individuals to Support Monozukuri ..... 20

In the Office and Other Places .............. 47

3. Contributing to the Environment through Our Business .... 22
CSR Activities: Past and Future ................ 24■ Social Section■ Financial Section

Management’s Discussion and Analysis ...... 48

Five-year Summary ...................................... 52

Improving Quality and Satisfying Customers ...... 26

Consolidated Balance Sheets ................... 54

Human Resources Development .............. 28

Consolidated Statements of Income ........ 56

Labor Health and Safety ............................. 30

Consolidated Statements of Changes in Net Assets ..... 58

Contributing to Society and Local Communities ..... 32

Consolidated Statements of Cash Flows ..... 60

Communicating with Stakeholders ........... 34

Notes to Consolidated Financial Statements ..... 62

Information Security ..................................... 35

ing our business activities and results we must also
report our CSR activities.

Reporting period

This is why we merged our “Annual Report” forThis report covers the fiscal year 2007, from April 1,

overseas investors with our “CSR Report”, making

2007 to March 31, 2008. The performance of compa-

this new “Aichi Steel Report”. This is the first year wenies in the Aichi Steel Group (including consolidated

have issued the report in this format, and we looksubsidiaries) is included where necessary. Some of

forward to your feedback.

the activities described may have taken place before

Report of Independent Auditors ..................... 86

or after fiscal 2007.

1

Corporate Profile

Financial Highlights

AICHI STEEL CORPORATION and Consolidated Subsidiaries"Year ended March 31, 2006, 2007 and 2008"
2006

Fiscal year
Operation Results for the Year

2008

Percent Change

2008

Millions of yen％

Thousanda of
U.S.dollars (note 2)

2007

Millions of yen (Note 1)[Established] March 8, 1940

The birth of Aichi Steel[Capital] 25,016 million yen（as of March 31, 2008）

In 1926 Sakichi Toyoda, recognized today as one of Japan’s[President ] Shokichi Yasukawa

foremost inventors, founded Toyoda Automatic Loom Works,[Employees] 2,328（as of March 31, 2008）

Ltd. (currently Toyota Industries Corporation). His oldest son,[Business Description] Production and sales of specialty

Kiichiro Toyoda, saw the need for promoting Japan’s automo-

steel products, forgings and electro-magnetic products

bile industry, and set up a research center in the Steel Produc-[Offices]tion Department to develop specialty steel for automobiles. In￥ 224,954￥ 235,637¥ 253,462

7.6$ 2,534,623

Operating income

16,051

10,611

10,884

2.6

108,844

Head Office: Tokai-shi, Aichi, Japan

1940, this Department developed into Toyota Steel Works,

Ordinary income

15,774

10,109

9,332

（7.7）

93,322

Sales Offices: Tokyo / Osaka / Hiroshima / Fukuoka

Ltd., known today as Aichi Steel Corporation. Kiichiro believed

Income before income taxes
and minority interests

13,784

9,037

9,055

0.2

90,551

Overseas Offices: Shanghai / Seoul

that manufacturing and materials technology were of equal

8,152

4,922

15.7

56,929importance in automobile manufacturing. Realizing the

Net income

5,693

Plants: Chita / Kariya / Forging / Higashiura / Gifu
[Customers and Suppliers]

necessity of supplying high-quality materials that are right for

Capital expenditure

21,37328,35913,165（53.6）

131,652

Major Customers:Toyota Tsusho Corporation / Toyota Motor

the job, he came up with the R&D principle, “Great cars are

Depreciation

8,983

12,00014,75423.0

147,544

Corporation / Aisin AW Co., Ltd.

made with great steel”. Aichi Steel continues to adhere to thisYen％

U.S.dollars

Major Suppliers: Toyota Tsusho Corporation / Mitsui & Co., Ltd.

principle, supplying the automobile industry with high-quality

16.1$ 0.29[Net Sales] 202,859 million yen（fiscal 2007）

specialty steel and forgings.

29.00
10.00

-

0.10

Millions of yen％

Thousanda of
U.S.dollars (note 2)

Net sales

Per share data

Yen￥

Net income

40.23

￥

9.00

Cash dividends
Information at Year-End

¥

24.97
10.00

Millions of yen

Total Net Assets
Total Assets￥ 119,784￥ 127,329¥ 128,155

0.6$ 1,281,555

269,606

274,608

264,048（3.8）

2,640,484

For Reference
Number of emplpyees

4,724

4,539

4,637

[Gross Profit] 6,087 million yen（fiscal 2007）

Aichi Steel Group
Domestic subsidiaries（9 companies）

Overseas subsidiaries（9 companies）●Aiko Corporation (Tokai-shi, Aichi, Japan; Processing and●Aichi Forging Company of Asia, Inc. [AFC]（Philippines;●Aichi Ceratec Corporation (Nishio-shi, Aichi, Japan;●Aichi USA, Inc.（USA; North American holding company）

sales of steel)（2.1）

Manufacture and sales of refractory materials)

Notes:●Omi Mining Co., Ltd.（Maibara-shi, Shiga, Japan; Mining,

1. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 "“Accounting Standards for Presentation of Net Assets in the Balance Sheet” and its Implementation Guidance No.8 "“Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheets” issued on December 9, 2005 "by the Accounting Standards Board of Japan.

processing, and sales of limestone）●Aichi Techno Metal Fukaumi Company（Tsubame-shi,
Niigata, Japan; Processing and sales of steel）

2. The U.S. dollar amounts above represents translations of yen, for convenience only, at the rate of \100=U.S.$1."●Aichi Steel Logistics Co., Ltd.（Tokai-shi, Aichi, Japan;

Operating income

Net income

Net income per share

20,00010,00050.00●Aichi Information System Company（Kariya-shi, Aichi,

15,000

7,500

40.00

●Aiko Service Co., Ltd.（Tokai-shi, Aichi, Japan; Various(Million ¥)(Million ¥)Transportation, handling, and storage of cargo）(Million ¥)Japan; Sales and development of software）

services including sale of general merchandise, operationof restaurants, lunch catering, etc.）

30.00
10,0005,000●Aichi Micro Intelligent Corporation（Tokai-shi, Aichi, Japan;

20.00
5,000

0

2,500

05

06

07

08

0

Research and development of electronic components）●Asdex Corporation（Kariya-shi, Aichi, Japan; Development,

10.00

05

06

07

08

0.00

designing, and manufacture of forging dies)

05

06

07

08

Business Update

Outline of Aichi Steel

Manufacture and sales of hot forgings and automotive parts）●Louisville Forge and Gear Works, LLC [LFG]（USA; Manufacture and sales of forgings）●Aichi Europe GmbH [AE]（Germany; Import and sales of steel）●Aichi International（Thailand）Co., Ltd. [AIT]（Thailand;
Manufacture and sales of automotive parts）●Shanghai Aichi Forging Co., Ltd.（China; Manufacture andsales of forgings）●P.T. Aichi Forging Indonesia [AFI]（Indonesia; Manufacture andsales of automotive parts）●Aichi Magfine Czech s.r.o.（Czech Republic; Production ofmagnets for small motors）●Aiwang Keji Gufen Youxian Gongsi（Taiwan; Sales ofelectronic components）

Affiliates●Tokai Special Steel Co., Ltd. (Tokai-shi, Aichi, Japan;

Manufacture and sales of specialty steel and crude steel)（Information current as of March 2008）2

3

Corporate Profile

Financial Highlights

AICHI STEEL CORPORATION and Consolidated Subsidiaries"Year ended March 31, 2006, 2007 and 2008"
2006

Fiscal year
Operation Results for the Year

2008

Percent Change

2008

Millions of yen％

Thousanda of
U.S.dollars (note 2)

2007

Millions of yen (Note 1)[Established] March 8, 1940

The birth of Aichi Steel[Capital] 25,016 million yen（as of March 31, 2008）

In 1926 Sakichi Toyoda, recognized today as one of Japan’s[President ] Shokichi Yasukawa

foremost inventors, founded Toyoda Automatic Loom Works,[Employees] 2,328（as of March 31, 2008）

Ltd. (currently Toyota Industries Corporation). His oldest son,[Business Description] Production and sales of specialty

Kiichiro Toyoda, saw the need for promoting Japan’s automo-

steel products, forgings and electro-magnetic products

bile industry, and set up a research center in the Steel Produc-[Offices]tion Department to develop specialty steel for automobiles. In￥ 224,954￥ 235,637¥ 253,462

7.6$ 2,534,623

Operating income

16,051

10,611

10,884

2.6

108,844

Head Office: Tokai-shi, Aichi, Japan

1940, this Department developed into Toyota Steel Works,

Ordinary income

15,774

10,109

9,332

（7.7）

93,322

Sales Offices: Tokyo / Osaka / Hiroshima / Fukuoka

Ltd., known today as Aichi Steel Corporation. Kiichiro believed

Income before income taxes
and minority interests

13,784

9,037

9,055

0.2

90,551

Overseas Offices: Shanghai / Seoul

that manufacturing and materials technology were of equal

8,152

4,922

15.7

56,929importance in automobile manufacturing. Realizing the

Net income

5,693

Plants: Chita / Kariya / Forging / Higashiura / Gifu
[Customers and Suppliers]

necessity of supplying high-quality materials that are right for

Capital expenditure

21,37328,35913,165（53.6）

131,652

Major Customers:Toyota Tsusho Corporation / Toyota Motor

the job, he came up with the R&D principle, “Great cars are

Depreciation

8,983

12,00014,75423.0

147,544

Corporation / Aisin AW Co., Ltd.

made with great steel”. Aichi Steel continues to adhere to thisYen％

U.S.dollars

Major Suppliers: Toyota Tsusho Corporation / Mitsui & Co., Ltd.

principle, supplying the automobile industry with high-quality

16.1$ 0.29[Net Sales] 202,859 million yen（fiscal 2007）

specialty steel and forgings.

29.00
10.00

-

0.10

Millions of yen％

Thousanda of
U.S.dollars (note 2)

Net sales

Per share data

Yen￥

Net income

40.23

￥

9.00

Cash dividends
Information at Year-End

¥

24.97
10.00

Millions of yen

Total Net Assets
Total Assets￥ 119,784￥ 127,329¥ 128,155

0.6$ 1,281,555

269,606

274,608

264,048（3.8）

2,640,484

For Reference
Number of emplpyees

4,724

4,539

4,637

[Gross Profit] 6,087 million yen（fiscal 2007）

Aichi Steel Group
Domestic subsidiaries（9 companies）

Overseas subsidiaries（9 companies）●Aiko Corporation (Tokai-shi, Aichi, Japan; Processing and●Aichi Forging Company of Asia, Inc. [AFC]（Philippines;●Aichi Ceratec Corporation (Nishio-shi, Aichi, Japan;●Aichi USA, Inc.（USA; North American holding company）

sales of steel)（2.1）

Manufacture and sales of refractory materials)

Notes:●Omi Mining Co., Ltd.（Maibara-shi, Shiga, Japan; Mining,

1. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 "“Accounting Standards for Presentation of Net Assets in the Balance Sheet” and its Implementation Guidance No.8 "“Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheets” issued on December 9, 2005 "by the Accounting Standards Board of Japan.

processing, and sales of limestone）●Aichi Techno Metal Fukaumi Company（Tsubame-shi,
Niigata, Japan; Processing and sales of steel）

2. The U.S. dollar amounts above represents translations of yen, for convenience only, at the rate of \100=U.S.$1."●Aichi Steel Logistics Co., Ltd.（Tokai-shi, Aichi, Japan;

Operating income

Net income

Net income per share

20,00010,00050.00●Aichi Information System Company（Kariya-shi, Aichi,

15,000

7,500

40.00

●Aiko Service Co., Ltd.（Tokai-shi, Aichi, Japan; Various(Million ¥)(Million ¥)Transportation, handling, and storage of cargo）(Million ¥)Japan; Sales and development of software）

services including sale of general merchandise, operationof restaurants, lunch catering, etc.）

30.00
10,0005,000●Aichi Micro Intelligent Corporation（Tokai-shi, Aichi, Japan;

20.00
5,000

0

2,500

05

06

07

08

0

Research and development of electronic components）●Asdex Corporation（Kariya-shi, Aichi, Japan; Development,

10.00

05

06

07

08

0.00

designing, and manufacture of forging dies)

05

06

07

08

Business Update

Outline of Aichi Steel

Manufacture and sales of hot forgings and automotive parts）●Louisville Forge and Gear Works, LLC [LFG]（USA; Manufacture and sales of forgings）●Aichi Europe GmbH [AE]（Germany; Import and sales of steel）●Aichi International（Thailand）Co., Ltd. [AIT]（Thailand;
Manufacture and sales of automotive parts）●Shanghai Aichi Forging Co., Ltd.（China; Manufacture andsales of forgings）●P.T. Aichi Forging Indonesia [AFI]（Indonesia; Manufacture andsales of automotive parts）●Aichi Magfine Czech s.r.o.（Czech Republic; Production ofmagnets for small motors）●Aiwang Keji Gufen Youxian Gongsi（Taiwan; Sales ofelectronic components）

Affiliates●Tokai Special Steel Co., Ltd. (Tokai-shi, Aichi, Japan;

Manufacture and sales of specialty steel and crude steel)（Information current as of March 2008）2

3

Corporate Profile

automobile of the future.
capa bilities, are creating new areas of business.

Aichi Steel has continued our founder Kiichiro Toyoda’s passion for research and creativity, and we create high-quality products used

Outline of an integrated steel forging process

by a wide variety of industries including the automobile industry, and the fields of industrial machinery, electronics, construction,
Steel scrap

medicine, and agriculture.

Steelmaking
process

In-processmaterial

Rolling process

Steel products

Forging
process

Business Update

High-quality formed products *1 will play a major role in the
We are strengthening our integrated steelmaking and forging

Forging

Through the creation of one and only technologies, we are working to become an international enterprise with existence value thatwill help society and the world develop sustainably and that will help the future become a better place. We will continue to use ourAutomobile

integrated strengths – our engineering prowess, reliability, and R&D strengths – to create useful formed products.

Specialty steel

Forgings

Specialty steel is manufactured by adding alloys and metallic

Forging is a technology that involves heating specialty steel

elements to iron and using fine constituent control to improve(sometimes there is no heating step) and forging it in amaterial properties such as strength, hardness, toughness,machine such as a forging press, upsetter, or rolling mill.

wear resistance, heat resistance, and corrosion resistance.

Through the heat treatments and secondary processing that

These steels can be used in environments that regular steel

follow, the forging is given properties such as additionalcannot take, and properties can be improved for a wide

Aichi Steel’s scope of operations

One of the world’s largest integrated
producers of steel and forgings

Steelmaker’s scope of operations

Producers of forgings scope of operations

Stainless steel

Electro-magnetic products / TetsuRiki-Agristrength or toughness. In recent years, technologies thatTough and corrosion-resistant, stainless steel is used inUsing our knowhow in manufacturing specialty steels, Aichi

variety of requirements and applications. In particular, thesemake it possible to achieve the same properties without heatapplications related to water such as dams, sluices, and ships.

Steel’s newest area of business is in electromagnetic

steels are indispensable for automotive parts, which aretreatment have been developed. Forgings are widely used in

They are also used in chemical and nuclear plants as well as

materials. This area of business started in 1992 with theexposed to extreme environmental conditions. It could becritical parts for which safety is paramount, includingin the utensils that we all use every day. In recent years, thedevelopment of a dental magnetic attachment for securing

said that without high-quality specialty steel, Japan’s automo-

powertrain parts such as engines and transmission as well as

use of stainless steels as structural materials for construction

false teeth. In addition, our Magfine bonded neodymium

tive industry would not have developed. Based on the skills

for vehicle chassis assemblies. To meet the demand forhas been authorized, so there are a widening variety ofmagnet has allowed the weight of small motors used inand experience since we were established, we manufacture a

improved vehicle power and reduced vehicle weight, weapplications that capitalize on their function and beauty. In

automobiles and electric tools to be greatly reduced, and avast array of specialty steel that are well-suited to ourcontinue to take on new monozukuri challenges that involve

addition, there is an increasing demand for our Suscon

world-wide increase in demand is expected. In addition tocustomer’s needs, and the quality of these products

unparalleled attention to quality in every step from the raw

stainless rebar as a replacement for regular steel rebar inmagnets, our MI (magneto-impedance) sensors, which arecontinues to evolve.

materials to the end product.

concrete structures that require a long life, and their use inable to precisely measure minute magnetic fields, are being

Primary products

Primary products

highway-related applications such as tunnels is increasing as

used in geomagnetic positioning devices and for finding●Structural steel (automotive parts, mechanical parts, etc.)●Crankshaft

is their applications in equipment for manufacturing food andforeign matter in food.

●Free-cutting steel (automotive parts, mechanical parts, etc.)●Differential ring gear

pharmaceuticals

Another novel product is TestuRiki-Agri, which was developed●Spring steel (automotive springs, coil springs, etc.)●Rear axle shaft

Primary products●Bearing steel (bearings for automobiles, machines, etc.)●Transmission gear

●Shaped stainless steels (chemical engineering equipment,
ships, structural materials, etc.)●Tool steel (dies, etc.)

to bring out a latent ability of iron. This product allows iron●Round bar and wire rod (utensils, bolts, nuts, etc.)●High-strength steel (automotive parts, etc.)●Stainless rebar

ions to enhance plant photosynthesis and enhance plant
growth, and is loved by farmers and gardeners alike. It is
expected to help contribute on a world-wide scale to makethe deserts greener and improve agricultural yields.

Electro-magnetic products,
specialty steel

Stainless steel

TetsuRiki-Agri, etc.

20.3％

2.3％

40.6％

Forgings
36.8％
Steel Rourd bars

4

※Pie chart: Sales breakdown(based on sales volume – nonconsolidated)

Crankshaft*1 Formed products: The products necessary for our standard of living and industries are made of materials such as metal, wood, rubber, or plastic. Formed products are those
products that have been shaped by applying heat and/or force to such materials.

Shaped stainless steels

Magfine5

Corporate Profile

automobile of the future.
capa bilities, are creating new areas of business.

Aichi Steel has continued our founder Kiichiro Toyoda’s passion for research and creativity, and we create high-quality products used

Outline of an integrated steel forging process

by a wide variety of industries including the automobile industry, and the fields of industrial machinery, electronics, construction,
Steel scrap

medicine, and agriculture.

Steelmaking
process

In-processmaterial

Rolling process

Steel products

Forging
process

Business Update

High-quality formed products *1 will play a major role in the
We are strengthening our integrated steelmaking and forging

Forging

Through the creation of one and only technologies, we are working to become an international enterprise with existence value thatwill help society and the world develop sustainably and that will help the future become a better place. We will continue to use ourAutomobile

integrated strengths – our engineering prowess, reliability, and R&D strengths – to create useful formed products.

Specialty steel

Forgings

Specialty steel is manufactured by adding alloys and metallic

Forging is a technology that involves heating specialty steel

elements to iron and using fine constituent control to improve(sometimes there is no heating step) and forging it in amaterial properties such as strength, hardness, toughness,machine such as a forging press, upsetter, or rolling mill.

wear resistance, heat resistance, and corrosion resistance.

Through the heat treatments and secondary processing that

These steels can be used in environments that regular steel

follow, the forging is given properties such as additionalcannot take, and properties can be improved for a wide

Aichi Steel’s scope of operations

One of the world’s largest integrated
producers of steel and forgings

Steelmaker’s scope of operations

Producers of forgings scope of operations

Stainless steel

Electro-magnetic products / TetsuRiki-Agristrength or toughness. In recent years, technologies thatTough and corrosion-resistant, stainless steel is used inUsing our knowhow in manufacturing specialty steels, Aichi

variety of requirements and applications. In particular, thesemake it possible to achieve the same properties without heatapplications related to water such as dams, sluices, and ships.

Steel’s newest area of business is in electromagnetic

steels are indispensable for automotive parts, which aretreatment have been developed. Forgings are widely used in

They are also used in chemical and nuclear plants as well as

materials. This area of business started in 1992 with theexposed to extreme environmental conditions. It could becritical parts for which safety is paramount, includingin the utensils that we all use every day. In recent years, thedevelopment of a dental magnetic attachment for securing

said that without high-quality specialty steel, Japan’s automo-

powertrain parts such as engines and transmission as well as

use of stainless steels as structural materials for construction

false teeth. In addition, our Magfine bonded neodymium

tive industry would not have developed. Based on the skills

for vehicle chassis assemblies. To meet the demand forhas been authorized, so there are a widening variety ofmagnet has allowed the weight of small motors used inand experience since we were established, we manufacture a

improved vehicle power and reduced vehicle weight, weapplications that capitalize on their function and beauty. In

automobiles and electric tools to be greatly reduced, and avast array of specialty steel that are well-suited to ourcontinue to take on new monozukuri challenges that involve

addition, there is an increasing demand for our Suscon

world-wide increase in demand is expected. In addition tocustomer’s needs, and the quality of these products

unparalleled attention to quality in every step from the raw

stainless rebar as a replacement for regular steel rebar inmagnets, our MI (magneto-impedance) sensors, which arecontinues to evolve.

materials to the end product.

concrete structures that require a long life, and their use inable to precisely measure minute magnetic fields, are being

Primary products

Primary products

highway-related applications such as tunnels is increasing as

used in geomagnetic positioning devices and for finding●Structural steel (automotive parts, mechanical parts, etc.)●Crankshaft

is their applications in equipment for manufacturing food andforeign matter in food.

●Free-cutting steel (automotive parts, mechanical parts, etc.)●Differential ring gear

pharmaceuticals

Another novel product is TestuRiki-Agri, which was developed●Spring steel (automotive springs, coil springs, etc.)●Rear axle shaft

Primary products●Bearing steel (bearings for automobiles, machines, etc.)●Transmission gear

●Shaped stainless steels (chemical engineering equipment,
ships, structural materials, etc.)●Tool steel (dies, etc.)

to bring out a latent ability of iron. This product allows iron●Round bar and wire rod (utensils, bolts, nuts, etc.)●High-strength steel (automotive parts, etc.)●Stainless rebar

ions to enhance plant photosynthesis and enhance plant
growth, and is loved by farmers and gardeners alike. It is
expected to help contribute on a world-wide scale to makethe deserts greener and improve agricultural yields.

Electro-magnetic products,
specialty steel

Stainless steel

TetsuRiki-Agri, etc.

20.3％

2.3％

40.6％

Forgings
36.8％
Steel Rourd bars

4

※Pie chart: Sales breakdown(based on sales volume – nonconsolidated)

Crankshaft*1 Formed products: The products necessary for our standard of living and industries are made of materials such as metal, wood, rubber, or plastic. Formed products are those
products that have been shaped by applying heat and/or force to such materials.

Shaped stainless steels

Magfine5

Message from the President

promote continuous and sustainable growthBusiness Update

Implementing CSR activities in our actual business to

What are your thoughts on dividend policies and other issues related to shareholder returns?

Q&A with our new President, Shokichi Yasukawa

We are here today as a company because of our stakehold-possible. However, for the enterprise to grow continuously,

Our CSR awareness is complete, and we’re moving fromers – our customers, local communities, the companies thatfacility investments are unquestionably necessary. Thus, we

we deal with, our employees, and our shareholders andwill secure the retained earnings necessary for our businessfundamental CSR to proactive CSR.

investors. Thus it is a given that we contribute to the interests

operations, but we will look at our overall performance andof all of our stakeholders in a well-balanced manner. I believe

finances and work to meet the expectations of our sharehold-that continuous growth is an enterprise’s most importanters and investors. Currently, our standard dividend payout ismission, and I believe that the mission of the president is to30% (consolidated) and we are looking at a value between 20

continue to create the ability to make continuous growthand 40%.

What are the strengths of Aichi Steel that support its growth? How do you plan to leverage these strengths?
We produce about 100,000 tons of steel a month. We forge

Agri, which gives iron ions to plant life. These are also ourabout 30,000 tons of it in-house and deliver about 70,000 tons

strengths. I would like to use these strengths for humanity and forof it to customers. Our integrated steelmaking and forging

society and to help realize a low-carbon society. There are two

operations, which are done at the same site, are our strength.

ways to do this – one is to contribute by supply products toAlso, for our new areas of business, we have one and only

improve automobile fuel economy, and the other is to reduce theproducts such as bonded neodymium magnets that contribute

CO2 emissions from our production processes. We will eventually

to smaller automotive motors and improved fuel economy,

be carrying out routine replacements of our production facilities,

high-sensitivity magnetic sensors that are expected to have a

but we believe that these replacements are a chance to improvewider range of applications going forward, as well as TetsuRiki-

our energy efficiency and reduce CO2 emissions.

With society becoming increasingly interested in corporate social responsibility, Aichi Steel started puttingout a Midium-term CSR Plan in 2005. What did that achieve and what are your plans going forward?
That an enterprise has to be a useful part of society is a given.

borrow a baseball metaphor, CSR has two facets – one isI believe that growing a business in a healthy manner is in itself

being in the outfield and the other is being in the batter’s box.

CSR. The reason that we amalgamated the annual report andObeying the law and preparing for risks corresponds to

the CSR report is because CSR is the foundation of ouroutfield. Making sure we have a solid outfield is what we did forbusiness, and one facet of this foundation is our financial

three years. I think it’s time to work to further strengthen ourreport. Our Midium-term CSR Plan started in 2005 and ended

outfield, but at the same time, to take our CSR to a more active

What did you think of the fiscal year ending March 2008 and what do you expect in the coming term?

in 2007. In these three years, I believe that awareness of CSR

and strategic level.

The unprecedented price for steel scrap and nickel, the raw

investments and we are moving into our commercializationmaterials that we need to produce steel and forgings - ourphase. Even in this severe environment, our net sales for the

Facility investment plan (improving competitiveness and creating a system that can handle increases in demand)core business - is having a large impact, and I think that

fiscal year ending March 2008 was 253.4 billion yen, a 7.6%

business conditions will continue to be severe in 2008. In ourincrease over last year. Our operating income was 10.8 billion

core businesses, however, we are actively carrying out

yen, an increase of 2.6% over last year. Our target for next

structural reforms and cost reduction activities related to ourfiscal year is 298.0 billion yen, and we are serious about

production systems, and in our new areas of business suchworking that much harder to improve our profitability

Shokichi Yasukawa, President

You’ve taken over as President at a time when the business environment is in a state of great change.

as electromagnetic products, we have finished our initial

6

issues became fairly well-established in the company. If weStage Ⅰ

(2005-2007)

Stage II

(2008-2010)

Steel

Streamlined production (eliminating bottlenecks)
・Installing an advanced new furnace
・Improving the finishing process

Improving the steelmaking andblooming processes

Forgings

Improving quality and turnaround time・Building a new forging plant
・Improving heat treatment and finishing process

Carrying out rationalization andperformance improvements

7

Message from the President

promote continuous and sustainable growthBusiness Update

Implementing CSR activities in our actual business to

What are your thoughts on dividend policies and other issues related to shareholder returns?

Q&A with our new President, Shokichi Yasukawa

We are here today as a company because of our stakehold-possible. However, for the enterprise to grow continuously,

Our CSR awareness is complete, and we’re moving fromers – our customers, local communities, the companies thatfacility investments are unquestionably necessary. Thus, we

we deal with, our employees, and our shareholders andwill secure the retained earnings necessary for our businessfundamental CSR to proactive CSR.

investors. Thus it is a given that we contribute to the interests

operations, but we will look at our overall performance andof all of our stakeholders in a well-balanced manner. I believe

finances and work to meet the expectations of our sharehold-that continuous growth is an enterprise’s most importanters and investors. Currently, our standard dividend payout ismission, and I believe that the mission of the president is to30% (consolidated) and we are looking at a value between 20

continue to create the ability to make continuous growthand 40%.

What are the strengths of Aichi Steel that support its growth? How do you plan to leverage these strengths?
We produce about 100,000 tons of steel a month. We forge

Agri, which gives iron ions to plant life. These are also ourabout 30,000 tons of it in-house and deliver about 70,000 tons

strengths. I would like to use these strengths for humanity and forof it to customers. Our integrated steelmaking and forging

society and to help realize a low-carbon society. There are two

operations, which are done at the same site, are our strength.

ways to do this – one is to contribute by supply products toAlso, for our new areas of business, we have one and only

improve automobile fuel economy, and the other is to reduce theproducts such as bonded neodymium magnets that contribute

CO2 emissions from our production processes. We will eventually

to smaller automotive motors and improved fuel economy,

be carrying out routine replacements of our production facilities,

high-sensitivity magnetic sensors that are expected to have a

but we believe that these replacements are a chance to improvewider range of applications going forward, as well as TetsuRiki-

our energy efficiency and reduce CO2 emissions.

With society becoming increasingly interested in corporate social responsibility, Aichi Steel started puttingout a Midium-term CSR Plan in 2005. What did that achieve and what are your plans going forward?
That an enterprise has to be a useful part of society is a given.

borrow a baseball metaphor, CSR has two facets – one isI believe that growing a business in a healthy manner is in itself

being in the outfield and the other is being in the batter’s box.

CSR. The reason that we amalgamated the annual report andObeying the law and preparing for risks corresponds to

the CSR report is because CSR is the foundation of ouroutfield. Making sure we have a solid outfield is what we did forbusiness, and one facet of this foundation is our financial

three years. I think it’s time to work to further strengthen ourreport. Our Midium-term CSR Plan started in 2005 and ended

outfield, but at the same time, to take our CSR to a more active

What did you think of the fiscal year ending March 2008 and what do you expect in the coming term?

in 2007. In these three years, I believe that awareness of CSR

and strategic level.

The unprecedented price for steel scrap and nickel, the raw

investments and we are moving into our commercializationmaterials that we need to produce steel and forgings - ourphase. Even in this severe environment, our net sales for the

Facility investment plan (improving competitiveness and creating a system that can handle increases in demand)core business - is having a large impact, and I think that

fiscal year ending March 2008 was 253.4 billion yen, a 7.6%

business conditions will continue to be severe in 2008. In ourincrease over last year. Our operating income was 10.8 billion

core businesses, however, we are actively carrying out

yen, an increase of 2.6% over last year. Our target for next

structural reforms and cost reduction activities related to ourfiscal year is 298.0 billion yen, and we are serious about

production systems, and in our new areas of business suchworking that much harder to improve our profitability

Shokichi Yasukawa, President

You’ve taken over as President at a time when the business environment is in a state of great change.

as electromagnetic products, we have finished our initial

6

issues became fairly well-established in the company. If weStage Ⅰ

(2005-2007)

Stage II

(2008-2010)

Steel

Streamlined production (eliminating bottlenecks)
・Installing an advanced new furnace
・Improving the finishing process

Improving the steelmaking andblooming processes

Forgings

Improving quality and turnaround time・Building a new forging plant
・Improving heat treatment and finishing process

Carrying out rationalization andperformance improvements

7

Message from the President

improve as individuals and to improve the company.

What kind of plans do you have for the second stage of CSR?

Lastly, do you have anything to say to our stakeholders as the new President?

We are currently implementing our 2010 Midium-term CSR

what we can through monozukuri. Also, as I mentioned

Since I was in my 30s, I’ve treasured the phrase “body, heart,

improve by the total sum of improvements. I truly believe this.

Plan, but for our outfield, we plan to further strengthen our

before, the opportunities for this are here. Another thing that I

and mind”. The essence of our lives and work is about the

As it happens, this way of thinking is consistent with theefforts to date and expand them to include the group as avalue is the development of the human resources that makes

never-ending improvement and renewal of our body, heart, andconcept of “ambition, learning, and achievement” that was awhole. On tap of that, I’d like to see Aichi Steel being useful to

all these products and processes possible. My motto is “thinkmind. “Body” means the energy for getting things done andpart of “AICHI Spirit” that we put together in 2006 as well associety in a more noticeable way. What we do is to takeof work as your life, not your job.” What I mean by this is thatmaking good on your promises. “Heart” means constantlywith the concept of “learning, thinking, and action” proposed

something worthless – steel scrap – and turn it into specialty

there’s life, and there’s also work. Recently, we hear a lot

thinking about your own objectives, ideals, and fundamentals.

by the Confucianist Heishu Hosoi, who was from Tokai City. Bysteel, a value-added product. We are inherently a resource-

about work-life balance. I think that work and life should not“Mind” means thinking about things using rules and principles,

improving “body, heart, and mind” both at an individual level

recycling enterprise. This is something to be proud of, andbe thought of as separately, but that work is that somethingfinding problems or new directions, and the ability to learn. I

and at the company level, Aichi Steel can grow continuously asbased on this, we can of course contribute to local communi-that exists in your life. I’d like to create a corporate culture

believe that improving these aspects will always open up newa “global enterprise that is small but that has existence value.”ties, reduce CO2 emissions from our production processes,that lets employees appreciate life while excelling at work.

opportunities. If you think about the company as being anThis is my hope.

create processes that are better for the environment, and do

Business Update

I’d like to see people think based on their “body, heart, and mind” toextension of one’s body, the same applies.
If each one of us improves themselves, the company will also

Aichi Steel’s business and environmental measures are two sides of the same coin. What are
our environmental priorities in terms of our CSR activities?
I’d like to keep the issue of safety front and center. An

Another issue is that I would like to set numerical reduction

important part of labor safety is Heinrich’s Law, which says thattargets for our CO2 emissions, and we are currently preparing

for every potential accident, it is important to establish counter-

these targets.

measures for close calls. Even for environmental measures, I
would like to raise our awareness of environmental close calls.

Long-term vision to 2015: -Challenge to Innovation-

Midium-term management policies

To continue to grow globally as a recycling-oriented
enterprise and to work to become a corporate group that isrespected by local communities and by society.

To grow into the world’s largest integrated producer of steel
and forgings through quality and technology.
To contribute to global environmental protection and theevolution of the automobile through the development of
cutting-edge material.

8

1.To work to become the world’s foremost integrated
producer of steel and forgings by “moving from the outfield
to the batting box”
2.To grow as an innovative enterprise through our one andonly products
3.To contribute to global environmental protection as arecycling-oriented enterprise.

Midium-term management targets
To achieve net sales exceeding 300 billion yen in 2010.

9

Message from the President

improve as individuals and to improve the company.

What kind of plans do you have for the second stage of CSR?

Lastly, do you have anything to say to our stakeholders as the new President?

We are currently implementing our 2010 Midium-term CSR

what we can through monozukuri. Also, as I mentioned

Since I was in my 30s, I’ve treasured the phrase “body, heart,

improve by the total sum of improvements. I truly believe this.

Plan, but for our outfield, we plan to further strengthen our

before, the opportunities for this are here. Another thing that I

and mind”. The essence of our lives and work is about the

As it happens, this way of thinking is consistent with theefforts to date and expand them to include the group as avalue is the development of the human resources that makes

never-ending improvement and renewal of our body, heart, andconcept of “ambition, learning, and achievement” that was awhole. On tap of that, I’d like to see Aichi Steel being useful to

all these products and processes possible. My motto is “thinkmind. “Body” means the energy for getting things done andpart of “AICHI Spirit” that we put together in 2006 as well associety in a more noticeable way. What we do is to takeof work as your life, not your job.” What I mean by this is thatmaking good on your promises. “Heart” means constantlywith the concept of “learning, thinking, and action” proposed

something worthless – steel scrap – and turn it into specialty

there’s life, and there’s also work. Recently, we hear a lot

thinking about your own objectives, ideals, and fundamentals.

by the Confucianist Heishu Hosoi, who was from Tokai City. Bysteel, a value-added product. We are inherently a resource-

about work-life balance. I think that work and life should not“Mind” means thinking about things using rules and principles,

improving “body, heart, and mind” both at an individual level

recycling enterprise. This is something to be proud of, andbe thought of as separately, but that work is that somethingfinding problems or new directions, and the ability to learn. I

and at the company level, Aichi Steel can grow continuously asbased on this, we can of course contribute to local communi-that exists in your life. I’d like to create a corporate culture

believe that improving these aspects will always open up newa “global enterprise that is small but that has existence value.”ties, reduce CO2 emissions from our production processes,that lets employees appreciate life while excelling at work.

opportunities. If you think about the company as being anThis is my hope.

create processes that are better for the environment, and do

Business Update

I’d like to see people think based on their “body, heart, and mind” toextension of one’s body, the same applies.
If each one of us improves themselves, the company will also

Aichi Steel’s business and environmental measures are two sides of the same coin. What are
our environmental priorities in terms of our CSR activities?
I’d like to keep the issue of safety front and center. An

Another issue is that I would like to set numerical reduction

important part of labor safety is Heinrich’s Law, which says thattargets for our CO2 emissions, and we are currently preparing

for every potential accident, it is important to establish counter-

these targets.

measures for close calls. Even for environmental measures, I
would like to raise our awareness of environmental close calls.

Long-term vision to 2015: -Challenge to Innovation-

Midium-term management policies

To continue to grow globally as a recycling-oriented
enterprise and to work to become a corporate group that isrespected by local communities and by society.

To grow into the world’s largest integrated producer of steel
and forgings through quality and technology.
To contribute to global environmental protection and theevolution of the automobile through the development of
cutting-edge material.

8

1.To work to become the world’s foremost integrated
producer of steel and forgings by “moving from the outfield
to the batting box”
2.To grow as an innovative enterprise through our one andonly products
3.To contribute to global environmental protection as arecycling-oriented enterprise.

Midium-term management targets
To achieve net sales exceeding 300 billion yen in 2010.

9

AICHI Spirit

AICHI Spirit is made up of the values that will help us to realize our Mission Statement. If our Action Guidelines defines our day-today conduct, AICHI Spirit defines who we are on a deeper level. In 2007, we worked to more thoroughly establish AICHI Spirit aspart of our CSR activities.

Establishing AICHI Spirit and increasing awarenessexplained these keywords, and we have distributed these to

Improving “human power”

Mission Statement
1.We will strive to make a positive contribution to society withSince 2006, we have created a pamphlet and card that

Distilling our corporate culture

Business Update

AICHI Spirit: An additional corporate gene for implementing CSR activities based on our Mission Statement.

all employees including temporary employees. In addition, we
have held presentations for managers and supervisors, study

safe, appealing and useful technology and products.
2.We will nurture a corporate culture based on trust, reliability
and the pursuit of excellence.
3.We will be a good corporate citizen, ever mindful of ourenvironment responsibilities.

AICHI Spirit is a distillation of the values that have been built up“Ambition, learning, and achievement.” These are the three

sessions in every department, and we constantly work to

by our predecessors – in effect, an easy-to-understandkeywords that we were left with when we thought about how

establish AICHI Spirit and increase awareness. We areblueprint of Aichi Steel’s corporate genes. Creating AICHI Spirit

we wanted to treat the teachings of our predecessors withcarrying out similar initiatives at our group companies and we

CSR Policy

started in 2005. It involved an analysis of the organization andrespect while extending and enhancing the distilled values

have started distributing this information at our overseas

We will contribute to the sustainable progress of society andof current issues as well as a review of what our founders andand characteristics. These keywords reflect the ideal of having

subsidiaries.

past presidents have said, and the corporate orientation slowly

each employee be ambitious and learning together withcame together. In the process of putting AICHI Spirit together,

humility while achieving great things. This is what AICHI Spirit

we came across our founder’s philosophy: “good cars comecalls on each of us to do. What we have done is to put whatof and provide satisfaction to external stakeholders. At thefrom good steel.” Based on this, we found parts of ourhas been passed down into writing as AICHI Spirit to improvesame time, our Company will develop a close relationshipcorporate culture that made a contribution through steelmaking,the professionalism of all those who support our monozukuri

with regional governments and people in the community.

a culture that encouraged employees to improve themselves

and to strengthen our “human power”.

the Earth through our sound corporate activities.

CSR Vision
1.As an environmentally recycling-oriented enterprise withpositive earnings, our Company will earn the unshakable trust

2.Our employees will feel confident and proud of working for
Aichi Steel and Aichi Steel group companies and will work to

and to work together to achieve a shared objective.

create a corporate culture as an “exciting” enterprise.

The three keywords of AICHI Spirit
Aichi Steel Group's Action Guidelines (revised in January 2007)
To establish a reliable corporate culture based on a global perspective and to extensively contribute to society, we will

To have noble ambitious (shi)as a professional and to takeon new challenges.

To learn (gaku) and train
through work andinteraction with coworkers.

respect human rights and comply with the letter and the spirit of domestic and overseas laws and regulations, and willconduct ourselves independently with the common sense expected of us from society with a view to the creation of asustainable society.
1. We will develop and supply products and services that are useful to society by taking safety, quality, protection of personaland customer information fully into consideration to earn the satisfaction and trust of our customers and society.
2. We will make every effort to develop fair, transparent, and open business activities as well as to conduct them in adignified manner.
3. We will openly disclose corporate information to a wide range of parties in society including shareholders in a proactive
and fair manner.
4. We will respect the diversity, personalities and individual characteristics of employees and at the same time, we will secure

To take action quickly by coming together topersevere and to achieve (sei) your goals.

a safe and pleasant working environment that will allow employees to enjoy comfort and prosperity in their daily lives.
5. We recognize the vital importance of the environment and we will engage in environmental preservation activities
voluntarily and proactively.

This figure represents how we cherish the uniqueness of each of our employees and our desire to see them interact, grow, and work

6. As a good corporate citizen, we will positively participate in social contribution activities.

together.

7. We will deal with any organizations and individuals that may pose a threat to the good order and safety of civil society in a
resolute manner, and we will never become involved with any of them.
8. In global management, we will comply with international and local laws and respect local practices, customs, and cultures.

10

11

AICHI Spirit

AICHI Spirit is made up of the values that will help us to realize our Mission Statement. If our Action Guidelines defines our day-today conduct, AICHI Spirit defines who we are on a deeper level. In 2007, we worked to more thoroughly establish AICHI Spirit aspart of our CSR activities.

Establishing AICHI Spirit and increasing awarenessexplained these keywords, and we have distributed these to

Improving “human power”

Mission Statement
1.We will strive to make a positive contribution to society withSince 2006, we have created a pamphlet and card that

Distilling our corporate culture

Business Update

AICHI Spirit: An additional corporate gene for implementing CSR activities based on our Mission Statement.

all employees including temporary employees. In addition, we
have held presentations for managers and supervisors, study

safe, appealing and useful technology and products.
2.We will nurture a corporate culture based on trust, reliability
and the pursuit of excellence.
3.We will be a good corporate citizen, ever mindful of ourenvironment responsibilities.

AICHI Spirit is a distillation of the values that have been built up“Ambition, learning, and achievement.” These are the three

sessions in every department, and we constantly work to

by our predecessors – in effect, an easy-to-understandkeywords that we were left with when we thought about how

establish AICHI Spirit and increase awareness. We areblueprint of Aichi Steel’s corporate genes. Creating AICHI Spirit

we wanted to treat the teachings of our predecessors withcarrying out similar initiatives at our group companies and we

CSR Policy

started in 2005. It involved an analysis of the organization andrespect while extending and enhancing the distilled values

have started distributing this information at our overseas

We will contribute to the sustainable progress of society andof current issues as well as a review of what our founders andand characteristics. These keywords reflect the ideal of having

subsidiaries.

past presidents have said, and the corporate orientation slowly

each employee be ambitious and learning together withcame together. In the process of putting AICHI Spirit together,

humility while achieving great things. This is what AICHI Spirit

we came across our founder’s philosophy: “good cars comecalls on each of us to do. What we have done is to put whatof and provide satisfaction to external stakeholders. At thefrom good steel.” Based on this, we found parts of ourhas been passed down into writing as AICHI Spirit to improvesame time, our Company will develop a close relationshipcorporate culture that made a contribution through steelmaking,the professionalism of all those who support our monozukuri

with regional governments and people in the community.

a culture that encouraged employees to improve themselves

and to strengthen our “human power”.

the Earth through our sound corporate activities.

CSR Vision
1.As an environmentally recycling-oriented enterprise withpositive earnings, our Company will earn the unshakable trust

2.Our employees will feel confident and proud of working for
Aichi Steel and Aichi Steel group companies and will work to

and to work together to achieve a shared objective.

create a corporate culture as an “exciting” enterprise.

The three keywords of AICHI Spirit
Aichi Steel Group's Action Guidelines (revised in January 2007)
To establish a reliable corporate culture based on a global perspective and to extensively contribute to society, we will

To have noble ambitious (shi)as a professional and to takeon new challenges.

To learn (gaku) and train
through work andinteraction with coworkers.

respect human rights and comply with the letter and the spirit of domestic and overseas laws and regulations, and willconduct ourselves independently with the common sense expected of us from society with a view to the creation of asustainable society.
1. We will develop and supply products and services that are useful to society by taking safety, quality, protection of personaland customer information fully into consideration to earn the satisfaction and trust of our customers and society.
2. We will make every effort to develop fair, transparent, and open business activities as well as to conduct them in adignified manner.
3. We will openly disclose corporate information to a wide range of parties in society including shareholders in a proactive
and fair manner.
4. We will respect the diversity, personalities and individual characteristics of employees and at the same time, we will secure

To take action quickly by coming together topersevere and to achieve (sei) your goals.

a safe and pleasant working environment that will allow employees to enjoy comfort and prosperity in their daily lives.
5. We recognize the vital importance of the environment and we will engage in environmental preservation activities
voluntarily and proactively.

This figure represents how we cherish the uniqueness of each of our employees and our desire to see them interact, grow, and work

6. As a good corporate citizen, we will positively participate in social contribution activities.

together.

7. We will deal with any organizations and individuals that may pose a threat to the good order and safety of civil society in a
resolute manner, and we will never become involved with any of them.
8. In global management, we will comply with international and local laws and respect local practices, customs, and cultures.

10

11

Corporate GovernanceIn our mission statement, we commit to “contributing to society by providing appealing products“ based on a “dynamic and

A new Midium-term CSR Plan

Promoting internal controls

Through discussions by the CSR Working Group, we found that

To continue being a listed enterprise that is trusted because

though the awareness of CSR issues had increased over threeof its sound and efficient business activities that are free ofyears of CSR activities, there were variations in the activities andillegal or inappropriate acts and mistakes, we are working toin awareness, making it hard to consider them call company-

create an internal control system to manage and monitor all

The objective of the biannual meetings of the CSR Working

wide activities. Thus we identified more thoroughly entrenchingactivities for everything from R&D to sales, purchasing, andwe are striving to run our business in a fair and efficient manner.

Group is to implement efforts relate to corporate social respon-and establishing our CSR policies and raising awareness of

production.

In our Regular Board Meetings, which are held monthly, and oursibility (CSR), and the major themes are compliance*2, risk

CSR issues across the entire enterprise as an issue goingAs part of this effort, we have reviewed the standards related

Special Board Meetings, which are held as needed, importantmanagement*3, and contributing to society.

forward. We also established the 2010 Midium-term CSR Plan

to the approval of decisions in the course of business

management decisions are made and the work of the represen-

In 2007, we mainly looked at our compliance-related activities

to take our CSR activities to the next level.

operations and we have centralized these standards. Also, totative directors is supervised.

and reviewed our educational and awareness efforts, ourAs a rule, the Board of Managing Directors, which is made up

conformance to important legislation such as the Laborof all directors who have additional corporate roles and who

Standards Act and Worker Dispatch Law, as well as ourrank as at least a managing director, meets twice a month totrusted corporate character”. Thus to maintain the trust of our stakeholders, we work to make our system of corporate
administration even more efficient and transparent as well as to review it constantly.

A more stringent management system

CSR Committee

Based on the system of corporate governance*1 shown below,

improve consistency and internal controls in the Aichi Steel

Conformance to the Financial Instruments and Exchange Law

Group’s management policies, we hold periodic meetingssystems such as the one used to manage confidential informa-

We started preparing for the Financial Instruments andand managing directors to check on business operations at

thoroughly discuss basic management policies so they cantion. We also reviewed our internal reporting system (ourExchange Law (J-SOX*4) in 2006. This law makes it manda-

our subsidiaries. We have also standardized the guidelines forassess each other.

Hotto Line) to see how often it was being used.

tory to submit reports of internal controls and for auditing

reports from our subsidiaries to strengthen our relationship.

Two standing and three part-time auditors check the work ofGoing forward, one of the issues related to compliance will becompanies to do checks starting the fiscal year ending March

the directors. They attend important meetings, review approvalensuring that compliance practices are thoroughly established2009. Currently, the Aichi Steel Group is going into theletters, and conduct meetings with corporate officers andat group companies and at all companies working on-site,

implementation stage of these requirements.

employees.

and this has been incorporated into the 2008 policy.

with the presidents of subsidiaries and we dispatch directors

Aichi Steel Group’s CSR concept diagram

Our corporate governance system

Local
communities
SocietyS h a re h o ld e r’s M e e tin g
Appoints/Dismisses

Appoints/Dismisses▼▼▼
AuditsMakes decisions/Supervises

Board of Auditors▼

Appoints/Dismisses

Reports to▼Reports to

Accounting Audit Team

Instructs/Supervises

Customers
Suppliers

Improved corporate value

CSR management
Realization of mission statement
Corporate governance

Judges if an accounting audit is needed

Shareholders

Audits▼ ▼▼Board of Representative Directors▼▼

Board of Directors

Appoints/Dismisses
Reports to▼▼Business Update

To maintain the trust of our stakeholders, we are putting
together a transparent management system.

Disclosure of
Shareholder’s Meeting
information(Accountability)
Board of Directors

・Companies Act
・Financial Instruments andExchange Law (J-SOX)

Reports toExternal auditing (Auditors)

Board of Auditors

Employees

Controls based on the “Basic policy on internal control systems”

Reports toReports toContributing to local communities and society / Contributing to environmental preservation

Instructs/Supervises

Audit Department
Audits▼▼AuditsAuditsCSR Working Group, etc.

(Deliberation of critical issues)(Deliberation of internal governance policies)

▼

▼

▼

Board of Managing Directors

Makes proposals to/Reports to▼▼

Makes decisions/
Makes proposals to/Approves
Reports to▼▼

Makes decisions/
Approves

Audits▼Corporate ethics / Compliance・Civil Code・Pharmaceutical Affairs Law
・Antitrust Law
・Other regulations

A sound corporate culture that is brimming with the desire to take on new challenges

Advises/Aids

AICHI Spirit / Action Guidelines▼

12▼
Group Company

Continuous growth through business activities

Risk management▼

Business / Department▼
Reports to・Labor Standards Act
・Industrial Safety and Health Act
・Worker Dispatch Law*1 Corporate Governance : A system for monitoring corporate management to make sure that it is fair and transparent with the objective of maximizing corporate value*2 Compliance : One of the principles of corporate governance. It means compliance by an enterprise with laws, social norms, principles of corporate ethics, and codes of conduct.
*3 Risk management : A method for managing losses and risks so that they can be avoided or minimized.

*4 J-SOX : This is a Japanese corporate reform law modeled after the Sarbanes-Oxley Act (SOX). It seeks to strengthen accounting auditing systems and internal controls.
*5 Internal controls : A part of corporate governance, these involve the management, monitoring, and guaranteeing of each area of business to make sure that the proper
standards are being followed to ensure that business operations are carried out soundly and efficiently. In particular, they involve creating standards and systems that prevent
improper accounting maneuvers and to monitor and certify that these systems are running correctly.

13Corporate GovernanceIn our mission statement, we commit to “contributing to society by providing appealing products“ based on a “dynamic and

A new Midium-term CSR Plan

Promoting internal controls

Through discussions by the CSR Working Group, we found that

To continue being a listed enterprise that is trusted because

though the awareness of CSR issues had increased over threeof its sound and efficient business activities that are free ofyears of CSR activities, there were variations in the activities andillegal or inappropriate acts and mistakes, we are working toin awareness, making it hard to consider them call company-

create an internal control system to manage and monitor all

The objective of the biannual meetings of the CSR Working

wide activities. Thus we identified more thoroughly entrenchingactivities for everything from R&D to sales, purchasing, andwe are striving to run our business in a fair and efficient manner.

Group is to implement efforts relate to corporate social respon-and establishing our CSR policies and raising awareness of

production.

In our Regular Board Meetings, which are held monthly, and oursibility (CSR), and the major themes are compliance*2, risk

CSR issues across the entire enterprise as an issue goingAs part of this effort, we have reviewed the standards related

Special Board Meetings, which are held as needed, importantmanagement*3, and contributing to society.

forward. We also established the 2010 Midium-term CSR Plan

to the approval of decisions in the course of business

management decisions are made and the work of the represen-

In 2007, we mainly looked at our compliance-related activities

to take our CSR activities to the next level.

operations and we have centralized these standards. Also, totative directors is supervised.

and reviewed our educational and awareness efforts, ourAs a rule, the Board of Managing Directors, which is made up

conformance to important legislation such as the Laborof all directors who have additional corporate roles and who

Standards Act and Worker Dispatch Law, as well as ourrank as at least a managing director, meets twice a month totrusted corporate character”. Thus to maintain the trust of our stakeholders, we work to make our system of corporate
administration even more efficient and transparent as well as to review it constantly.

A more stringent management system

CSR Committee

Based on the system of corporate governance*1 shown below,

improve consistency and internal controls in the Aichi Steel

Conformance to the Financial Instruments and Exchange Law

Group’s management policies, we hold periodic meetingssystems such as the one used to manage confidential informa-

We started preparing for the Financial Instruments andand managing directors to check on business operations at

thoroughly discuss basic management policies so they cantion. We also reviewed our internal reporting system (ourExchange Law (J-SOX*4) in 2006. This law makes it manda-

our subsidiaries. We have also standardized the guidelines forassess each other.

Hotto Line) to see how often it was being used.

tory to submit reports of internal controls and for auditing

reports from our subsidiaries to strengthen our relationship.

Two standing and three part-time auditors check the work ofGoing forward, one of the issues related to compliance will becompanies to do checks starting the fiscal year ending March

the directors. They attend important meetings, review approvalensuring that compliance practices are thoroughly established2009. Currently, the Aichi Steel Group is going into theletters, and conduct meetings with corporate officers andat group companies and at all companies working on-site,

implementation stage of these requirements.

employees.

and this has been incorporated into the 2008 policy.

with the presidents of subsidiaries and we dispatch directors

Aichi Steel Group’s CSR concept diagram

Our corporate governance system

Local
communities
SocietyS h a re h o ld e r’s M e e tin g
Appoints/Dismisses

Appoints/Dismisses▼▼▼
AuditsMakes decisions/Supervises

Board of Auditors▼

Appoints/Dismisses

Reports to▼Reports to

Accounting Audit Team

Instructs/Supervises

Customers
Suppliers

Improved corporate value

CSR management
Realization of mission statement
Corporate governance

Judges if an accounting audit is needed

Shareholders

Audits▼ ▼▼Board of Representative Directors▼▼

Board of Directors

Appoints/Dismisses
Reports to▼▼Business Update

To maintain the trust of our stakeholders, we are putting
together a transparent management system.

Disclosure of
Shareholder’s Meeting
information(Accountability)
Board of Directors

・Companies Act
・Financial Instruments andExchange Law (J-SOX)

Reports toExternal auditing (Auditors)

Board of Auditors

Employees

Controls based on the “Basic policy on internal control systems”

Reports toReports toContributing to local communities and society / Contributing to environmental preservation

Instructs/Supervises

Audit Department
Audits▼▼AuditsAuditsCSR Working Group, etc.

(Deliberation of critical issues)(Deliberation of internal governance policies)

▼

▼

▼

Board of Managing Directors

Makes proposals to/Reports to▼▼

Makes decisions/
Makes proposals to/Approves
Reports to▼▼

Makes decisions/
Approves

Audits▼Corporate ethics / Compliance・Civil Code・Pharmaceutical Affairs Law
・Antitrust Law
・Other regulations

A sound corporate culture that is brimming with the desire to take on new challenges

Advises/Aids

AICHI Spirit / Action Guidelines▼

12▼
Group Company

Continuous growth through business activities

Risk management▼

Business / Department▼
Reports to・Labor Standards Act
・Industrial Safety and Health Act
・Worker Dispatch Law*1 Corporate Governance : A system for monitoring corporate management to make sure that it is fair and transparent with the objective of maximizing corporate value*2 Compliance : One of the principles of corporate governance. It means compliance by an enterprise with laws, social norms, principles of corporate ethics, and codes of conduct.
*3 Risk management : A method for managing losses and risks so that they can be avoided or minimized.

*4 J-SOX : This is a Japanese corporate reform law modeled after the Sarbanes-Oxley Act (SOX). It seeks to strengthen accounting auditing systems and internal controls.
*5 Internal controls : A part of corporate governance, these involve the management, monitoring, and guaranteeing of each area of business to make sure that the proper
standards are being followed to ensure that business operations are carried out soundly and efficiently. In particular, they involve creating standards and systems that prevent
improper accounting maneuvers and to monitor and certify that these systems are running correctly.

13

Risk Management

We believe that clarifying the latent risks in our business operations and minimizing any effects of these risks on our stakeholders are

Earthquake preparations

Large-scale disaster training

To prepare for the Tokai and Tohnankai earthquakes, which are

In November 2007, we carried out our “Company-wide

thought to be the most significant risk to us right now, all ofdisaster response training” concurrently with the “Joint

Risk management at the department levelour departments are working on creating a disaster response

disaster training” held by the Safety Association*1, which issystem based on our Earthquake Response Standard.

made up by the 44 companies in Tokai City’s coastal area.

We thoroughly manage risk based on our Risk Management

Based on the critical company-wide risks identified up to thisWe also distribute an Earthquake Response Manual to all of

Approximately 130 individuals took part in the training, which

Standard so that our business operations can go on even if

point, each department has selected what the critical risks are

our directors and employees. This manual sets out what to do

involved nine fire trucks and ambulances. In this trainingsome risk were to occur. These critical risks include natural

within their departments. As needed, they are incorporating

if an earthquake of 5 or more on the Richter scale were toscenario, a forecast of a Tokai earthquake was received, adisasters, fires, civil disturbances, riots, terrorism, criticalthese risks into their departmental policies and methodicallyoccur; we also distribute an Earthquake Response Procedure,task force was set up, damage was inspected, an on-site

product claims and other issues relating to manufacturing

carrying out countermeasures.

which is in the form of a wallet-sized card.

headquarters was set up, an oil spill was contained, and the

responsibility, loss of trust, lawsuits, and corporate wrongdo-

The principal departments in charge of each risk send out aing. This type of emergency situation will be handled as

request to all related departments to do a self-check once aneeded by setting up a task force.

year to gauge the progress of these countermeasures. The

Risk awareness activities

principal departments then hold consultations to find out what

We carry out activities to improve mutual awarenessthe issues are.

within the Aichi Steel Group.

part of corporate social responsibility. We are clarifying our risk management priorities by identifying and assessing the risks
associated with our business operations, i.e. risks that are changing as society changes.

Risk management is a major management priority

Promoting risk management throughout the entire group

By discussing risks face-to-face, it is sometimes possible toIn fiscal 2007, we worked to mitigate the critical risks

shift attention to the issues and make new discoveries, raisingidentified up to that point. Also, we finished identifying risks inthe overall level of risk management.

Business Update

We are identifying the critical risks at the Aichi SteelGroup so that they can be managed.

injured were rescued and evacuated.

Presentation on responding to earthquakes
No one knows when the next Tokai or Tohnankai earthquake will
hit. In April 2008, the Aichi Steel Engineer’s Association*2 held aour domestic and overseas group companies, and we arepresentation to explore earthquake issues. They invited Nobuo

working to create a group-wide risk management system. As

Fukuwa from the Graduate School of Environmental Studies atpart of this effort, we have top management at our group

Nagoya University to talk about the latest efforts in earthquake

companies receive risk management training sessions, andscience

we hold consultations related to priority items.

and

to

present

damage estimates based on

Disaster training (spraying water)

earthquake simulations. He

Identifying and assessing risks

also talked about predicting
earthquake●Risk classification
Internal factors

Risk type

External factors

Risks to avoid（1）
Compliance risk

Effect of the risk

Risks to take（2）Risks related tobusiness operations（3）Investment-related risks（4）
External risks① Safety of employees and local residents
Specific risk items

Responsibility to provide products③ (long-term shutdown)

responding to earthquakes.
Presentation on preventing disasters in the workplace
In February 2008, we invited Fire Chief Hasegawa from the Tokai

trends: What you can do” and “Preventing fire in the home”.
During this presentation, he drew on examples from his time spent④ Continued existence of enterprisefighting fires to explain measures we could take and lessons we●Risk map

Disaster training (A Tokai City firefighter at work)

can learn based on an analysis
Likelihood / frequency of occurrence
Major

Moderate

Major
Moderate
Minor

Specific risk items

Minorof fires and leakages athazardous materials facilities.
He also gave us advice on
Aichi Steel’s management
system.

14

andCity Fire Department to discuss two subjects: “Fires and accident② Loss of trust from stakeholders

Effect on management

damage*1 Safety Association : The Tokai City Seaside Industrial Zone Safety Association*2 Aichi Steel Engineer’s Association : This is an independent organization made up
primarily of engineering staff; everyone from directors to new employees can join. Its
aims are to have members working with each other to improve their skills and toincrease workplace vitality.

15

Risk Management

We believe that clarifying the latent risks in our business operations and minimizing any effects of these risks on our stakeholders are

Earthquake preparations

Large-scale disaster training

To prepare for the Tokai and Tohnankai earthquakes, which are

In November 2007, we carried out our “Company-wide

thought to be the most significant risk to us right now, all ofdisaster response training” concurrently with the “Joint

Risk management at the department levelour departments are working on creating a disaster response

disaster training” held by the Safety Association*1, which issystem based on our Earthquake Response Standard.

made up by the 44 companies in Tokai City’s coastal area.

We thoroughly manage risk based on our Risk Management

Based on the critical company-wide risks identified up to thisWe also distribute an Earthquake Response Manual to all of

Approximately 130 individuals took part in the training, which

Standard so that our business operations can go on even if

point, each department has selected what the critical risks are

our directors and employees. This manual sets out what to do

involved nine fire trucks and ambulances. In this trainingsome risk were to occur. These critical risks include natural

within their departments. As needed, they are incorporating

if an earthquake of 5 or more on the Richter scale were toscenario, a forecast of a Tokai earthquake was received, adisasters, fires, civil disturbances, riots, terrorism, criticalthese risks into their departmental policies and methodicallyoccur; we also distribute an Earthquake Response Procedure,task force was set up, damage was inspected, an on-site

product claims and other issues relating to manufacturing

carrying out countermeasures.

which is in the form of a wallet-sized card.

headquarters was set up, an oil spill was contained, and the

responsibility, loss of trust, lawsuits, and corporate wrongdo-

The principal departments in charge of each risk send out aing. This type of emergency situation will be handled as

request to all related departments to do a self-check once aneeded by setting up a task force.

year to gauge the progress of these countermeasures. The

Risk awareness activities

principal departments then hold consultations to find out what

We carry out activities to improve mutual awarenessthe issues are.

within the Aichi Steel Group.

part of corporate social responsibility. We are clarifying our risk management priorities by identifying and assessing the risks
associated with our business operations, i.e. risks that are changing as society changes.

Risk management is a major management priority

Promoting risk management throughout the entire group

By discussing risks face-to-face, it is sometimes possible toIn fiscal 2007, we worked to mitigate the critical risks

shift attention to the issues and make new discoveries, raisingidentified up to that point. Also, we finished identifying risks inthe overall level of risk management.

Business Update

We are identifying the critical risks at the Aichi SteelGroup so that they can be managed.

injured were rescued and evacuated.

Presentation on responding to earthquakes
No one knows when the next Tokai or Tohnankai earthquake will
hit. In April 2008, the Aichi Steel Engineer’s Association*2 held aour domestic and overseas group companies, and we arepresentation to explore earthquake issues. They invited Nobuo

working to create a group-wide risk management system. As

Fukuwa from the Graduate School of Environmental Studies atpart of this effort, we have top management at our group

Nagoya University to talk about the latest efforts in earthquake

companies receive risk management training sessions, andscience

we hold consultations related to priority items.

and

to

present

damage estimates based on

Disaster training (spraying water)

earthquake simulations. He

Identifying and assessing risks

also talked about predicting
earthquake●Risk classification
Internal factors

Risk type

External factors

Risks to avoid（1）
Compliance risk

Effect of the risk

Risks to take（2）Risks related tobusiness operations（3）Investment-related risks（4）
External risks① Safety of employees and local residents
Specific risk items

Responsibility to provide products③ (long-term shutdown)

responding to earthquakes.
Presentation on preventing disasters in the workplace
In February 2008, we invited Fire Chief Hasegawa from the Tokai

trends: What you can do” and “Preventing fire in the home”.
During this presentation, he drew on examples from his time spent④ Continued existence of enterprisefighting fires to explain measures we could take and lessons we●Risk map

Disaster training (A Tokai City firefighter at work)

can learn based on an analysis
Likelihood / frequency of occurrence
Major

Moderate

Major
Moderate
Minor

Specific risk items

Minorof fires and leakages athazardous materials facilities.
He also gave us advice on
Aichi Steel’s management
system.

14

andCity Fire Department to discuss two subjects: “Fires and accident② Loss of trust from stakeholders

Effect on management

damage*1 Safety Association : The Tokai City Seaside Industrial Zone Safety Association*2 Aichi Steel Engineer’s Association : This is an independent organization made up
primarily of engineering staff; everyone from directors to new employees can join. Its
aims are to have members working with each other to improve their skills and toincrease workplace vitality.

15

Compliance

We want to continue being an open and fair enterprise. Based on this simple desire and in addition to the self-regulating systems

Creating an open and transparent environment

Compliance activities in the technical departments

Proactively preventing wrongdoing and illegal acts, and promot-

The Technical Planning Div. worked with Technical Develop-

ing compliance depends on creating an open corporate culture

ment Div. to launch “technical department compliance liaison

in which it is easy for employees to discuss problems. Thus wemeetings” where compliance issues relevant to technicalare putting an emphasis on clarifying our work and decision-

departments are discussed. Since 2006, the two divisions

Our compliance awareness efforts focus on the education

making systems as well as to enhance communication between

have held joint morning meeting once a month where theGroup’s Action Guidelines, which was established in 1998.

and training of employees in every position including new

managers, supervisors, and employees.

employees give “compliance declarations” in which theyThis document, along with another document called Code of

employees, newly appointed officers, and department manag-

Also, as part of a system to strengthen self-purification measures,present their views of compliance as well as about important

Conduct, were summarized on a wallet-sized card anders. It involves issuing a publication called Legal News, as well

we created the Aichi Steel “Hotto Line”, a hotline that lets people

topics. We are continuing these efforts slowly and steadily.

distributed to all employees to make sure corporate ethics

as a column in the company bulletin called CSR Corner.

discuss and report wrongdoing and illegal acts by the company

have been thoroughly established. Another document that

Legal News is issued once or twice a month, and covers

or by employees as well as other issues on their minds. The

was distributed was an explanation of prohibited actions andcompliance issues related to work as well as general ethicalhotline is operated by the Legal Affairs Dept. in the Generalapplicable laws entitled “Compliance Do’s and Don’ts”. In

and legal issues. We also plan to start featuring compliance-

Affairs Div., auditors who are independent from Aichi Steel, and2007, we worked to expand our compliance activities andrelated efforts at other companies.

our corporation lawyer. It is available not only to employees but

being created by our employees, we are revitalizing our communication and creating an open workplace environment to create a
corporate culture in which it is difficult for wrongdoing and illegal acts to take place.

Improving awareness of compliance issues
Aichi Steel’s compliance activities are based on the Aichi Steel

Enriching ongoing awareness activities

raise awareness across the entire Aichi Steel Group as well as

also to subsidiaries, contractors operating on-site, and suppliers.

at our on-site contractors. We plan to continue this in 2008.

In 2007, five calls were made to this hotline.
An employee giving a compliance declaration

Calls to the “Hotto Line”

Compliance promotion system
In 2007, we pushed full legal compliance throughout thesocial issues, and case studies are covered in order toentire company, and to strengthen our legal capabilities, we

increase our sensitivity to compliance issues.

established a Legal Department in the General Affairs Division.

Also, each legal site completes a prescribed compliance

We also created “primary legal sites” for various relevant laws;

checklist at the end of each fiscal year; they also discuss

the “key legal persons” from each workplace who have beenvarious issues in meetings with the Legal Dept., devise

selected meet every other month or as needed to hold a

improvements, and implement them.

“compliance liaison meeting”. At this meeting, legal trends,

Business Update

We are working to creating an open corporate culture
and to improve awareness of compliance issues.

Fiscal year

'04

'05

'06

'07

Number of calls

5

2

11

5

CSR and ComplianceEnterprise
Fulfill activities as an economic entityand as a good corporate citizen

Improve corporate value

Contribute to the sustainable
development of society and the earth

CSR (Corporate Social Responsibility)＜Meeting the expectations and maintaining trust with stakeholders＞

Compliance promotion system
CSR Working Group
Chairperson: President
Members: Managing directors
and auditors

Person in charge of legal affairs
Director responsible for the General Affairs Div.
Compliance liaison meeting

Legal Compliance Site
General Affairs Div.

16

Customer /Consumer

Suppliers

Administration /Supervising
agencyThe earthShareholders /Investors

Local community/Society

Employees

Product safety
Improved CS

Fair and mutually
beneficial
coexistence

Following the rules
Disclosing
information

Environmental
preservation
Energy savings

Distribution of
earnings

Disclosing information
Contributing tosociety

Creating a pleasantwork environment /Ability / Purpose in life▲

Various locations
Person in charge of legal compliancein the department

Compliance / Respect for human rights

Key legal person

Various primary
legal sites

Compliance status
Mission statement“A trusted corporatecharacter”

Aichi Steel Groupʼs
Action Guidelines

Code of Conduct for
employees

The day-to-day
work of employees

Employment rules,
standards, and manuals

Laws and regulations, social
norms, safety

Eﬃciency and the pursuit of
proﬁt(Excerpt from employee training material)

17Compliance

We want to continue being an open and fair enterprise. Based on this simple desire and in addition to the self-regulating systems

Creating an open and transparent environment

Compliance activities in the technical departments

Proactively preventing wrongdoing and illegal acts, and promot-

The Technical Planning Div. worked with Technical Develop-

ing compliance depends on creating an open corporate culture

ment Div. to launch “technical department compliance liaison

in which it is easy for employees to discuss problems. Thus wemeetings” where compliance issues relevant to technicalare putting an emphasis on clarifying our work and decision-

departments are discussed. Since 2006, the two divisions

Our compliance awareness efforts focus on the education

making systems as well as to enhance communication between

have held joint morning meeting once a month where theGroup’s Action Guidelines, which was established in 1998.

and training of employees in every position including new

managers, supervisors, and employees.

employees give “compliance declarations” in which theyThis document, along with another document called Code of

employees, newly appointed officers, and department manag-

Also, as part of a system to strengthen self-purification measures,present their views of compliance as well as about important

Conduct, were summarized on a wallet-sized card anders. It involves issuing a publication called Legal News, as well

we created the Aichi Steel “Hotto Line”, a hotline that lets people

topics. We are continuing these efforts slowly and steadily.

distributed to all employees to make sure corporate ethics

as a column in the company bulletin called CSR Corner.

discuss and report wrongdoing and illegal acts by the company

have been thoroughly established. Another document that

Legal News is issued once or twice a month, and covers

or by employees as well as other issues on their minds. The

was distributed was an explanation of prohibited actions andcompliance issues related to work as well as general ethicalhotline is operated by the Legal Affairs Dept. in the Generalapplicable laws entitled “Compliance Do’s and Don’ts”. In

and legal issues. We also plan to start featuring compliance-

Affairs Div., auditors who are independent from Aichi Steel, and2007, we worked to expand our compliance activities andrelated efforts at other companies.

our corporation lawyer. It is available not only to employees but

being created by our employees, we are revitalizing our communication and creating an open workplace environment to create a
corporate culture in which it is difficult for wrongdoing and illegal acts to take place.

Improving awareness of compliance issues
Aichi Steel’s compliance activities are based on the Aichi Steel

Enriching ongoing awareness activities

raise awareness across the entire Aichi Steel Group as well as

also to subsidiaries, contractors operating on-site, and suppliers.

at our on-site contractors. We plan to continue this in 2008.

In 2007, five calls were made to this hotline.
An employee giving a compliance declaration

Calls to the “Hotto Line”

Compliance promotion system
In 2007, we pushed full legal compliance throughout thesocial issues, and case studies are covered in order toentire company, and to strengthen our legal capabilities, we

increase our sensitivity to compliance issues.

established a Legal Department in the General Affairs Division.

Also, each legal site completes a prescribed compliance

We also created “primary legal sites” for various relevant laws;

checklist at the end of each fiscal year; they also discuss

the “key legal persons” from each workplace who have beenvarious issues in meetings with the Legal Dept., devise

selected meet every other month or as needed to hold a

improvements, and implement them.

“compliance liaison meeting”. At this meeting, legal trends,

Business Update

We are working to creating an open corporate culture
and to improve awareness of compliance issues.

Fiscal year

'04

'05

'06

'07

Number of calls

5

2

11

5

CSR and ComplianceEnterprise
Fulfill activities as an economic entityand as a good corporate citizen

Improve corporate value

Contribute to the sustainable
development of society and the earth

CSR (Corporate Social Responsibility)＜Meeting the expectations and maintaining trust with stakeholders＞

Compliance promotion system
CSR Working Group
Chairperson: President
Members: Managing directors
and auditors

Person in charge of legal affairs
Director responsible for the General Affairs Div.
Compliance liaison meeting

Legal Compliance Site
General Affairs Div.

16

Customer /Consumer

Suppliers

Administration /Supervising
agencyThe earthShareholders /Investors

Local community/Society

Employees

Product safety
Improved CS

Fair and mutually
beneficial
coexistence

Following the rules
Disclosing
information

Environmental
preservation
Energy savings

Distribution of
earnings

Disclosing information
Contributing tosociety

Creating a pleasantwork environment /Ability / Purpose in life▲

Various locations
Person in charge of legal compliancein the department

Compliance / Respect for human rights

Key legal person

Various primary
legal sites

Compliance status
Mission statement“A trusted corporatecharacter”

Aichi Steel Groupʼs
Action Guidelines

Code of Conduct for
employees

The day-to-day
work of employees

Employment rules,
standards, and manuals

Laws and regulations, social
norms, safety

Eﬃciency and the pursuit of
proﬁt(Excerpt from employee training material)

17

Highlights-1: We Are a Monozukuri Company

Highlights-1: Monozukuri

The monozukuri capabilities of Aichi Steel – finding new possibilities from “Fe(ferrum)” and meeting the needs of society

A production system that can handle increased demand

Electromagnetic products full of possibility“Monozukuri Revolution” that we started in 2004 and our massive facility investments are

2007 was the year that our electromagnetic products businessOur dental attachment for securing false teeth is the size of abearing fruit. In our forging business, we have made great progress toward establishing a

finally took off. Demand for Magfine magnets has increased

grain of rice and has a powerful 600gf (gram force) magnetic

high-profit revenue base both in Japan and overseas. In our steel business, we have lookedworldwide, and we have started production in the Czech

force. As of March 2008, 2 million of these have been used

at numerous issues including adopting direct-delivery logistics in our quality assurance lines.

Republic for the European market, and we have started building

around the world, and as populations around the world age, we

We plan to expand these efforts to include our source of steel – our steelmaking anda new production facility in Seki City, Gifu. We plan to use ourhope to continue to contribute to enhanced safety and quality

blooming processes.

environmental knowhow related to production processes that weof life.

In new areas of business, we have started the mass production of our Magfine bonded

have been accumulating in our Chita and Higashiura plants.

In addition to magnets, we are expanding into other products

Aichi Steel is an integrated producer of steel and forgings, and this is our strength. Our

anisotropic neodymium magnet, and we have increased the range of applications for bothwith our MI (magneto-impedance) sensor, which is able toour magnetic sensors and our TetsuRiki-Agri; our one and only products are on track tosuccess. I believe that Aichi Steel’s mission is to use its engineering capabilities and monozu-

Hiroaki Asano

kuri capabilities to find new possibilities in materials in order to contribute to society.

Managing Director andGeneral Manager of Technical Headquarters

precisely measure minute magnetic fields.

Starting mass production of Magfine in Europe

In 2006, we developed an MI sensor capable of detecting a

In September 2007, we established Aichi Magfine Czech s.r.o., aminute 0.5 nanotesla (one 50,000th of the earth’s magnetic

subsidiary of Aichi Steel that started production of Magfine

field), and we were able to successfully apply it in a device formagnets in February 2008. We supply a certain German

New lines at No. 7 Forging Shop

Magfine – a product that contributes to better fuel economy

detecting metal particles in foodstuffs. Currently, we arecompany that is working to make motors smaller and lighter todeveloping an even more sensitive sensor that works at the

reduce CO2 emissions. In 2010, we plan to increase our monthly
production volume of 200,000 pieces to 2 million pieces a month.

picotesla level. This technology is expected to have medical
applications among others.

In January 2008, construction of our Rolling Mill Line No. 8, a

One of the primary products in Aichi Steel’s electromagnetic

A new production facility in Gifu Prefectureline that will produce ring gears, was completed. This is one ofproducts division is our Magfine bonded anisotropic neodymium

In August 2008, construction started on our new Seki Plant,

the world’s fastest lines, and it will enable us to reduce costs

magnet. There is a demand for magnets with excellent formabil-which will produce products for our electromagnetic

significantly over the existing Lines No. 6 and No. 7. This facility

ity and magnetic power to make it possible to reduce the size

products business in Seki City, Gifu Prefecture. It is expected

people, cars, and the environment. Expect to see more

has everything from forging to shipping in one plant to improve

and weight of motors and to improve performance. What we did

to be complete in May 2009. In the first year of operation, it

growth in this area of business.

customer satisfaction by assuring on-time delivery. This is how

was to focus on the development of a bonded anisotropic

is expected to produce 2 million pieces per month.

we are working to achieve zero defects to fully meet the quality

neodymium magnet early on. We discovered the manufacturing

expectations of our customers.

principles for anisotropic magnetic powder in 1996, and weestablished a mass-production system for magnetic powder in

Aichi Steel’s efforts to develop monozukuri that is better for

Efforts in new areas of business2001. In 2003, we were successful in commercializing the
Magfine bonded anisotropic neodymium magnet, which had the

Our electromagnetic products business is another aspect ofElectromagnetic productsElectronic parts

DentalMagnets

Sensors

Lighter motors

Electronic compasses and sensors
for detecting foreign matter

TetsuRiki-Agribest magnetic properties in the world.
The use of this product in home electronics and electric tools in
Small magnet

2004 was the beginning of a new opportunity. Since 2005,
Magfine magnets have been used in car seat motors in the
Crown, Estima, and Lexus, and their use is on the rise. Throughthis product, we are able to contribute to lighter vehicles, better

Dental root or implant

Parts for hybrid vehicles

Magnetic metal(Keeper)

Comfortable false teeth

fuel economy, and lower CO2 emissions.

Expantion of food production, reforestation
and regenelation of ocean

Rolling Mill Line No. 8

An aging population

Safety, peace ofmind, and comfort

A networked society

Environmental
conservation

Increased
population

The new areas of business that will contribute to the sustainable society of the future18

19

Highlights-1: We Are a Monozukuri Company

Highlights-1: Monozukuri

The monozukuri capabilities of Aichi Steel – finding new possibilities from “Fe(ferrum)” and meeting the needs of society

A production system that can handle increased demand

Electromagnetic products full of possibility“Monozukuri Revolution” that we started in 2004 and our massive facility investments are

2007 was the year that our electromagnetic products businessOur dental attachment for securing false teeth is the size of abearing fruit. In our forging business, we have made great progress toward establishing a

finally took off. Demand for Magfine magnets has increased

grain of rice and has a powerful 600gf (gram force) magnetic

high-profit revenue base both in Japan and overseas. In our steel business, we have lookedworldwide, and we have started production in the Czech

force. As of March 2008, 2 million of these have been used

at numerous issues including adopting direct-delivery logistics in our quality assurance lines.

Republic for the European market, and we have started building

around the world, and as populations around the world age, we

We plan to expand these efforts to include our source of steel – our steelmaking anda new production facility in Seki City, Gifu. We plan to use ourhope to continue to contribute to enhanced safety and quality

blooming processes.

environmental knowhow related to production processes that weof life.

In new areas of business, we have started the mass production of our Magfine bonded

have been accumulating in our Chita and Higashiura plants.

In addition to magnets, we are expanding into other products

Aichi Steel is an integrated producer of steel and forgings, and this is our strength. Our

anisotropic neodymium magnet, and we have increased the range of applications for bothwith our MI (magneto-impedance) sensor, which is able toour magnetic sensors and our TetsuRiki-Agri; our one and only products are on track tosuccess. I believe that Aichi Steel’s mission is to use its engineering capabilities and monozu-

Hiroaki Asano

kuri capabilities to find new possibilities in materials in order to contribute to society.

Managing Director andGeneral Manager of Technical Headquarters

precisely measure minute magnetic fields.

Starting mass production of Magfine in Europe

In 2006, we developed an MI sensor capable of detecting a

In September 2007, we established Aichi Magfine Czech s.r.o., aminute 0.5 nanotesla (one 50,000th of the earth’s magnetic

subsidiary of Aichi Steel that started production of Magfine

field), and we were able to successfully apply it in a device formagnets in February 2008. We supply a certain German

New lines at No. 7 Forging Shop

Magfine – a product that contributes to better fuel economy

detecting metal particles in foodstuffs. Currently, we arecompany that is working to make motors smaller and lighter todeveloping an even more sensitive sensor that works at the

reduce CO2 emissions. In 2010, we plan to increase our monthly
production volume of 200,000 pieces to 2 million pieces a month.

picotesla level. This technology is expected to have medical
applications among others.

In January 2008, construction of our Rolling Mill Line No. 8, a

One of the primary products in Aichi Steel’s electromagnetic

A new production facility in Gifu Prefectureline that will produce ring gears, was completed. This is one ofproducts division is our Magfine bonded anisotropic neodymium

In August 2008, construction started on our new Seki Plant,

the world’s fastest lines, and it will enable us to reduce costs

magnet. There is a demand for magnets with excellent formabil-which will produce products for our electromagnetic

significantly over the existing Lines No. 6 and No. 7. This facility

ity and magnetic power to make it possible to reduce the size

products business in Seki City, Gifu Prefecture. It is expected

people, cars, and the environment. Expect to see more

has everything from forging to shipping in one plant to improve

and weight of motors and to improve performance. What we did

to be complete in May 2009. In the first year of operation, it

growth in this area of business.

customer satisfaction by assuring on-time delivery. This is how

was to focus on the development of a bonded anisotropic

is expected to produce 2 million pieces per month.

we are working to achieve zero defects to fully meet the quality

neodymium magnet early on. We discovered the manufacturing

expectations of our customers.

principles for anisotropic magnetic powder in 1996, and weestablished a mass-production system for magnetic powder in

Aichi Steel’s efforts to develop monozukuri that is better for

Efforts in new areas of business2001. In 2003, we were successful in commercializing the
Magfine bonded anisotropic neodymium magnet, which had the

Our electromagnetic products business is another aspect ofElectromagnetic productsElectronic parts

DentalMagnets

Sensors

Lighter motors

Electronic compasses and sensors
for detecting foreign matter

TetsuRiki-Agribest magnetic properties in the world.
The use of this product in home electronics and electric tools in
Small magnet

2004 was the beginning of a new opportunity. Since 2005,
Magfine magnets have been used in car seat motors in the
Crown, Estima, and Lexus, and their use is on the rise. Throughthis product, we are able to contribute to lighter vehicles, better

Dental root or implant

Parts for hybrid vehicles

Magnetic metal(Keeper)

Comfortable false teeth

fuel economy, and lower CO2 emissions.

Expantion of food production, reforestation
and regenelation of ocean

Rolling Mill Line No. 8

An aging population

Safety, peace ofmind, and comfort

A networked society

Environmental
conservation

Increased
population

The new areas of business that will contribute to the sustainable society of the future18

19

Highlights-2: Developing Individuals to Support Monozukuri
Highlights-2: Developing individuals

Motivating the people that power monozukuri depends on improving the ability to communicate.

Multifaceted human resources development
Monozukuri is powered by individuals. It’s important to organize them and make sure they areprovided with an environment in which they can contribute to their fullest. To do this, you need tohave everyone communicating properly, but when I saw the results of our workplace assessment

Tamio Hayakawa, a Senior Meister with the Equipment

teach and be taught.

senior people take the initiative and break the ice with their fellow employees to establish get more

We want to create a process where people can enter the

warmth and interaction. If you can revitalize the atmosphere in your plant with an easy-to-understandcompany, become mainstays and veterans and where

message, this will make employees understand their role a bit better. This will lead to better teamwork

Creating an atmosphere where people can say what’s on their minds

conditions, and we welcome those skilled retirees as “senior

they play in role in creating an environment where people canplan that started with thoroughly establishing basic etiquette in the company and trying to get ouras well as presentations related to etiquette and morals in order to improve overall workplace vitality.

generation

they accumulated over long years to the next generation, and

new Senior Advisor, we started the “Ikiiki Aichi Team” and in January 2008, we put together an action

and higher work efficiency. Going forward, we plan to have employee events and sports tournaments

At Aichi Steel, we reemploy retired employees under specificmeisters”. Their mission is to pass on the knowhow and skills

survey, I became painfully aware that there was much room for improvement. Based on talks with

employees can learn the knowledge they need for whatever

Tetsuo Suzuki
Excutive officer andGeneral Manager of Forging Plant

Creating an environment where people can teach and be taught

Veterans pass on their knowledge to the next

work they are involved in, inside and outside the workplace

Engineering Div., is involved in employee training andother education related to equipment maintenance. He
also independently started show-and-tell sessions at
each plant. His teaching materials? Sheets on which hehas summarized tricks and tips related to his work. His
material is then placed on our internal network.
Initially, there were time and space restrictions and theand regardless of whether where one is in a superior-turnout was spotty. Turnout has increased since 2006,

subordinate relationship.

however, when we set up a system that lets Mr.

Aichi Steel is working to create a multi-faceted humanHayakawa and our other senior meisters go to theresources development through this type of education,

conference rooms of various workplaces to give “on-site”

job-specific training, on-the-job training, and off-the-job

education to employees coming off their shifts. “I’mtraining.

happiest when people ask questions,” says Mr.

In 2005, we started carrying out a workplace assessment

In fiscal 2007, we realized that our horizontal organizational

survey once a year in order to better understand what oursystem was not effective from the standpoint of humanHayakawa. “It means that they’re proactive and engaged.

workplace was like and to analyze the strengths andresources development, and we brought back our “senior

To me, education means learning together to growweaknesses of the organization. In 2006, we used the survey

employee system” for passing on knowhow from senior

together.”to do a group discussion to identify what we should be

employees to junior employees. This is a change that will

Worksite employees have said that on-site education

working on to improve the workplace and to establish aenhance communication by reconsidering the advantages to

has taught them teamwork and made them willing toformat where each individual gives a declaration to address

teaching and being taught.

consult others. They have also said that they would likethese issues.

Even in our QC circles, which have stimulated our workplace

In 2007, we gauged our workplace with another survey andthrough creative workplace and quality control proposals, we

we continued our group discussion to improve communica-

have focused our gaze on revitalizing small-group activities totion; our efforts to have everyone taking a problem-solving

make it easier for people to be creative. It has been over 40

approach to stimulate our workplace developed greatly. In ouryears since QC circles were introduced at Aichi Steel, andChita and forging plants, these activities have been

currently we have over 140 circles throughout the company.

thoroughly established, and we are currently in the process ofThese changes will only increase their importance as aexpanding them to cover our head office departments.

foundation of our business.

to use what they have learned to create an open andrespectful workplace where they can look others in theeye and tackle problems head-on in an atmosphere of
On-site education

respect.
Human resources development is critical for producing
good products. Part of this is our on-site education for
the generation that will be responsible for the Aichi Steelof tomorrow, and it is producing real results.

20

21

Highlights-2: Developing Individuals to Support Monozukuri
Highlights-2: Developing individuals

Motivating the people that power monozukuri depends on improving the ability to communicate.

Multifaceted human resources development
Monozukuri is powered by individuals. It’s important to organize them and make sure they areprovided with an environment in which they can contribute to their fullest. To do this, you need tohave everyone communicating properly, but when I saw the results of our workplace assessment

Tamio Hayakawa, a Senior Meister with the Equipment

teach and be taught.

senior people take the initiative and break the ice with their fellow employees to establish get more

We want to create a process where people can enter the

warmth and interaction. If you can revitalize the atmosphere in your plant with an easy-to-understandcompany, become mainstays and veterans and where

message, this will make employees understand their role a bit better. This will lead to better teamwork

Creating an atmosphere where people can say what’s on their minds

conditions, and we welcome those skilled retirees as “senior

they play in role in creating an environment where people canplan that started with thoroughly establishing basic etiquette in the company and trying to get ouras well as presentations related to etiquette and morals in order to improve overall workplace vitality.

generation

they accumulated over long years to the next generation, and

new Senior Advisor, we started the “Ikiiki Aichi Team” and in January 2008, we put together an action

and higher work efficiency. Going forward, we plan to have employee events and sports tournaments

At Aichi Steel, we reemploy retired employees under specificmeisters”. Their mission is to pass on the knowhow and skills

survey, I became painfully aware that there was much room for improvement. Based on talks with

employees can learn the knowledge they need for whatever

Tetsuo Suzuki
Excutive officer andGeneral Manager of Forging Plant

Creating an environment where people can teach and be taught

Veterans pass on their knowledge to the next

work they are involved in, inside and outside the workplace

Engineering Div., is involved in employee training andother education related to equipment maintenance. He
also independently started show-and-tell sessions at
each plant. His teaching materials? Sheets on which hehas summarized tricks and tips related to his work. His
material is then placed on our internal network.
Initially, there were time and space restrictions and theand regardless of whether where one is in a superior-turnout was spotty. Turnout has increased since 2006,

subordinate relationship.

however, when we set up a system that lets Mr.

Aichi Steel is working to create a multi-faceted humanHayakawa and our other senior meisters go to theresources development through this type of education,

conference rooms of various workplaces to give “on-site”

job-specific training, on-the-job training, and off-the-job

education to employees coming off their shifts. “I’mtraining.

happiest when people ask questions,” says Mr.

In 2005, we started carrying out a workplace assessment

In fiscal 2007, we realized that our horizontal organizational

survey once a year in order to better understand what oursystem was not effective from the standpoint of humanHayakawa. “It means that they’re proactive and engaged.

workplace was like and to analyze the strengths andresources development, and we brought back our “senior

To me, education means learning together to growweaknesses of the organization. In 2006, we used the survey

employee system” for passing on knowhow from senior

together.”to do a group discussion to identify what we should be

employees to junior employees. This is a change that will

Worksite employees have said that on-site education

working on to improve the workplace and to establish aenhance communication by reconsidering the advantages to

has taught them teamwork and made them willing toformat where each individual gives a declaration to address

teaching and being taught.

consult others. They have also said that they would likethese issues.

Even in our QC circles, which have stimulated our workplace

In 2007, we gauged our workplace with another survey andthrough creative workplace and quality control proposals, we

we continued our group discussion to improve communica-

have focused our gaze on revitalizing small-group activities totion; our efforts to have everyone taking a problem-solving

make it easier for people to be creative. It has been over 40

approach to stimulate our workplace developed greatly. In ouryears since QC circles were introduced at Aichi Steel, andChita and forging plants, these activities have been

currently we have over 140 circles throughout the company.

thoroughly established, and we are currently in the process ofThese changes will only increase their importance as aexpanding them to cover our head office departments.

foundation of our business.

to use what they have learned to create an open andrespectful workplace where they can look others in theeye and tackle problems head-on in an atmosphere of
On-site education

respect.
Human resources development is critical for producing
good products. Part of this is our on-site education for
the generation that will be responsible for the Aichi Steelof tomorrow, and it is producing real results.

20

21

Highlights-3: Contributing to the Environment through Our BusinessHighlights-3: Environment

We are carrying out environmental investments to further reduce ourCO2 emissions and we are also introducing eco-friendly products.

Harnessing the power of iron for plants

Possible envilonmental contribation

As we researched the possibilities of iron, we came upon the

Because TetsuRiki-Agri can supply ferrous ions in a stable

relationship between iron and plant life.

manner even in soil, it may be used to help grow plants inIron is an element that is indispensible to photosynthesis.

extreme environments such as alkaline soils and used to help

Plants struggle to absorb the iron in soil. This is where it

on a world-wide scale by greening of deserts and to increase

occurred to us that we could help plants by making it easiercrop yields. It has a huge potential for someday contributing

for them to absorb iron. This is where the idea for TetsuRiki-preserve the environment. We are currently only in the starting

Agri came from.

stages, but we will be putting more effort into PR activities toThis product gives plants iron in the form of ferrous (Fe 2+) ionsconvey the possibilities of this product.

to increase chlorophyll and to stimulate photosynthesis. As a

In 2007, we also introduced new

result, sugar content in fruit, promotion of flowering, and raiseversions of this product – TetsuRiki-

agricultural yields are expeeted. It has gradually been gaining

Agri Super and TetsuRiki-Agri Great.

acceptance among gardeners and farmers, and this market

They work in the same way as thecontinues to increase.

original product, but they have

We have been aggressively working to reduce our energy consumption in our various manufacturing processes from steelmaking to rolling and forging. In our steelmaking process, which isparticularly energy-intensive, we increased the capacity of our electric furnaces and wepurchased burners with high thermal efficiency and heat recovery systems. In terms of solidifying steel, we started continuous casting to improve yields. Recently, we have been putting anemphasis on production technology and product R&D that will reduce the CO2 emissions while
producing products for customers. Going forward we will be intensifying all of these efforts; wewill also establish a “Process Energy Reform Committee” to review our production technology
at a fundamental level and a “Eco-life Committee” that promotes individual energy-saving
activities by each of our employees so that we can achieve further reductions in CO2 emissions
and help stop global warming.

Hiromi Sato
Director in charge of
Safety & Environmental Div.

Conserving energy by building a new heat treatment furnace
We built NH Furnace No. 8 in our in No. 6 Forging Shop in orderto address the issues with our existing heat treatment furnaces.
Parts were put into our existing furnaces in piles, making themheat up unevenly. A large amount of time (and energy) was
needed to heat up the entire pile. Also, when the products werefertilizer component to meet theneeds of different market segments.

Development of TetsuRiki-Agri

Existing furnaces
・Large variation in heating times because parts were
piled into heat treatment trays

DemandHigh

3rd generation
Growing crops
in alkaline soil

・Dents from parts being dropped when they werebeing loaded into the heat treatment tray

loaded into heat treatment trays, they became dented becauseof the impact. Thus in the new furnace, the heat treatment trays

1st generation

robot stacking were made to the loading method to improve

For individuals(gardening)heat distribution and to eliminate dents. This reduced theamount of time needed for heat treatment by approx. 40%.
Through additional improvements such as shortening the timerequired to reach the set temperature and changing the fuelfrom fuel oil to municipal gas, the new furnace emits 53% less
CO2 than existing furnaces. We can say with confidence that we
improved quality and that we helped the environment.

Reduction in CO2 emissions

Index
100
80
60

→

100

▲53％

47

40

New furnace▲

Flowers andornamental plants

Seedlings andsaplings

Greenhouses Industrial crops

Root crops

GrainsFertilizer for home gardening

Low

2003

Restoring sea flora
Greening the deserts
Biomass energy

For farmers

2nd generation

For individuals

were optimally designed to reduce weight, and changes such as

TetsuRiki-Agri Super

2006

2007

・Improved heating times because parts are stacked inheat treatment trays

Aichi Steel awarded the Chunichi Newspaper Prize・Stacking and de-stacking by robots has eliminated dents

The Chunichi Industrial Technology Awards recognize

2008

20XX

excellence in production technology and product R&D. In
2007, Aichi Steel was awarded the Chunichi Newspaper
Prize portion of the 21st Chunichi Industrial Technology
Awards for TetsuRiki-Agri. Aichi Steel also received thesame prize in 1994 for its magnetic dental attachment.

20
0

22

Existing furnaces

New furnace

23

Highlights-3: Contributing to the Environment through Our BusinessHighlights-3: Environment

We are carrying out environmental investments to further reduce ourCO2 emissions and we are also introducing eco-friendly products.

Harnessing the power of iron for plants

Possible envilonmental contribation

As we researched the possibilities of iron, we came upon the

Because TetsuRiki-Agri can supply ferrous ions in a stable

relationship between iron and plant life.

manner even in soil, it may be used to help grow plants inIron is an element that is indispensible to photosynthesis.

extreme environments such as alkaline soils and used to help

Plants struggle to absorb the iron in soil. This is where it

on a world-wide scale by greening of deserts and to increase

occurred to us that we could help plants by making it easiercrop yields. It has a huge potential for someday contributing

for them to absorb iron. This is where the idea for TetsuRiki-preserve the environment. We are currently only in the starting

Agri came from.

stages, but we will be putting more effort into PR activities toThis product gives plants iron in the form of ferrous (Fe 2+) ionsconvey the possibilities of this product.

to increase chlorophyll and to stimulate photosynthesis. As a

In 2007, we also introduced new

result, sugar content in fruit, promotion of flowering, and raiseversions of this product – TetsuRiki-

agricultural yields are expeeted. It has gradually been gaining

Agri Super and TetsuRiki-Agri Great.

acceptance among gardeners and farmers, and this market

They work in the same way as thecontinues to increase.

original product, but they have

We have been aggressively working to reduce our energy consumption in our various manufacturing processes from steelmaking to rolling and forging. In our steelmaking process, which isparticularly energy-intensive, we increased the capacity of our electric furnaces and wepurchased burners with high thermal efficiency and heat recovery systems. In terms of solidifying steel, we started continuous casting to improve yields. Recently, we have been putting anemphasis on production technology and product R&D that will reduce the CO2 emissions while
producing products for customers. Going forward we will be intensifying all of these efforts; wewill also establish a “Process Energy Reform Committee” to review our production technology
at a fundamental level and a “Eco-life Committee” that promotes individual energy-saving
activities by each of our employees so that we can achieve further reductions in CO2 emissions
and help stop global warming.

Hiromi Sato
Director in charge of
Safety & Environmental Div.

Conserving energy by building a new heat treatment furnace
We built NH Furnace No. 8 in our in No. 6 Forging Shop in orderto address the issues with our existing heat treatment furnaces.
Parts were put into our existing furnaces in piles, making themheat up unevenly. A large amount of time (and energy) was
needed to heat up the entire pile. Also, when the products werefertilizer component to meet theneeds of different market segments.

Development of TetsuRiki-Agri

Existing furnaces
・Large variation in heating times because parts were
piled into heat treatment trays

DemandHigh

3rd generation
Growing crops
in alkaline soil

・Dents from parts being dropped when they werebeing loaded into the heat treatment tray

loaded into heat treatment trays, they became dented becauseof the impact. Thus in the new furnace, the heat treatment trays

1st generation

robot stacking were made to the loading method to improve

For individuals(gardening)heat distribution and to eliminate dents. This reduced theamount of time needed for heat treatment by approx. 40%.
Through additional improvements such as shortening the timerequired to reach the set temperature and changing the fuelfrom fuel oil to municipal gas, the new furnace emits 53% less
CO2 than existing furnaces. We can say with confidence that we
improved quality and that we helped the environment.

Reduction in CO2 emissions

Index
100
80
60

→

100

▲53％

47

40

New furnace▲

Flowers andornamental plants

Seedlings andsaplings

Greenhouses Industrial crops

Root crops

GrainsFertilizer for home gardening

Low

2003

Restoring sea flora
Greening the deserts
Biomass energy

For farmers

2nd generation

For individuals

were optimally designed to reduce weight, and changes such as

TetsuRiki-Agri Super

2006

2007

・Improved heating times because parts are stacked inheat treatment trays

Aichi Steel awarded the Chunichi Newspaper Prize・Stacking and de-stacking by robots has eliminated dents

The Chunichi Industrial Technology Awards recognize

2008

20XX

excellence in production technology and product R&D. In
2007, Aichi Steel was awarded the Chunichi Newspaper
Prize portion of the 21st Chunichi Industrial Technology
Awards for TetsuRiki-Agri. Aichi Steel also received thesame prize in 1994 for its magnetic dental attachment.

20
0

22

Existing furnaces

New furnace

23

CSR Activities: Past and Future

CSR Activities: Past and Future

Looking back at the Midium-term CSR Plan
In 2005, we had a “Midium-term CSR Plan” for three years, which focused on building our foundations. The result of this is thateach one of our employees recognizes the importance of CSR, and is working to act with awareness. Going forward, we will work tofurther develop efforts relevant to our actual business activities – activities that involve developing products and technology that are
better for the environment and that involve reforming of our manufacturing processes to make them more environmentally sound.
We will also work to spread these efforts across the entire Aichi Steel Group.

Classification

Priority items

I
Activity
management

1. Thoroughly establishing our
CSR Policy

2. Creating a CSR promotion

Primary activities for each year (Please refer to individual yearly reports for details on ongoing activities or other efforts)

2005

3. Increasing PR efforts
highlighting our recyclingoriented nature and contributing
to local communities in order toincrease corporate value●Issued the “Aichi Steel CSR Report 2007

Evaluation

Direction heading toward 2010△
Weak at the Aichi Steel Group level
and at the business level

We will implement activities from both thefunctional and business sides●Put AICHI Spirit in writing

and Midium-term CSR Plan
●Established the 2010 Environmental
Action Plan

●Changed the Aichi Steel Corporate Action Guidelines to the Aichi●Established the CSR committee*1●Established the Aichi Steel Hotto Line, a reporting and consultation●Made

the Legal Affairs Dept. independent topromote compliance○

We will establish a CSR Month and concentrateon raising awareness●Developed new versions of TetsuRiki-Agri B10 and C10●Started actively promoting TetsuRiki-Agri as a product●Developed

in-house recycling technologies: Nickel
briquetting, ANRP, and AS shot
●Participated in the 2006 Messe Nagoya exhibition titled“Eco-Industrial Revolution”

that contributes to the environment; received one of
the Chunichi Industrial Technology Awards●Had a booth at the 2007 Messe Nagoya exhibition,
which had the theme “Safety, Security, and Comfort”○

We will promote environmental activities throughour actual business activities△
We are not reaching out enough tostakeholders outside the company

We will actively work together with local communities and release information

Steel Group’s Action Guidelines●Issued the “Aichi Steel CSR Report 2006

desk that has grown to include an advisory legal oﬃce.

●Sponsored to greenery project in Tokai-shi

with the “TetsuRiki-Agri” brandour web page (Japaneseversion)●Donated a monument for the traffic circle
in Tokai City’s Shurakuen Park

●Held a meeting with the press to discuss CS, ES, and the●Improved the events we hold to contribute toenvironment.
●Invited people from the local neighborhood association to have ameeting on local CSR issues●Formalized our matching gift program that supports the
Aichi Steel Volunteer’s fund●Held the Clean Aichi Day

local communities●Together with local residents, organized a tour togo cheer for the Nagoya Grampus soccer team.
●New uniforms completely

5. Strengthening internal controls●Carried out a corporate ethics compliance●Changed the auditors that check the work of directors to a

●Carriedacross the entire Aichi Steel Groupsurvey to gauge awareness of complianceissues in the company●Established the Aichi Steel Personal
Information Protection Policy in addition to the
Personal Information Protection Standard

system with two standing auditors and three part-time auditors●Narrowed down the critical company-wide risks out of all
the risks the company is facing; started implementing thismethod at domestic and overseas subsidiaries

out risk management training for top
directors for the Aichi Steel Group●Prepared for the Financial Instruments andExchange Law (J-SOX)○

We will collect more information and respondrapidly.

6. Anticipating environmental●Took action together with automakers to conform●Installed a tire washing area to counteract dust on internal●Reached the target reductions in CO2 emissions

preservation measures

to the ELV Recycling Law (ASR recycling)●Met our reduction targets for landfilled waste bythoroughly sorting industrial byproducts
generated internally

vehicles●Installed fluorine-removing equipment at our Kariya Plant

set by the Japan Iron and Steel Federation,
reduced the amount of landfill, and reduced our
COD values○

We will challenge ourselves with ever-higher
voluntary targets●Had

all assistant managers go through time
management training to shorten time spentworking.

○

We will increase awareness in employees related
to improving labor productivity and life planning●Carried out a workplace assessment survey and○We will promote communications to create an
exciting place to work△
There were lost-worktime accidents

We will review our safety practices to work toward
the total elimination of accidents.

●Overhauled●Recognized as a Aichi Prefecture Certified Family Friendly

7. Promoting a diverse range ofCorporation for our Nice Family System●Introduced the New Nice Senior’s System

work styles for a better
work-life balance
8. Introducing various systems to
support the growth of our employees
and creating an exciting andchallengeable workplace culture
9. Creating a comfortable andsafe work environment●Carried out a workplace assessment survey●Held our 1st Women’s Conference so that our female employees

for all employees to create an even better
workplace culture and to get feedback
about our strengths and weaknesses.

can actively exchange views to revitalize the workplace●Strengthened our leadership training in areas such as
nurturing and training the leaders of the next generation●Createda new Comprehensive Safety and HealthManagement System based on the passage of therevised Industrial Safety and Health Act*1 CSR committee: In January 2006, we amalgamated the Corporate Ethics Working Group, Risk Management Working Committee, and Social Contribution

24

2007

brand image so that local
communities and employees
can take pride in Aichi Steel

4. Improving our corporate

III
Respecting
employees
and human
resourcesdevelopment

2006●Established the CSR Policy, CSR Vision,

systemII
CSR
Activities

http://www.aichi-steel.co.jp/envi_rep/index.html）

Committee into the CSR Working Group as a forum to discuss CSR activities such as compliance, risk management, and contributing to society.

expanded our group discussions●Establisheda 5-year plan as a DesignatedWorkplace for Comprehensive Safety and HealthManagement Activities

25

CSR Activities: Past and Future

CSR Activities: Past and Future

Looking back at the Midium-term CSR Plan
In 2005, we had a “Midium-term CSR Plan” for three years, which focused on building our foundations. The result of this is thateach one of our employees recognizes the importance of CSR, and is working to act with awareness. Going forward, we will work tofurther develop efforts relevant to our actual business activities – activities that involve developing products and technology that are
better for the environment and that involve reforming of our manufacturing processes to make them more environmentally sound.
We will also work to spread these efforts across the entire Aichi Steel Group.

Classification

Priority items

I
Activity
management

1. Thoroughly establishing our
CSR Policy

2. Creating a CSR promotion

Primary activities for each year (Please refer to individual yearly reports for details on ongoing activities or other efforts)

2005

3. Increasing PR efforts
highlighting our recyclingoriented nature and contributing
to local communities in order toincrease corporate value●Issued the “Aichi Steel CSR Report 2007

Evaluation

Direction heading toward 2010△
Weak at the Aichi Steel Group level
and at the business level

We will implement activities from both thefunctional and business sides●Put AICHI Spirit in writing

and Midium-term CSR Plan
●Established the 2010 Environmental
Action Plan

●Changed the Aichi Steel Corporate Action Guidelines to the Aichi●Established the CSR committee*1●Established the Aichi Steel Hotto Line, a reporting and consultation●Made

the Legal Affairs Dept. independent topromote compliance○

We will establish a CSR Month and concentrateon raising awareness●Developed new versions of TetsuRiki-Agri B10 and C10●Started actively promoting TetsuRiki-Agri as a product●Developed

in-house recycling technologies: Nickel
briquetting, ANRP, and AS shot
●Participated in the 2006 Messe Nagoya exhibition titled“Eco-Industrial Revolution”

that contributes to the environment; received one of
the Chunichi Industrial Technology Awards●Had a booth at the 2007 Messe Nagoya exhibition,
which had the theme “Safety, Security, and Comfort”○

We will promote environmental activities throughour actual business activities△
We are not reaching out enough tostakeholders outside the company

We will actively work together with local communities and release information

Steel Group’s Action Guidelines●Issued the “Aichi Steel CSR Report 2006

desk that has grown to include an advisory legal oﬃce.

●Sponsored to greenery project in Tokai-shi

with the “TetsuRiki-Agri” brandour web page (Japaneseversion)●Donated a monument for the traffic circle
in Tokai City’s Shurakuen Park

●Held a meeting with the press to discuss CS, ES, and the●Improved the events we hold to contribute toenvironment.
●Invited people from the local neighborhood association to have ameeting on local CSR issues●Formalized our matching gift program that supports the
Aichi Steel Volunteer’s fund●Held the Clean Aichi Day

local communities●Together with local residents, organized a tour togo cheer for the Nagoya Grampus soccer team.
●New uniforms completely

5. Strengthening internal controls●Carried out a corporate ethics compliance●Changed the auditors that check the work of directors to a

●Carriedacross the entire Aichi Steel Groupsurvey to gauge awareness of complianceissues in the company●Established the Aichi Steel Personal
Information Protection Policy in addition to the
Personal Information Protection Standard

system with two standing auditors and three part-time auditors●Narrowed down the critical company-wide risks out of all
the risks the company is facing; started implementing thismethod at domestic and overseas subsidiaries

out risk management training for top
directors for the Aichi Steel Group●Prepared for the Financial Instruments andExchange Law (J-SOX)○

We will collect more information and respondrapidly.

6. Anticipating environmental●Took action together with automakers to conform●Installed a tire washing area to counteract dust on internal●Reached the target reductions in CO2 emissions

preservation measures

to the ELV Recycling Law (ASR recycling)●Met our reduction targets for landfilled waste bythoroughly sorting industrial byproducts
generated internally

vehicles●Installed fluorine-removing equipment at our Kariya Plant

set by the Japan Iron and Steel Federation,
reduced the amount of landfill, and reduced our
COD values○

We will challenge ourselves with ever-higher
voluntary targets●Had

all assistant managers go through time
management training to shorten time spentworking.

○

We will increase awareness in employees related
to improving labor productivity and life planning●Carried out a workplace assessment survey and○We will promote communications to create an
exciting place to work△
There were lost-worktime accidents

We will review our safety practices to work toward
the total elimination of accidents.

●Overhauled●Recognized as a Aichi Prefecture Certified Family Friendly

7. Promoting a diverse range ofCorporation for our Nice Family System●Introduced the New Nice Senior’s System

work styles for a better
work-life balance
8. Introducing various systems to
support the growth of our employees
and creating an exciting andchallengeable workplace culture
9. Creating a comfortable andsafe work environment●Carried out a workplace assessment survey●Held our 1st Women’s Conference so that our female employees

for all employees to create an even better
workplace culture and to get feedback
about our strengths and weaknesses.

can actively exchange views to revitalize the workplace●Strengthened our leadership training in areas such as
nurturing and training the leaders of the next generation●Createda new Comprehensive Safety and HealthManagement System based on the passage of therevised Industrial Safety and Health Act*1 CSR committee: In January 2006, we amalgamated the Corporate Ethics Working Group, Risk Management Working Committee, and Social Contribution

24

2007

brand image so that local
communities and employees
can take pride in Aichi Steel

4. Improving our corporate

III
Respecting
employees
and human
resourcesdevelopment

2006●Established the CSR Policy, CSR Vision,

systemII
CSR
Activities

http://www.aichi-steel.co.jp/envi_rep/index.html）

Committee into the CSR Working Group as a forum to discuss CSR activities such as compliance, risk management, and contributing to society.

expanded our group discussions●Establisheda 5-year plan as a DesignatedWorkplace for Comprehensive Safety and HealthManagement Activities

25

Improving Quality and Satisfying Customers

quality” across the entire
process.

There are three types of product quality: quality that is merely up to specification, quality goes one step further than the specification

Expanded third-party certification

but that is only at the expected level (expected quality), and quality that is above and beyond expectations (“wow” quality). Putting
the customer first and quality first are part of our basic policies, and to this end we are creating a quality assurance system where

Giving and receiving suggestions to improve businessIn response to the 2004 revision of the Industrial Standard-●Procurement policy

ization Act, Chita Plant, Kariya Plant, and four affiliates

With our AVI-21*2 initiative ongoing, our procurement

received a certification audit from JIC Quality Assurance

departments are carrying out this initiative as AVIP-21*3. We

Ltd. in August 2008. They were successfully certified to use

have informed all of our suppliers of our new procurement policy.

the new JIS symbol. (The change to the new JIS symbol

In 2007, the procurement market changed drastically because of

In October 2007, we completed our amalgamation of rolling

was completed in May 2008.)

the high cost of resources and materials, and we are rethinking

lines at Kariya Plant. We built a new heating furnace to achieve

In September 2007, the Technical Development Division’s

our procurement structure in the 2010 Medium-term Plan tosignificant increases in energy efficiency and quality, and we

Material evaluation Dept. received laboratory accreditation

reduce the risks associated with resource procurement,

Based on the idea that quality comes before everythingtransferred rolling units from the old plant and installed a newfor testing and analyzing steel from the Japan Accreditation

rearrange our supply sources, and to create an even moreelse, we have created a trustworthy system based on ISO

crop shear to configure our rolling line as efficiently as possible.

Board for Conformity Assessment. This allows test results

mutually beneficial relationship with our suppliers. Currently, our

9001 in order to meet customer needs and expectations

We are also optimizing equipment operation rate, improvingfrom this department to be regarded as coming from a

suppliers are actively giving us suggestions related to costs andwith attractive products.

our work environment, and reducing our environmental impact.

publicly recognized laboratory.

other suggestions, and we are working to create a solid

quality is built into the process and where defects do not make it into the next step of the process by having a philosophy of “assuring one’s own process”.

Our basic policy regarding quality●Basic Quality Policy●Improved efficiency of rolling line at Kariya Plant

Social Report

We are thoroughly establishing the practice of “Built-in
Aichi Steel Group to further improve our quality assurance

foundation on which we can work together to improve quality.
One of our targets in our 2010 Global Quality Midium-term Plan
is to eliminate customer complaints by 2010, and we areworking to achieve an even more competitive level of quality.
We are maintaining and improving quality with the practice of“built-in quality”, carrying out facility improvements to raise
quality, and developing quality-conscious people with training
to strengthen our systems. In January 2008, we combined the
Quality Assurance Division and the Engineering Service Division
so that we can provide our customer with even more detailed
service.

Developing quality-conscious individuals

Product

In 2007, we carried out the following facility improvements toimprove quality.
●Improvements at billet finishing facility
In November 2007, we started a billet finishing reengineering
project in the billet plant, which inspects billets produced by
the steelmaking and blooming processes and for scratches
and internal flaws. This project is the first step to realize theconcept of “built-in quality” through a facility improvement thatwill improve productivity and yields. In the future, we will work
to augment our quality assurance devices and realize 100%
same-day inspections through logistics reforms in order tofurther improve our quality assurance.

26

Date certified

Auditing body

●Enhancing our monozukuri capabilities

Shaped stainless steel

April 1993

JICQA

Since 2006, we have been pushing reforms in our monozu-

Specialty steel

December 1995

JICQA

kuri capabilities as part of AMS-Innovation*1. Our top manage-

Forgings

November 1997

JICQA

ment has instructed that in terms of improving quality,

Electro-magnetic products

March 1998

BSI Japan

customer-first activities based on improving the practice of“built-in quality” and improving operational availability need tobe thoroughly established. As part of our human resources
development for supporting good monozukuri, we have

Increasing quality through facility improvements

ISO 9001 certification status at Aichi Steelintroduced unique initiatives such as on-site education carried(see p. 28).
●Engineering workshops
For some time now, we have carried out training sessions
such as Specialty Steel Workshops for young sales staff fromour suppliers so that we can meet the requests of our customers at a high level. These unique efforts have fostered ourability to give our customers more options. We carried out aSpecialty Steel Workshop in March 2008.

The “Aichi Steel Hoko-kai” is a group made up of suppliers. This
group holds a VA*4 Conference every year to share examples ofkaizen and technical ideas. The 15th VA Conference, which had
as its theme “Monozukuri: Let’s improve it with VA”, was held in
May 2007. In addition to evaluating different kaizen andrecognizing good examples of kaizen, we also had a special

Certification status of consolidated subsidiaries
Certification standard

booth called “The unit cost challenge (AVIP-21) corner” where

Country

Company and primary productJapan

Aiko (Steel)ISO9001

Omi Mining(Raw materials for steel)ISO9001

USA

LFG (Forgings)

ISO9001

Philippines

AFC (Forgings)

ISO9001

China

Shanghai Aichi (Forgings)

ISO/TS16949

One of the top domestic manufacturers of ferronickel, an
ingredient in stainless steel, gave us the following suggestion related to the delivery of ferronickel. This suggestion
has allowing us to make an environmental improvement.

Indonesia

AFI (Forgings)

Certification expected in 2008

●Change the way the material is delivered

ThailandAIT (Forgings)

ISO9001out by senior meisters (see p. 21) and regular personnel
rotations to prevent imbalances in human resources and skills●VA Conference

we introduced our initiative and collected VA ideas.

One example of a VA idea

Instead of using the cargo containers used in shiptransport, pile the material in a truck so that empty
containers do not have to be collected.
●Change the final finishing methods for the productInstead of using a dried product, use a non-driedproduct that is cheaper because no energy isneeded to dry it.
*1 AMS-Innovation: An initiative started in 2006 to reform AMS(Aichi Management System), which is an effort started in 1996 to find the best sales, development, and production methods for Aichi Steel.
*2 AVI-21: AVI is an acronym for AICHI Value Innovation. The purpose of this initiative is not just to reduce costs but to maximize the effectiveness andvalue of work in everything from manufacturing to clerical and management departments.
*3 AVIP-21: As part of AVI-21, the purpose of this initiative is to rationalize procurement.
*4 VA: An acronym for Value Analysis. This means getting an understanding of your strengths as a company in everything from R&D to after-sales
service and to create ideas that have value for the customers that cannot be imitated by other companies.

27

Improving Quality and Satisfying Customers

quality” across the entire
process.

There are three types of product quality: quality that is merely up to specification, quality goes one step further than the specification

Expanded third-party certification

but that is only at the expected level (expected quality), and quality that is above and beyond expectations (“wow” quality). Putting
the customer first and quality first are part of our basic policies, and to this end we are creating a quality assurance system where

Giving and receiving suggestions to improve businessIn response to the 2004 revision of the Industrial Standard-●Procurement policy

ization Act, Chita Plant, Kariya Plant, and four affiliates

With our AVI-21*2 initiative ongoing, our procurement

received a certification audit from JIC Quality Assurance

departments are carrying out this initiative as AVIP-21*3. We

Ltd. in August 2008. They were successfully certified to use

have informed all of our suppliers of our new procurement policy.

the new JIS symbol. (The change to the new JIS symbol

In 2007, the procurement market changed drastically because of

In October 2007, we completed our amalgamation of rolling

was completed in May 2008.)

the high cost of resources and materials, and we are rethinking

lines at Kariya Plant. We built a new heating furnace to achieve

In September 2007, the Technical Development Division’s

our procurement structure in the 2010 Medium-term Plan tosignificant increases in energy efficiency and quality, and we

Material evaluation Dept. received laboratory accreditation

reduce the risks associated with resource procurement,

Based on the idea that quality comes before everythingtransferred rolling units from the old plant and installed a newfor testing and analyzing steel from the Japan Accreditation

rearrange our supply sources, and to create an even moreelse, we have created a trustworthy system based on ISO

crop shear to configure our rolling line as efficiently as possible.

Board for Conformity Assessment. This allows test results

mutually beneficial relationship with our suppliers. Currently, our

9001 in order to meet customer needs and expectations

We are also optimizing equipment operation rate, improvingfrom this department to be regarded as coming from a

suppliers are actively giving us suggestions related to costs andwith attractive products.

our work environment, and reducing our environmental impact.

publicly recognized laboratory.

other suggestions, and we are working to create a solid

quality is built into the process and where defects do not make it into the next step of the process by having a philosophy of “assuring one’s own process”.

Our basic policy regarding quality●Basic Quality Policy●Improved efficiency of rolling line at Kariya Plant

Social Report

We are thoroughly establishing the practice of “Built-in
Aichi Steel Group to further improve our quality assurance

foundation on which we can work together to improve quality.
One of our targets in our 2010 Global Quality Midium-term Plan
is to eliminate customer complaints by 2010, and we areworking to achieve an even more competitive level of quality.
We are maintaining and improving quality with the practice of“built-in quality”, carrying out facility improvements to raise
quality, and developing quality-conscious people with training
to strengthen our systems. In January 2008, we combined the
Quality Assurance Division and the Engineering Service Division
so that we can provide our customer with even more detailed
service.

Developing quality-conscious individuals

Product

In 2007, we carried out the following facility improvements toimprove quality.
●Improvements at billet finishing facility
In November 2007, we started a billet finishing reengineering
project in the billet plant, which inspects billets produced by
the steelmaking and blooming processes and for scratches
and internal flaws. This project is the first step to realize theconcept of “built-in quality” through a facility improvement thatwill improve productivity and yields. In the future, we will work
to augment our quality assurance devices and realize 100%
same-day inspections through logistics reforms in order tofurther improve our quality assurance.

26

Date certified

Auditing body

●Enhancing our monozukuri capabilities

Shaped stainless steel

April 1993

JICQA

Since 2006, we have been pushing reforms in our monozu-

Specialty steel

December 1995

JICQA

kuri capabilities as part of AMS-Innovation*1. Our top manage-

Forgings

November 1997

JICQA

ment has instructed that in terms of improving quality,

Electro-magnetic products

March 1998

BSI Japan

customer-first activities based on improving the practice of“built-in quality” and improving operational availability need tobe thoroughly established. As part of our human resources
development for supporting good monozukuri, we have

Increasing quality through facility improvements

ISO 9001 certification status at Aichi Steelintroduced unique initiatives such as on-site education carried(see p. 28).
●Engineering workshops
For some time now, we have carried out training sessions
such as Specialty Steel Workshops for young sales staff fromour suppliers so that we can meet the requests of our customers at a high level. These unique efforts have fostered ourability to give our customers more options. We carried out aSpecialty Steel Workshop in March 2008.

The “Aichi Steel Hoko-kai” is a group made up of suppliers. This
group holds a VA*4 Conference every year to share examples ofkaizen and technical ideas. The 15th VA Conference, which had
as its theme “Monozukuri: Let’s improve it with VA”, was held in
May 2007. In addition to evaluating different kaizen andrecognizing good examples of kaizen, we also had a special

Certification status of consolidated subsidiaries
Certification standard

booth called “The unit cost challenge (AVIP-21) corner” where

Country

Company and primary productJapan

Aiko (Steel)ISO9001

Omi Mining(Raw materials for steel)ISO9001

USA

LFG (Forgings)

ISO9001

Philippines

AFC (Forgings)

ISO9001

China

Shanghai Aichi (Forgings)

ISO/TS16949

One of the top domestic manufacturers of ferronickel, an
ingredient in stainless steel, gave us the following suggestion related to the delivery of ferronickel. This suggestion
has allowing us to make an environmental improvement.

Indonesia

AFI (Forgings)

Certification expected in 2008

●Change the way the material is delivered

ThailandAIT (Forgings)

ISO9001out by senior meisters (see p. 21) and regular personnel
rotations to prevent imbalances in human resources and skills●VA Conference

we introduced our initiative and collected VA ideas.

One example of a VA idea

Instead of using the cargo containers used in shiptransport, pile the material in a truck so that empty
containers do not have to be collected.
●Change the final finishing methods for the productInstead of using a dried product, use a non-driedproduct that is cheaper because no energy isneeded to dry it.
*1 AMS-Innovation: An initiative started in 2006 to reform AMS(Aichi Management System), which is an effort started in 1996 to find the best sales, development, and production methods for Aichi Steel.
*2 AVI-21: AVI is an acronym for AICHI Value Innovation. The purpose of this initiative is not just to reduce costs but to maximize the effectiveness andvalue of work in everything from manufacturing to clerical and management departments.
*3 AVIP-21: As part of AVI-21, the purpose of this initiative is to rationalize procurement.
*4 VA: An acronym for Value Analysis. This means getting an understanding of your strengths as a company in everything from R&D to after-sales
service and to create ideas that have value for the customers that cannot be imitated by other companies.

27

Human Resources Development

motivates employees to pursue new things,

People who are filled with the desire to try new things, who want to take on new challenges, and who are conscientious when it●Morecomes to society and the environment. This is what we want Aichi Steel employees to be like. Aichi Steel values each employee as
an individual and is putting together a system that will develop the leaders of tomorrow.

Our policy and initiatives for 2007

Creating a more pleasant work environment

With the overall goal of “creating a flexible labor structure

In addition, we are carrying out various measures to help

and utilizing a diverse workforce,” our specific priorities for

employees strike a good balance between work and life and2007 were to improve our hiring capabilities, use a diverse

live life to the fullest to further improve their motivation. Our

workforce, and improve our workplace culture. To accom-

primary efforts in 2007 are shown below.

plish these goals, we carried out measures to further●Responding to workplace harassment

The purpose of the Senior Expert System is to use retired

nity and Treatment between Men and Women in Employ-

employees directly or on a temporary basis in order toment was revised. We took this opportunity to review ourharness their skills and knowhow. We are attempting torules of employment and to strengthen our response todevelop the next generation with Senior Expert Staff

sexual harassment, and to inform the entire company of this(Administration), Senior Expert Engineers (Engineeringchange. We have also worked to make managers andskills) and Senior Meisters (Practical skills).

supervisors more aware of this issue and to improve●Improving work-life balanceclarifying the role of management to increase awareness of

We established a Work-life Balance Improvement Commit-

their role and creating a system that lets more employees

tee together with the labor union. Under this committee, allguide and nurture more junior employees.

assistant managers went through time management
training in order to shorten overall time worked by 2,100●Creating leaders

hours per year by 2010 and to raise awareness of theTo create leaders that are filled with the desire toimportance of work efficiency improvements. We areexperiment and be creative in addition to a high degree oftalking with the labor union to define what labor is, to get

professionalism, we have defined performance require-

an understanding of time worked, and what a work-lifebalance should look like at Aichi Steel.

efficient training system in place. We have also changed

In April 2007, the Act on Securing, Etc. of Equal Opportu-

awareness as part of educational programs for each job

Senior Expert System
Participants

increase employee awareness and motivation such as

ments for each job classification, and we have put an

thorough establishment of the
Senior Expert System

Social Report

We are carrying out human resources development thattake on new challenges, and become leaders.

(People)

2003

2004

2005

2006

2007

7

10

15

25

50

These are the number of participants at the end of each year.

classification. In addition, we hold related presentations forour affiliates.

Workforce statistics
2003●Retirement Strategy Seminars
Working with the labor union, we are carrying out
Retirement Strategy Seminars for employees who have

Total
No. ofemployee

Managers andsupervisors

Men
Women

reached the age of 55 as well as their spouses to look at life

2004

2005

2006

2007

2,416 2,359 2,340 2,327 2,328
215

227

238

241

247

2,309 2,258 2,245 2,233 2,224
107

101

95

94

104

after retirement together. This seminar raises awareness of

Average age

38.7

39.2

39.2

39.2

39.3

issues related to health and finances, and also introduces

Average number of years
employed

19.2

19.7

19.6

19.7

19.8

the Retirement Strategy Seminars. In each workplace,Turnover (%)

0.8

0.8

0.5

0.4

0.8

employees have face-to-face meetings with their superiors

No. of employees leaving
the company

18

17

13

10

18

at ages 55, 57, and 59 about participating in this system.

our employee evaluations to put an increased emphasis on●Expanding the Family Care Systemteam management. To nurture the leaders that will steer

Our Family Care System helps employees with their child●Change to cafeteria menu

the company in the future, we have a monthly leadershipcare as well as with senior care. In this system, employees

We listened to our employees and made significant changes

training program that takes place over 9 months called theare able to choose 4, 5, or 6-hour shifts. Until now, thisto our cafeteria menu. We created a Women’s Corner in the

Aichi Steel Business College (ABC) that emphasizes thesystem only applied to children up until they enter elemen-cafeteria and we started posting the menus on our internal

executive management perspective.

tary school, but we have changed the applicable age to

network.

the end of 2nd grade.
●Human resource development in the engineering

departments●Continuation of our Women’s Conference

Family Care System utilization

After reviewing the human resources development in our(People)To better include the views of our female employees to

2003

2004

2005

2006

2007

create a more comfortable workplace, Women’s Conference
was held in 2007. This conference was started in 2006, andengineering departments, we established a Medium- to

Family care leave

9

4

6

9

8

Long-term Technical Development Plan to think of a more

Short workdays tocare for family

10

5

1

7

13

organizationally relevant human resources development

The values shown above are not cumulative.

2007 Retirement Strategy Seminar

this year’s conference included a plant tour and an active
discussion, and 20 female employees participated.

system. In addition to developing specialists, this system
will have personnel rotations so that the same people are
not in the same type of job for too long so that we canfocus on efficiently transmitting skills and finding the ideal
human resources for a given job. Going forward, we will beworking to put this system in place.

28

29

Human Resources Development

motivates employees to pursue new things,

People who are filled with the desire to try new things, who want to take on new challenges, and who are conscientious when it●Morecomes to society and the environment. This is what we want Aichi Steel employees to be like. Aichi Steel values each employee as
an individual and is putting together a system that will develop the leaders of tomorrow.

Our policy and initiatives for 2007

Creating a more pleasant work environment

With the overall goal of “creating a flexible labor structure

In addition, we are carrying out various measures to help

and utilizing a diverse workforce,” our specific priorities for

employees strike a good balance between work and life and2007 were to improve our hiring capabilities, use a diverse

live life to the fullest to further improve their motivation. Our

workforce, and improve our workplace culture. To accom-

primary efforts in 2007 are shown below.

plish these goals, we carried out measures to further●Responding to workplace harassment

The purpose of the Senior Expert System is to use retired

nity and Treatment between Men and Women in Employ-

employees directly or on a temporary basis in order toment was revised. We took this opportunity to review ourharness their skills and knowhow. We are attempting torules of employment and to strengthen our response todevelop the next generation with Senior Expert Staff

sexual harassment, and to inform the entire company of this(Administration), Senior Expert Engineers (Engineeringchange. We have also worked to make managers andskills) and Senior Meisters (Practical skills).

supervisors more aware of this issue and to improve●Improving work-life balanceclarifying the role of management to increase awareness of

We established a Work-life Balance Improvement Commit-

their role and creating a system that lets more employees

tee together with the labor union. Under this committee, allguide and nurture more junior employees.

assistant managers went through time management
training in order to shorten overall time worked by 2,100●Creating leaders

hours per year by 2010 and to raise awareness of theTo create leaders that are filled with the desire toimportance of work efficiency improvements. We areexperiment and be creative in addition to a high degree oftalking with the labor union to define what labor is, to get

professionalism, we have defined performance require-

an understanding of time worked, and what a work-lifebalance should look like at Aichi Steel.

efficient training system in place. We have also changed

In April 2007, the Act on Securing, Etc. of Equal Opportu-

awareness as part of educational programs for each job

Senior Expert System
Participants

increase employee awareness and motivation such as

ments for each job classification, and we have put an

thorough establishment of the
Senior Expert System

Social Report

We are carrying out human resources development thattake on new challenges, and become leaders.

(People)

2003

2004

2005

2006

2007

7

10

15

25

50

These are the number of participants at the end of each year.

classification. In addition, we hold related presentations forour affiliates.

Workforce statistics
2003●Retirement Strategy Seminars
Working with the labor union, we are carrying out
Retirement Strategy Seminars for employees who have

Total
No. ofemployee

Managers andsupervisors

Men
Women

reached the age of 55 as well as their spouses to look at life

2004

2005

2006

2007

2,416 2,359 2,340 2,327 2,328
215

227

238

241

247

2,309 2,258 2,245 2,233 2,224
107

101

95

94

104

after retirement together. This seminar raises awareness of

Average age

38.7

39.2

39.2

39.2

39.3

issues related to health and finances, and also introduces

Average number of years
employed

19.2

19.7

19.6

19.7

19.8

the Retirement Strategy Seminars. In each workplace,Turnover (%)

0.8

0.8

0.5

0.4

0.8

employees have face-to-face meetings with their superiors

No. of employees leaving
the company

18

17

13

10

18

at ages 55, 57, and 59 about participating in this system.

our employee evaluations to put an increased emphasis on●Expanding the Family Care Systemteam management. To nurture the leaders that will steer

Our Family Care System helps employees with their child●Change to cafeteria menu

the company in the future, we have a monthly leadershipcare as well as with senior care. In this system, employees

We listened to our employees and made significant changes

training program that takes place over 9 months called theare able to choose 4, 5, or 6-hour shifts. Until now, thisto our cafeteria menu. We created a Women’s Corner in the

Aichi Steel Business College (ABC) that emphasizes thesystem only applied to children up until they enter elemen-cafeteria and we started posting the menus on our internal

executive management perspective.

tary school, but we have changed the applicable age to

network.

the end of 2nd grade.
●Human resource development in the engineering

departments●Continuation of our Women’s Conference

Family Care System utilization

After reviewing the human resources development in our(People)To better include the views of our female employees to

2003

2004

2005

2006

2007

create a more comfortable workplace, Women’s Conference
was held in 2007. This conference was started in 2006, andengineering departments, we established a Medium- to

Family care leave

9

4

6

9

8

Long-term Technical Development Plan to think of a more

Short workdays tocare for family

10

5

1

7

13

organizationally relevant human resources development

The values shown above are not cumulative.

2007 Retirement Strategy Seminar

this year’s conference included a plant tour and an active
discussion, and 20 female employees participated.

system. In addition to developing specialists, this system
will have personnel rotations so that the same people are
not in the same type of job for too long so that we canfocus on efficiently transmitting skills and finding the ideal
human resources for a given job. Going forward, we will beworking to put this system in place.

28

29

Labor Health and Safety

People make monozukuri possible. Creating a system that maintains and improves each person’s mind, body, and health andmaintaining a safe and comfortable space to work in lead to improved monozukuri quality. Aichi Steel is taking step-by-step action
to create a workplace environment in which people can excel.

Promoting physical and mental healthHelping to revitalize our employees

Since 2006, we have been continuing our efforts to enhance

In addition to a massage room in the Aichi Steel Gymnasium

workplace communication in order to promote mental health.

(ASCOM), we have people on call going to the factory to give

Labor safety and health policy and system

Key initiatives in 2007

In 2007, we made it a priority for people to share the issues

massages in order to help employees rejuvenate their bodies

facing their individual workplaces in the group discussions

and minds. We use massages to support those on sick leave

We are developing improvements in education, training, andWe established a 5-year spiral-up plan that spirals up every

held as part of our workplace vitality assessment. This has

for mental health issues as well.

equipment in addition to standardizing inspections andyear for our Comprehensive Safety and Health Management

increased awareness of mental health management issues inworking to create an accident-free workplace that is safe in

Activities for Designated Workplaces*1; 2007 was the starting

the workplace, making all of us more sensitive to employees

terms of people, equipment, and work.

year for this. This includes risk assessments to prevent

who may have something troubling them. Our sick day rate*3

The mainstay of this effort is our Comprehensive Safety andserious accidents and ways to prevent pinch-point andfor mental health issues was 0.13% in 2007, a favorable level.

To promote traffic safety and accident prevention inside and

Health Management System, which we created in 2006 withdragging accidents – efforts that are a key part of our

In terms of physical health, we carry out a Lifestyle Habits

outside the company, our cross-organizational Traffic Safety

affiliates and on-site contractors. To attain the objects set out

OSHMS*2 – that we have been putting in place together with

Improvement Seminar for all 35-year-old employees in order

Promotion Committee holds a Central Safety and Healthin this system, we have periodic Comprehensive Safety andour subsidiaries.

to make them aware of ways to prevent disease and to help

Conference twice a year, and it works to reflect on past errors

them make better choices in terms of nutrition, relaxation,and set targets. To promote more environmentally friendly driving,and exercise. Our sick day rate for lifestyle diseases isin 2007, we devised the “123 initiative”. This initiative promotes

currently steady at 0.06%.

driving 10% slower, maintaining twice the vehicle-to-vehicle

Health Discussions.

Introduction and standardization of lockout

Labor safety and health support systemsystems

workplace and supports health and safety management. 173
people have gone through the Safety Assessor System,
which develops key people, and these people contribute to
an improved level of management. Additionally, to reinforce

Eliminating traffic accidents

distance, and leaving 3 minutes early. By having everyone

A lockout system is a set of rules that requires workers to use
We have a key person in each workplace that assesses theSocial Report

A workplace environment that is safe and has peace of mind thatis focused on monozukuri - this is the foundation for good quality.

participate by writing a collective document, we improved

Sick day rate for mental-health issues

locks to make sure that equipment stays off to prevent

awareness.

％

catastrophic accidents caused by someone accidentally

0.4

operating this equipment. In 2007, this was adopted as a

0.3
0.2

company-wide standard.

0.1
0

the weak points in the safety and health activities in each

2003

2004

2005

2006

2007

workplace, we also carry out Workplace Health and Safety
Assessments that we are expanding across the entire group.

Accidents and lost-time rate (For fiscal year)(Incidents)
0.80

0.71
●

9
8

Accidents

7

0.35

6
5
4
3

●

0.29

0.30
●

0.33
●

2

0.00

1
0

0.18

1996

1997

1998

●

1999

0.16
●

2000

0.17
●

0.17

2001

2002

●

●

0.18
●

●

0.00

2003

Lost-time accidents

●

2004

2005

Non-lost-time accidents

2006
●

2007

0.70

Susumu Niwa, Manager, Planning Dept., Human Resources Div.

0.60

We are in the automotive business, and we do not want any of our employees, their families, or local residents to

0.50
0.40
0.30

Lost-time rate

10

ever be involved in a car accident. This is particularly true in Aichi Prefecture, which has had the worst record for
traffic fatalities in Japan for three years in a row. We are working to make sure anyone connected to the Aichi
Steel Group does not cause a traffic accident through activities such as standing at street corners to ensure

0.20

traffic safety as well as through safe driving competitions. We will also actively make employees more aware of

0.10

driving habits that are better for the environment and other activities related to cars and the environment.

0.00

Lost-time rate

*1 Comprehensive Safety and Health Management Activities for Designated Workplaces: These are activities promoting comprehensive health andsafety management, and are primarily for the manufacturing industry. These activities include a company and its related contractors.

30*2 OSHMS: Occupational Safety & Health Management System*3 Sick day rate (%): This is calculated by the following formula: Number of sick days taken ÷ Total number of days worked x 100

31

Labor Health and Safety

People make monozukuri possible. Creating a system that maintains and improves each person’s mind, body, and health andmaintaining a safe and comfortable space to work in lead to improved monozukuri quality. Aichi Steel is taking step-by-step action
to create a workplace environment in which people can excel.

Promoting physical and mental healthHelping to revitalize our employees

Since 2006, we have been continuing our efforts to enhance

In addition to a massage room in the Aichi Steel Gymnasium

workplace communication in order to promote mental health.

(ASCOM), we have people on call going to the factory to give

Labor safety and health policy and system

Key initiatives in 2007

In 2007, we made it a priority for people to share the issues

massages in order to help employees rejuvenate their bodies

facing their individual workplaces in the group discussions

and minds. We use massages to support those on sick leave

We are developing improvements in education, training, andWe established a 5-year spiral-up plan that spirals up every

held as part of our workplace vitality assessment. This has

for mental health issues as well.

equipment in addition to standardizing inspections andyear for our Comprehensive Safety and Health Management

increased awareness of mental health management issues inworking to create an accident-free workplace that is safe in

Activities for Designated Workplaces*1; 2007 was the starting

the workplace, making all of us more sensitive to employees

terms of people, equipment, and work.

year for this. This includes risk assessments to prevent

who may have something troubling them. Our sick day rate*3

The mainstay of this effort is our Comprehensive Safety andserious accidents and ways to prevent pinch-point andfor mental health issues was 0.13% in 2007, a favorable level.

To promote traffic safety and accident prevention inside and

Health Management System, which we created in 2006 withdragging accidents – efforts that are a key part of our

In terms of physical health, we carry out a Lifestyle Habits

outside the company, our cross-organizational Traffic Safety

affiliates and on-site contractors. To attain the objects set out

OSHMS*2 – that we have been putting in place together with

Improvement Seminar for all 35-year-old employees in order

Promotion Committee holds a Central Safety and Healthin this system, we have periodic Comprehensive Safety andour subsidiaries.

to make them aware of ways to prevent disease and to help

Conference twice a year, and it works to reflect on past errors

them make better choices in terms of nutrition, relaxation,and set targets. To promote more environmentally friendly driving,and exercise. Our sick day rate for lifestyle diseases isin 2007, we devised the “123 initiative”. This initiative promotes

currently steady at 0.06%.

driving 10% slower, maintaining twice the vehicle-to-vehicle

Health Discussions.

Introduction and standardization of lockout

Labor safety and health support systemsystems

workplace and supports health and safety management. 173
people have gone through the Safety Assessor System,
which develops key people, and these people contribute to
an improved level of management. Additionally, to reinforce

Eliminating traffic accidents

distance, and leaving 3 minutes early. By having everyone

A lockout system is a set of rules that requires workers to use
We have a key person in each workplace that assesses theSocial Report

A workplace environment that is safe and has peace of mind thatis focused on monozukuri - this is the foundation for good quality.

participate by writing a collective document, we improved

Sick day rate for mental-health issues

locks to make sure that equipment stays off to prevent

awareness.

％

catastrophic accidents caused by someone accidentally

0.4

operating this equipment. In 2007, this was adopted as a

0.3
0.2

company-wide standard.

0.1
0

the weak points in the safety and health activities in each

2003

2004

2005

2006

2007

workplace, we also carry out Workplace Health and Safety
Assessments that we are expanding across the entire group.

Accidents and lost-time rate (For fiscal year)(Incidents)
0.80

0.71
●

9
8

Accidents

7

0.35

6
5
4
3

●

0.29

0.30
●

0.33
●

2

0.00

1
0

0.18

1996

1997

1998

●

1999

0.16
●

2000

0.17
●

0.17

2001

2002

●

●

0.18
●

●

0.00

2003

Lost-time accidents

●

2004

2005

Non-lost-time accidents

2006
●

2007

0.70

Susumu Niwa, Manager, Planning Dept., Human Resources Div.

0.60

We are in the automotive business, and we do not want any of our employees, their families, or local residents to

0.50
0.40
0.30

Lost-time rate

10

ever be involved in a car accident. This is particularly true in Aichi Prefecture, which has had the worst record for
traffic fatalities in Japan for three years in a row. We are working to make sure anyone connected to the Aichi
Steel Group does not cause a traffic accident through activities such as standing at street corners to ensure

0.20

traffic safety as well as through safe driving competitions. We will also actively make employees more aware of

0.10

driving habits that are better for the environment and other activities related to cars and the environment.

0.00

Lost-time rate

*1 Comprehensive Safety and Health Management Activities for Designated Workplaces: These are activities promoting comprehensive health andsafety management, and are primarily for the manufacturing industry. These activities include a company and its related contractors.

30*2 OSHMS: Occupational Safety & Health Management System*3 Sick day rate (%): This is calculated by the following formula: Number of sick days taken ÷ Total number of days worked x 100

31

Contributing to Society and Local Communities

We cannot exist without the support of local communities. Thus doing everything we can for local communities is a given. Our social
contribution activities are divided into four categories – “Clean”, “Green”, “Creative”, and “Volunteering” – and our efforts in each ofthese categories is multi-faceted.

Effectively using our Volunteer’s Fund
●Volunteer’s fund●Looking out for kids

We ask employees to refrain from the reciprocal gift-giving

As part of the Businesses Supporting the Tokai City Kid’s Care

“Green” – Helping to maintain foreststhat takes place with marriages and funerals at Aichi Steel

Network, we have volunteers making sure that the streets are

and its group companies. In place of this practice, we devised

safe for kids going to school.

We actively participate in the beautification of local communi-

Forests require periodic thinning to maintain their function.

a way for employees to contribute to the Aichi SteelIn 2007, we donated vests and armbands to this effort, whichties through activities such as the following:

The headwaters of the Kiso River are in Kiso Village, Kiso

Volunteer’s Fund, and we also created a Matching Giftcontribute to peace of mind and safety in the local community

County, Nagano Prefecture. Recognizing that this is theProgram where the company matches the donation. These

where the company is located.

●Clean Aichi Day

source of the industrial water used by our Chita, Forging, andprograms enable our Volunteer’s Fund Committee to promote

This is a volunteer event started in 2006 where our employees

Higashiura Plants, we have been engaged in tree-thinningvolunteer activities and gives donations and gifts to local

use their lunch break to clean the area around Meitetsu

work there since 2006. In May and September 2007, oursocial welfare agencies.

Shurakuen Station, where our head office is located. In 2007,

employees, their families, and employees from affiliated group

In 2007, we started giving gifts to volunteer associations that

●Supporting the Tokai City Marathon

this event was held in June and November. 120 people

companies participated.

our employees participate in, and we plan to continue thisThe 23rd Tokai City Marathon, a longstanding event in the city,

practice.

was held in 2007. We supported this event by donating vests“Clean”: Local beautification activities

participated in the first event and 110 in the second.

In this cleanup, which is carried out every two months,
volunteers from each department and students from Aichi
Steel Technical School (where new employees who have justgraduated from high school undergo work training for oneyear) clean up the area around the Arao interchange, an area
Forest care volunteers

that sees a great deal of use. In 2007, approximately 60
people participated each time. In October, students form theTechnical School took the initiative to beautify the area around
Shurakuen Station.

“Creative” – Passing on skills
Every November, we have a papermaking booth for children at
the local Momiji Festival using the kenaf plants grown on ourcompany grounds. In addition, in February 2007, we received arequest from Tokai City to participate in a monozukuri event sothat children could again try their hand at making their own paper.
We sent students from our technical school to Tokai City’s
Inventor’s Club for Boys and Girls to interact with the community

Donated toGiftChubu Guide Dog Association
Akatsuki Gakuen
Fureai (Nonprofit organization)
Yuinokai (Nonprofit organization)
Kizuna (Nonprofit organization)
Satsuki Welfare Society
Chita Welfare Society (Nagomi-en)
Chita Welfare Society (Yamamomo Work Center)
Kusunoki Work Center
Japan Tennis Association for the Visually Handicapped
12 elementary schools in Tokai City
Oumei 4-za
Businesses Supporting the Tokai City Kid’s Care Network
Chita City Junior Brass Band

Plasma TVs and DVD recorders
Washing machines, vacuum cleaners, and bicycles
Helped with purchase of a vehicle for the disabled
Helped with purchase of AED
Wheelchairs
LCD color TV
Keyboards and anti-slide mats
Tillers for home gardens
Stacking trays, sewing machines, and carafes
Balls for visually handicapped tennis
Books related to monozukuri
Portable drums
Traffic safety vests and arm bands
Musical instruments●Supporting the Nagoya Grampus
Aichi Steel sponsors the Nagoya Grampus J-League soccer
team. In August 2007, we worked with Tokai City to invite
members of a local soccer club (for elementary school children)and their families to a bus tour of the soccer match.

Other initiatives●Supported the Japan Tennis Association for the VisuallyHandicapped
Support for employee volunteers●Provided the trophy at the Tokai City Junior High School

Donated toTokai City Mini-basketball Club
Tokai City Junior Basketball Club
Chita City Junior Basketball Club
Tokai Boy Scout Troop No. 1
Tokai Boy Scout Troop No. 2

GiftFoul display board and numbers
Timer remote controllers and numbers
Helped with purchase of uniforms
Helped with purchase of uniforms
Collapsible flag sets and dome tents

Soft Indoor Tennis Tournament●Aichi Steel volunteers participated in local nighttime crime

prevention patrols●Our employees participated in the Hand-up Intersection

Campaign that works to improve traffic safety

through monozukuri.
●Increasing awarenessWe created a Volunteer Center in the General Affairs Div. toissue information and give advice related to volunteer

Cleanup of industrial road

Support for sporting eventsand helping along the race route.

Volunteer’s fund donations and gifts●Cleanup of West Chita Industrial Road

Social Report

We are working to ensure prosperous coexistence with local
communities through a variety of social contribution activities.

●Donated 3 million yen toward aid efforts for the Niigata

Prefecture Chuetsu Earthquake, which occurred in July
2007.

activities. During new employee training, the center informs
new employees about volunteer efforts in the company and in
Tokai City, and informs retired employees twice a year ofopportunities where they can volunteer. In this way, we areworking to raise volunteer awareness.

32

Papermaking booth33

Contributing to Society and Local Communities

We cannot exist without the support of local communities. Thus doing everything we can for local communities is a given. Our social
contribution activities are divided into four categories – “Clean”, “Green”, “Creative”, and “Volunteering” – and our efforts in each ofthese categories is multi-faceted.

Effectively using our Volunteer’s Fund
●Volunteer’s fund●Looking out for kids

We ask employees to refrain from the reciprocal gift-giving

As part of the Businesses Supporting the Tokai City Kid’s Care

“Green” – Helping to maintain foreststhat takes place with marriages and funerals at Aichi Steel

Network, we have volunteers making sure that the streets are

and its group companies. In place of this practice, we devised

safe for kids going to school.

We actively participate in the beautification of local communi-

Forests require periodic thinning to maintain their function.

a way for employees to contribute to the Aichi SteelIn 2007, we donated vests and armbands to this effort, whichties through activities such as the following:

The headwaters of the Kiso River are in Kiso Village, Kiso

Volunteer’s Fund, and we also created a Matching Giftcontribute to peace of mind and safety in the local community

County, Nagano Prefecture. Recognizing that this is theProgram where the company matches the donation. These

where the company is located.

●Clean Aichi Day

source of the industrial water used by our Chita, Forging, andprograms enable our Volunteer’s Fund Committee to promote

This is a volunteer event started in 2006 where our employees

Higashiura Plants, we have been engaged in tree-thinningvolunteer activities and gives donations and gifts to local

use their lunch break to clean the area around Meitetsu

work there since 2006. In May and September 2007, oursocial welfare agencies.

Shurakuen Station, where our head office is located. In 2007,

employees, their families, and employees from affiliated group

In 2007, we started giving gifts to volunteer associations that

●Supporting the Tokai City Marathon

this event was held in June and November. 120 people

companies participated.

our employees participate in, and we plan to continue thisThe 23rd Tokai City Marathon, a longstanding event in the city,

practice.

was held in 2007. We supported this event by donating vests“Clean”: Local beautification activities

participated in the first event and 110 in the second.

In this cleanup, which is carried out every two months,
volunteers from each department and students from Aichi
Steel Technical School (where new employees who have justgraduated from high school undergo work training for oneyear) clean up the area around the Arao interchange, an area
Forest care volunteers

that sees a great deal of use. In 2007, approximately 60
people participated each time. In October, students form theTechnical School took the initiative to beautify the area around
Shurakuen Station.

“Creative” – Passing on skills
Every November, we have a papermaking booth for children at
the local Momiji Festival using the kenaf plants grown on ourcompany grounds. In addition, in February 2007, we received arequest from Tokai City to participate in a monozukuri event sothat children could again try their hand at making their own paper.
We sent students from our technical school to Tokai City’s
Inventor’s Club for Boys and Girls to interact with the community

Donated toGiftChubu Guide Dog Association
Akatsuki Gakuen
Fureai (Nonprofit organization)
Yuinokai (Nonprofit organization)
Kizuna (Nonprofit organization)
Satsuki Welfare Society
Chita Welfare Society (Nagomi-en)
Chita Welfare Society (Yamamomo Work Center)
Kusunoki Work Center
Japan Tennis Association for the Visually Handicapped
12 elementary schools in Tokai City
Oumei 4-za
Businesses Supporting the Tokai City Kid’s Care Network
Chita City Junior Brass Band

Plasma TVs and DVD recorders
Washing machines, vacuum cleaners, and bicycles
Helped with purchase of a vehicle for the disabled
Helped with purchase of AED
Wheelchairs
LCD color TV
Keyboards and anti-slide mats
Tillers for home gardens
Stacking trays, sewing machines, and carafes
Balls for visually handicapped tennis
Books related to monozukuri
Portable drums
Traffic safety vests and arm bands
Musical instruments●Supporting the Nagoya Grampus
Aichi Steel sponsors the Nagoya Grampus J-League soccer
team. In August 2007, we worked with Tokai City to invite
members of a local soccer club (for elementary school children)and their families to a bus tour of the soccer match.

Other initiatives●Supported the Japan Tennis Association for the VisuallyHandicapped
Support for employee volunteers●Provided the trophy at the Tokai City Junior High School

Donated toTokai City Mini-basketball Club
Tokai City Junior Basketball Club
Chita City Junior Basketball Club
Tokai Boy Scout Troop No. 1
Tokai Boy Scout Troop No. 2

GiftFoul display board and numbers
Timer remote controllers and numbers
Helped with purchase of uniforms
Helped with purchase of uniforms
Collapsible flag sets and dome tents

Soft Indoor Tennis Tournament●Aichi Steel volunteers participated in local nighttime crime

prevention patrols●Our employees participated in the Hand-up Intersection

Campaign that works to improve traffic safety

through monozukuri.
●Increasing awarenessWe created a Volunteer Center in the General Affairs Div. toissue information and give advice related to volunteer

Cleanup of industrial road

Support for sporting eventsand helping along the race route.

Volunteer’s fund donations and gifts●Cleanup of West Chita Industrial Road

Social Report

We are working to ensure prosperous coexistence with local
communities through a variety of social contribution activities.

●Donated 3 million yen toward aid efforts for the Niigata

Prefecture Chuetsu Earthquake, which occurred in July
2007.

activities. During new employee training, the center informs
new employees about volunteer efforts in the company and in
Tokai City, and informs retired employees twice a year ofopportunities where they can volunteer. In this way, we areworking to raise volunteer awareness.

32

Papermaking booth33

Information Security

We are working to further improve communication with
our stakeholders through a wide variety of channels.

Proper information management is vital because information is vital to an enterprise.

We have a wide range of communication activities to inform all of our stakeholders of our business activities and obtain their under-

In this age where the exchange of information through the internet and using electronic media is commonplace, the need to handle

standing. Also, we use our web page, exhibitions, and various reports to work to establish two-way communication.

information appropriately is more important than ever. We have devised and are implementing a variety of measures to protect

Social Report

Communicating with Stakeholders

valuable information such as our customer information.

Reporting our CSR activities for local residents

Shareholders and investors

Information management initiatives

Enhanced information security

In October 2007, we invited representatives of local

In addition to explaining our business to shareholders, investors,

We protect personal information and other confidential informa-

To further restrict people from carrying confidential documents,neighborhood associations for the neighborhoods adjoining

and investment analysts, we hold regular shareholder meetingstion based on our Confidentiality Management Standard.

information devices, and electronic media in and out of thethe Head Office and held a Community CSR Meeting toand IR presentations as part of our IR*1 in order to provide

In addition to informing and educating employees aboutcompany, we carried out periodic inspections of personal

introduce Aichi Steel’s CSR activities. Started in 2006, thisinformation helpful to make investment decisions. We also have

handling confidential information on an as-needed basis tobelongings in 2006. In 2007, we carried this out in March,meeting presents efforts such as our environmental

booths at events like the ones shown below.

raise their awareness, we hold an Information Security Meeting

August, September, and November. We require all visitors topreservation activities and gathers feedback and requests●Nagoya Stock Exchange IR Expo 2007 (July)

every other month to discuss measures to attain the objectives

fill out a permission form related to information devices andfrom the neighborhood associations. This is done based on
the “Aichi Steel CSR Report 2007”.

●10th Nomura Money Fair (November)● Tokai Tri-prefectural Nomura Money Fair 2007 (December)Participating in exhibitionsof this standard from an IT standpoint.

confidential information, and we will be working to increase

In 2007, we introduced a system that requires users to log into

understanding and to more thoroughly implement these steps.

PCs in the company before they can use them as well, we
installed cables to prevent theft, and we introduced a system
to save and audit all e-mail going outside the company.

Aichi Steel also participates in many different exhibitions to
showcase our technology and products, and we use theCommunity CSR Meeting

Plant tours

Management system and roles of each department

feedback we get from these exhibitions to improve ourmonozukuri.
●Automotive Engineering Exposition 2007 (May)●16th Hoko-kai VA Conference (May)Overall control

Administrative
departments

We hold plant tours to help people better understand our●2007 Messe Nagoya (September)business by giving them an opportunity to look at monozukuri●Nagoya Karakuri Kaizen and Creativity Fair (October)in action.

●Shiawase Village Social Welfare Festival 2007 (October)In each department

In December 2007, 21 7th-grade students from Nawa Junior●Tokai TV Festival (November)

Person in charge ofconfidentiality management(General managers ofindividual divisions)High School in Tokai City toured our plant as part of theirComprehensive Studies class. They discussed the subject ofEfforts of the Forging Technology Museum

work with our employees.
Plant tours in fiscal 2007 including outside observers were as

Since its inception in March 2000, our Forging Technology

follows:

Museum has had a total of 15,000 visitors (as of June 2007).

●Dubai Aluminum Quality Management Investigation Team (February)This museum has exhibits of the local Ohno Forging tradition●ASEAN trainees – Forging technology training (February)

as well as our forging technology. In September, we published●Representatives of Finland’s Ministry of Trade and Industry (May)a pamphlet to highlight the importance of monozukuri titled●JICA Welding Technology Group (May)“Ohno Forging: The Traditional Skills of Chita”, and we gave it●Meijo University Senior High School (July)to local schools and to members of the community.

Person in charge ofconfidentiality management(Manager or supervisor namedby the division general manager)

Representative
managers,
GMs, etc.

●Forging Plant family plant tour (September)●Shikoku Stainless Steel Distributor’s Association (October)●Nawa Junior High School, Tokai City (December)

34*1 IR: Investor relations. These are activities including the disclosure of information that helps shareholders and investors better understand a company and the state of that company.

Department
employees

Director in charge of general affairs
・Person responsible for confidentiality management
The General Affairs Div. and the Coporate Planning Div.
・Creates and revises measures related to the
management of confidential information
・Audits and provides guidance according to
the confidentiality management status acrossthe entire company
・Manages systems (both technical and human aspects)
Role・Total responsibility for confidential
information within the division
・Designates people in charge ofconfidentiality management
・Has the final say in confidentiality classification
・Designates employees authorized tocreate top-secret documents
・Implements voluntary auditing ofconfidentiality management status
・Establishes rules for the division
・Acts under the authority of the person
responsible for confidentiality (Designates
confidentiality classifications and sets theoperating rules within the division)・Works to promote and fully establish
confidentiality in the division

A search of personal belongings

Protecting personal information
We do not just recognize how important it is to protect
personal information - we regard it as a duty. This is why weestablished the Personal Information Protection Policy. We
have also fully informed our employees of this policy. Please
consult the website below for details.
"http://www.aichi-steel.co.jp/p_pol.html"

・Follows laws, regulations, and company
rules related to confidentiality management
・Gives approval, instruction, andguidance related to confidential
information used in their location.
・Follows laws, regulations, and company
rules related to confidentiality management
・Reports accidents, damage, illegal acts,
and wrongdoing to his/her superior

35

Information Security

We are working to further improve communication with
our stakeholders through a wide variety of channels.

Proper information management is vital because information is vital to an enterprise.

We have a wide range of communication activities to inform all of our stakeholders of our business activities and obtain their under-

In this age where the exchange of information through the internet and using electronic media is commonplace, the need to handle

standing. Also, we use our web page, exhibitions, and various reports to work to establish two-way communication.

information appropriately is more important than ever. We have devised and are implementing a variety of measures to protect

Social Report

Communicating with Stakeholders

valuable information such as our customer information.

Reporting our CSR activities for local residents

Shareholders and investors

Information management initiatives

Enhanced information security

In October 2007, we invited representatives of local

In addition to explaining our business to shareholders, investors,

We protect personal information and other confidential informa-

To further restrict people from carrying confidential documents,neighborhood associations for the neighborhoods adjoining

and investment analysts, we hold regular shareholder meetingstion based on our Confidentiality Management Standard.

information devices, and electronic media in and out of thethe Head Office and held a Community CSR Meeting toand IR presentations as part of our IR*1 in order to provide

In addition to informing and educating employees aboutcompany, we carried out periodic inspections of personal

introduce Aichi Steel’s CSR activities. Started in 2006, thisinformation helpful to make investment decisions. We also have

handling confidential information on an as-needed basis tobelongings in 2006. In 2007, we carried this out in March,meeting presents efforts such as our environmental

booths at events like the ones shown below.

raise their awareness, we hold an Information Security Meeting

August, September, and November. We require all visitors topreservation activities and gathers feedback and requests●Nagoya Stock Exchange IR Expo 2007 (July)

every other month to discuss measures to attain the objectives

fill out a permission form related to information devices andfrom the neighborhood associations. This is done based on
the “Aichi Steel CSR Report 2007”.

●10th Nomura Money Fair (November)● Tokai Tri-prefectural Nomura Money Fair 2007 (December)Participating in exhibitionsof this standard from an IT standpoint.

confidential information, and we will be working to increase

In 2007, we introduced a system that requires users to log into

understanding and to more thoroughly implement these steps.

PCs in the company before they can use them as well, we
installed cables to prevent theft, and we introduced a system
to save and audit all e-mail going outside the company.

Aichi Steel also participates in many different exhibitions to
showcase our technology and products, and we use theCommunity CSR Meeting

Plant tours

Management system and roles of each department

feedback we get from these exhibitions to improve ourmonozukuri.
●Automotive Engineering Exposition 2007 (May)●16th Hoko-kai VA Conference (May)Overall control

Administrative
departments

We hold plant tours to help people better understand our●2007 Messe Nagoya (September)business by giving them an opportunity to look at monozukuri●Nagoya Karakuri Kaizen and Creativity Fair (October)in action.

●Shiawase Village Social Welfare Festival 2007 (October)In each department

In December 2007, 21 7th-grade students from Nawa Junior●Tokai TV Festival (November)

Person in charge ofconfidentiality management(General managers ofindividual divisions)High School in Tokai City toured our plant as part of theirComprehensive Studies class. They discussed the subject ofEfforts of the Forging Technology Museum

work with our employees.
Plant tours in fiscal 2007 including outside observers were as

Since its inception in March 2000, our Forging Technology

follows:

Museum has had a total of 15,000 visitors (as of June 2007).

●Dubai Aluminum Quality Management Investigation Team (February)This museum has exhibits of the local Ohno Forging tradition●ASEAN trainees – Forging technology training (February)

as well as our forging technology. In September, we published●Representatives of Finland’s Ministry of Trade and Industry (May)a pamphlet to highlight the importance of monozukuri titled●JICA Welding Technology Group (May)“Ohno Forging: The Traditional Skills of Chita”, and we gave it●Meijo University Senior High School (July)to local schools and to members of the community.

Person in charge ofconfidentiality management(Manager or supervisor namedby the division general manager)

Representative
managers,
GMs, etc.

●Forging Plant family plant tour (September)●Shikoku Stainless Steel Distributor’s Association (October)●Nawa Junior High School, Tokai City (December)

34*1 IR: Investor relations. These are activities including the disclosure of information that helps shareholders and investors better understand a company and the state of that company.

Department
employees

Director in charge of general affairs
・Person responsible for confidentiality management
The General Affairs Div. and the Coporate Planning Div.
・Creates and revises measures related to the
management of confidential information
・Audits and provides guidance according to
the confidentiality management status acrossthe entire company
・Manages systems (both technical and human aspects)
Role・Total responsibility for confidential
information within the division
・Designates people in charge ofconfidentiality management
・Has the final say in confidentiality classification
・Designates employees authorized tocreate top-secret documents
・Implements voluntary auditing ofconfidentiality management status
・Establishes rules for the division
・Acts under the authority of the person
responsible for confidentiality (Designates
confidentiality classifications and sets theoperating rules within the division)・Works to promote and fully establish
confidentiality in the division

A search of personal belongings

Protecting personal information
We do not just recognize how important it is to protect
personal information - we regard it as a duty. This is why weestablished the Personal Information Protection Policy. We
have also fully informed our employees of this policy. Please
consult the website below for details.
"http://www.aichi-steel.co.jp/p_pol.html"

・Follows laws, regulations, and company
rules related to confidentiality management
・Gives approval, instruction, andguidance related to confidential
information used in their location.
・Follows laws, regulations, and company
rules related to confidentiality management
・Reports accidents, damage, illegal acts,
and wrongdoing to his/her superior

35

Environmental Policy

2010 Environmental Action Plan

To further step up our activities to accomplish our Environmental Mission, we created a 2010 Environmental Action Plan that outlines

Environmental Report

We are making steady progress toward achieving several ambitious goals.
Results of 2007 efforts related to the 2010 Environmental Action Plan

the activities we should engage in between 2006 and 2010. Based on this plan, we have established specific targets related topreventing global warming, recycling, and reducing our environmental impact, and we are steadily working to meet these targets.

Item

Primary initiatives●Spiral-up of environmental activities

Aichi Steel’s Environmental Charter (Established June 5, 1996)

Highlights from our 2010 Environmental Action Plan

Aichi Steel is committed to environmental preservation in all

established in March 2006 are shown below.

phases of its business operations based on the recognition

Please refer to the page shown for details on our 2007 efforts.

that preserving the global environment is essential for the●Environmental management (see pp. 38-39, 44-46)
・Expanded and implemented environmental activities thatspanned the entire Aichi Steel Group including consoli-

Basic Policy
All divisions will cooperate to voluntarily establish action plans,clarify objectives, and work to continuously improve theirenvironmental protection activities.
1. All divisions will work together to keep our environmental

mental protection activities.
2. We will strictly conform to environmental regulations andimplement voluntary management and auditing to improve
the level of environmental management in all of ourbusiness activities.
3. We will take environmental protection into account from the

4. We will work to conserve resources and energy, increase
recycling, and reduce industrial waste in all of our businessactivities.
5. We will contribute to society and to local communities by
supporting environmental protection and participating incooperative activities.
6. We will raise awareness of environmental protection in all of
our employees through educational and publicity activities.

dated subsidiaries
・Increased our facility capabilities to the maximum andpromoted environmental preservation
・Conformed to regulatory requirements and implemented

measures that anticipate future regulatory changes to theentire company●Preventing global warming (see p. 42)
・Carried out kaizen of facilities, operational methods, andproduction processes to save energy
・Put in new facilities, new technology, and clean energy

sources●Resouces recycling (see p.43)○

Complaints from outside
the company
Problems pointed out,
administrative guidance
given, and complaints(0 incidents/year)

2 incidents

Reduce CO2 emissions fromour manufacturing departments
to 10% below the 1990 level

CO2 emissions: 717,000
tons/year

678,000
tons/year○

Reduce energy usage intensity
at logistics departments by anaverage of 1% from the 2006
level

Logistics CO2: Reductionof 466 tons/year

Reduction of
863 tons/year○

Reduced landfilled amount to
2% below the 1990 level(1990 level: 58,000 tons/year)
Achieve a total landfilledamount of 1,160 tons/year or
less.

Direct landfilling: 300
tons/year
Indirect landfilling: 2,100
tons/year

300 tons/year
2,160 tons/year○

LCA analysis of R&D
theme

1 case○Expand green purchasing

Increased thenumber ofregisteredsuppliers○

Disclose environmental
information

Released a
CSR Report○

Contribute to local
society

Twice○

that is important from an environmental
standpoint
・Reduced our environmental impact andcontributed to environmental preservation
・Carried out environmental regulatorycompliance activities
・Worked to keep emissions values at 80%of the legal limit and improved high-risk
facilities●Energy conservation activities to reduce

the amount of emissions
・New facilities displayed their full potential●Worked to reduce emissions by increasing

logistics efficiency

・Zero fill promotion of landfilled waste・Through going recycling and reuse●Reducing the environmental impact of products (see p. 47)
・Publicized product technology and R&D that contributes toreducing environmental impact●Social contribution activities (see pp. 32-34)
・Disclosed environmental information and increased ourcommunication of risks●Used Al203-Mg-C brick waste as ladle●Currently creating product evaluation

furnace slag
●Investigated the recycling of vacuumed
sludge using dry suction●Activities were carried out by a teamtasked to address fluorine in slag

sheets (completed for the 1GR model)●Review of suggested green purchasing

proposals●Disclosed environmental information toreleasing information on policies related to our environmenSocial contribution

36

Majornonconformances: 0
Minornonconformances: 1

・Carried out kaizen of facilities and work

・Collected data to better understand logistics

7. We will contribute to environmental preservation by publicly

tal efforts and on technologies and methods we develop.

Passed the Environmental
ISO surveillance audit(Major non-conformances: 0
Minor non-conformances:
one or less for each site)●Environmental preservation

Reducing the environmental
impact of products

products and facilities.

100% ISO 14001 certification
at consolidated companies(manufacturing)

environmental efforts at
consolidated subsidiaries (Implementationof an Aichi-Steel-wide environmental
policy started in the first half of ’07)

Recycling resources

planning, development, and design stages for our

Evaluation

・Enhanced

Preventing global warming

management system up-to-date, and implement environ-2007 results

・Our Gifu Plant and Asdex Corp. were

Environmental management

The priorities for our 2010 Environmental Action Plan that wement of business.

(manifests) for improved internal auditing

2010 target

both certified

Missionsurvival of mankind, as well as for the sustainable develop-

・Establishment of common check items

2010 target

stakeholders (5,500 copies sent out)
●Carried out community meetings(October: Local neighborhood
associations; December: Kariya region)●Employees volunteered in tree thinning

events sponsored by Green Challenger,a nonprofit organization△

37

Environmental Policy

2010 Environmental Action Plan

To further step up our activities to accomplish our Environmental Mission, we created a 2010 Environmental Action Plan that outlines

Environmental Report

We are making steady progress toward achieving several ambitious goals.
Results of 2007 efforts related to the 2010 Environmental Action Plan

the activities we should engage in between 2006 and 2010. Based on this plan, we have established specific targets related topreventing global warming, recycling, and reducing our environmental impact, and we are steadily working to meet these targets.

Item

Primary initiatives●Spiral-up of environmental activities

Aichi Steel’s Environmental Charter (Established June 5, 1996)

Highlights from our 2010 Environmental Action Plan

Aichi Steel is committed to environmental preservation in all

established in March 2006 are shown below.

phases of its business operations based on the recognition

Please refer to the page shown for details on our 2007 efforts.

that preserving the global environment is essential for the●Environmental management (see pp. 38-39, 44-46)
・Expanded and implemented environmental activities thatspanned the entire Aichi Steel Group including consoli-

Basic Policy
All divisions will cooperate to voluntarily establish action plans,clarify objectives, and work to continuously improve theirenvironmental protection activities.
1. All divisions will work together to keep our environmental

mental protection activities.
2. We will strictly conform to environmental regulations andimplement voluntary management and auditing to improve
the level of environmental management in all of ourbusiness activities.
3. We will take environmental protection into account from the

4. We will work to conserve resources and energy, increase
recycling, and reduce industrial waste in all of our businessactivities.
5. We will contribute to society and to local communities by
supporting environmental protection and participating incooperative activities.
6. We will raise awareness of environmental protection in all of
our employees through educational and publicity activities.

dated subsidiaries
・Increased our facility capabilities to the maximum andpromoted environmental preservation
・Conformed to regulatory requirements and implemented

measures that anticipate future regulatory changes to theentire company●Preventing global warming (see p. 42)
・Carried out kaizen of facilities, operational methods, andproduction processes to save energy
・Put in new facilities, new technology, and clean energy

sources●Resouces recycling (see p.43)○

Complaints from outside
the company
Problems pointed out,
administrative guidance
given, and complaints(0 incidents/year)

2 incidents

Reduce CO2 emissions fromour manufacturing departments
to 10% below the 1990 level

CO2 emissions: 717,000
tons/year

678,000
tons/year○

Reduce energy usage intensity
at logistics departments by anaverage of 1% from the 2006
level

Logistics CO2: Reductionof 466 tons/year

Reduction of
863 tons/year○

Reduced landfilled amount to
2% below the 1990 level(1990 level: 58,000 tons/year)
Achieve a total landfilledamount of 1,160 tons/year or
less.

Direct landfilling: 300
tons/year
Indirect landfilling: 2,100
tons/year

300 tons/year
2,160 tons/year○

LCA analysis of R&D
theme

1 case○Expand green purchasing

Increased thenumber ofregisteredsuppliers○

Disclose environmental
information

Released a
CSR Report○

Contribute to local
society

Twice○

that is important from an environmental
standpoint
・Reduced our environmental impact andcontributed to environmental preservation
・Carried out environmental regulatorycompliance activities
・Worked to keep emissions values at 80%of the legal limit and improved high-risk
facilities●Energy conservation activities to reduce

the amount of emissions
・New facilities displayed their full potential●Worked to reduce emissions by increasing

logistics efficiency

・Zero fill promotion of landfilled waste・Through going recycling and reuse●Reducing the environmental impact of products (see p. 47)
・Publicized product technology and R&D that contributes toreducing environmental impact●Social contribution activities (see pp. 32-34)
・Disclosed environmental information and increased ourcommunication of risks●Used Al203-Mg-C brick waste as ladle●Currently creating product evaluation

furnace slag
●Investigated the recycling of vacuumed
sludge using dry suction●Activities were carried out by a teamtasked to address fluorine in slag

sheets (completed for the 1GR model)●Review of suggested green purchasing

proposals●Disclosed environmental information toreleasing information on policies related to our environmenSocial contribution

36

Majornonconformances: 0
Minornonconformances: 1

・Carried out kaizen of facilities and work

・Collected data to better understand logistics

7. We will contribute to environmental preservation by publicly

tal efforts and on technologies and methods we develop.

Passed the Environmental
ISO surveillance audit(Major non-conformances: 0
Minor non-conformances:
one or less for each site)●Environmental preservation

Reducing the environmental
impact of products

products and facilities.

100% ISO 14001 certification
at consolidated companies(manufacturing)

environmental efforts at
consolidated subsidiaries (Implementationof an Aichi-Steel-wide environmental
policy started in the first half of ’07)

Recycling resources

planning, development, and design stages for our

Evaluation

・Enhanced

Preventing global warming

management system up-to-date, and implement environ-2007 results

・Our Gifu Plant and Asdex Corp. were

Environmental management

The priorities for our 2010 Environmental Action Plan that wement of business.

(manifests) for improved internal auditing

2010 target

both certified

Missionsurvival of mankind, as well as for the sustainable develop-

・Establishment of common check items

2010 target

stakeholders (5,500 copies sent out)
●Carried out community meetings(October: Local neighborhood
associations; December: Kariya region)●Employees volunteered in tree thinning

events sponsored by Green Challenger,a nonprofit organization△

37

Environmental Management

Environmental Report

We created an Environmental Working Group with several subcommittees
and we are implementing multifaceted initiative in a variety of areas.
Our 4th 2010 Environmental Action Plan is being implemented by our Environmental Working Group and our Environmental ISO
Review Committee. The former has six subcommittees and is headed by the President, while the latter manages the efforts of ourplants based on the ISO 14001 environmental management system.

Environmental management promotion system

Reinforcing environmental education and internal audits

Our Environmental Close Call initiative

Results of 2007 audits

Our Environmental Working Group is made up of six subcom-

The training for both new employees and assistant managers

In 2007, we started an Environmental Close Call initiative that

The results of our internal audits and surveillance audits in 2007

mittees including the Environmental Preservation Subcommit-

includes environmental education. We do this to ensure thatcollects and analyzes minor issues that employees observe toare shown below. There were no major non-conformances. We

tee, which works to implement and improve environmental

there is full awareness that environmental activities areproactively prevent complaints about our plants. This newwill take these results and continue internal audits that focus

management systems as well as to increase the number ofimportant parts of corporate management and CSR.

effort also aims to increase awareness of environmental

down on a narrowed-down set of priorities. Regardless of theircertified group companies. These six subcommittees also

The number of internal auditors who do internal checks topreservation issues.

severity of the non-conformances, we will work to find theinclude the Product and Environment Subcommittee, which ismake sure our environmental management system is function-

establishing environmental impact assessment methods

ing correctly increased to 147 in 2007, and at our consoli-

through life cycle assessments*1 of products.

dated domestic affiliates with manufacturing work sites,
internal auditors lead environmental activities.

Environmental management implementation organization chart
Environmental Working Group(Meets twice a year)(Chair: President)
Environmental Office・Environmental Management
Dept., Safety, Health, andManagement Div.
・Various sites

Increasing our ISO 14001certification

actual cause and deal with it appropriately. We will continue toConforming to regulatory requirements

spiral-up activities.
In 2007, Aichi Steel conformed to all environmental laws andregulations.

Classification

2004

2005

2006

2007

4

2

0

0

0.9

1.0

0.9

0.7

The first complaint concerned how industrial waste handling
We are working to have 100% ISO 14001 certification of our

Major non-conformance(incidents)

was contracted out. The contractor identified deficiencies in

consolidated affiliates with manufacturing work sites. In 2007,

the control tickets and contract. We addressed these deficien-

Minor non-conformance(incidents/department)

Energy Conservation
Subcommittee

Asdex Corp., which manufactures forging dies, was certified

cies and we voluntarily made a report to the authorities.

(see p. 3), raising the number of certified domestic manufac-

Because the waste handling was done appropriately, we wereZero Emission Subcommittee

turing companies to four.

given no administrative guidance, but we would like to ensure

Environmental Preservation
Subcommittee

Product and Environment
Subcommittee
Awareness and Publicity
Subcommittee
Logistics Energy
Conservation Subcommittee
Aichi Steel Group Environmental
Committee(Chair: Director in chargeof environmental issues)

Results of internal audits

However, we did receive two complaints.

that this will never happen again by ensuring our education ismore thorough.

Environmental ISO Review
Committee(Meets twice a year)

work to further establish ISO 14001 and to continue using our

The second complaint concerned dust from work being done

Surveillance audit results
Classification
Minor non-conformance(incidents)
Opportunities for
improvement and otherobservances(incidents/department)

2004

2005

2006

2007

1

1

1

1

11
18
21
12
（0.7） （1.0） （0.5） （0.3）

outdoors that ended up on the products in a neighboring
company. We will work to better manage our dust control
equipment to prevent this from happening again.

Site-based Environmental
Committees
Chita Site
Kariya Site
Forging Site
Higashiura Site
Related sites

Yoichi Kuno, Assistant Manager, Machine Facilities Mainterance Dept., Facility Engineering Div.

(Chair: Heads of sites)

environmental risks and not to notice abnormalities as much. We are reducing environmental impact that

Our mission is to reduce the environmental impact of our manufacturing operations. In other words, wewant to clean up what’s dirty. As people get used to their work, it is easy to become numb to potential
cannot be seen with the eyes, so it’s hard, and it’s hard to maintain your motivation. But to create asustainable society, we have to keep CSR in mind by remembering it’s not someone else’s responsibility it’s ours. It’s also important to find abnormalities the instant we notice something’s not right, and tovisually control environmental close calls to improve our ability to detect problems.

38*1 Life cycle assessment: A method of assessing the environmental impact of a product through its entire life

39

Environmental Management

Environmental Report

We created an Environmental Working Group with several subcommittees
and we are implementing multifaceted initiative in a variety of areas.
Our 4th 2010 Environmental Action Plan is being implemented by our Environmental Working Group and our Environmental ISO
Review Committee. The former has six subcommittees and is headed by the President, while the latter manages the efforts of ourplants based on the ISO 14001 environmental management system.

Environmental management promotion system

Reinforcing environmental education and internal audits

Our Environmental Close Call initiative

Results of 2007 audits

Our Environmental Working Group is made up of six subcom-

The training for both new employees and assistant managers

In 2007, we started an Environmental Close Call initiative that

The results of our internal audits and surveillance audits in 2007

mittees including the Environmental Preservation Subcommit-

includes environmental education. We do this to ensure thatcollects and analyzes minor issues that employees observe toare shown below. There were no major non-conformances. We

tee, which works to implement and improve environmental

there is full awareness that environmental activities areproactively prevent complaints about our plants. This newwill take these results and continue internal audits that focus

management systems as well as to increase the number ofimportant parts of corporate management and CSR.

effort also aims to increase awareness of environmental

down on a narrowed-down set of priorities. Regardless of theircertified group companies. These six subcommittees also

The number of internal auditors who do internal checks topreservation issues.

severity of the non-conformances, we will work to find theinclude the Product and Environment Subcommittee, which ismake sure our environmental management system is function-

establishing environmental impact assessment methods

ing correctly increased to 147 in 2007, and at our consoli-

through life cycle assessments*1 of products.

dated domestic affiliates with manufacturing work sites,
internal auditors lead environmental activities.

Environmental management implementation organization chart
Environmental Working Group(Meets twice a year)(Chair: President)
Environmental Office・Environmental Management
Dept., Safety, Health, andManagement Div.
・Various sites

Increasing our ISO 14001certification

actual cause and deal with it appropriately. We will continue toConforming to regulatory requirements

spiral-up activities.
In 2007, Aichi Steel conformed to all environmental laws andregulations.

Classification

2004

2005

2006

2007

4

2

0

0

0.9

1.0

0.9

0.7

The first complaint concerned how industrial waste handling
We are working to have 100% ISO 14001 certification of our

Major non-conformance(incidents)

was contracted out. The contractor identified deficiencies in

consolidated affiliates with manufacturing work sites. In 2007,

the control tickets and contract. We addressed these deficien-

Minor non-conformance(incidents/department)

Energy Conservation
Subcommittee

Asdex Corp., which manufactures forging dies, was certified

cies and we voluntarily made a report to the authorities.

(see p. 3), raising the number of certified domestic manufac-

Because the waste handling was done appropriately, we wereZero Emission Subcommittee

turing companies to four.

given no administrative guidance, but we would like to ensure

Environmental Preservation
Subcommittee

Product and Environment
Subcommittee
Awareness and Publicity
Subcommittee
Logistics Energy
Conservation Subcommittee
Aichi Steel Group Environmental
Committee(Chair: Director in chargeof environmental issues)

Results of internal audits

However, we did receive two complaints.

that this will never happen again by ensuring our education ismore thorough.

Environmental ISO Review
Committee(Meets twice a year)

work to further establish ISO 14001 and to continue using our

The second complaint concerned dust from work being done

Surveillance audit results
Classification
Minor non-conformance(incidents)
Opportunities for
improvement and otherobservances(incidents/department)

2004

2005

2006

2007

1

1

1

1

11
18
21
12
（0.7） （1.0） （0.5） （0.3）

outdoors that ended up on the products in a neighboring
company. We will work to better manage our dust control
equipment to prevent this from happening again.

Site-based Environmental
Committees
Chita Site
Kariya Site
Forging Site
Higashiura Site
Related sites

Yoichi Kuno, Assistant Manager, Machine Facilities Mainterance Dept., Facility Engineering Div.

(Chair: Heads of sites)

environmental risks and not to notice abnormalities as much. We are reducing environmental impact that

Our mission is to reduce the environmental impact of our manufacturing operations. In other words, wewant to clean up what’s dirty. As people get used to their work, it is easy to become numb to potential
cannot be seen with the eyes, so it’s hard, and it’s hard to maintain your motivation. But to create asustainable society, we have to keep CSR in mind by remembering it’s not someone else’s responsibility it’s ours. It’s also important to find abnormalities the instant we notice something’s not right, and tovisually control environmental close calls to improve our ability to detect problems.

38*1 Life cycle assessment: A method of assessing the environmental impact of a product through its entire life

39

Environmental Material Flows

Environmental Report

This is our environmental material flow for 2007.
We make steel out of steel scrap from the market, and forge it to create our products. This process includes a recycling network

MarketWaste material (Steel scrap) 795,000 tons

Energy:Power
1,094 TWh
Fuel
117,000 KL
Oxygen44,520,000 m3N
Municipal Gas 88,610,000 m3N

Steel scrap

Industrial wastewater:Industrial water

517,000 m

Nitrogen
Argon▲

Released to atmosphere:
CO2

678,000 tons CO2

956,000 m3N

SOX

10.5 tons

184,000 m

NOX

122 tons*1

3

Wastewater volume 267,000 m

3

3N[Steelmaking]

1,204 tons

[Forging][Rolling]

Casting

254,000 tons

Internal steel scrap

Internal recycling 37,000 tons (reducing slag and scale)

Waste

153,000 tons

Used outside the company(for- value / free)
151,000 tons▲

Landfilledamount2,000 tons

*1 Emitted between January and December 2007.
*2 ASR: Automobile shredder residue. This is what is left after metal is removed from shredded end-of-life vehicles. It contains materials such as
plastic, rubber, and glass.

Recycled byanother company

Slag, dust, and waterway sludge▲

230,000 tons

Used outside thecompany (for value)
64,000 tons

Forging▲

Byproducts

Scale

▲

Internal steel scrap

Heating

Pickling
Heat treatment▲▲

Rolling▲▲Heating▲

Refining▲

Melting▲

489,000 tons▲

22,000 tons▲

35,000 tons

Reducing agents

▲

Slag

▲

57,000 tons

Purchased slab and steel

40

Products

114,000 tons▲

Slab fromother companies

Utilities:

Steel products 884,000 tons
Forgings
320,000 tons

Aichi Steel Manufacturing process▲

Primary andMaterial:
secondary materials
Alloy steels

1,082,000 tons▲

Recycled material:
Steel scrap
795,000 tons
Internally recycled scrap 230,000 tons
Primary and secondary materials 37,000 tons
20,000 tons
ASR*2

▲

with thorough recycling measures to reduce the amount of waste.

Direct landfilling Vacuumed sludge
Indirect landfilling

Internal processing: Waste acid / dust
Contracted processing: Waste acid / waste plastic

41

Environmental Material Flows

Environmental Report

This is our environmental material flow for 2007.
We make steel out of steel scrap from the market, and forge it to create our products. This process includes a recycling network

MarketWaste material (Steel scrap) 795,000 tons

Energy:Power
1,094 TWh
Fuel
117,000 KL
Oxygen44,520,000 m3N
Municipal Gas 88,610,000 m3N

Steel scrap

Industrial wastewater:Industrial water

517,000 m

Nitrogen
Argon▲

Released to atmosphere:
CO2

678,000 tons CO2

956,000 m3N

SOX

10.5 tons

184,000 m

NOX

122 tons*1

3

Wastewater volume 267,000 m

3

3N[Steelmaking]

1,204 tons

[Forging][Rolling]

Casting

254,000 tons

Internal steel scrap

Internal recycling 37,000 tons (reducing slag and scale)

Waste

153,000 tons

Used outside the company(for- value / free)
151,000 tons▲

Landfilledamount2,000 tons

*1 Emitted between January and December 2007.
*2 ASR: Automobile shredder residue. This is what is left after metal is removed from shredded end-of-life vehicles. It contains materials such as
plastic, rubber, and glass.

Recycled byanother company

Slag, dust, and waterway sludge▲

230,000 tons

Used outside thecompany (for value)
64,000 tons

Forging▲

Byproducts

Scale

▲

Internal steel scrap

Heating

Pickling
Heat treatment▲▲

Rolling▲▲Heating▲

Refining▲

Melting▲

489,000 tons▲

22,000 tons▲

35,000 tons

Reducing agents

▲

Slag

▲

57,000 tons

Purchased slab and steel

40

Products

114,000 tons▲

Slab fromother companies

Utilities:

Steel products 884,000 tons
Forgings
320,000 tons

Aichi Steel Manufacturing process▲

Primary andMaterial:
secondary materials
Alloy steels

1,082,000 tons▲

Recycled material:
Steel scrap
795,000 tons
Internally recycled scrap 230,000 tons
Primary and secondary materials 37,000 tons
20,000 tons
ASR*2

▲

with thorough recycling measures to reduce the amount of waste.

Direct landfilling Vacuumed sludge
Indirect landfilling

Internal processing: Waste acid / dust
Contracted processing: Waste acid / waste plastic

41

Environmental Preservation Activities (Industrial Waste)

We are working to reduce our CO2 emissions by actively investing in new facilities and steadily continuing improvements.

Controlling the amount of byproducts and recycling as
much as possible – this is just part of doing business.

Our target is to reduce CO2 emissions by 10% from the 1990 level by 2010. To this end, we are steadily working to reduce energy

We are a recycling-oriented enterprise that uses steel scrap to make steel. Byproducts of producing specialty steel such as slag add

losses due to inefficient operation, to improve energy efficiency through new facilities, and to reduce CO2 emissions by changing to

up to 254,000 tons a year. We believe that controlling and using this effectively is part of doing business, and we are working todifferent fuels.

develop technology and to reduce the amount of that goes into the landfill.

2007 targets and results

Direct landfilled waste

2007 targets and results

Achieving energy savings in our shipping operations

Item2007 target

Results

Aichi Steel ships 157 million ton-km*1 of cargo a year, andItem2007 target

Performance

CO2 emissions

717,000 tons/year

678,000 tons/year

thus is a Specified Consigner according to the Act on the

Direct landfilling

300 tons/year

300 tons/year

Indirect landfilling

2,100 tons/year

2,160 tons/year

Environmental Report

Environmental Preservation Activities (Global Warming)(thousand tons/year)

60
52.0

Rational Use of Energy.

In 2007, factors such as increased production raised our CO2

In 2007, we changed our shipping practices to incorporate

emissions, but our high-efficiency heating furnaces andideas such as modal shift and consolidated loading. These

increased productivity allowed us to reduce our CO2changes resulted in a 9% reduction in CO2 emissions over theemissions by 14 to 15% from the 1990 level.

previous year, a significant decrease.

In 2007, we met our target for reducing direct landfilled waste.
We came very close to meeting our target for indirect
landfilled waste. Next year, we plan to focus on the recycling

50
40
30

26.1

20

13.2
8.2

10

8.9

Product life cycle assessments

In 2007, we changed the way we measure CO2 emissions

In 2007, we carried out a thorough life cycle assessment offrom one that measures our regular energy sources to theselected product models to gauge the environmental impact

method specified in the Japan Iron and Steel Federation’s

at every manufacturing stage from steelmaking to forging.

voluntary action plan.

Going forward, we will increase the range of products that areassessed in order to bring additional environmental considerations in at the design stage.

1990

CO2 Breakdown (2007)

Thousand tons of CO2 / year
CO2 emissions
Target (10% less than 1990)

797
723

727

701
628

695

665

640

662

688

677

686

678

678

600

400

200

0
90

95

96

97

Breakdown of CO2
emissions byenergy source

98

99

00

01

02

03

Heavy oil A
3.9％
Coke
6.5％

Municipal
gas
27.5％

42

0.6

0.5

0.3

1995

2000

2001

2002

2003

2004

2005

2006

2007

Indirect landfilled waste
In past years, we developed technology to make abrasives
from slag, the ANRP method*2 for reusing reducing slag inelectrical arc furnaces, as well as a briquetting machine tocollect nickel from the byproducts of the stainless steel
manufacturing process.

30
24.4

(thousand tons/year)

25.5
22.2

20

19.2
16.7
9.1

10

3.5

2.3

2.2

2005

2006

2007

0
1999

2000

2001

2002

2003

2004

by recycling brick waste and conveyor dust, to have outsidecontractors accept electric arc furnace dust to recover zinc,

1000

800

0.8

Efforts to develop new recycling technologies bearing fruit

We have also being working to reduce direct landfilled waste

CO2 emissions

2.5
〜
〜

A change to the way CO2 emissions are measure0〜〜of vacuumed sludge.

Total CO2 emissions
678,000tons-CO2

04

05

06

07

Oxygen
1.6％
Other
1.1％

Factors decreasing CO2 emissions
・Achieved energy savings in slab
heating furnace – Chita Plant・
・
・
・
・
・
・13,000 tons CO2
・Other energy intensity improvements・・・・1,000 tons CO2
・Achieved energy savings with a
new heating furnace - Kariya Plant・・・・2,000 tons CO2
・Improved forging productivity ・
・
・
・
・
・
・
・8,000 tons CO2
Total ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・24,000 tons CO2
Factors increasing CO2 emissions
・Increased production ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・20,000 tons CO2・Changes to steelmaking procedures ・・・1,000 tons CO2
・Environmental measures taken
for steelmaking・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・3,000 tons CO2
Total ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・24,000 tons CO2

and to increase production of nickel-bearing briquettes out of
our waste acid sludge to reduce the amount of indirect
landfilled waste. In 2007, we recycled the equivalent of 87
tons of pure nickel

Nickel recycling
150

137

(tons/ year)

141
123

106
87

100
52

50

27
5

0

2000

2001

2002

2003

2004

2005

2006

2007

Electricity(purchased)
59.4％*1 ton-km: A unit for cargo shipped, which is calculated by multiplying the shipped amount (in tons) by the shipped distance (in kilometers)*2 ANRP: The Aichi New Hot Slag Recycling Process

43Environmental Preservation Activities (Industrial Waste)

We are working to reduce our CO2 emissions by actively investing in new facilities and steadily continuing improvements.

Controlling the amount of byproducts and recycling as
much as possible – this is just part of doing business.

Our target is to reduce CO2 emissions by 10% from the 1990 level by 2010. To this end, we are steadily working to reduce energy

We are a recycling-oriented enterprise that uses steel scrap to make steel. Byproducts of producing specialty steel such as slag add

losses due to inefficient operation, to improve energy efficiency through new facilities, and to reduce CO2 emissions by changing to

up to 254,000 tons a year. We believe that controlling and using this effectively is part of doing business, and we are working todifferent fuels.

develop technology and to reduce the amount of that goes into the landfill.

2007 targets and results

Direct landfilled waste

2007 targets and results

Achieving energy savings in our shipping operations

Item2007 target

Results

Aichi Steel ships 157 million ton-km*1 of cargo a year, andItem2007 target

Performance

CO2 emissions

717,000 tons/year

678,000 tons/year

thus is a Specified Consigner according to the Act on the

Direct landfilling

300 tons/year

300 tons/year

Indirect landfilling

2,100 tons/year

2,160 tons/year

Environmental Report

Environmental Preservation Activities (Global Warming)(thousand tons/year)

60
52.0

Rational Use of Energy.

In 2007, factors such as increased production raised our CO2

In 2007, we changed our shipping practices to incorporate

emissions, but our high-efficiency heating furnaces andideas such as modal shift and consolidated loading. These

increased productivity allowed us to reduce our CO2changes resulted in a 9% reduction in CO2 emissions over theemissions by 14 to 15% from the 1990 level.

previous year, a significant decrease.

In 2007, we met our target for reducing direct landfilled waste.
We came very close to meeting our target for indirect
landfilled waste. Next year, we plan to focus on the recycling

50
40
30

26.1

20

13.2
8.2

10

8.9

Product life cycle assessments

In 2007, we changed the way we measure CO2 emissions

In 2007, we carried out a thorough life cycle assessment offrom one that measures our regular energy sources to theselected product models to gauge the environmental impact

method specified in the Japan Iron and Steel Federation’s

at every manufacturing stage from steelmaking to forging.

voluntary action plan.

Going forward, we will increase the range of products that areassessed in order to bring additional environmental considerations in at the design stage.

1990

CO2 Breakdown (2007)

Thousand tons of CO2 / year
CO2 emissions
Target (10% less than 1990)

797
723

727

701
628

695

665

640

662

688

677

686

678

678

600

400

200

0
90

95

96

97

Breakdown of CO2
emissions byenergy source

98

99

00

01

02

03

Heavy oil A
3.9％
Coke
6.5％

Municipal
gas
27.5％

42

0.6

0.5

0.3

1995

2000

2001

2002

2003

2004

2005

2006

2007

Indirect landfilled waste
In past years, we developed technology to make abrasives
from slag, the ANRP method*2 for reusing reducing slag inelectrical arc furnaces, as well as a briquetting machine tocollect nickel from the byproducts of the stainless steel
manufacturing process.

30
24.4

(thousand tons/year)

25.5
22.2

20

19.2
16.7
9.1

10

3.5

2.3

2.2

2005

2006

2007

0
1999

2000

2001

2002

2003

2004

by recycling brick waste and conveyor dust, to have outsidecontractors accept electric arc furnace dust to recover zinc,

1000

800

0.8

Efforts to develop new recycling technologies bearing fruit

We have also being working to reduce direct landfilled waste

CO2 emissions

2.5
〜
〜

A change to the way CO2 emissions are measure0〜〜of vacuumed sludge.

Total CO2 emissions
678,000tons-CO2

04

05

06

07

Oxygen
1.6％
Other
1.1％

Factors decreasing CO2 emissions
・Achieved energy savings in slab
heating furnace – Chita Plant・
・
・
・
・
・
・13,000 tons CO2
・Other energy intensity improvements・・・・1,000 tons CO2
・Achieved energy savings with a
new heating furnace - Kariya Plant・・・・2,000 tons CO2
・Improved forging productivity ・
・
・
・
・
・
・
・8,000 tons CO2
Total ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・24,000 tons CO2
Factors increasing CO2 emissions
・Increased production ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・20,000 tons CO2・Changes to steelmaking procedures ・・・1,000 tons CO2
・Environmental measures taken
for steelmaking・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・3,000 tons CO2
Total ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・24,000 tons CO2

and to increase production of nickel-bearing briquettes out of
our waste acid sludge to reduce the amount of indirect
landfilled waste. In 2007, we recycled the equivalent of 87
tons of pure nickel

Nickel recycling
150

137

(tons/ year)

141
123

106
87

100
52

50

27
5

0

2000

2001

2002

2003

2004

2005

2006

2007

Electricity(purchased)
59.4％*1 ton-km: A unit for cargo shipped, which is calculated by multiplying the shipped amount (in tons) by the shipped distance (in kilometers)*2 ANRP: The Aichi New Hot Slag Recycling Process

43Environmental Preservation Activities (Air Quality)

Appropriately managing chemicals and restricting theiremission is how we reduce the risk to the environment.

It’s our responsibility to control dust and soot and to protect the atmosphere.

Our business requires a wide variety of chemical substances, so it is very important to manage them properly and restrict their

Minimizing the effect of the gases that are released into the atmosphere in the course of business operations on the natural environ-emission. Each plant knows the amounts of different substances it is permitted to handle and transfer based on the PRTR*1 systemment – the environment that we all live in – is an important corporate responsibility. We are actively investing in new facilities towhich is in turn based on the Chemical Substance Act*2, and each plant is working hard to reduce risk.

reduce our environmental impact and we are changing to materials that do not contain substances of environmental concern.

Appropriate management of PRTR chemicals

Finished environmental improvements to the No. 3 Electric Arc Furnace

PRTR Data
EmittedWe are continuing to manage PRTR substances appropri-

Substances

Handledately to work toward the target in the 2010 Environmental
Action Plan, which was established to strengthen the

Water-soluble zinc compounds

1.3

Atmosphere

Water

ー

0.4

Outside ofpremises(as waste, etc.)

0.3

Substance

Facility

Limit

Actual levels (max)Furnace to decrease its environmental impact. This work was

NOx

Boiler130

75.3

finished in August 2007, and has allowed us to suction

150

25.5

180

59.7

250

33.5

130

69.4

150

46.0

170

51.5

180

62.9

200

47.3

0.15

0.00

0.30

0.00

0.08

0.00

0.10

0.00

0.20

0.00

0.25

0.00

0.30

0.01

0.05

0.00

0.08

0.00

0.10

0.00

Ethylbenzene

2.1

0.1

ー

ー

manufacturing processes and to reduce the associatedXylene

11

0.3

ー

ー

work environment in front of the furnace was also improved.

Chrome and trivalent chrome compounds 26000

0.0

0.0

110.0

Cobalt and its compounds

160

ー

0.0

0.4

Dioxins

0.09

0.09

ー

ー

collector was reduced to 0.09g-TEQ/year, a significant

Toluene

14

0.8

ー

ー

decrease.

Lead and its compounds

330

0.0

0.2

120.0

Nickel

6600

ー

ー

ー

Nickel compounds

950

0.0

0.1

19.0

Hydrofluoric acid and its water-soluble salts

9

0.0

5.3

1.5

Benzene

1.3

0.0

ー

ー

Boron and its compounds

69

ー

0.1

0.7

Manganese and its compounds

14000

0.0

1.6

120.0

Molybdenum and its compounds

8900

ー

0.4

0.6

Chrome and trivalent chrome compounds

1200

ー

0.0

38.0

Nickel compounds

570

ー

0.0

20.0

Hydrofluoric acid and its water-soluble salts

150

0.1

0.7

110.0

Molybdenum and its compounds

19

ー

0.2

1.3

58,937 t

Wateremissions

Products
such as steel(consumed)

Waste(transferred)

9t

Decomposition /neutralization (removed)

543 t

57,512 t

871 t

Emissions of PRTR substances (2007): a breakdown
Other 7.2%
Xylene 2.5%
Water-soluble zinc compounds 3.5%
Molybdenum andits compounds 6.0%

Manganese andits compounds
15.5%

Higashiura Plant: None reportable
Gifu Plant: None reportable● A hyphen (“-“) indicates a quantity of zero. The amounts were
calculated according to the PRTR system.
●The units shown are tons/year (except for 179. Dioxins, which are
g-TEQ/year)

Soot

BoilerHeating furnace

Electrical arc
furnaceNo. 3 Electric Arc Furnace

SOx(Total limit)

34.35

3.79

NOx

Boiler180

70.7

Heating furnace

130

63.0

150

48.4

170

65.1

200

61.0

Boiler

0.30

0.00

Heating furnace

0.20

0.00

0.25

0.00

Expanding our measures to control particulates
Areas within our plant grounds where there may be airborne
particulate matter are sprayed with water, and we are pavingroads and slab yards. In 2007, we expanded these activities.

Kariya Plant

Toluene 7.4%

Hydrofluoric acidand its water-soluble salts
57.9%

Kariya Plant* Units for diagram: tons

Heating furnace

The concentration of dioxin in the gas emitted from the dust

Chita Plant (inc. Forging)Chemicals in our
raw materials
and secondary
materials

Atmosphericemissions

Chita Plant (inc. Forging)

1t

Control Law and Prefectural regulations)

In March 2007, we started work on the No. 3 Electric Arc

management of substances of environmental concern in our

Material balance (2007) for PRTR substances

Atmospheric data (Limits from the Air Pollution

Transferred

particulate matter efficiently and to reduce it by 50%. The

environmental risk.

Environmental Report

Environmental Preservation Activities (Chemicals)

Soot

Gifu Plant

SOx(Total limit)

11.62

7.333

NOx

Boiler150

83.0

Higashiura plant: No reportable facilities●The actual levels for NOx and soot show the maximum recorded value

for the facility in question.
●Units are as follows in brackets: NOx (ppm); Soot (g/m3N) ; SOx (m3/h)(Total limit set out in the Air Pollution Control Law)

44

*1 PRTR: Pollutant Release and Transfer Register*2 Chemical Substances Act: Act on Confirmation, etc. of Release Amounts of Specific Chemical Substances in the Environment and Promotion of
Improvements to the Management Thereof

45

Environmental Preservation Activities (Air Quality)

Appropriately managing chemicals and restricting theiremission is how we reduce the risk to the environment.

It’s our responsibility to control dust and soot and to protect the atmosphere.

Our business requires a wide variety of chemical substances, so it is very important to manage them properly and restrict their

Minimizing the effect of the gases that are released into the atmosphere in the course of business operations on the natural environ-emission. Each plant knows the amounts of different substances it is permitted to handle and transfer based on the PRTR*1 systemment – the environment that we all live in – is an important corporate responsibility. We are actively investing in new facilities towhich is in turn based on the Chemical Substance Act*2, and each plant is working hard to reduce risk.

reduce our environmental impact and we are changing to materials that do not contain substances of environmental concern.

Appropriate management of PRTR chemicals

Finished environmental improvements to the No. 3 Electric Arc Furnace

PRTR Data
EmittedWe are continuing to manage PRTR substances appropri-

Substances

Handledately to work toward the target in the 2010 Environmental
Action Plan, which was established to strengthen the

Water-soluble zinc compounds

1.3

Atmosphere

Water

ー

0.4

Outside ofpremises(as waste, etc.)

0.3

Substance

Facility

Limit

Actual levels (max)Furnace to decrease its environmental impact. This work was

NOx

Boiler130

75.3

finished in August 2007, and has allowed us to suction

150

25.5

180

59.7

250

33.5

130

69.4

150

46.0

170

51.5

180

62.9

200

47.3

0.15

0.00

0.30

0.00

0.08

0.00

0.10

0.00

0.20

0.00

0.25

0.00

0.30

0.01

0.05

0.00

0.08

0.00

0.10

0.00

Ethylbenzene

2.1

0.1

ー

ー

manufacturing processes and to reduce the associatedXylene

11

0.3

ー

ー

work environment in front of the furnace was also improved.

Chrome and trivalent chrome compounds 26000

0.0

0.0

110.0

Cobalt and its compounds

160

ー

0.0

0.4

Dioxins

0.09

0.09

ー

ー

collector was reduced to 0.09g-TEQ/year, a significant

Toluene

14

0.8

ー

ー

decrease.

Lead and its compounds

330

0.0

0.2

120.0

Nickel

6600

ー

ー

ー

Nickel compounds

950

0.0

0.1

19.0

Hydrofluoric acid and its water-soluble salts

9

0.0

5.3

1.5

Benzene

1.3

0.0

ー

ー

Boron and its compounds

69

ー

0.1

0.7

Manganese and its compounds

14000

0.0

1.6

120.0

Molybdenum and its compounds

8900

ー

0.4

0.6

Chrome and trivalent chrome compounds

1200

ー

0.0

38.0

Nickel compounds

570

ー

0.0

20.0

Hydrofluoric acid and its water-soluble salts

150

0.1

0.7

110.0

Molybdenum and its compounds

19

ー

0.2

1.3

58,937 t

Wateremissions

Products
such as steel(consumed)

Waste(transferred)

9t

Decomposition /neutralization (removed)

543 t

57,512 t

871 t

Emissions of PRTR substances (2007): a breakdown
Other 7.2%
Xylene 2.5%
Water-soluble zinc compounds 3.5%
Molybdenum andits compounds 6.0%

Manganese andits compounds
15.5%

Higashiura Plant: None reportable
Gifu Plant: None reportable● A hyphen (“-“) indicates a quantity of zero. The amounts were
calculated according to the PRTR system.
●The units shown are tons/year (except for 179. Dioxins, which are
g-TEQ/year)

Soot

BoilerHeating furnace

Electrical arc
furnaceNo. 3 Electric Arc Furnace

SOx(Total limit)

34.35

3.79

NOx

Boiler180

70.7

Heating furnace

130

63.0

150

48.4

170

65.1

200

61.0

Boiler

0.30

0.00

Heating furnace

0.20

0.00

0.25

0.00

Expanding our measures to control particulates
Areas within our plant grounds where there may be airborne
particulate matter are sprayed with water, and we are pavingroads and slab yards. In 2007, we expanded these activities.

Kariya Plant

Toluene 7.4%

Hydrofluoric acidand its water-soluble salts
57.9%

Kariya Plant* Units for diagram: tons

Heating furnace

The concentration of dioxin in the gas emitted from the dust

Chita Plant (inc. Forging)Chemicals in our
raw materials
and secondary
materials

Atmosphericemissions

Chita Plant (inc. Forging)

1t

Control Law and Prefectural regulations)

In March 2007, we started work on the No. 3 Electric Arc

management of substances of environmental concern in our

Material balance (2007) for PRTR substances

Atmospheric data (Limits from the Air Pollution

Transferred

particulate matter efficiently and to reduce it by 50%. The

environmental risk.

Environmental Report

Environmental Preservation Activities (Chemicals)

Soot

Gifu Plant

SOx(Total limit)

11.62

7.333

NOx

Boiler150

83.0

Higashiura plant: No reportable facilities●The actual levels for NOx and soot show the maximum recorded value

for the facility in question.
●Units are as follows in brackets: NOx (ppm); Soot (g/m3N) ; SOx (m3/h)(Total limit set out in the Air Pollution Control Law)

44

*1 PRTR: Pollutant Release and Transfer Register*2 Chemical Substances Act: Act on Confirmation, etc. of Release Amounts of Specific Chemical Substances in the Environment and Promotion of
Improvements to the Management Thereof

45

Environmental Preservation Activities (In the Office and Other Places)

A rapid and accurate data management system makes
our water quality control stringent and thorough.

We are actively working on well-structured CO2 reduction
activities and green purchasing initiatives in the office.

In order to reduce the effect of plant waste water on the natural environment, we are working to put in systems to help us rapidly

There are many things that Aichi Steel can and should be doing for the environment such as energy conservation and green

and accurately grasp water quality data and we are carrying out facility improvements. We are managing our water quality usingpurchasing initiatives in the office. We will be expanding the scope of these initiatives to include both domestic and overseas group

voluntary targets even more stringent than those required by law.

companies and developing them further.

Using the power of IT for our data collection to manage water quality

Water quality data (Limits from the Water Pollution
Control Law and Prefectural regulations)

Environmental activities in the office

Green purchasing initiatives

Even in our offices, we are steadily working to reduce our

We have been working to carry out green purchasing -

Item

Limit

Max.

Min.

Averageand the levels of nitrogen and phosphorous in our plant

pH

5〜9

7.3

6.5

6.8

electrical consumption and create less waste.

purchasing materials with the least possible environmental

COD

25（20）

10.8

5.0

7.4

We created an Office Energy Conservation Team in 2007, andimpact - based on our own guidelines. At the beginning ofSS

40（30）

15.5

0.1

2.7

each year, our suppliers meet in the general meeting of the

Nitrogen120（60）

we are working steadily to raise employee awareness and to

2.2

0.8

1.5

Phosphorus

16（8）

0.2

Less than 0.1

0.10

reduce our energy consumption.

Hoko-kai. At this meeting, we inform our suppliers of ourpH

5.8〜8.6

7.7

6.2

6.8

BOD

25（20）

2.6

0.7

1.3

SS

40（30）

18.0

0.5

5.1

wastewater, and as a rule, our voluntary limits are 80% of thelegal and regulatory limits. We also continuously treat ourwastewater.

Chita Plant(Includes Forging Plant)

We use measurement devices to continuously monitor COD

In 2007, we upgraded our water quality data collection towater quality management based on even more accurate
data collection. We are also preparing to upgrade the

Kariya Plant

make it part of our IT network, and we are improving ourcollection of our atmospheric emissions data to make it part
Higashiura Plant

of our IT network as well.

purchasing policy, asking them not only to raise quality and●Thorough establishment of Cool Biz and Warm Biz

Cool Biz and Warm Biz practices, which include setting
air-conditioners to 28°C and heaters to 20°C, are ongoing.

Gifu Plant

Nitrogen120（60）

12.7

6.3

8.9

Phosphorus

16（8）

1.1

0.1

0.50

pH

5.8〜8.6

6.9

6.0

6.6

BOD

25（20）

7.2

4.0

5.6

SS

40（30）

7.5

0.1

1.6

Nitrogen120（60）

8.5

3.1

4.9

Phosphorus

16（8）

0.9

0.4

0.60

pH

5.8〜8.6

7.4

6.0

6.9

BOD

30（20）

3.2

1.9

2.6

Effective environmental preservation and the effective use of●Waste reduction and recycling activities

We thoroughly sort the garbage generated within the office.

Getting a grasp of environmental costsSS

60（50）

8.0

0.1

1.5

management resources require quantitatively understanding

120（60）

6.0

1.3

4.0

16（8）

and assessing the cost and effectiveness of environmental

Phosphorus

0.4

Less than 0.1

0.16●Not all restricted substances are shown, but those that are notshown were also below the limit, were below the lower limit ofquantitation, or were not detected.
●pH: hydrogen ion concentration; COD: Chemical oxygen demand;

BOD: Biological oxygen demand: SS: Suspended solids●The values shown in brackets are average daily values

Atsushi Kinugawa, Manager, Environmental Management Dept., Safety andEnvironmental Div.
The water quality management system lets us see trends and make rapid decisions before an abnormality even happens, and it has made data collection much less labor-intensive. We are working on putting
a similar monitoring system in place for our atmospheric emissions, but the observation conditions are
difficult, and it is a trial-and-error process. We would first like to put a PC-based monitoring system formonitoring particulates, soot, and NOx on a vehicle that we can use to carry out environmental measurements to make it easier for worksite employees. In the future, we would like to design a system to get a
grasp of the CO2 we produce on a daily basis based on our energy consumption.

tally friendly based on a suggestion system.
In 2007, we started laying the groundwork for a review of ourguidelines to make them more realistic. By supporting theenvironmental management efforts at our suppliers, we areenvironmentally friendly products

initiatives. To do this, we discuss the best ways to track ourenvironmental costs and use guidelines from the Ministry of
the Environment, among other sources, to calculate andpublicize our environmental costs every year.

Costs of environmental initiatives in 2007
Operational costs(Unit: million yen)Highlights

Investment/cost●Environmental preservation costs

Expenses for electrical power and repairs to dust collectors
Investment in energy conservation measures for our wastewater processing
facilities and related maintenance expenses
Processing and recycling costs associated with industrial waste and regular waste

1,648●Upstream and downstream costs

Simplifying packaging (less packaging material / shorter time)●Management costs

Cost of environmental education for employees; Expenses associated withobtaining ISO certification and running the environmental management system;
labor and other expenses for environmental departments and committees

420●R&D costs

R&D expenses associated with environmental preservation

15●Social contribution costs

Greening company grounds and cleaning up the industrial road32

associated with controlling the environmental
impact of production and service activities carriedout in our operational area

Costs associated with controlling the environmental
impact of processes upstream and downstream ofour production and service activities
Environmental preservation costs associated withmanagement activities
Environmental preservation costs associated with
R&D activities
Environmental preservation costs associated withsocial contribution activities

Total

46

value, but also to provide products that are more environmen-

working on a system that will make it easier to develop

Nitrogen●Units: mg/ℓ (except for pH)

Environmental Report

Environmental Preservation Activities (Water Quality)

2

2,118

47

Environmental Preservation Activities (In the Office and Other Places)

A rapid and accurate data management system makes
our water quality control stringent and thorough.

We are actively working on well-structured CO2 reduction
activities and green purchasing initiatives in the office.

In order to reduce the effect of plant waste water on the natural environment, we are working to put in systems to help us rapidly

There are many things that Aichi Steel can and should be doing for the environment such as energy conservation and green

and accurately grasp water quality data and we are carrying out facility improvements. We are managing our water quality usingpurchasing initiatives in the office. We will be expanding the scope of these initiatives to include both domestic and overseas group

voluntary targets even more stringent than those required by law.

companies and developing them further.

Using the power of IT for our data collection to manage water quality

Water quality data (Limits from the Water Pollution
Control Law and Prefectural regulations)

Environmental activities in the office

Green purchasing initiatives

Even in our offices, we are steadily working to reduce our

We have been working to carry out green purchasing -

Item

Limit

Max.

Min.

Averageand the levels of nitrogen and phosphorous in our plant

pH

5〜9

7.3

6.5

6.8

electrical consumption and create less waste.

purchasing materials with the least possible environmental

COD

25（20）

10.8

5.0

7.4

We created an Office Energy Conservation Team in 2007, andimpact - based on our own guidelines. At the beginning ofSS

40（30）

15.5

0.1

2.7

each year, our suppliers meet in the general meeting of the

Nitrogen120（60）

we are working steadily to raise employee awareness and to

2.2

0.8

1.5

Phosphorus

16（8）

0.2

Less than 0.1

0.10

reduce our energy consumption.

Hoko-kai. At this meeting, we inform our suppliers of ourpH

5.8〜8.6

7.7

6.2

6.8

BOD

25（20）

2.6

0.7

1.3

SS

40（30）

18.0

0.5

5.1

wastewater, and as a rule, our voluntary limits are 80% of thelegal and regulatory limits. We also continuously treat ourwastewater.

Chita Plant(Includes Forging Plant)

We use measurement devices to continuously monitor COD

In 2007, we upgraded our water quality data collection towater quality management based on even more accurate
data collection. We are also preparing to upgrade the

Kariya Plant

make it part of our IT network, and we are improving ourcollection of our atmospheric emissions data to make it part
Higashiura Plant

of our IT network as well.

purchasing policy, asking them not only to raise quality and●Thorough establishment of Cool Biz and Warm Biz

Cool Biz and Warm Biz practices, which include setting
air-conditioners to 28°C and heaters to 20°C, are ongoing.

Gifu Plant

Nitrogen120（60）

12.7

6.3

8.9

Phosphorus

16（8）

1.1

0.1

0.50

pH

5.8〜8.6

6.9

6.0

6.6

BOD

25（20）

7.2

4.0

5.6

SS

40（30）

7.5

0.1

1.6

Nitrogen120（60）

8.5

3.1

4.9

Phosphorus

16（8）

0.9

0.4

0.60

pH

5.8〜8.6

7.4

6.0

6.9

BOD

30（20）

3.2

1.9

2.6

Effective environmental preservation and the effective use of●Waste reduction and recycling activities

We thoroughly sort the garbage generated within the office.

Getting a grasp of environmental costsSS

60（50）

8.0

0.1

1.5

management resources require quantitatively understanding

120（60）

6.0

1.3

4.0

16（8）

and assessing the cost and effectiveness of environmental

Phosphorus

0.4

Less than 0.1

0.16●Not all restricted substances are shown, but those that are notshown were also below the limit, were below the lower limit ofquantitation, or were not detected.
●pH: hydrogen ion concentration; COD: Chemical oxygen demand;

BOD: Biological oxygen demand: SS: Suspended solids●The values shown in brackets are average daily values

Atsushi Kinugawa, Manager, Environmental Management Dept., Safety andEnvironmental Div.
The water quality management system lets us see trends and make rapid decisions before an abnormality even happens, and it has made data collection much less labor-intensive. We are working on putting
a similar monitoring system in place for our atmospheric emissions, but the observation conditions are
difficult, and it is a trial-and-error process. We would first like to put a PC-based monitoring system formonitoring particulates, soot, and NOx on a vehicle that we can use to carry out environmental measurements to make it easier for worksite employees. In the future, we would like to design a system to get a
grasp of the CO2 we produce on a daily basis based on our energy consumption.

tally friendly based on a suggestion system.
In 2007, we started laying the groundwork for a review of ourguidelines to make them more realistic. By supporting theenvironmental management efforts at our suppliers, we areenvironmentally friendly products

initiatives. To do this, we discuss the best ways to track ourenvironmental costs and use guidelines from the Ministry of
the Environment, among other sources, to calculate andpublicize our environmental costs every year.

Costs of environmental initiatives in 2007
Operational costs(Unit: million yen)Highlights

Investment/cost●Environmental preservation costs

Expenses for electrical power and repairs to dust collectors
Investment in energy conservation measures for our wastewater processing
facilities and related maintenance expenses
Processing and recycling costs associated with industrial waste and regular waste

1,648●Upstream and downstream costs

Simplifying packaging (less packaging material / shorter time)●Management costs

Cost of environmental education for employees; Expenses associated withobtaining ISO certification and running the environmental management system;
labor and other expenses for environmental departments and committees

420●R&D costs

R&D expenses associated with environmental preservation

15●Social contribution costs

Greening company grounds and cleaning up the industrial road32

associated with controlling the environmental
impact of production and service activities carriedout in our operational area

Costs associated with controlling the environmental
impact of processes upstream and downstream ofour production and service activities
Environmental preservation costs associated withmanagement activities
Environmental preservation costs associated with
R&D activities
Environmental preservation costs associated withsocial contribution activities

Total

46

value, but also to provide products that are more environmen-

working on a system that will make it easier to develop

Nitrogen●Units: mg/ℓ (except for pH)

Environmental Report

Environmental Preservation Activities (Water Quality)

2

2,118

47

Management’s Discussion and Analysis

Financial Section

Overview
At the beginning of fiscal year 2007, the Japanese
economy showed signs of a gradual recovery backed
by the steady growth in corporate income; however,the skyrocketing price of oil, a slower U.S. economy,
and the high value of the Japanese yen during thelatter half of the year increased the uncertainty inJapan’s economic prospects.

thousand tons

These are the conditions that we found ourselves in,and the Aichi Steel Group worked to create an
optimized production system that fully utilizes ourinvestment in facilities and that satisfies our customers;
we also worked to improve productivity and lower unit
costs. As a result, net sales for the year amounted to253,462 million yen, a 7.6% increase over net sales in
the previous year, which amounted to 235,637 million
yen.
In terms of profit, despite higher raw material costs, wehave achieved better sales prices, decreased unit
costs, and increased profit from our overseas
subsidiaries, resulting in an operating income of
10,884 million yen, an increase of 274 million yen(2.6%) over the previous year. However, the foreignexchange loss from the abrupt appreciation of the yen
and depreciation of the dollar was included as a
non-operating expenditure, resulting in ordinary incomeof 9,332 million yen, a decrease of 777 million yen(7.7%) from the previous year. Net income for the year
was 5,693 million yen, a 771 million yen (15.7%)
increase over the previous year.

48

Net sales for the year stood at 253,462 million yen, a
7.6% increase over the previous year. Cost of sales
was 220,662 million yen, and the cost-to-sales ratiorose to 87.1% from 86.1% a year earlier. Selling,
general and administrative expenses totaled 21,916
million yen, which was 8.6% of net sales (compared to
9.4% in the previous year).

1,500

1,000

We expect increased demand for our products in themedium term from the automotive industry, which is
our primary customer base; sales of steel and forgings
for automotive applications was higher during the year
compared to the previous year. On the other hand,prices for raw materials as scrap iron and nickel
remained high; in particular, scrap steel prices, rose toa level significantly higher than the price we estimatedat the beginning of the year.

Net income

Sales Volume(Non-Consolidated)

500

Operating Income(Millions of Yen)
20,00015,00010,000Forgings

As a result, operating income came to 10,884 million
yen, a 2.6% increase over the previous year. Net
income was 5,693 million yen, with an ROE of 4.7%.

Specialty
Steel

0

5,000

0
04/3

05/3

06/3

07/3

08/3

04/3

Sales

Net Income(Millions of Yen)

(Millions of Yen)

05/3

06/3

07/3

08/3

05/3

06/3

07/3

08/3

10,000250,000
7,500

200,000

150,000

5,000

100,000
2,500
50,000

0

0
04/3

05/3

06/3

07/3

08/3

04/3

49

Management’s Discussion and Analysis

Financial Section

Overview
At the beginning of fiscal year 2007, the Japanese
economy showed signs of a gradual recovery backed
by the steady growth in corporate income; however,the skyrocketing price of oil, a slower U.S. economy,
and the high value of the Japanese yen during thelatter half of the year increased the uncertainty inJapan’s economic prospects.

thousand tons

These are the conditions that we found ourselves in,and the Aichi Steel Group worked to create an
optimized production system that fully utilizes ourinvestment in facilities and that satisfies our customers;
we also worked to improve productivity and lower unit
costs. As a result, net sales for the year amounted to253,462 million yen, a 7.6% increase over net sales in
the previous year, which amounted to 235,637 million
yen.
In terms of profit, despite higher raw material costs, wehave achieved better sales prices, decreased unit
costs, and increased profit from our overseas
subsidiaries, resulting in an operating income of
10,884 million yen, an increase of 274 million yen(2.6%) over the previous year. However, the foreignexchange loss from the abrupt appreciation of the yen
and depreciation of the dollar was included as a
non-operating expenditure, resulting in ordinary incomeof 9,332 million yen, a decrease of 777 million yen(7.7%) from the previous year. Net income for the year
was 5,693 million yen, a 771 million yen (15.7%)
increase over the previous year.

48

Net sales for the year stood at 253,462 million yen, a
7.6% increase over the previous year. Cost of sales
was 220,662 million yen, and the cost-to-sales ratiorose to 87.1% from 86.1% a year earlier. Selling,
general and administrative expenses totaled 21,916
million yen, which was 8.6% of net sales (compared to
9.4% in the previous year).

1,500

1,000

We expect increased demand for our products in themedium term from the automotive industry, which is
our primary customer base; sales of steel and forgings
for automotive applications was higher during the year
compared to the previous year. On the other hand,prices for raw materials as scrap iron and nickel
remained high; in particular, scrap steel prices, rose toa level significantly higher than the price we estimatedat the beginning of the year.

Net income

Sales Volume(Non-Consolidated)

500

Operating Income(Millions of Yen)
20,00015,00010,000Forgings

As a result, operating income came to 10,884 million
yen, a 2.6% increase over the previous year. Net
income was 5,693 million yen, with an ROE of 4.7%.

Specialty
Steel

0

5,000

0
04/3

05/3

06/3

07/3

08/3

04/3

Sales

Net Income(Millions of Yen)

(Millions of Yen)

05/3

06/3

07/3

08/3

05/3

06/3

07/3

08/3

10,000250,000
7,500

200,000

150,000

5,000

100,000
2,500
50,000

0

0
04/3

05/3

06/3

07/3

08/3

04/3

49

Management’s Discussion and Analysis

Financial Section

Sales by Business Segment●Specialty steel

As our primary product category, net sales in thissegment increased 9.5% to 140,282 million yen from
128,079 million yen a year earlier.

●Forgings
Closed-die forgings for automobiles are a major part ofthis segment. In order to respond to the need of ourmajor customers to increase automobile production,
we have been working to build an optimized
production system. Through improved sales prices, net
sales in this segment for the year increased 4.2% to104,324 million yen from 100,164 million yen a year
earlier.

●Electro-magnetic components

This segment utilizes the company’s one and only
technology and we are working to make this a corebusiness. Because of increased net sales of our
Magfine bonded NdFeB magnet, net sales in thissegment increased 48.5% to 4,417 million yen from2,975 million yen a year earlier.

●Other Businesses

Some of our subsidiaries are involved in services andcomputer software development. Net sales in thissegment increased 0.5% to 4,439 million yen from4,419 million yen a year earlier.

50

Financial Position
As of the end of the fiscal year in March 2008, ourgroup’s financial position was as follows.
Total assets decreased by 10,559 million yen from theprevious year to 264,048 million yen. Current assets
decreased by 2,793 million yen to 138,153 million yen.
This decrease is mainly attributable to the fact that theend of the previous year fell on a non-working day, so
notes and accounts receivable amounting to 4,235
million yen that otherwise would have been included in
the previous year were carried over.
Investments and other assets decreased by 4,783
million yen to 32,803 million yen.
Property, plant and equipment decreased by 2,984
million yen from the previous year. A total of 13,165
million yen was invested during the year for facility
improvements. The total depreciation amounted to
14,754 million yen.
Current liabilities increased by 11,406 million yen overthe previous year, which is mainly attributable to a
20,147 million yen increase in current portion of
long-term debt.
Long-term liabilities decreased by 22,792 million yen
from the previous year, which is mainly attributable to a
20,278 million yen decrease in long-term debt.
Net assets at the end of the fiscal year stood at
128,155 million yen, which is 826 million yen morethan the previous year. Net assets per share stood at
624.49 yen (compared to 618.99 yen a year earlier)and our equity ratio was 46.4% (compared to 44.4% a
year earlier).

Consolidated Cash Flows
Income before income taxes and minority interests was
9,055 million yen, and the depreciation was 14,754
million yen, resulting in a total of 16,079 million yen for
cash flows from operating activities.
Net cash used in investing activities totaled 18,191
million yen, including 18,665 million yen for theacquisition of property, plant and equipment.
Cash flow from financial activities included 1,964
million yen for dividend payments and 693 million yen
for purchasing our own shares, leading to a decreaseof 3,072 million yen in capital.

ROE

％

8.0

6.0

4.0

2.0

0

The balance of cash and cash equivalents as of theend of the fiscal year stood at 30,492 million yen, adecrease of 5,137 million yen from the end of theprevious fiscal year.

04/3

06/3

07/3

08/3

Net Assets&Equity ratio(Millions of Yen)％

150,000

70

Marketable Securities
Of the total marketable securities held by Aichi Steeland its consolidated subsidiaries, those reported on
our consolidated balance sheet at fair market value
stood at 2,363 million yen, while the amount reported
on our non-consolidated balance sheet stood at
12,684 million yen.

05/3

■

60

■

100,000

■

■

■

50
40
30

50,000

20
10

0

0
04/3

05/3

06/3

07/3

08/3

51

Management’s Discussion and Analysis

Financial Section

Sales by Business Segment●Specialty steel

As our primary product category, net sales in thissegment increased 9.5% to 140,282 million yen from
128,079 million yen a year earlier.

●Forgings
Closed-die forgings for automobiles are a major part ofthis segment. In order to respond to the need of ourmajor customers to increase automobile production,
we have been working to build an optimized
production system. Through improved sales prices, net
sales in this segment for the year increased 4.2% to104,324 million yen from 100,164 million yen a year
earlier.

●Electro-magnetic components

This segment utilizes the company’s one and only
technology and we are working to make this a corebusiness. Because of increased net sales of our
Magfine bonded NdFeB magnet, net sales in thissegment increased 48.5% to 4,417 million yen from2,975 million yen a year earlier.

●Other Businesses

Some of our subsidiaries are involved in services andcomputer software development. Net sales in thissegment increased 0.5% to 4,439 million yen from4,419 million yen a year earlier.

50

Financial Position
As of the end of the fiscal year in March 2008, ourgroup’s financial position was as follows.
Total assets decreased by 10,559 million yen from theprevious year to 264,048 million yen. Current assets
decreased by 2,793 million yen to 138,153 million yen.
This decrease is mainly attributable to the fact that theend of the previous year fell on a non-working day, so
notes and accounts receivable amounting to 4,235
million yen that otherwise would have been included in
the previous year were carried over.
Investments and other assets decreased by 4,783
million yen to 32,803 million yen.
Property, plant and equipment decreased by 2,984
million yen from the previous year. A total of 13,165
million yen was invested during the year for facility
improvements. The total depreciation amounted to
14,754 million yen.
Current liabilities increased by 11,406 million yen overthe previous year, which is mainly attributable to a
20,147 million yen increase in current portion of
long-term debt.
Long-term liabilities decreased by 22,792 million yen
from the previous year, which is mainly attributable to a
20,278 million yen decrease in long-term debt.
Net assets at the end of the fiscal year stood at
128,155 million yen, which is 826 million yen morethan the previous year. Net assets per share stood at
624.49 yen (compared to 618.99 yen a year earlier)and our equity ratio was 46.4% (compared to 44.4% a
year earlier).

Consolidated Cash Flows
Income before income taxes and minority interests was
9,055 million yen, and the depreciation was 14,754
million yen, resulting in a total of 16,079 million yen for
cash flows from operating activities.
Net cash used in investing activities totaled 18,191
million yen, including 18,665 million yen for theacquisition of property, plant and equipment.
Cash flow from financial activities included 1,964
million yen for dividend payments and 693 million yen
for purchasing our own shares, leading to a decreaseof 3,072 million yen in capital.

ROE

％

8.0

6.0

4.0

2.0

0

The balance of cash and cash equivalents as of theend of the fiscal year stood at 30,492 million yen, adecrease of 5,137 million yen from the end of theprevious fiscal year.

04/3

06/3

07/3

08/3

Net Assets&Equity ratio(Millions of Yen)％

150,000

70

Marketable Securities
Of the total marketable securities held by Aichi Steeland its consolidated subsidiaries, those reported on
our consolidated balance sheet at fair market value
stood at 2,363 million yen, while the amount reported
on our non-consolidated balance sheet stood at
12,684 million yen.

05/3

■

60

■

100,000

■

■

■

50
40
30

50,000

20
10

0

0
04/3

05/3

06/3

07/3

08/3

51

Five –year Summary (Non-Consolidated)

Five –year Summary (Consolidated)

Net sales

2008

2007

2006

2005

2004

2008

¥ 202,860￥ 187,076￥ 178,621￥ 149,479￥ 134,008$ 2,028,597

6,559

7,012

15,051

7,543

3,001

65,594

Operating income

Thousands of
U.S. Dollars

Millions of Yen

2008

2007

2006

2005

2004

2008

¥ 253,462￥ 235,637￥ 224,954￥ 184,425￥ 163,836$ 2,534,623

Operating income

10,884

10,611

16,051

7,065

4,188

108,844

9,055

9,037

13,784

6,381

1,281

90,551

Net sales

Income before income
taxes

5,811

6,929

11,532

7,235

1,303

58,107

Income before income
taxes and minority interests

Net income

3,838

4,017

5,478

4,345

777

38,377

Net income

5,693

4,922

8,152

3,289

519

56,929Property, plant andequipment

77,53979,57564,77954,84756,515775,393

Property, plant andequipment

93,092

96,07680,301

67,261

68,275930,924

Total assets

236,098

250,844

246,287

175,234

163,4022,360,979

Total assets

264,048274,608

269,606

192,771

177,888

2,640,484

Net assets

115,615

117,709

116,770

108,686

105,559

1,156,145

Net assets

128,155

127,329

119,784

108,103106,331

1,281,555

Per share data
Net income:
Basic

Financial Section

Thousands of
U.S. Dollars

Millions of Yen

Per share data
Net income:
¥

19.55

￥

20.38

￥

27.08

￥

21.34

￥

3.54

$

0.2

Basic
Diluted

Diluted

17.68

18.42

26.59

21.33

−

0.2

Dividends

10.00

10.00

9.00

6.00

5.00

0.1

¥

29.00

￥

26.23

24.97
22.56

￥

40.23
39.49

￥

15.74

￥

15.74

2.00
−

$

0.2
0.2

Notes:

Number of employees

2,328

2,327

2,340

2,359

2,407

Notes:
1. Net sales are presented exclusive of consumption taxes.
2. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 “Accounting Standards for Presentation of Net Assets in the Balance Sheet” and its Implementation Guidance No.8 “Guidance on Accounting Standards for Presentation of Net
Assets in the Balance Sheets” issued on December 9, 2005 by the Accounting Standards Board of Japan.
3. Net income per share is computed by dividing income available to common shareholders by the weighted-average number of shares ofcommon stock outstanding during the respective years.
4. Diluted net income per share of the fiscal year ended 2004 has not been presented, because potential common stock to be issued had not been
applicable for the fiscal year.
5. Each fiscal year ends March 31.
6. The U.S. dollar amounts above represents translations of yen, for convenience only, at the rate of ¥100=U.S.$1.

52

1. Net sales are presented exclusive of consumption taxes.
2. Scope of Consolidation:
All subsidiaries are consolidated. Names of subsidiaries at March 31, 2008 are as follows:
Aiko Corporation, Aichi Ceratec Corporation, Omi Mining Co., Ltd., Aichi Techno Metal Fukaumi Company, Aichi Steel Logistics Co., Ltd., Aichi
Information System Company, Aiko Service Co., Ltd., Aichi Micro Intelligent Corporation, Asdex Corporation, Aichi Forging Company of Asia,
Inc., Aichi USA, Inc., Louisville Forge and Gear Works, LLC, Aichi Europe GmbH, Aichi International (Thailand) Co., LTD., Shanghai Aichi
Forging Co., Ltd., PT. Aichi Forging Indonesia, Aichi Magfine Czech s.r.o., and AMIT, Inc.
3. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 “Accounting Standards for Presentation of Net Assets in the Balance Sheet” and its Implementation Guidance No.8 “Guidance on Accounting Standards for Presentation of Net
Assets in the Balance Sheets” issued on December 9, 2005 by the Accounting Standards Board of Japan.
4. Net income per share is computed by dividing income available to common shareholders by the weighted-average number of shares ofcommon stock outstanding during the respective years.
5. Diluted net income per share of the fiscal year ended 2004 has not been presented, because potential common stock to be issued had not been
applicable for the fiscal year.
6. Each fiscal year ends March 31.
7. The U.S. dollar amounts above represents translations of yen, for convenience only, at the rate of ¥100=U.S.$1.

53

Five –year Summary (Non-Consolidated)

Five –year Summary (Consolidated)

Net sales

2008

2007

2006

2005

2004

2008

¥ 202,860￥ 187,076￥ 178,621￥ 149,479￥ 134,008$ 2,028,597

6,559

7,012

15,051

7,543

3,001

65,594

Operating income

Thousands of
U.S. Dollars

Millions of Yen

2008

2007

2006

2005

2004

2008

¥ 253,462￥ 235,637￥ 224,954￥ 184,425￥ 163,836$ 2,534,623

Operating income

10,884

10,611

16,051

7,065

4,188

108,844

9,055

9,037

13,784

6,381

1,281

90,551

Net sales

Income before income
taxes

5,811

6,929

11,532

7,235

1,303

58,107

Income before income
taxes and minority interests

Net income

3,838

4,017

5,478

4,345

777

38,377

Net income

5,693

4,922

8,152

3,289

519

56,929Property, plant andequipment

77,53979,57564,77954,84756,515775,393

Property, plant andequipment

93,092

96,07680,301

67,261

68,275930,924

Total assets

236,098

250,844

246,287

175,234

163,4022,360,979

Total assets

264,048274,608

269,606

192,771

177,888

2,640,484

Net assets

115,615

117,709

116,770

108,686

105,559

1,156,145

Net assets

128,155

127,329

119,784

108,103106,331

1,281,555

Per share data
Net income:
Basic

Financial Section

Thousands of
U.S. Dollars

Millions of Yen

Per share data
Net income:
¥

19.55

￥

20.38

￥

27.08

￥

21.34

￥

3.54

$

0.2

Basic
Diluted

Diluted

17.68

18.42

26.59

21.33

−

0.2

Dividends

10.00

10.00

9.00

6.00

5.00

0.1

¥

29.00

￥

26.23

24.97
22.56

￥

40.23
39.49

￥

15.74

￥

15.74

2.00
−

$

0.2
0.2

Notes:

Number of employees

2,328

2,327

2,340

2,359

2,407

Notes:
1. Net sales are presented exclusive of consumption taxes.
2. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 “Accounting Standards for Presentation of Net Assets in the Balance Sheet” and its Implementation Guidance No.8 “Guidance on Accounting Standards for Presentation of Net
Assets in the Balance Sheets” issued on December 9, 2005 by the Accounting Standards Board of Japan.
3. Net income per share is computed by dividing income available to common shareholders by the weighted-average number of shares ofcommon stock outstanding during the respective years.
4. Diluted net income per share of the fiscal year ended 2004 has not been presented, because potential common stock to be issued had not been
applicable for the fiscal year.
5. Each fiscal year ends March 31.
6. The U.S. dollar amounts above represents translations of yen, for convenience only, at the rate of ¥100=U.S.$1.

52

1. Net sales are presented exclusive of consumption taxes.
2. Scope of Consolidation:
All subsidiaries are consolidated. Names of subsidiaries at March 31, 2008 are as follows:
Aiko Corporation, Aichi Ceratec Corporation, Omi Mining Co., Ltd., Aichi Techno Metal Fukaumi Company, Aichi Steel Logistics Co., Ltd., Aichi
Information System Company, Aiko Service Co., Ltd., Aichi Micro Intelligent Corporation, Asdex Corporation, Aichi Forging Company of Asia,
Inc., Aichi USA, Inc., Louisville Forge and Gear Works, LLC, Aichi Europe GmbH, Aichi International (Thailand) Co., LTD., Shanghai Aichi
Forging Co., Ltd., PT. Aichi Forging Indonesia, Aichi Magfine Czech s.r.o., and AMIT, Inc.
3. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 “Accounting Standards for Presentation of Net Assets in the Balance Sheet” and its Implementation Guidance No.8 “Guidance on Accounting Standards for Presentation of Net
Assets in the Balance Sheets” issued on December 9, 2005 by the Accounting Standards Board of Japan.
4. Net income per share is computed by dividing income available to common shareholders by the weighted-average number of shares ofcommon stock outstanding during the respective years.
5. Diluted net income per share of the fiscal year ended 2004 has not been presented, because potential common stock to be issued had not been
applicable for the fiscal year.
6. Each fiscal year ends March 31.
7. The U.S. dollar amounts above represents translations of yen, for convenience only, at the rate of ¥100=U.S.$1.

53

Consolidated Balance Sheets

Financial Section

As at March 31, 2008 and 2007
Millions of Yen

Thousands of U.S. Dollars

2008

Millions of Yen

2008

2007

2008

AssetsLiabilities and Net Assets

Current assets:

Current liabilities:

Cash and deposit

Notes and accounts
receivable (Note7, 18):￥

30,408￥53,859

Short-term investments

35,536$58,094

304,081

Notes and accounts payable
Short-term borrowings (Note 5 )1,664

Current portion of long-term debt (Note 5)
Income taxes payable

245

244

2,445

37,719419,575

Deferred tax assets (Note 17)

4,207

4,109

42,070

Other assets

7,636

5,439

76,358(Note 4)

Allowance for doubtfulreceivables(159)

Property,plant and equipment: (Note 6)(1,587)(195)

138,153

Total current assets

140,946

1,381,531

Allowance for bonuses to directors
and corporate auditors

Deferred tax liabilities (Note 17)
Other liabilities

2008

2007

538,589

41,957

Inventories￥

Thousands of U.S. Dollars

31,866￥33,474$

318,656

1,969

16,63920,978830

209,775

2,008

2,581

20,081

244

295

2,443

2

−

18

14,451

20,658144,519

71,21359,807712,131

Convertible bond-type bondwith stock acquisition rights

Total current liabilities
Long-term liabilities:

Buildings and structures

56,48555,169564,851

30,00030,000300,000

Less: accumulated depreciation(35,266)(33,640)(352,663)

Long-term debt (Note 5)

21,641

41,919216,415

242,459

235,4392,424,595

Long-term payables

1,386

1,817

13,858Less: accumulated depreciation(188,455)(182,213)(1,884,550)

Deferred tax liabilities (Note 17)

1,365

3,295

13,648

Employees’ retirement benefit liabilities (Note 15)

9,008

9,073

90,081

1,198

1,360

11,981

Machinery,equipment and vehicles

Equipment

13,11812,827

131,180

Less: accumulated depreciation(10,807)(10,153)(108,067)Land

12,521

12,364125,208

Construction in progress

3,037

6,283

30,370Net property,
plant and equipment

93,092

96,076930,924

12

12

118

Intangible fixed assets:

Reserve for retirement benefits of directors
and corporate auditors

Other liabilities

Total long-term liabilities
Total liabilities

82

64,680887,472815

646,798

135,893

147,279

1,358,929

25,01725,017250,167

Net Assets

Right of telephone
Other assets

28

58

40

Total intangible fixed assets

279

70

397

Shareholders' equity (Note 8):
Common stock, no par value:
Authorized: 476,000,000 shares;
Issued: 198,866,751 shares in 2008 andInvestments and other assets:

2007

Investments securities (Note 4)

16,48422,091

164,844

Capital surplus

27,89927,899278,988

Long-term loans

1,314

1,423

13,136

Retained earnings

63,16259,410631,619

Prepaid pension cost (Note 15)

13,922

12,918139,225Less, treasury stock, at cost

Deferred tax assets (Note 17)

273

286

2,731

(1,612)(1,001)(16,117)

795

825

7,947

(25)

(27)

(251)

114,466

111,325

1,144,657

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

6,171

9,597

61,716

Total valuation and translation adjustments

8,060

10,65880,603

5,530

5,315

55,302Other assets

Allowance for doubtfulreceivables
Total investments
and other assets

Total fixed assets
Total Assets

32,763¥125,895

264,048

The accompanying notes are an integral part of these financial statements.

37,516¥

133,662

274,608

327,632$

1,258,953

2,640,484

2,666,097 shares in 2008 and 1,798,010
shares in 2007
Total shareholders’ equity
Valuation and translation adjustments

Foreign currency translation adjustments
Subscription rights to shares (Note16)
Minority interests in subsidiaries
Total Net assets

Commitments and contingent liabilities(Note7)

Total Liabilities and Net assets

54

1,889

99

1,061

31

18,887993

128,155

127,329

1,281,555¥ 264,048¥ 274,608$ 2,640,48455

Consolidated Balance Sheets

Financial Section

As at March 31, 2008 and 2007
Millions of Yen

Thousands of U.S. Dollars

2008

Millions of Yen

2008

2007

2008

AssetsLiabilities and Net Assets

Current assets:

Current liabilities:

Cash and deposit

Notes and accounts
receivable (Note7, 18):￥

30,408￥53,859

Short-term investments

35,536$58,094

304,081

Notes and accounts payable
Short-term borrowings (Note 5 )1,664

Current portion of long-term debt (Note 5)
Income taxes payable

245

244

2,445

37,719419,575

Deferred tax assets (Note 17)

4,207

4,109

42,070

Other assets

7,636

5,439

76,358(Note 4)

Allowance for doubtfulreceivables(159)

Property,plant and equipment: (Note 6)(1,587)(195)

138,153

Total current assets

140,946

1,381,531

Allowance for bonuses to directors
and corporate auditors

Deferred tax liabilities (Note 17)
Other liabilities

2008

2007

538,589

41,957

Inventories￥

Thousands of U.S. Dollars

31,866￥33,474$

318,656

1,969

16,63920,978830

209,775

2,008

2,581

20,081

244

295

2,443

2

−

18

14,451

20,658144,519

71,21359,807712,131

Convertible bond-type bondwith stock acquisition rights

Total current liabilities
Long-term liabilities:

Buildings and structures

56,48555,169564,851

30,00030,000300,000

Less: accumulated depreciation(35,266)(33,640)(352,663)

Long-term debt (Note 5)

21,641

41,919216,415

242,459

235,4392,424,595

Long-term payables

1,386

1,817

13,858Less: accumulated depreciation(188,455)(182,213)(1,884,550)

Deferred tax liabilities (Note 17)

1,365

3,295

13,648

Employees’ retirement benefit liabilities (Note 15)

9,008

9,073

90,081

1,198

1,360

11,981

Machinery,equipment and vehicles

Equipment

13,11812,827

131,180

Less: accumulated depreciation(10,807)(10,153)(108,067)Land

12,521

12,364125,208

Construction in progress

3,037

6,283

30,370Net property,
plant and equipment

93,092

96,076930,924

12

12

118

Intangible fixed assets:

Reserve for retirement benefits of directors
and corporate auditors

Other liabilities

Total long-term liabilities
Total liabilities

82

64,680887,472815

646,798

135,893

147,279

1,358,929

25,01725,017250,167

Net Assets

Right of telephone
Other assets

28

58

40

Total intangible fixed assets

279

70

397

Shareholders' equity (Note 8):
Common stock, no par value:
Authorized: 476,000,000 shares;
Issued: 198,866,751 shares in 2008 andInvestments and other assets:

2007

Investments securities (Note 4)

16,48422,091

164,844

Capital surplus

27,89927,899278,988

Long-term loans

1,314

1,423

13,136

Retained earnings

63,16259,410631,619

Prepaid pension cost (Note 15)

13,922

12,918139,225Less, treasury stock, at cost

Deferred tax assets (Note 17)

273

286

2,731

(1,612)(1,001)(16,117)

795

825

7,947

(25)

(27)

(251)

114,466

111,325

1,144,657

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

6,171

9,597

61,716

Total valuation and translation adjustments

8,060

10,65880,603

5,530

5,315

55,302Other assets

Allowance for doubtfulreceivables
Total investments
and other assets

Total fixed assets
Total Assets

32,763¥125,895

264,048

The accompanying notes are an integral part of these financial statements.

37,516¥

133,662

274,608

327,632$

1,258,953

2,640,484

2,666,097 shares in 2008 and 1,798,010
shares in 2007
Total shareholders’ equity
Valuation and translation adjustments

Foreign currency translation adjustments
Subscription rights to shares (Note16)
Minority interests in subsidiaries
Total Net assets

Commitments and contingent liabilities(Note7)

Total Liabilities and Net assets

54

1,889

99

1,061

31

18,887993

128,155

127,329

1,281,555¥ 264,048¥ 274,608$ 2,640,48455

Consolidated Statements of Income

Financial Section

For the years ended March 31, 2008 and 2007
Millions of Yen

Thousands of U.S. Dollars

2008
Net sales (Notes 18 and 19)
Cost of sales (Note 9)
Gross profit
Selling, general and administrative
expenses (Note 9)￥

253,462
220,662

32,800

￥

2008

2008

2007
235,637
202,798

32,839$2,534,623
2,206,617

328,006

Millions of Yen

Thousands of U.S. Dollars

2008

2007

Extraordinary income :Gain on sale of investment securities

−

177

−

Total extraordinary income

−

177

−

Extraordinary expenses :Freight expenses

3,265

2,645

32,650

Impairment loss on fixed assets

277

69

2,771

Sales commission

1,205

1,370

12,051

Impairment loss on goodwill

−

1,180

−

277

1,249

Salaries and allowances andwelfare expenses

Retirement benefit expenses

Provision of reserve fordirectors’ bonuses
Provision of reserve fordirectors' retirement benefits

Depreciation

Research and development expenses
OthersTotal selling, general andadministrative expenses

Operating income (Note 19)

8,381

9,138

83,814

276

299

2,759

241

295

2,413

255

277

2,548

601

496

6,013

2,001

2,446

20,013

5,691

5,262

56,901

21,91622,228219,162

10,884

10,611

324

218

3,245

Dividends income

290

214

2,903

Rent income

80

75

796

Gain on sales of articles

187

128

1,865

Gain on valuation of derivatives

329

−

3,289

−

221

−

OthersTotal non-operating income

Income before income taxes
and minority interests
Income taxes:
Current
Deferred

Total income taxes

Minority interests in net income ofsubsidiaries

Net income

¥

−

174

−

617

395

6,175

1,827

1,425

18,273

635

619

6,347

674

770

6,746

−

47

−

1,250

−

12,501

Net income:
Basic

Diluted

9,037

90,551

2,792
278

3,380
373

27,925
2,780

3,070

3,753

30,705

292

362

2,917

Cash dividends

¥

5,693

4,922

29.00
26.23
10.00

$

56,929U.S. Dollars

Yen
￥

2,771

9,055

Per share (Note20)

Interest income

Amortization of negative goodwill

Total extraordinary expenses:

108,844

Non-operating income:

Foreign exchange gain

(Note 10)

￥

24.97
22.56
10.00

$

0.2
0.2
0.1

The accompanying notes are an integral part of these financial statements

Non-operating expenses:
Interest expenses

Loss on disposal of property, plantand equipment, net

Loss on derivatives
Foreign exchange loss
OthersTotal other expenses
Ordinary income

56

820

491

8,201

3,379

1,927

33,795

9,332

10,10993,32257

Consolidated Statements of Income

Financial Section

For the years ended March 31, 2008 and 2007
Millions of Yen

Thousands of U.S. Dollars

2008
Net sales (Notes 18 and 19)
Cost of sales (Note 9)
Gross profit
Selling, general and administrative
expenses (Note 9)￥

253,462
220,662

32,800

￥

2008

2008

2007
235,637
202,798

32,839$2,534,623
2,206,617

328,006

Millions of Yen

Thousands of U.S. Dollars

2008

2007

Extraordinary income :Gain on sale of investment securities

−

177

−

Total extraordinary income

−

177

−

Extraordinary expenses :Freight expenses

3,265

2,645

32,650

Impairment loss on fixed assets

277

69

2,771

Sales commission

1,205

1,370

12,051

Impairment loss on goodwill

−

1,180

−

277

1,249

Salaries and allowances andwelfare expenses

Retirement benefit expenses

Provision of reserve fordirectors’ bonuses
Provision of reserve fordirectors' retirement benefits

Depreciation

Research and development expenses
OthersTotal selling, general andadministrative expenses

Operating income (Note 19)

8,381

9,138

83,814

276

299

2,759

241

295

2,413

255

277

2,548

601

496

6,013

2,001

2,446

20,013

5,691

5,262

56,901

21,91622,228219,162

10,884

10,611

324

218

3,245

Dividends income

290

214

2,903

Rent income

80

75

796

Gain on sales of articles

187

128

1,865

Gain on valuation of derivatives

329

−

3,289

−

221

−

OthersTotal non-operating income

Income before income taxes
and minority interests
Income taxes:
Current
Deferred

Total income taxes

Minority interests in net income ofsubsidiaries

Net income

¥

−

174

−

617

395

6,175

1,827

1,425

18,273

635

619

6,347

674

770

6,746

−

47

−

1,250

−

12,501

Net income:
Basic

Diluted

9,037

90,551

2,792
278

3,380
373

27,925
2,780

3,070

3,753

30,705

292

362

2,917

Cash dividends

¥

5,693

4,922

29.00
26.23
10.00

$

56,929U.S. Dollars

Yen
￥

2,771

9,055

Per share (Note20)

Interest income

Amortization of negative goodwill

Total extraordinary expenses:

108,844

Non-operating income:

Foreign exchange gain

(Note 10)

￥

24.97
22.56
10.00

$

0.2
0.2
0.1

The accompanying notes are an integral part of these financial statements

Non-operating expenses:
Interest expenses

Loss on disposal of property, plantand equipment, net

Loss on derivatives
Foreign exchange loss
OthersTotal other expenses
Ordinary income

56

820

491

8,201

3,379

1,927

33,795

9,332

10,10993,32257

Consolidated Statements of Changes in Net Assets

Financial Section

For the years ended March 31, 2008and 2007
(Millions of yen)
Shareholders’ equity
Common stock
Balance at March 31, 2006¥

Capital surplus

25,017¥27,899Retained earnings¥

56,700

Valuation and translation adjustments

Treasury stock¥(1,015)

Total
shareholders’ equity¥

108,601

Net unrealized gains onavailable-for-sale securities,
net of taxes¥

10,606

Foreign currencytranslation adjustments¥

Total valuation andtranslation adjustments¥

577

11,183

Subscription rights
to shares¥-

Minority interestsin subsidiaries

¥

4,998

Total net assets¥ 124,782

Change of items during the period
Net income for the year

-

-

4,922

-

4,922

-

-

-

-

-

4,922

Cash dividends (Note11)--(1,971)-(1,971)

-

-

-

-

-

(1,971)

Bonuses to directors and corporate auditors

-

-

(232)

-

(232)

-

-

-

-

-

(232)

Purchase of treasury stock and fractional shares

-

-

-

(236)

(236)

-

-

-

-

-

(236)

-

-

(9)

250

241

-

-

-

-

-

241

-

-

-

-

-

(1,009)

484

(525)

31

317

(177)

Disposal of treasury stock due to exercise ofstock options

Net changes of items other than shareholders’ equity

Total changes of items during the period
Balance at March 31, 2007¥

25,017¥27,899¥2,710
59,410¥14(1,001)¥

2,724
111,325¥(1,009)
9,597

¥

484

¥

1,061

(525)
10,658

¥

31
31

¥

317

2,547

5,315

¥ 127,329

Minority interestsin subsidiaries

Total net assets(Millions of yen)
Shareholders’ equity
Common stock
Balance at March 31, 2007¥

Capital surplus

25,017¥27,899Retained earnings¥

59,410

Valuation and translation adjustments

Treasury stock¥(1,001)

Total
shareholders’ equity¥

111,325

Net unrealized gains onavailable-for-sale securities,
net of taxes

¥

9,597

Foreign currencytranslation adjustments¥

Total valuation andtranslation adjustments

¥

1,061

10,658Subscription rights
to shares

¥

31

¥

5,315

¥ 127,329

Change of items during the period
Net income for the year

-

-

5,693

-

5,693

-

-

-

-

-

5,693

Cash dividends (Note11)--(1,966)-(1,966)

-

-

-

-

-

(1,966)

Purchase of treasury stock and fractional shares

-

-

-

(693)

(693)

-

-

-

-

-

(693)

-

-

(7)

82

75

-

-

-

-

-

75

Increase due to decrease in consolidated subsidiaries

-

-

32

-

32

-

-

-

-

-

32

Net changes of items other than shareholders’ equity

-

-

-

-

-

(3,426)828(2,598)68

215(2,315)

-

-

3,752

(611)

3,141

(3,426)828(2,598)68

215

Disposal of treasury stock due to exercise ofstock options

Total changes of items during the period
Balance at March 31, 2008¥

25,017¥27,899¥63,162¥(1,612)¥

114,466

¥

6,171

¥

¥

1,889

8,060

¥

99

¥

826

5,530

¥ 128,155

Minority interestsin subsidiaries

Total net assets(Thousands of U.S.dollars)
Shareholders’ equity
Common stock
Balance at March 31, 2007$

Capital surplus

250,167$

278,988

Retained earnings$

594,103

Valuation and translation adjustments

Treasury stock$(10,008)

Total
shareholders’ equity$

1,113,250

Net unrealized gains onavailable-for-sale securities,
net of taxes$

95,968Foreign currencytranslation adjustments$

10,608

Total valuation andtranslation adjustments$

106,576

Subscription rights
to shares
$

310

$

53,155$ 1,273,291

Change of items during the period
Net income for the year--

56,929Cash dividends (Note11)--

Purchase of treasury stock and fractional shares

-

-

-

Increase due to decrease in consolidated subsidiaries-

Net changes of items other than shareholders’ equity

-

-

-

-

-

37,516

Disposal of treasury stock due to exercise ofstock options

Total changes of items during the period
Balance at March 31, 2008$

250,167$-

56,929

-

-

-

-

-

56,929(19,662)-(19,662)

-

-

-

-

-

(19,662)-(6,927)(6,927)

-

-

-

-

-

(6,927)

-

(75)

818

743

-

-

-

-

-

743

-

324

-

324

-

-

-

-

-

324

-

-

(34,252)

8,279(25,973)

683

2,147

(23,143)(6,109)31,407(34,252)

8,279(25,973)

683

2,147

8,264

55,302$ 1,281,555

278,988$631,619$(16,117)$

1,144,657$

61,716$

18,887$80,603$993$

The accompanying notes are an integral part of these financial statements.

58

59

Consolidated Statements of Changes in Net Assets

Financial Section

For the years ended March 31, 2008and 2007
(Millions of yen)
Shareholders’ equity
Common stock
Balance at March 31, 2006¥

Capital surplus

25,017¥27,899Retained earnings¥

56,700

Valuation and translation adjustments

Treasury stock¥(1,015)

Total
shareholders’ equity¥

108,601

Net unrealized gains onavailable-for-sale securities,
net of taxes¥

10,606

Foreign currencytranslation adjustments¥

Total valuation andtranslation adjustments¥

577

11,183

Subscription rights
to shares¥-

Minority interestsin subsidiaries

¥

4,998

Total net assets¥ 124,782

Change of items during the period
Net income for the year

-

-

4,922

-

4,922

-

-

-

-

-

4,922

Cash dividends (Note11)--(1,971)-(1,971)

-

-

-

-

-

(1,971)

Bonuses to directors and corporate auditors

-

-

(232)

-

(232)

-

-

-

-

-

(232)

Purchase of treasury stock and fractional shares

-

-

-

(236)

(236)

-

-

-

-

-

(236)

-

-

(9)

250

241

-

-

-

-

-

241

-

-

-

-

-

(1,009)

484

(525)

31

317

(177)

Disposal of treasury stock due to exercise ofstock options

Net changes of items other than shareholders’ equity

Total changes of items during the period
Balance at March 31, 2007¥

25,017¥27,899¥2,710
59,410¥14(1,001)¥

2,724
111,325¥(1,009)
9,597

¥

484

¥

1,061

(525)
10,658

¥

31
31

¥

317

2,547

5,315

¥ 127,329

Minority interestsin subsidiaries

Total net assets(Millions of yen)
Shareholders’ equity
Common stock
Balance at March 31, 2007¥

Capital surplus

25,017¥27,899Retained earnings¥

59,410

Valuation and translation adjustments

Treasury stock¥(1,001)

Total
shareholders’ equity¥

111,325

Net unrealized gains onavailable-for-sale securities,
net of taxes

¥

9,597

Foreign currencytranslation adjustments¥

Total valuation andtranslation adjustments

¥

1,061

10,658Subscription rights
to shares

¥

31

¥

5,315

¥ 127,329

Change of items during the period
Net income for the year

-

-

5,693

-

5,693

-

-

-

-

-

5,693

Cash dividends (Note11)--(1,966)-(1,966)

-

-

-

-

-

(1,966)

Purchase of treasury stock and fractional shares

-

-

-

(693)

(693)

-

-

-

-

-

(693)

-

-

(7)

82

75

-

-

-

-

-

75

Increase due to decrease in consolidated subsidiaries

-

-

32

-

32

-

-

-

-

-

32

Net changes of items other than shareholders’ equity

-

-

-

-

-

(3,426)828(2,598)68

215(2,315)

-

-

3,752

(611)

3,141

(3,426)828(2,598)68

215

Disposal of treasury stock due to exercise ofstock options

Total changes of items during the period
Balance at March 31, 2008¥

25,017¥27,899¥63,162¥(1,612)¥

114,466

¥

6,171

¥

¥

1,889

8,060

¥

99

¥

826

5,530

¥ 128,155

Minority interestsin subsidiaries

Total net assets(Thousands of U.S.dollars)
Shareholders’ equity
Common stock
Balance at March 31, 2007$

Capital surplus

250,167$

278,988

Retained earnings$

594,103

Valuation and translation adjustments

Treasury stock$(10,008)

Total
shareholders’ equity$

1,113,250

Net unrealized gains onavailable-for-sale securities,
net of taxes$

95,968Foreign currencytranslation adjustments$

10,608

Total valuation andtranslation adjustments$

106,576

Subscription rights
to shares
$

310

$

53,155$ 1,273,291

Change of items during the period
Net income for the year--

56,929Cash dividends (Note11)--

Purchase of treasury stock and fractional shares

-

-

-

Increase due to decrease in consolidated subsidiaries-

Net changes of items other than shareholders’ equity

-

-

-

-

-

37,516

Disposal of treasury stock due to exercise ofstock options

Total changes of items during the period
Balance at March 31, 2008$

250,167$-

56,929

-

-

-

-

-

56,929(19,662)-(19,662)

-

-

-

-

-

(19,662)-(6,927)(6,927)

-

-

-

-

-

(6,927)

-

(75)

818

743

-

-

-

-

-

743

-

324

-

324

-

-

-

-

-

324

-

-

(34,252)

8,279(25,973)

683

2,147

(23,143)(6,109)31,407(34,252)

8,279(25,973)

683

2,147

8,264

55,302$ 1,281,555

278,988$631,619$(16,117)$

1,144,657$

61,716$

18,887$80,603$993$

The accompanying notes are an integral part of these financial statements.

58

59

Consolidated Statements of Cash Flows

Financial Section

For the years ended March 31, 2008 and 2007
Millions of Yen

2008

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

2008

2007
￥

9,037

2008

Thousands of U.S. Dollars

2008

2007

Cash flows from financing activities:

90,551

Net decrease in short-term borrowings

14,75412,001

147,544

Proceeds from long-term debt

651

945

6,506

277

69

2,771

Repayments of long-term debt

(843)

(1,838)(8,434)

Adjustments for impairment loss on goodwill

-

1,181

-

Proceeds from minority shareholders of subsidiary

Adjustments for gain on sales of investment securities

-

(177)

-

Payments for acquisitions of treasury stock(1,004)(1,390)(10,044)

Proceeds from disposal of treasury stock

1

3

8

(72)

93

(724)

Proceeds from exercise of stock options

73

238

735

Decrease in defined contribution pension payable

(395)

(392)

(3,947)(1,964)(1,968)(19,641)(Decrease) increase of allowance for doubtful receivables

(36)

64

(362)

(75)

(51)

(751)

Interest and dividend income

(615)

(432)

(6,148)Interest expenses

635

619

6,347

Foreign exchange loss (gain)

685

(85)

Loss on sale of property, plant and equipment, net

172

(16)

Adjustments for depreciation
Adjustments for impairment loss on fixed assets

Increase of prepaid pension cost

(Decrease) increase of employees’ retirement benefit
liabilities

9,055

$

(332)

Cash dividends paid
Cash dividends paid for minority shareholders(152)(3,314)

110

-

1,099

(693)

(236)

(6,928)Net cash used in financing activities(3,072)(3,059)(30,720)

6,850

Net decrease in cash and cash equivalents(5,137)(26,092)(51,372)

1,724

Cash and cash equivalents at beginning of year

370

434

3,704

Cash and cash equivalents at end of year

Inventories

4,339(4,539)(12,440)(2,526)43,386(45,386)

Notes and accounts payable(3,940)

6,789(39,399)

(206)

92

Loss on disposal of property, plant and equipment
Increase/Decrease in operating assets and liabilities:
Notes and accounts receivable

Other, net
Subtotal

19,48012,921

Interest and dividend received

617

432

Interest paid

(634)

(619)

(3,384)(6,614)

Income taxes paid

(100)

Payments for purchase of property, plant and equipment(18,665)(186,646)

Proceeds from sales of property, plant and equipment

140

315

1,398

Payments for purchase of investment securities(5)(1,486)(49)

Proceeds from sales of investment securities

-

234

2,330

Proceeds from acquisition of shares of newly
consolidated subsidiaries (Note12)
Proceeds from sales of shares of former consolidated
subsidiaries (Note12)

-

16

233

-

Payments for acquisition of subsidiary’s shares

(6)

(129)

(60)

Payments for loans

(68)

(68)

(675)

Collections of loans

177

219

1,769

Others, net

13

32

127

Net cash used in investing activities(18,191)¥

35,629$356,288

304,916

The accompanying notes are an integral part of these financial statements.

(33,842)(49)(29,416)

30,492

61,721

467

6,169(28,500)

Net increase in time deposits¥

35,629263(6,337)(10)

Cash flows from investing activities:

47(2,070)160,787

16,079Effect of exchange rate changes on cash andcash equivalents

194,797

6,120

Net cash provided by operating activities

60￥

Millions of Yen

Thousands of U.S. Dollars(181,906)61

Consolidated Statements of Cash Flows

Financial Section

For the years ended March 31, 2008 and 2007
Millions of Yen

2008

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

2008

2007
￥

9,037

2008

Thousands of U.S. Dollars

2008

2007

Cash flows from financing activities:

90,551

Net decrease in short-term borrowings

14,75412,001

147,544

Proceeds from long-term debt

651

945

6,506

277

69

2,771

Repayments of long-term debt

(843)

(1,838)(8,434)

Adjustments for impairment loss on goodwill

-

1,181

-

Proceeds from minority shareholders of subsidiary

Adjustments for gain on sales of investment securities

-

(177)

-

Payments for acquisitions of treasury stock(1,004)(1,390)(10,044)

Proceeds from disposal of treasury stock

1

3

8

(72)

93

(724)

Proceeds from exercise of stock options

73

238

735

Decrease in defined contribution pension payable

(395)

(392)

(3,947)(1,964)(1,968)(19,641)(Decrease) increase of allowance for doubtful receivables

(36)

64

(362)

(75)

(51)

(751)

Interest and dividend income

(615)

(432)

(6,148)Interest expenses

635

619

6,347

Foreign exchange loss (gain)

685

(85)

Loss on sale of property, plant and equipment, net

172

(16)

Adjustments for depreciation
Adjustments for impairment loss on fixed assets

Increase of prepaid pension cost

(Decrease) increase of employees’ retirement benefit
liabilities

9,055

$

(332)

Cash dividends paid
Cash dividends paid for minority shareholders(152)(3,314)

110

-

1,099

(693)

(236)

(6,928)Net cash used in financing activities(3,072)(3,059)(30,720)

6,850

Net decrease in cash and cash equivalents(5,137)(26,092)(51,372)

1,724

Cash and cash equivalents at beginning of year

370

434

3,704

Cash and cash equivalents at end of year

Inventories

4,339(4,539)(12,440)(2,526)43,386(45,386)

Notes and accounts payable(3,940)

6,789(39,399)

(206)

92

Loss on disposal of property, plant and equipment
Increase/Decrease in operating assets and liabilities:
Notes and accounts receivable

Other, net
Subtotal

19,48012,921

Interest and dividend received

617

432

Interest paid

(634)

(619)

(3,384)(6,614)

Income taxes paid

(100)

Payments for purchase of property, plant and equipment(18,665)(186,646)

Proceeds from sales of property, plant and equipment

140

315

1,398

Payments for purchase of investment securities(5)(1,486)(49)

Proceeds from sales of investment securities

-

234

2,330

Proceeds from acquisition of shares of newly
consolidated subsidiaries (Note12)
Proceeds from sales of shares of former consolidated
subsidiaries (Note12)

-

16

233

-

Payments for acquisition of subsidiary’s shares

(6)

(129)

(60)

Payments for loans

(68)

(68)

(675)

Collections of loans

177

219

1,769

Others, net

13

32

127

Net cash used in investing activities(18,191)¥

35,629$356,288

304,916

The accompanying notes are an integral part of these financial statements.

(33,842)(49)(29,416)

30,492

61,721

467

6,169(28,500)

Net increase in time deposits¥

35,629263(6,337)(10)

Cash flows from investing activities:

47(2,070)160,787

16,079Effect of exchange rate changes on cash andcash equivalents

194,797

6,120

Net cash provided by operating activities

60￥

Millions of Yen

Thousands of U.S. Dollars(181,906)

61

Notes to Consolidated Financial Statements(a) Basis of presenting the consolidated financial
statements

The accompanying consolidated financial statements of AICHI STEELCORPORATION ("the Company") and its subsidiaries are prepared on
the basis of accounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards. These
consolidated financial statements are compiled from the original
consolidated financial statements in Japanese prepared by theCompany as required by the Financial Instruments and Exchange Law
and submitted to the Director of Kanto Finance Bureau in Japan.
On the accompanying consolidated financial statements, amounts lessthan ¥1 million are rounded to the nearest million yen; therefore, someaccounts and notes are not consistent with those on the consolidated
financial statements submitted to the Director of Kanto Finance Bureau
in Japan, on which amounts less than ¥1 million are omitted.

(b) U.S. dollar amounts

The U.S. dollar amounts included in the accompanying consolidated
financial statements and notes thereto represent the arithmetic resultsof translating Japanese Yen into U.S. dollars at the rate of ¥100 to $1,
the approximate rate of exchange at March 31, 2008. The inclusion ofsuch dollar amounts is solely for the convenience of the readers and is
not intended to imply that the assets and liabilities originating in Yen
have been or could be readily converted, realized or settled in U.S.
dollars at ¥100 to $1 or at any other rates. Amounts less than US$ 1
thousand are rounded to the nearest US$ 1 thousand.

(c) Reclassification

In preparing the accompanying consolidated financial statement,
certain comparative figures have been reclassified to conform to thecurrent year’s presentations.

2. Summary of Significant Accounting Policies(a) Principles of consolidation

The accompanying consolidated financial statements include theaccounts of the Company and all of its subsidiaries (18 and 17
companies in 2008 and 2007, respectively). Investments in affiliates (3and 2 companies in 2008 and 2007, respectively) are carried at cost,
since the equities in retained earning and net income of affiliates are
not material. Significant intercompany transactions and accounts havebeen eliminated. Assets and liabilities of subsidiaries are revalued attheir fair value as of the date of acquisition of control based on the full
fair value method.

(a-i) Scope of consolidation

Subsidiaries at March 31, 2008 are as follows：
Domestic subsidiaries（9 companies）：
Aiko Corporation
Aichi Ceratec Corporation
Omi Mining Co., Ltd.
Aichi Techno Metal Fukaumi Company

62

Aichi Steel Logistics Co., Ltd.
Aichi Information System Company
Aiko Service Co., Ltd.
Aichi Micro Intelligent Corporation
Asdex Corporation
Overseas subsidiaries（9 companies）：

Aichi Forging Company of Asia, Inc.
Aichi USA, Inc.
Louisville Forge and Gear Works, LLC
Aichi Europe GmbH
Aichi International (Thailand) Co., Ltd.
Shanghai Aichi Forging Co., Ltd.
PT. Aichi Forging Indonesia
Aichi Magﬁne Czech s.r.o.
AMIT, Inc.

Aichi Magfine Czech s.r.o. and AMIT, Inc. are established during theyear ended March 31, 2008 and newly consolidated.
Kentucky Advanced Forge, LLC, which used to be one of overseas
subsidiaries, is eliminated from subsidiaries because of sale of its stock.
Overseas subsidiaries adopt accounting principles generally acceptedin their respective countries, and no adjustments have been made totheir financial statements on consolidation as allowed under accounting
principles and practice generally accepted in Japan.

(a-ii) Fiscal year of subsidiaries

The Company's overseas subsidiaries use fiscal year ending on
December 31, three months earlier than the Company. The Company
consolidates such subsidiaries' financial statements as of the year-end.
Significant transactions for the period between subsidiaries' year-end
and the Company's year-end are adjusted on consolidation.

(b) Cash and cash equivalents

The Company and its subsidiaries consider short-term highly liquid
investments with maturities of three months or less when purchased tobe cash equivalents.

(c) Valuation of securities

The accounting standard for financial instruments requires that
securities to be classified into three categories: trading,held-to-maturity or available-for-sale, whose classification determines
the respective accounting method. According to the Company’s
investment policies, the securities portfolio of the Company and its
subsidiaries are classified as available-for-sale securities. The
accounting standard requires that available-for-sale securities withavailable market quotations are valued at fair value, and net unrealized
gains or losses on such securities are reported as a separate
component of shareholders’ equity, net of applicable income taxes.
Gains and losses on disposition of marketable securities are computedby the moving average method. Non-marketable available-for-salesecurities without marketable quotations are carried at cost determinedby the moving average method. Adjustments in carrying values ofndividual investment securities are charged to income throughwrite-downs, when a significant decline in value is deemed other than
temporary.

(d) Derivatives and Hedge Accounting

Derivatives are valued at fair value, if hedge accounting is not
appropriate or where there is no hedging designation, and gains orlosses on derivatives are recognized in current earnings. In addition,
when interest rate swaps that meet certain required conditions havecritical terms matching exactly with those of financial assets or liabilities
that are being hedged, such interest rate swaps are not recognized in
the balance sheet, and net interest paid or received on the swaps isrecognized as adjustment to the interest income or expense on thefinancial assets or liabilities that are being hedged.
The Company uses the interest rate swap contract for the borrowing
from a bank to reduce its own exposure to fluctuations in interest rate.
The Company does not perform the evaluation of effectiveness of thehedging items because the interest rate swap contract meets therequired condition above.

(e) Inventories

Finished goods and work in process are mainly stated at cost
determined by the periodic average method. Iron scraps and ferroalloy
in raw materials are stated at the lower of cost or market, cost being
determined by the moving average method. Raw materials, excluding
iron scraps and ferroalloy, and supplies are mainly stated at cost
determined by the moving average method, except for rolls and molds
included in supplies, which are depreciated over useful life andrecorded after depreciation value.
(Accounting Change)
Effective from the year ended March 31, 2007, the Company has
adopted the lower of cost or market method, based on the moving
average method for ferroalloy in raw materials. The Company madethis change in order to present its financial position more accurately.
Market prices for ferroalloy have recently been fluctuant, and thosefluctuations have resulted in large discrepancies between the bookvalue and market value of the inventories. In addition, management
expects that market prices will continue to fluctuate widely in future. As
a result of adoption, ordinary income and income before income taxes
and minority interests decreased by ¥52 million.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost, and have been
depreciated by the declining balance method, except that the No.2 Bar
and Wire Rod Mill Shop of the Company have been depreciated by thestraight-line method.
Expenditures on maintenance and repairs are charged to income as
incurred. Upon the disposal of property, the cost and accumulated
depreciation are removed from the related accounts and any gain orloss is recorded as income or expenses.
(Accounting Change)
Effective from the year ended March 31, 2008, the Company and its
domestic subsidiaries have changed their depreciation methods for theproperty, plant and equipment acquired on or after April 1, 2007 inaccordance with the revised Corporate Tax Law of Japan. As a resultof the change, operating income, ordinary income and income before
income taxes and minority interests decreased by ¥292 million ($2,921
thousand), respectively.

Financial Section

1. Basis of Presenting Consolidated Financial
Statements(Additional information)
Effective from the year ended March 31, 2008, the Company and its
domestic subsidiaries depreciate the property, plant and equipment
acquired before April 1, 2007 from 5% of their cost to ¥1 by thestraight-line method for 5 years from the following year the property,
plant and equipment reach 5% of their cost calculated by pre-revised
depreciation method, in accordance with the revised Corporate Tax
Law of Japan. As a result of the change, operational income decreasedby ¥1,087 million ($10,865 thousand) and ordinary income and income
before income taxes and minority interests decreased by ¥1,087 million($10,866 thousand), respectively.

(g) Goodwill and Negative Goodwill

The differences between the cost of investments in subsidiaries andthe underlying equity in their net asset are recorded as goodwill or
negative goodwill in the consolidated balance sheets and amortizedusing the straight –line method over the period within 20 years. If theamount is immaterial, it is fully recognized as expenses as incurred.
For the year ended March 31, 2007, a certain U.S. subsidiary, Aichi
USA, Inc., has recorded goodwill under the accounting method
prescribed in U.S. Statement of Financial Accounting Standards(“SFAS”) No. 142, “Goodwill and Other Intangible Asset”. Under SFAS
No. 142, goodwill which has undefined useful life will be tested for
impairment on an annual basis and between annual test if an event
occurs or circumstances change that would more likely than not
reduce the fair value below its carrying amount.

(h) Accounting for finance leases

Where financing leases do not transfer ownership of the leased
property to the lessee during the term of the lease, the leased propertyof the Company and its domestic subsidiaries are not capitalized andthe relating rental and lease expenses are charged to income as
incurred.

(i) Allowance for doubtful receivables

Allowance for doubtful receivables are provided based on the historicalloss expenses during a certain reference period plus the estimatednon-collectable amount based on the analysis of certain individual
accounts in accordance with the accounting standard.

(j) Allowance for bonuses to directors and corporate auditors
Bonuses to directors and corporate auditors are recorded on an
accrual basis with a related charge to income.
(Accounting Change)
Effective from the year ended March 31, 2007, the Company adopted
Financial Accounting Standard No.4 “Accounting Standard for
Directors’ Bonus” issued on November 29, 2005 by the AccountingStandards Board of Japan. As a result of adoption, operating income,ordinary income and income before income taxes and minority
interests decreased by ¥295 million.
For the year ended March 31, 2006, bonuses paid to directors andcorporate auditors were recorded as a part of the appropriation ofretained earnings, instead of being charged to income, as permitted by
the Japanese accounting standard.

63

Notes to Consolidated Financial Statements(a) Basis of presenting the consolidated financial
statements

The accompanying consolidated financial statements of AICHI STEELCORPORATION ("the Company") and its subsidiaries are prepared on
the basis of accounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards. These
consolidated financial statements are compiled from the original
consolidated financial statements in Japanese prepared by theCompany as required by the Financial Instruments and Exchange Law
and submitted to the Director of Kanto Finance Bureau in Japan.
On the accompanying consolidated financial statements, amounts lessthan ¥1 million are rounded to the nearest million yen; therefore, someaccounts and notes are not consistent with those on the consolidated
financial statements submitted to the Director of Kanto Finance Bureau
in Japan, on which amounts less than ¥1 million are omitted.

(b) U.S. dollar amounts

The U.S. dollar amounts included in the accompanying consolidated
financial statements and notes thereto represent the arithmetic resultsof translating Japanese Yen into U.S. dollars at the rate of ¥100 to $1,
the approximate rate of exchange at March 31, 2008. The inclusion ofsuch dollar amounts is solely for the convenience of the readers and is
not intended to imply that the assets and liabilities originating in Yen
have been or could be readily converted, realized or settled in U.S.
dollars at ¥100 to $1 or at any other rates. Amounts less than US$ 1
thousand are rounded to the nearest US$ 1 thousand.

(c) Reclassification

In preparing the accompanying consolidated financial statement,
certain comparative figures have been reclassified to conform to thecurrent year’s presentations.

2. Summary of Significant Accounting Policies(a) Principles of consolidation

The accompanying consolidated financial statements include theaccounts of the Company and all of its subsidiaries (18 and 17
companies in 2008 and 2007, respectively). Investments in affiliates (3and 2 companies in 2008 and 2007, respectively) are carried at cost,
since the equities in retained earning and net income of affiliates are
not material. Significant intercompany transactions and accounts havebeen eliminated. Assets and liabilities of subsidiaries are revalued attheir fair value as of the date of acquisition of control based on the full
fair value method.

(a-i) Scope of consolidation

Subsidiaries at March 31, 2008 are as follows：
Domestic subsidiaries（9 companies）：
Aiko Corporation
Aichi Ceratec Corporation
Omi Mining Co., Ltd.
Aichi Techno Metal Fukaumi Company

62

Aichi Steel Logistics Co., Ltd.
Aichi Information System Company
Aiko Service Co., Ltd.
Aichi Micro Intelligent Corporation
Asdex Corporation
Overseas subsidiaries（9 companies）：

Aichi Forging Company of Asia, Inc.
Aichi USA, Inc.
Louisville Forge and Gear Works, LLC
Aichi Europe GmbH
Aichi International (Thailand) Co., Ltd.
Shanghai Aichi Forging Co., Ltd.
PT. Aichi Forging Indonesia
Aichi Magﬁne Czech s.r.o.
AMIT, Inc.

Aichi Magfine Czech s.r.o. and AMIT, Inc. are established during theyear ended March 31, 2008 and newly consolidated.
Kentucky Advanced Forge, LLC, which used to be one of overseas
subsidiaries, is eliminated from subsidiaries because of sale of its stock.
Overseas subsidiaries adopt accounting principles generally acceptedin their respective countries, and no adjustments have been made totheir financial statements on consolidation as allowed under accounting
principles and practice generally accepted in Japan.

(a-ii) Fiscal year of subsidiaries

The Company's overseas subsidiaries use fiscal year ending on
December 31, three months earlier than the Company. The Company
consolidates such subsidiaries' financial statements as of the year-end.
Significant transactions for the period between subsidiaries' year-end
and the Company's year-end are adjusted on consolidation.

(b) Cash and cash equivalents

The Company and its subsidiaries consider short-term highly liquid
investments with maturities of three months or less when purchased tobe cash equivalents.

(c) Valuation of securities

The accounting standard for financial instruments requires that
securities to be classified into three categories: trading,held-to-maturity or available-for-sale, whose classification determines
the respective accounting method. According to the Company’s
investment policies, the securities portfolio of the Company and its
subsidiaries are classified as available-for-sale securities. The
accounting standard requires that available-for-sale securities withavailable market quotations are valued at fair value, and net unrealized
gains or losses on such securities are reported as a separate
component of shareholders’ equity, net of applicable income taxes.
Gains and losses on disposition of marketable securities are computedby the moving average method. Non-marketable available-for-salesecurities without marketable quotations are carried at cost determinedby the moving average method. Adjustments in carrying values ofndividual investment securities are charged to income throughwrite-downs, when a significant decline in value is deemed other than
temporary.

(d) Derivatives and Hedge Accounting

Derivatives are valued at fair value, if hedge accounting is not
appropriate or where there is no hedging designation, and gains orlosses on derivatives are recognized in current earnings. In addition,
when interest rate swaps that meet certain required conditions havecritical terms matching exactly with those of financial assets or liabilities
that are being hedged, such interest rate swaps are not recognized in
the balance sheet, and net interest paid or received on the swaps isrecognized as adjustment to the interest income or expense on thefinancial assets or liabilities that are being hedged.
The Company uses the interest rate swap contract for the borrowing
from a bank to reduce its own exposure to fluctuations in interest rate.
The Company does not perform the evaluation of effectiveness of thehedging items because the interest rate swap contract meets therequired condition above.

(e) Inventories

Finished goods and work in process are mainly stated at cost
determined by the periodic average method. Iron scraps and ferroalloy
in raw materials are stated at the lower of cost or market, cost being
determined by the moving average method. Raw materials, excluding
iron scraps and ferroalloy, and supplies are mainly stated at cost
determined by the moving average method, except for rolls and molds
included in supplies, which are depreciated over useful life andrecorded after depreciation value.
(Accounting Change)
Effective from the year ended March 31, 2007, the Company has
adopted the lower of cost or market method, based on the moving
average method for ferroalloy in raw materials. The Company madethis change in order to present its financial position more accurately.
Market prices for ferroalloy have recently been fluctuant, and thosefluctuations have resulted in large discrepancies between the bookvalue and market value of the inventories. In addition, management
expects that market prices will continue to fluctuate widely in future. As
a result of adoption, ordinary income and income before income taxes
and minority interests decreased by ¥52 million.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost, and have been
depreciated by the declining balance method, except that the No.2 Bar
and Wire Rod Mill Shop of the Company have been depreciated by thestraight-line method.
Expenditures on maintenance and repairs are charged to income as
incurred. Upon the disposal of property, the cost and accumulated
depreciation are removed from the related accounts and any gain orloss is recorded as income or expenses.
(Accounting Change)
Effective from the year ended March 31, 2008, the Company and its
domestic subsidiaries have changed their depreciation methods for theproperty, plant and equipment acquired on or after April 1, 2007 inaccordance with the revised Corporate Tax Law of Japan. As a resultof the change, operating income, ordinary income and income before
income taxes and minority interests decreased by ¥292 million ($2,921
thousand), respectively.

Financial Section

1. Basis of Presenting Consolidated Financial
Statements(Additional information)
Effective from the year ended March 31, 2008, the Company and its
domestic subsidiaries depreciate the property, plant and equipment
acquired before April 1, 2007 from 5% of their cost to ¥1 by thestraight-line method for 5 years from the following year the property,
plant and equipment reach 5% of their cost calculated by pre-revised
depreciation method, in accordance with the revised Corporate Tax
Law of Japan. As a result of the change, operational income decreasedby ¥1,087 million ($10,865 thousand) and ordinary income and income
before income taxes and minority interests decreased by ¥1,087 million($10,866 thousand), respectively.

(g) Goodwill and Negative Goodwill

The differences between the cost of investments in subsidiaries andthe underlying equity in their net asset are recorded as goodwill or
negative goodwill in the consolidated balance sheets and amortizedusing the straight –line method over the period within 20 years. If theamount is immaterial, it is fully recognized as expenses as incurred.
For the year ended March 31, 2007, a certain U.S. subsidiary, Aichi
USA, Inc., has recorded goodwill under the accounting method
prescribed in U.S. Statement of Financial Accounting Standards(“SFAS”) No. 142, “Goodwill and Other Intangible Asset”. Under SFAS
No. 142, goodwill which has undefined useful life will be tested for
impairment on an annual basis and between annual test if an event
occurs or circumstances change that would more likely than not
reduce the fair value below its carrying amount.

(h) Accounting for finance leases

Where financing leases do not transfer ownership of the leased
property to the lessee during the term of the lease, the leased propertyof the Company and its domestic subsidiaries are not capitalized andthe relating rental and lease expenses are charged to income as
incurred.

(i) Allowance for doubtful receivables

Allowance for doubtful receivables are provided based on the historicalloss expenses during a certain reference period plus the estimatednon-collectable amount based on the analysis of certain individual
accounts in accordance with the accounting standard.

(j) Allowance for bonuses to directors and corporate auditors
Bonuses to directors and corporate auditors are recorded on an
accrual basis with a related charge to income.
(Accounting Change)
Effective from the year ended March 31, 2007, the Company adopted
Financial Accounting Standard No.4 “Accounting Standard for
Directors’ Bonus” issued on November 29, 2005 by the AccountingStandards Board of Japan. As a result of adoption, operating income,ordinary income and income before income taxes and minority
interests decreased by ¥295 million.
For the year ended March 31, 2006, bonuses paid to directors andcorporate auditors were recorded as a part of the appropriation ofretained earnings, instead of being charged to income, as permitted by
the Japanese accounting standard.

63

Notes to Consolidated Financial Statements

Employees’ retirement benefit liabilities includes reserve for retirement
benefits of executive officers calculated based on the method similar
to reserve for retirement benefits of directors and corporate auditors.

(l) Reserve for retirement benefits of directors
and corporate auditors

The Company and its domestic subsidiaries pay severance
indemnities to directors and corporate auditors, which are subject tothe approval of the shareholders. The Company and its domestic
subsidiaries have provided for the full amount of the liabilities of
directors' and corporate auditors' retirement benefits which would be
required for payments of retirement benefits for directors andcorporate auditors in accordance with internal regulations at therespective balance sheet dates.

(m) Income taxes

Income taxes are accounted for in accordance with the accounting
standard for income taxes, which require recognizing the deferredtaxes under the asset and liability method. Under the accounting
standard, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
carrying amounts of existing assets and liabilities and their respective
tax bases, and measured using the enacted tax rates expected toapply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect ondeferred tax assets and liabilities of a change in tax rates is recognizedin the period that includes the enactment date.

(n) Consumption taxes

Consumption taxes are excluded from the revenue and expense
accounts which are subject to such taxes.

(o) Accounting for foreign currency translation

All monetary assets and liabilities denominated in foreign currencies,
whether long-term or short-term, are translated into Japanese yen at
the exchange rates prevailing at the respective balance sheet dates.
Resulting unrealized gain and loss are charged to income of each year.
As for the method of translating foreign currency financial statementsof overseas subsidiaries into Japanese yen, assets and liabilities aretranslated into Japanese yen at the exchange rates prevailing at thebalance sheet dates. The shareholders' equity in Net Assets istranslated into Japanese yen at the historical rates. Profit and loss
accounts for the year are translated into Japanese yen using the64

average exchange rates during the respective years. Differences in yen
amounts arising from use of different rates have been presented as"Foreign currency translation adjustments" in Net Assets or included in"Minority interests in subsidiaries" in Net Assets.

(p) Per share data

Basic net income per share of common stock is computed by dividing
income available to shareholders of common stock by theweighted-average number of shares of common stock outstanding forthe period. Diluted net income per share of common stock is
calculated based on the assumption for the possible dilution that
could occur if securities or other contracts to issue common stock
were excised or converted into common stock, or result in theissuance of common stock.
As described Note 16, the Company granted the stock option to its
directors, executive officers and selected employees for purchase its
common stock. In addition, the Company issued ¥30-billion
convertible bond-type bond with stock acquisition rights during theyear ended March 31, 2006. Diluted net income per share of common
stock for the year ended March 31, 2008 and 2007 reflects possible
dilution of the stock option and the convertible bond-type bond withstock acquisition rights to shares.
Cash dividends per share shown for each fiscal year in theaccompanying consolidated statements of income represent
dividends declared as applicable to the respective years.

3. Accounting Changes(a) Presentation of Net Assets in the Balance
Sheets

Effective from the year ended March 31, 2007, the Company adopted
Financial Accounting Standard No.5 “Accounting Standards for
Presentation of Net Assets in the Balance Sheet” and its
Implementation Guidance No.8 “Guidance on Accounting Standards
for Presentation of Net Assets in the Balance Sheets” issued on
December 9, 2005 by the Accounting Standards Board of Japan. As aresult, minority interests in subsidiaries which were disclosed between
Liabilities and Net Assets in the prior year are disclosed as a line itemin Net Assets in the current year.
If the previous accounting policy were to be adopted, Net assets at
March 31, 2007 were ¥121,983 million.

(b) Share-based Payment

Effective from the year ended March 31, 2007, the Company adopted
Financial Accounting Standard No.8 “Accounting Standard for
Share-based Payment” issued on December 27, 2005 by the
Accounting Standards Board of Japan and its Implementation
Guidance No.11 “Guidance on Accounting Standards for
Share-based Payment” issued on May 31, 2006 by the AccountingStandards Board of Japan. As a result of adoption, operating income,ordinary income and income before income taxes and minority
interests decreased by ¥31 million, as compared with the previous
accounting method.

Financial Section(k) Employees’ retirement benefit liabilities

The Company and its subsidiaries have recognized the retirement
benefits including pension cost and related liabilities based on
actuarial present value of projected benefit obligation using actuarial
appraisal approach and the pension plan assets available for benefits
at the respective year-ends. Unrecognized actuarial differences aschanges in the projected benefit obligation or pension plan assets
resulting from the experience different from that assumed and fromchanges in assumptions is to be amortized by a straight-line method
over 15 years, within remaining service lives of employees, from thenext year in which they arise. Prior service cost is amortized bystraight-line method over 15 years.

4. Investments(a) Investment securities

All marketable securities are classified as available-for-sale and are valued at fair value with unrealized gains and losses excluded
from the current earnings and reported a net amount within the shareholders’ equity account until realized. At March 31, 2008 and2007, gross unrealized gains and losses for marketable securities are summarized as follows:
Millions of Yen
Acquisition cost

Fair and carrying value

Difference

At March 31, 2008:
Securities with exceeding acquisition costMarketable securities:
Equity securities

￥

2,326

￥

12,653￥

10,327

Bonds

-

-

-

Others---Subtotal
Securities with not exceeding acquisition costMarketable securities:
Equity securities

￥

2,326

￥

12,653￥

10,327

￥

37

￥

31

￥

(6)

Bonds

Total

-

-

-

OthersSubtotal

-

-

-

￥

37

￥

31

￥

(6)

￥

2,363

￥

12,684￥

10,321

￥

2,352

￥

18,389￥16,037At March 31, 2007:
Securities with exceeding acquisition costMarketable securities:
Equity securities
Bonds

-

-

-

Others---Subtotal
Securities with not exceeding acquisition costMarketable securities:
Equity securities

￥

2,352

￥

18,389￥16,037

￥

10

￥

9

￥

(1)

Bonds

Total

-

-

-

OthersSubtotal

-

-

-

￥

10

￥

9

￥

(1)

￥

2,362

￥

18,398￥16,036

Thousands of U.S. Dollars
Acquisition cost

Fair and carrying value

Difference

At March 31, 2008:
Securities with exceeding acquisition costMarketable securities:
Equity securities$$

126,528$--

OthersSubtotal

23,259-Bonds

103,269---$

23,259$126,528$

103,269

$

370

$

316

$

(54)

Securities with not exceeding acquisition costMarketable securities:
Equity securities
Bonds

-

-

-

Others---Subtotal

$

370

$

316

$

(54)

Total

$

23,629$126,844$

103,21565

Notes to Consolidated Financial Statements

Employees’ retirement benefit liabilities includes reserve for retirement
benefits of executive officers calculated based on the method similar
to reserve for retirement benefits of directors and corporate auditors.

(l) Reserve for retirement benefits of directors
and corporate auditors

The Company and its domestic subsidiaries pay severance
indemnities to directors and corporate auditors, which are subject tothe approval of the shareholders. The Company and its domestic
subsidiaries have provided for the full amount of the liabilities of
directors' and corporate auditors' retirement benefits which would be
required for payments of retirement benefits for directors andcorporate auditors in accordance with internal regulations at therespective balance sheet dates.

(m) Income taxes

Income taxes are accounted for in accordance with the accounting
standard for income taxes, which require recognizing the deferredtaxes under the asset and liability method. Under the accounting
standard, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
carrying amounts of existing assets and liabilities and their respective
tax bases, and measured using the enacted tax rates expected toapply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect ondeferred tax assets and liabilities of a change in tax rates is recognizedin the period that includes the enactment date.

(n) Consumption taxes

Consumption taxes are excluded from the revenue and expense
accounts which are subject to such taxes.

(o) Accounting for foreign currency translation

All monetary assets and liabilities denominated in foreign currencies,
whether long-term or short-term, are translated into Japanese yen at
the exchange rates prevailing at the respective balance sheet dates.
Resulting unrealized gain and loss are charged to income of each year.
As for the method of translating foreign currency financial statementsof overseas subsidiaries into Japanese yen, assets and liabilities aretranslated into Japanese yen at the exchange rates prevailing at thebalance sheet dates. The shareholders' equity in Net Assets istranslated into Japanese yen at the historical rates. Profit and loss
accounts for the year are translated into Japanese yen using the64

average exchange rates during the respective years. Differences in yen
amounts arising from use of different rates have been presented as"Foreign currency translation adjustments" in Net Assets or included in"Minority interests in subsidiaries" in Net Assets.

(p) Per share data

Basic net income per share of common stock is computed by dividing
income available to shareholders of common stock by theweighted-average number of shares of common stock outstanding forthe period. Diluted net income per share of common stock is
calculated based on the assumption for the possible dilution that
could occur if securities or other contracts to issue common stock
were excised or converted into common stock, or result in theissuance of common stock.
As described Note 16, the Company granted the stock option to its
directors, executive officers and selected employees for purchase its
common stock. In addition, the Company issued ¥30-billion
convertible bond-type bond with stock acquisition rights during theyear ended March 31, 2006. Diluted net income per share of common
stock for the year ended March 31, 2008 and 2007 reflects possible
dilution of the stock option and the convertible bond-type bond withstock acquisition rights to shares.
Cash dividends per share shown for each fiscal year in theaccompanying consolidated statements of income represent
dividends declared as applicable to the respective years.

3. Accounting Changes(a) Presentation of Net Assets in the Balance
Sheets

Effective from the year ended March 31, 2007, the Company adopted
Financial Accounting Standard No.5 “Accounting Standards for
Presentation of Net Assets in the Balance Sheet” and its
Implementation Guidance No.8 “Guidance on Accounting Standards
for Presentation of Net Assets in the Balance Sheets” issued on
December 9, 2005 by the Accounting Standards Board of Japan. As aresult, minority interests in subsidiaries which were disclosed between
Liabilities and Net Assets in the prior year are disclosed as a line itemin Net Assets in the current year.
If the previous accounting policy were to be adopted, Net assets at
March 31, 2007 were ¥121,983 million.

(b) Share-based Payment

Effective from the year ended March 31, 2007, the Company adopted
Financial Accounting Standard No.8 “Accounting Standard for
Share-based Payment” issued on December 27, 2005 by the
Accounting Standards Board of Japan and its Implementation
Guidance No.11 “Guidance on Accounting Standards for
Share-based Payment” issued on May 31, 2006 by the AccountingStandards Board of Japan. As a result of adoption, operating income,ordinary income and income before income taxes and minority
interests decreased by ¥31 million, as compared with the previous
accounting method.

Financial Section(k) Employees’ retirement benefit liabilities

The Company and its subsidiaries have recognized the retirement
benefits including pension cost and related liabilities based on
actuarial present value of projected benefit obligation using actuarial
appraisal approach and the pension plan assets available for benefits
at the respective year-ends. Unrecognized actuarial differences aschanges in the projected benefit obligation or pension plan assets
resulting from the experience different from that assumed and fromchanges in assumptions is to be amortized by a straight-line method
over 15 years, within remaining service lives of employees, from thenext year in which they arise. Prior service cost is amortized bystraight-line method over 15 years.

4. Investments(a) Investment securities

All marketable securities are classified as available-for-sale and are valued at fair value with unrealized gains and losses excluded
from the current earnings and reported a net amount within the shareholders’ equity account until realized. At March 31, 2008 and2007, gross unrealized gains and losses for marketable securities are summarized as follows:
Millions of Yen
Acquisition cost

Fair and carrying value

Difference

At March 31, 2008:
Securities with exceeding acquisition costMarketable securities:
Equity securities

￥

2,326

￥

12,653￥

10,327

Bonds

-

-

-

Others---Subtotal
Securities with not exceeding acquisition costMarketable securities:
Equity securities

￥

2,326

￥

12,653￥

10,327

￥

37

￥

31

￥

(6)

Bonds

Total

-

-

-

OthersSubtotal

-

-

-

￥

37

￥

31

￥

(6)

￥

2,363

￥

12,684￥

10,321

￥

2,352

￥

18,389￥16,037At March 31, 2007:
Securities with exceeding acquisition costMarketable securities:
Equity securities
Bonds

-

-

-

Others---Subtotal
Securities with not exceeding acquisition costMarketable securities:
Equity securities

￥

2,352

￥

18,389￥16,037

￥

10

￥

9

￥

(1)

Bonds

Total

-

-

-

OthersSubtotal

-

-

-

￥

10

￥

9

￥

(1)

￥

2,362

￥

18,398￥16,036

Thousands of U.S. Dollars
Acquisition cost

Fair and carrying value

Difference

At March 31, 2008:
Securities with exceeding acquisition costMarketable securities:
Equity securities$$

126,528$--

OthersSubtotal

23,259-Bonds

103,269---$

23,259$126,528$

103,269

$

370

$

316

$

(54)

Securities with not exceeding acquisition costMarketable securities:
Equity securities
Bonds

-

-

-

Others---Subtotal

$

370

$

316

$

(54)

Total

$

23,629$126,844$

103,21565

Notes to Consolidated Financial Statements

Financial Section

Sales of investment securities are as follows;

The aggregate annual maturities of long-term debt at March 31, 2008 are as follows:
Millions of Yen

2008¥

Proceeds from sales

Thousands of U.S. Dollars

Years ending March 31,

2008

2009

2007
-

$

234

￥

-

2010

Gain on sales

-

177

-

2011

Loss on sales

-

-

-

2012
2013
Total

Book value of investment securities carried at cost at March 31, 2008 and 2007 are as follows:
Millions of Yen¥

Non-marketable securities
Securities investment trusts

Thousands of U.S. Dollars

2008

3,652

2007

244

(Included in Cash and cash equivalents)

$

3,548

￥

244

2008

36,522
2,445

The Company and its subsidiaries do not have any held-to-maturity bonds or available-for-sale debt securities.

Millions of Yen¥

Thousands of U.S. Dollars

20,978$5,740

30,776

57,401

307,757

71

715

15,054¥

209,775

72,619$150,542

726,190

6. Advanced Depreciation of Fixed Assets
Advanced depreciation of fixed assets is permitted by the accounting principles and practices generally accepted in Japan. For theyear ended March 31, 2008, the amount of ¥181 million ($1,812 thousand) was directly reduced from the acquisition cost ofmachinery and equipment newly acquired with government subsidies. At March 31, 2008, its total amount is ¥681 million ($6,812
thousand). For the year ended March 31, 2007, the amount of ¥500 million was directly reduced from the acquisition cost ofmachinery and equipment newly acquired with government subsidies.

(b) Investments in affiliates
Investments in affiliates at March 31, 2008 and 2007 are as follows:
Millions of Yen

Thousands of U.S. Dollars

2008

¥

Investments as stated at cost in affiliates

2007

148

$

146

￥

2008

2008

Thousands of U.S. Dollars

1,664

￥

1,969

$

16,6392008

SubtotalLess, current portion
Total

¥

30,000Thousands of U.S. Dollars

2008

2007
￥

30,000$300,000

42,61942,749426,190

72,61972,749726,190(20,978)

51,641(830)￥

71,919$The current conversion price of convertible bond-type bond with stock acquisition rights due March 2011 is¥1,440 per share and is subject to adjustment in certain circumstances, including in the event of a stock split.
At March 31, 2008, the number of shares of common stock necessary for conversion of all convertible bond-typebond with stock acquisition rights outstanding was approximately 21 million.

66

Chita Medias Corporation
Kentucky Advanced Forge, LLC
Total

Millions of Yen

Unsecured bank loans due through 2012 withinterest at rate ranging from 0.42% to 6.72%
at March 31, 2008

Millions of Yen

48

Thousands of U.S. Dollars
2007
84

￥

Millions of Yen

2008

2007

Long-term debt at March 31, 2008 and 2007 are as follows:

¥

2008

$

2008

480

Guarantees against bank loans of an affiliate and other company at March 31, 2008 and 2007 are as follows:
Millions of Yen

Unsecured convertible bond-type bond with stockacquisition rights due March 2011 with no interest¥

Notes receivable endorsed

Short-term borrowings at March 31, 2008 and 2007 are as follows:¥

Notes receivable endorsed at March 31, 2008 and 2007 are as follows:

1,478

5. Short-term Borrowings and Long-term Debt

Unsecured bank loans with interest at rates ranging
from 0.75% to 5.83% per annum at March 31, 2008

7. Contingent Liabilities(209,775)

516,415

¥
¥

2008

402

￥

1

403

Thousands of U.S. Dollars
2007
473
-

￥

473

$
$

2008

4,023

10

4,033

8. Shareholders' Equity in Net Assets
At March 31, 2008 and 2007, respectively, capital surplus consisted of additional paid-in capital. The Commercial Code of Japan(the “Code”) provides that an amount equal to at least 10% of cash dividend and other distributions from retained earnings paid by
the Company is appropriate as a legal reserve until the total amount of additional paid-in capital and legal reserve equals to 25% ofstated capital. When the total amount of additional paid-in capital and legal reserve exceeds 25% of stated capital, such excess
can be transferred to retained earnings by resolution of shareholders, which may be available for dividends. Legal reserve wasincluded in retained earnings and amounted to ¥6,254 million ($62,542 thousand)at March 31, 2008 and 2007, respectively.
Effective July 30, 2003, the Code permits to repurchase its stock by resolution of the Board of Directors, if authorized by the Article
of Incorporation. The Company established a new article on repurchase of its stock authorized by the resolution of shareholders at
the general shareholders’ meeting held on June 22, 2004. During the year ended March 31, 2007, the Company repurchased
330,000 shares for the aggregate amount of ¥233 million by the resolution of the Board of Directors held at February 1, 2007.
During the year ended March 31, 2008, the Company repurchased 1,000,000 shares for the aggregate amount of ¥691 million($6,906 thousand) by the resolution of the Board of Directors held at May 18, 2007.
Dividends are approved by the shareholders at a meeting held after the close of the fiscal year to which the dividends areapplicable. In addition, interim dividends may be paid upon resolution of the Board of Directors, subject to limitations imposed by
the Code.

67

Notes to Consolidated Financial Statements

Financial Section

Sales of investment securities are as follows;

The aggregate annual maturities of long-term debt at March 31, 2008 are as follows:
Millions of Yen

2008¥

Proceeds from sales

Thousands of U.S. Dollars

Years ending March 31,

2008

2009

2007
-

$

234

￥

-

2010

Gain on sales

-

177

-

2011

Loss on sales

-

-

-

2012
2013
Total

Book value of investment securities carried at cost at March 31, 2008 and 2007 are as follows:
Millions of Yen¥

Non-marketable securities
Securities investment trusts

Thousands of U.S. Dollars

2008

3,652

2007

244

(Included in Cash and cash equivalents)

$

3,548

￥

244

2008

36,522
2,445

The Company and its subsidiaries do not have any held-to-maturity bonds or available-for-sale debt securities.

Millions of Yen¥

Thousands of U.S. Dollars

20,978$5,740

30,776

57,401

307,757

71

715

15,054¥

209,775

72,619$150,542

726,190

6. Advanced Depreciation of Fixed Assets
Advanced depreciation of fixed assets is permitted by the accounting principles and practices generally accepted in Japan. For theyear ended March 31, 2008, the amount of ¥181 million ($1,812 thousand) was directly reduced from the acquisition cost ofmachinery and equipment newly acquired with government subsidies. At March 31, 2008, its total amount is ¥681 million ($6,812
thousand). For the year ended March 31, 2007, the amount of ¥500 million was directly reduced from the acquisition cost ofmachinery and equipment newly acquired with government subsidies.

(b) Investments in affiliates
Investments in affiliates at March 31, 2008 and 2007 are as follows:
Millions of Yen

Thousands of U.S. Dollars

2008

¥

Investments as stated at cost in affiliates

2007

148

$

146

￥

2008

2008

Thousands of U.S. Dollars

1,664

￥

1,969

$

16,6392008

SubtotalLess, current portion
Total

¥

30,000Thousands of U.S. Dollars

2008

2007
￥

30,000$300,000

42,61942,749426,190

72,61972,749726,190(20,978)

51,641(830)￥

71,919$The current conversion price of convertible bond-type bond with stock acquisition rights due March 2011 is¥1,440 per share and is subject to adjustment in certain circumstances, including in the event of a stock split.
At March 31, 2008, the number of shares of common stock necessary for conversion of all convertible bond-typebond with stock acquisition rights outstanding was approximately 21 million.

66

Chita Medias Corporation
Kentucky Advanced Forge, LLC
Total

Millions of Yen

Unsecured bank loans due through 2012 withinterest at rate ranging from 0.42% to 6.72%
at March 31, 2008

Millions of Yen

48

Thousands of U.S. Dollars
2007
84

￥

Millions of Yen

2008

2007

Long-term debt at March 31, 2008 and 2007 are as follows:

¥

2008

$

2008

480

Guarantees against bank loans of an affiliate and other company at March 31, 2008 and 2007 are as follows:
Millions of Yen

Unsecured convertible bond-type bond with stockacquisition rights due March 2011 with no interest¥

Notes receivable endorsed

Short-term borrowings at March 31, 2008 and 2007 are as follows:¥

Notes receivable endorsed at March 31, 2008 and 2007 are as follows:

1,478

5. Short-term Borrowings and Long-term Debt

Unsecured bank loans with interest at rates ranging
from 0.75% to 5.83% per annum at March 31, 2008

7. Contingent Liabilities(209,775)

516,415

¥
¥

2008

402

￥

1

403

Thousands of U.S. Dollars
2007
473
-

￥

473

$
$

2008

4,023

10

4,033

8. Shareholders' Equity in Net Assets
At March 31, 2008 and 2007, respectively, capital surplus consisted of additional paid-in capital. The Commercial Code of Japan(the “Code”) provides that an amount equal to at least 10% of cash dividend and other distributions from retained earnings paid by
the Company is appropriate as a legal reserve until the total amount of additional paid-in capital and legal reserve equals to 25% ofstated capital. When the total amount of additional paid-in capital and legal reserve exceeds 25% of stated capital, such excess
can be transferred to retained earnings by resolution of shareholders, which may be available for dividends. Legal reserve wasincluded in retained earnings and amounted to ¥6,254 million ($62,542 thousand)at March 31, 2008 and 2007, respectively.
Effective July 30, 2003, the Code permits to repurchase its stock by resolution of the Board of Directors, if authorized by the Article
of Incorporation. The Company established a new article on repurchase of its stock authorized by the resolution of shareholders at
the general shareholders’ meeting held on June 22, 2004. During the year ended March 31, 2007, the Company repurchased
330,000 shares for the aggregate amount of ¥233 million by the resolution of the Board of Directors held at February 1, 2007.
During the year ended March 31, 2008, the Company repurchased 1,000,000 shares for the aggregate amount of ¥691 million($6,906 thousand) by the resolution of the Board of Directors held at May 18, 2007.
Dividends are approved by the shareholders at a meeting held after the close of the fiscal year to which the dividends areapplicable. In addition, interim dividends may be paid upon resolution of the Board of Directors, subject to limitations imposed by
the Code.

67

Notes to Consolidated Financial Statements

11. Consolidated Statements of Changes in Net Assets

Expenses related research and development activities are charged to income as incurred. Research and development expenses
were included in general and administrative expenses, and manufacturing costs and amounted to ¥2,001 million ($20,013
thousand) and ¥2,446 million for the years ended March 31, 2008 and 2007，respectively.

(a) Type and number of shares outstanding and treasury stock

Financial Section

9. Research and Development Expenses

Fiscal year ended March 31, 2008
Thousands of Unit
Shares outstanding

10. Impairment

Type

Common stock

Common stock

198,867

1,798(a) Impairment of Fixed Assets

Number of shares at the end of the previous fiscal year

“Impairment loss on fixed assets” recorded in the consolidated statements of income for the year ended March 31, 2008
was as follows:

Number of increase during the year ended March 31, 2008

-

1,004

Number of decrease during the year ended March 31, 2008-

136

198,867

2,666

Item

Description

Location

Millions of Yen

Machinery and equipment

Idle assets

Aichi prefecture

Machinery and equipment

Idle assets

Gifu prefecture

330Construction in progress

Idle assets

Aichi prefecture

80

799

Land

Idle assets

Aichi prefecture

20

197

Land
Buildings and structuresand other assets

Idle assets

Gifu prefecture0

1

Idle assets

Aichi prefecture

26

264

￥

￥

148

277

Thousand of U.S. Dollars
$

$

1,480

2,771

Fixed assets are principally grouped into cash-generating units based on the production units, other than assets for rents and idle
assets. An impairment loss on these assets is based on the expected net selling prices. The impairment loss was recognized for theyear ended March 31, 2008 because the forecast of future cash flow has changed due to the renewal plan of the machinery andequipment and the fair value of the land diminished significantly due to recent decline in land price. The machinery, equipment,
construction in progress and other assets is devalued to ¥1 because net selling prices of the machinery, equipment, construction inprogress and other assets are expected essentially nothing and the lands are devalued to expected net selling prices of the lands
based on the valuations for property tax bases for land, and the salvage values for tax purposes for other properties.

Number of shares at the end of the fiscal year

Increase in the number of shares was due to purchase of 1,000 thousand shares based on Article 459, Paragraph 1, item 1 of the
Corporation Law and purchase of 4 thousand less-than-one-unit shares. Decrease in the number of shares was sales of 134
thousand shares by exercises of stock options and sales of 2 thousand less-than-one-unit shares.

(b) Matters related to the subscription rights to shares
Millions of Yen
Class

Details

the Company

Stock option

Item

Description

Location

Machinery and equipment

Idle assets

Aichi prefecture

Millions of Yen

Land

Idle assets

Aichi prefecture

23

Land

Idle assets

Gifu prefecture

2

￥

￥

44

69

Fixed assets are principally grouped into cash-generating units based on the production units, other than assets for rents and idle
assets. An impairment loss on these assets is based on the expected net selling prices. The impairment loss was recognized for theyear ended March 31, 2007 because the forecast of future cash flow has changed due to the renewal plan of the machinery andequipment and the fair value of the land diminished significantly due to recent decline in land price. The machinery and equipment isdevalued to ¥1 because net selling prices of the machinery and equipment are expected essentially nothing and the lands aredevalued to expected net selling prices of the lands based on the valuations for property tax bases for land, and the salvage values
for tax purposes for other properties.

For the year ended March 31, 2007, SFAS No. 142 is applied to the U.S. subsidiary as described Note 2(g), and the impairment
loss is recorded.

Balance
￥

$

99

993

(c) Matters related to dividends(1) Dividend payment
Approvals by ordinary general meeting of shareholders held on June 21, 2007 are as follows:

Total amount of dividends
Dividends per share￥ 985 million$ 9,853 thousand¥ 5.00$ 0.05

Record date

March 31,2007

Effective dateJune 22, 2007

Approvals by the Board of Directors meeting held on October 31, 2007 are as follows;
Dividends on common stock
Total amount of dividends
Dividends per share￥ 981 million$ 9,808 thousand¥ 5.00$ 0.05

Record date

September 30,2007

Effective dateNovember 20, 2007

(2) Dividend whose record date is attributable to the year ended March 31, 2008 but to be effective after the said fiscal year.
The Company resolved approval at the general meeting of shareholders to be held on June 20, 2008 as follows:
Dividends on common stock(b) Impairment of Goodwill

Thousands of U.S. Dollars

Exercise period of the rights has yet to arrive.

Dividends on common stock“Impairment loss on fixed assets” recorded in the consolidated statements of income for the year
ended March 31, 2007 was as follows:

68

Treasury stock

Total amount of dividends
Dividends per share￥ 981 million$ 9,810 thousand¥ 5.00$ 0.05

Record date

March 31,2008

Effective dateJune 23, 200869

Notes to Consolidated Financial Statements

11. Consolidated Statements of Changes in Net Assets

Expenses related research and development activities are charged to income as incurred. Research and development expenses
were included in general and administrative expenses, and manufacturing costs and amounted to ¥2,001 million ($20,013
thousand) and ¥2,446 million for the years ended March 31, 2008 and 2007，respectively.

(a) Type and number of shares outstanding and treasury stock

Financial Section

9. Research and Development Expenses

Fiscal year ended March 31, 2008
Thousands of Unit
Shares outstanding

10. Impairment

Type

Common stock

Common stock

198,867

1,798(a) Impairment of Fixed Assets

Number of shares at the end of the previous fiscal year

“Impairment loss on fixed assets” recorded in the consolidated statements of income for the year ended March 31, 2008
was as follows:

Number of increase during the year ended March 31, 2008

-

1,004

Number of decrease during the year ended March 31, 2008-

136

198,867

2,666

Item

Description

Location

Millions of Yen

Machinery and equipment

Idle assets

Aichi prefecture

Machinery and equipment

Idle assets

Gifu prefecture

330Construction in progress

Idle assets

Aichi prefecture

80

799

Land

Idle assets

Aichi prefecture

20

197

Land
Buildings and structuresand other assets

Idle assets

Gifu prefecture0

1

Idle assets

Aichi prefecture

26

264

￥

￥

148

277

Thousand of U.S. Dollars
$

$

1,480

2,771

Fixed assets are principally grouped into cash-generating units based on the production units, other than assets for rents and idle
assets. An impairment loss on these assets is based on the expected net selling prices. The impairment loss was recognized for theyear ended March 31, 2008 because the forecast of future cash flow has changed due to the renewal plan of the machinery andequipment and the fair value of the land diminished significantly due to recent decline in land price. The machinery, equipment,
construction in progress and other assets is devalued to ¥1 because net selling prices of the machinery, equipment, construction inprogress and other assets are expected essentially nothing and the lands are devalued to expected net selling prices of the lands
based on the valuations for property tax bases for land, and the salvage values for tax purposes for other properties.

Number of shares at the end of the fiscal year

Increase in the number of shares was due to purchase of 1,000 thousand shares based on Article 459, Paragraph 1, item 1 of the
Corporation Law and purchase of 4 thousand less-than-one-unit shares. Decrease in the number of shares was sales of 134
thousand shares by exercises of stock options and sales of 2 thousand less-than-one-unit shares.

(b) Matters related to the subscription rights to shares
Millions of Yen
Class

Details

the Company

Stock option

Item

Description

Location

Machinery and equipment

Idle assets

Aichi prefecture

Millions of Yen

Land

Idle assets

Aichi prefecture

23

Land

Idle assets

Gifu prefecture

2

￥

￥

44

69

Fixed assets are principally grouped into cash-generating units based on the production units, other than assets for rents and idle
assets. An impairment loss on these assets is based on the expected net selling prices. The impairment loss was recognized for theyear ended March 31, 2007 because the forecast of future cash flow has changed due to the renewal plan of the machinery andequipment and the fair value of the land diminished significantly due to recent decline in land price. The machinery and equipment isdevalued to ¥1 because net selling prices of the machinery and equipment are expected essentially nothing and the lands aredevalued to expected net selling prices of the lands based on the valuations for property tax bases for land, and the salvage values
for tax purposes for other properties.

For the year ended March 31, 2007, SFAS No. 142 is applied to the U.S. subsidiary as described Note 2(g), and the impairment
loss is recorded.

Balance
￥

$

99

993

(c) Matters related to dividends(1) Dividend payment
Approvals by ordinary general meeting of shareholders held on June 21, 2007 are as follows:

Total amount of dividends
Dividends per share￥ 985 million$ 9,853 thousand¥ 5.00$ 0.05

Record date

March 31,2007

Effective dateJune 22, 2007

Approvals by the Board of Directors meeting held on October 31, 2007 are as follows;
Dividends on common stock
Total amount of dividends
Dividends per share￥ 981 million$ 9,808 thousand¥ 5.00$ 0.05

Record date

September 30,2007

Effective dateNovember 20, 2007

(2) Dividend whose record date is attributable to the year ended March 31, 2008 but to be effective after the said fiscal year.
The Company resolved approval at the general meeting of shareholders to be held on June 20, 2008 as follows:
Dividends on common stock(b) Impairment of Goodwill

Thousands of U.S. Dollars

Exercise period of the rights has yet to arrive.

Dividends on common stock“Impairment loss on fixed assets” recorded in the consolidated statements of income for the year
ended March 31, 2007 was as follows:

68

Treasury stock

Total amount of dividends
Dividends per share￥ 981 million$ 9,810 thousand¥ 5.00$ 0.05

Record date

March 31,2008

Effective dateJune 23, 200869

Notes to Consolidated Financial Statements

Financial Section

12. Consolidated Statements of Cash flows

Fiscal year ended March 31, 2007

Fiscal year ended March 31, 2008(a) Type and number of shares outstanding and treasury stock

Assets and liabilities of Kentucky Advanced Forge LLC, and relationship with the sales price and net cash inflow of such sales,
which are included in “Proceeds from sale of shares of former consolidated subsidiaries” for the year ended March 31, 2008 are as
follows;

Thousands of Unit
Shares outstanding

Treasury stock

Common stock

Common stockType
Number of shares at the end of the previous fiscal year

Current assets

198,867

1,941

-

335

Non current assets-

478

Current liabilities

198,867

1,798

Minority interests

Number of increase during the year ended March 31, 2007
Number of decrease during the year ended March 31, 2007
Number of shares at the end of the fiscal year

Millions of Yen

Increase in the number of shares was due to purchase of 330 thousand shares based on Article 459, Paragraph 1, item 1 of the
Corporation Law and purchase of 5 thousand less-than-one-unit shares. Decrease in the number of shares was sales of 474
thousand shares by exercises of stock options and sales of 4 thousand less-than-one-unit shares.

Net cash provided by sales of the company

the Company

Stock option

Balance￥

31

Exercise period of the rights has yet to arrive.

¥

Cash and deposit
Short-term investment

Approvals by ordinary general meeting of shareholders held on June 22, 2006 are as follows:￥ 985 million
March 31,2006

Effective dateJune 23, 2006

30,408
245

¥

(161)

30,492￥Current assets(145)

Dividends on common stock(232)

Non current liabilities(142)

Minority interests(76)

Record date

September 30,2006

Effective dateNovember 20, 2006

Total amount of dividends
Dividends per share

Acquisition cost of the company

160

Acquisition cost before consolidation(46)

Cash and cash equivalents of the company

Record date

March 31,2007

Effective dateJune 22, 2007

2,445

306,526$(1,610)304,916(130)￥

Net cash provided by acquisition of the company

16

Reconciliation between ‘Cash and deposit’ on the balance sheet and ‘Cash and cash equivalents’ on the statement of cash flows is as follows;
Millions of Yen￥ 985 million¥ 5.00304,081345

Current liabilities¥ 5.00

$

2008

2007

Negative goodwill￥ 986 million

Thousands of U.S. Dollars

Millions of Yen

Approvals by the Board of Directors meeting held on October 31, 2006 are as follows;

Dividends on common stock

(96)

2,330

Assets and liabilities of Aichi Techno Metal Fukaumi Company and relationship with the acquisition cost and net cash inflow of suchacquisition, which are included in “Proceeds from acquisition of shares of newly consolidated subsidiaries” for the year ended
March 31, 2007 are as follows;

410(2) Dividend whose record date is attributable to the year ended March 31, 2007 but to be effective after the said fiscal year.
The Company resolved approval at the general meeting of shareholders to be held on June 21, 2007 as follows:

2007
Cash and deposit￥

Short-term investment
Total
Cash and cash equivalents of the company

35,536244
35,780Time deposit more than 3 months

70

2008

Non current assets

Dividends per share$

Fiscal year ended March 31, 2007

¥ 5.00Record date

Total amount of dividends(3,794)30,653

Cash and cash equivalents of the company(1) Dividend payment

Dividends per share

2,909

2,426

233

Total

(c) Matters related to dividends

Total amount of dividends

5,158

243

(10)

¥

2008

(1,847)(379)

Time deposit more than 3 months

Dividends on common stock

$

(185)

Millions of Yen

Millions of Yen
Details

291

Sales price of the company
Cash and cash equivalents of the company

516

Reconciliation between ‘Cash and deposit’ on the Consolidated Balance Sheets and ‘Cash and cash equivalents’ on theConsolidated Statements of Cash Flows is as follows;(b) Matters related to the subscription rights to shares
Class

2008

¥

Thousands of U.S. Dollars

(151)
￥

35,62971

Notes to Consolidated Financial Statements

Financial Section

12. Consolidated Statements of Cash flows

Fiscal year ended March 31, 2007

Fiscal year ended March 31, 2008(a) Type and number of shares outstanding and treasury stock

Assets and liabilities of Kentucky Advanced Forge LLC, and relationship with the sales price and net cash inflow of such sales,
which are included in “Proceeds from sale of shares of former consolidated subsidiaries” for the year ended March 31, 2008 are as
follows;

Thousands of Unit
Shares outstanding

Treasury stock

Common stock

Common stockType
Number of shares at the end of the previous fiscal year

Current assets

198,867

1,941

-

335

Non current assets-

478

Current liabilities

198,867

1,798

Minority interests

Number of increase during the year ended March 31, 2007
Number of decrease during the year ended March 31, 2007
Number of shares at the end of the fiscal year

Millions of Yen

Increase in the number of shares was due to purchase of 330 thousand shares based on Article 459, Paragraph 1, item 1 of the
Corporation Law and purchase of 5 thousand less-than-one-unit shares. Decrease in the number of shares was sales of 474
thousand shares by exercises of stock options and sales of 4 thousand less-than-one-unit shares.

Net cash provided by sales of the company

the Company

Stock option

Balance￥

31

Exercise period of the rights has yet to arrive.

¥

Cash and deposit
Short-term investment

Approvals by ordinary general meeting of shareholders held on June 22, 2006 are as follows:￥ 985 million
March 31,2006

Effective dateJune 23, 2006

30,408
245

¥

(161)

30,492￥Current assets(145)

Dividends on common stock(232)

Non current liabilities(142)

Minority interests(76)

Record date

September 30,2006

Effective dateNovember 20, 2006

Total amount of dividends
Dividends per share

Acquisition cost of the company

160

Acquisition cost before consolidation(46)

Cash and cash equivalents of the company

Record date

March 31,2007

Effective dateJune 22, 2007

2,445

306,526$(1,610)304,916(130)￥

Net cash provided by acquisition of the company

16

Reconciliation between ‘Cash and deposit’ on the balance sheet and ‘Cash and cash equivalents’ on the statement of cash flows is as follows;
Millions of Yen￥ 985 million¥ 5.00304,081345

Current liabilities¥ 5.00

$

2008

2007

Negative goodwill￥ 986 million

Thousands of U.S. Dollars

Millions of Yen

Approvals by the Board of Directors meeting held on October 31, 2006 are as follows;

Dividends on common stock

(96)

2,330

Assets and liabilities of Aichi Techno Metal Fukaumi Company and relationship with the acquisition cost and net cash inflow of suchacquisition, which are included in “Proceeds from acquisition of shares of newly consolidated subsidiaries” for the year ended
March 31, 2007 are as follows;

410(2) Dividend whose record date is attributable to the year ended March 31, 2007 but to be effective after the said fiscal year.
The Company resolved approval at the general meeting of shareholders to be held on June 21, 2007 as follows:

2007
Cash and deposit￥

Short-term investment
Total
Cash and cash equivalents of the company

35,536244
35,780Time deposit more than 3 months

70

2008

Non current assets

Dividends per share$

Fiscal year ended March 31, 2007

¥ 5.00Record date

Total amount of dividends(3,794)30,653

Cash and cash equivalents of the company(1) Dividend payment

Dividends per share

2,909

2,426

233

Total

(c) Matters related to dividends

Total amount of dividends

5,158

243

(10)

¥

2008

(1,847)(379)

Time deposit more than 3 months

Dividends on common stock

$

(185)

Millions of Yen

Millions of Yen
Details

291

Sales price of the company
Cash and cash equivalents of the company

516

Reconciliation between ‘Cash and deposit’ on the Consolidated Balance Sheets and ‘Cash and cash equivalents’ on theConsolidated Statements of Cash Flows is as follows;(b) Matters related to the subscription rights to shares
Class

2008

¥

Thousands of U.S. Dollars

(151)
￥

35,62971

Notes to Consolidated Financial Statements

14. Derivative Financial Instruments

The Company and its subsidiaries use certain machinery and equipment by finance lease contracts.
Pro forma information regarding the leased property such as acquisition cost, accumulated depreciation and future minimum lease
payments under finance leases that do not transfer the ownership of the leased property to the lessee at March 31, 2008 and 2007
are as follows:

The Company and its subsidiaries have entered into foreign currency swap contracts and foreign exchange forward contracts. The
Company uses foreign currency swap contracts for its long-term loan to one overseas subsidiary denominated in U.S. Dollar, toreduce its own exposure to fluctuations in exchange rate principally for hedge purposes and its subsidiaries use foreign exchange
forward contracts to manage its exposure to foreign currency exchange rate fluctuations for their import.
A summary of foreign currency swap contracts and foreign exchange forward contracts outstanding, excluding those for a hedge ofassets recognized on accompanying consolidated balance sheets, at March 31, 2008 and 2007 are as follows:

Millions of Yen
Acquisition Costs
At March 31, 2008:
Machinery
Equipment
Total
At March 31, 2007:
Machinery
Equipment
Total

¥
¥

803

549

1,352

￥

667

Accumulated
Depreciation

¥

￥

2,511

414

¥

771

￥

1,844

Balance

357

¥

¥

581

Receiving Japanese Yen, paying U.S. Dollar

419
393

￥

1,699

Contract amounts

812

Fair value

Net unrealized gain

At March 31, 2008:

¥

3,636

¥

¥

3,804

¥

￥

4,576

￥

Foreign exchange forward contracts￥

248

Millions of Yen

389

192

1,451
￥

Financial Section

13. Lease Transactions

168

556

¥

556

724

¥

556

227

￥

227

168

(0)

At March 31, 2007:
Receiving Japanese Yen, paying U.S. Dollar

634

Foreign exchange forward contracts
￥

5,210

629
￥

856

(5)
￥

222

Thousands of U.S. Dollars
Acquisition Costs
At March 31, 2008:
Machinery
Equipment
Total

$

8,032

5,492

$

13,524

Accumulated
Depreciation

$
$

4,146

3,571

7,717

BalanceThousands of U.S. Dollars

$
$

3,886

1,921

5,807

Contract amounts
Receiving Japanese Yen, paying U.S. Dollar$

36,359$$38,038$Foreign exchange forward contracts

Acquisition costs include the imputed interest expense portion because the percentage which is computed by dividing future
minimum lease payments by total balance of machinery and equipment at year-end is immaterial.
Aggregate minimum future lease obligations at March 31, 2008 and 2007 and lease expenses for the year then ended are as
follows:
Millions of Yen
Thousands of U.S. Dollars

2008

Due within one year¥

Due over one year
Total
Lease expenses for the year

¥

2007

202

￥

379
581

365

348
464

$

812
￥

541

$

Fair value

Net unrealized gain

At March 31, 2008:

1,679

5,566

$

5,566

7,241

$

5,562

1,675

(4)

Notes:
Fair value of foreign currency swap contracts is calculated based on the market price. Fair value of foreign exchange forward contracts is
calculated based on the price provided by a bank.

2008

2,015

3,792
5,807

3,652

Pro forma amounts of acquisition costs and future minimum lease payments under finance leases include the imputed interest
expense portion. Pro forma depreciation expenses, which are not reflected in the accompanying consolidated statements ofincome, computed by the straight-line method, would be ¥365 million ($3,652 thousand) and ¥541 million for the years ended
March 31, 2008 and 2007, respectively.

7273

Notes to Consolidated Financial Statements

14. Derivative Financial Instruments

The Company and its subsidiaries use certain machinery and equipment by finance lease contracts.
Pro forma information regarding the leased property such as acquisition cost, accumulated depreciation and future minimum lease
payments under finance leases that do not transfer the ownership of the leased property to the lessee at March 31, 2008 and 2007
are as follows:

The Company and its subsidiaries have entered into foreign currency swap contracts and foreign exchange forward contracts. The
Company uses foreign currency swap contracts for its long-term loan to one overseas subsidiary denominated in U.S. Dollar, toreduce its own exposure to fluctuations in exchange rate principally for hedge purposes and its subsidiaries use foreign exchange
forward contracts to manage its exposure to foreign currency exchange rate fluctuations for their import.
A summary of foreign currency swap contracts and foreign exchange forward contracts outstanding, excluding those for a hedge ofassets recognized on accompanying consolidated balance sheets, at March 31, 2008 and 2007 are as follows:

Millions of Yen
Acquisition Costs
At March 31, 2008:
Machinery
Equipment
Total
At March 31, 2007:
Machinery
Equipment
Total

¥
¥

803

549

1,352

￥

667

Accumulated
Depreciation

¥

￥

2,511

414

¥

771

￥

1,844

Balance

357

¥

¥

581

Receiving Japanese Yen, paying U.S. Dollar

419
393

￥

1,699

Contract amounts

812

Fair value

Net unrealized gain

At March 31, 2008:

¥

3,636

¥

¥

3,804

¥

￥

4,576

￥

Foreign exchange forward contracts￥

248

Millions of Yen

389

192

1,451
￥

Financial Section

13. Lease Transactions

168

556

¥

556

724

¥

556

227

￥

227

168

(0)

At March 31, 2007:
Receiving Japanese Yen, paying U.S. Dollar

634

Foreign exchange forward contracts
￥

5,210

629
￥

856

(5)
￥

222

Thousands of U.S. Dollars
Acquisition Costs
At March 31, 2008:
Machinery
Equipment
Total

$

8,032

5,492

$

13,524

Accumulated
Depreciation

$
$

4,146

3,571

7,717

BalanceThousands of U.S. Dollars

$
$

3,886

1,921

5,807

Contract amounts
Receiving Japanese Yen, paying U.S. Dollar$

36,359$$38,038$Foreign exchange forward contracts

Acquisition costs include the imputed interest expense portion because the percentage which is computed by dividing future
minimum lease payments by total balance of machinery and equipment at year-end is immaterial.
Aggregate minimum future lease obligations at March 31, 2008 and 2007 and lease expenses for the year then ended are as
follows:
Millions of Yen
Thousands of U.S. Dollars

2008

Due within one year¥

Due over one year
Total
Lease expenses for the year

¥

2007

202

￥

379
581

365

348
464

$

812
￥

541

$

Fair value

Net unrealized gain

At March 31, 2008:

1,679

5,566

$

5,566

7,241

$

5,562

1,675

(4)

Notes:
Fair value of foreign currency swap contracts is calculated based on the market price. Fair value of foreign exchange forward contracts is
calculated based on the price provided by a bank.

2008

2,015

3,792
5,807

3,652

Pro forma amounts of acquisition costs and future minimum lease payments under finance leases include the imputed interest
expense portion. Pro forma depreciation expenses, which are not reflected in the accompanying consolidated statements ofincome, computed by the straight-line method, would be ¥365 million ($3,652 thousand) and ¥541 million for the years ended
March 31, 2008 and 2007, respectively.

7273

Notes to Consolidated Financial Statements

16. Share-based Payment(a) Overview of retirement benefit plans(a) Stock option expenses recorded during the year ended March 31,2008

The Company operates two non-contributory defined benefit retirement plans and a defined contribution pension plan. Defined
benefit retirement plans consist of lump-sum retirement plan and enterprise pension plan. The Company established an employee
retirement benefit trust for defined benefit retirement plans.The enterprise pension benefits are payable as pension payment or
lump-sum payment at the option of terminated employees.Domestic subsidiaries and an overseas subsidiary operate
non-contributory tax qualified pension plan and lump-sum retirement plan.

Millions of Yen(1) Projected benefit obligation(2) Fair value of pension plan assets (include

2008

¥

(28,988)
35,282

retirement benefit trust)

Employees’ retirement benefit liabilities[(3)+(4)+(5)‐(6)]¥(9,008)352,825￥$(9,073)

Note:
Subsidiaries have adopted the simplified method in calculation of the projected benefit obligations, based on the amount which would be required
if all eligible employees voluntarily terminated their employment, less pension plan assets as of the year-end.

(1) Service cost (Notes)

¥

2008

970

(7) Contribution payments to the defined contribution

200

retirement benefit plans[(6)+(7)]¥749(5,385)(1,355)

(125)

549

(6) Retirement benefit expenses [(1)+(2)+(3)+(4)+(5)]

￥

9,695

5,781

836

5,490

196

2,002

1,032

$

7,492

Notes:
1. The retirement benefit expenses of subsidiaries are included in "(1) Service cost".
2. Retirement benefit obligations for executive officers are included in "(1) Service cost".

(d) Major assumptions used in calculation of above information for the years ended March 31, 2008 and 2007 are as follows:
Discount rate

74

2.0%

2008

Period allocation method for estimatedretirement benefits

Straight-line method

Straight-line method

Amortization period of unrecognizedactuarial gains or losses

15 years (Expenses fromnext ﬁscal year)

16 years (Expenses fromnext fiscal year)

Amortization period of prior service cost

15 years

16years

$

31

683

2005

Position andnumber of grantees

Directors: 15
Executive officers: 12
Selected employees 29

Directors: 15
Executive officers: 12
Selected employees 29

Directors: 15
Executive officers: 11
Selected employees 26

Directors: 15
Executive officers: 10
Selected employees 25

Class andnumber of stock

Common stock:
470,000

Common stock:490,000

Common stock:450,000

Common stock:
870,000

Date of issue

August 1,2007

August 1,2006

August 1,2005

August 2,2004

Grantee must be a director,
executive officer or
employee of the Company
at the time of exercise of
the stock options. However,grantee can exercise thestock options for 12 months
after retirement or
resignation from theCompany.

Same as left

Same as left

Same as left

Periods that grantees
must provide service
in return for the stock
options

From August 1, 2007
to July 31, 2009

From August 1, 2006
to July 31, 2008

From August 1, 2005
to July 31, 2007

From August 2, 2004
to July 31, 2006

Exercise period of
the stock options

From August 1, 2009
to July 31, 2014

From August 1, 2008
to July 31, 2013

From August 1, 2007
to July 31, 2012

From August 1, 2006
to July 31, 2011

Condition of settlementof the stock options

For the year ended March 31, 2007
Year of issue

2007

2006

2005

Position and number of grantees

Directors: 15
Executive officers: 12
Selected employees 29

Directors: 15
Executive officers: 11
Selected employees 26

Directors: 15
Executive officers: 10
Selected employees 25

Class and number of stock

Common stock: 490,000

Common stock: 450,000

Common stock: 870,000

Date of issue

August 1,2006

August 1,2005

August 2,2004

Condition of settlement of the stock options

Grantee must be a director,
executive officer or employeeof the Company at the time of
exercise of the stock options.
However, grantee can exercise
the stock options for 12 months
after retirement or resignationfrom the Company.

Same as left

Same as left

Periods that grantees must provide
service in return for the stock options

From August 1, 2006 to
July 31, 2008

From August 1, 2005 toJuly 31, 2007

From August 2, 2004 toJuly 31, 2006

Exercise period of the stock options

From August 1, 2008 to
July 31, 2013

From August 1, 2007 to
July 31, 2012

From August 1, 2006 to
July 31, 2011

2.0%

2.0%

￥

2006

2007

Expected rate of return on pension plan assets

68

371

312

2007

2008

(3,246)

(274)

(135)

(5) Amortization of unrecognized prior service cost

$

(308)

(539)

(4) Amortization of unrecognized actuarial losses

980
563

(325)

(3) Expected return on pension plan assets(8) Total

￥

-

2008

Thousands of U.S. Dollars
2007

578

(2) Interest cost

¥

$

31

For the year ended March 31, 2008(c) The components of retirement benefit expenses for the years ended March 31, 2008 and 2007 are as follows:
Millions of Yen￥(1) Details of stock option(14,186)(90,081)37

2008(b) Details, number and state of fluctuation of stock options

Year of issue

139,225

12,9182007

31

Other selling, general and administrative expenses

62,941389(1,554)

13,922(6) Prepaid pension cost

(289,884)(9,920)(1,419)(5) Unrecognized prior service cost$

(29,464)
15,31939(4) Unrecognized actuarial (gains)losses

2008

44,783

6,294(3) Subtotal [(1)+(2)]Thousands of U.S. Dollars
2007

￥

¥

Salaries and allowances and welfare expenses
Personnel expenses(b) Projected benefit obligation at March 31, 2008 and 2007 are as follows:

Thousands of U.S. Dollars

Millions of Yen

2008

Financial Section

15. Employees’ Retirement Benefit Liabilities

2.0%

75

Notes to Consolidated Financial Statements

16. Share-based Payment(a) Overview of retirement benefit plans(a) Stock option expenses recorded during the year ended March 31,2008

The Company operates two non-contributory defined benefit retirement plans and a defined contribution pension plan. Defined
benefit retirement plans consist of lump-sum retirement plan and enterprise pension plan. The Company established an employee
retirement benefit trust for defined benefit retirement plans.The enterprise pension benefits are payable as pension payment or
lump-sum payment at the option of terminated employees.Domestic subsidiaries and an overseas subsidiary operate
non-contributory tax qualified pension plan and lump-sum retirement plan.

Millions of Yen(1) Projected benefit obligation(2) Fair value of pension plan assets (include

2008

¥

(28,988)
35,282

retirement benefit trust)

Employees’ retirement benefit liabilities[(3)+(4)+(5)‐(6)]¥(9,008)352,825￥$(9,073)

Note:
Subsidiaries have adopted the simplified method in calculation of the projected benefit obligations, based on the amount which would be required
if all eligible employees voluntarily terminated their employment, less pension plan assets as of the year-end.

(1) Service cost (Notes)

¥

2008

970

(7) Contribution payments to the defined contribution

200

retirement benefit plans[(6)+(7)]¥749(5,385)(1,355)

(125)

549

(6) Retirement benefit expenses [(1)+(2)+(3)+(4)+(5)]

￥

9,695

5,781

836

5,490

196

2,002

1,032

$

7,492

Notes:
1. The retirement benefit expenses of subsidiaries are included in "(1) Service cost".
2. Retirement benefit obligations for executive officers are included in "(1) Service cost".

(d) Major assumptions used in calculation of above information for the years ended March 31, 2008 and 2007 are as follows:
Discount rate

74

2.0%

2008

Period allocation method for estimatedretirement benefits

Straight-line method

Straight-line method

Amortization period of unrecognizedactuarial gains or losses

15 years (Expenses fromnext ﬁscal year)

16 years (Expenses fromnext fiscal year)

Amortization period of prior service cost

15 years

16years

$

31

683

2005

Position andnumber of grantees

Directors: 15
Executive officers: 12
Selected employees 29

Directors: 15
Executive officers: 12
Selected employees 29

Directors: 15
Executive officers: 11
Selected employees 26

Directors: 15
Executive officers: 10
Selected employees 25

Class andnumber of stock

Common stock:
470,000

Common stock:490,000

Common stock:450,000

Common stock:
870,000

Date of issue

August 1,2007

August 1,2006

August 1,2005

August 2,2004

Grantee must be a director,
executive officer or
employee of the Company
at the time of exercise of
the stock options. However,grantee can exercise thestock options for 12 months
after retirement or
resignation from theCompany.

Same as left

Same as left

Same as left

Periods that grantees
must provide service
in return for the stock
options

From August 1, 2007
to July 31, 2009

From August 1, 2006
to July 31, 2008

From August 1, 2005
to July 31, 2007

From August 2, 2004
to July 31, 2006

Exercise period of
the stock options

From August 1, 2009
to July 31, 2014

From August 1, 2008
to July 31, 2013

From August 1, 2007
to July 31, 2012

From August 1, 2006
to July 31, 2011

Condition of settlementof the stock options

For the year ended March 31, 2007
Year of issue

2007

2006

2005

Position and number of grantees

Directors: 15
Executive officers: 12
Selected employees 29

Directors: 15
Executive officers: 11
Selected employees 26

Directors: 15
Executive officers: 10
Selected employees 25

Class and number of stock

Common stock: 490,000

Common stock: 450,000

Common stock: 870,000

Date of issue

August 1,2006

August 1,2005

August 2,2004

Condition of settlement of the stock options

Grantee must be a director,
executive officer or employeeof the Company at the time of
exercise of the stock options.
However, grantee can exercise
the stock options for 12 months
after retirement or resignationfrom the Company.

Same as left

Same as left

Periods that grantees must provide
service in return for the stock options

From August 1, 2006 to
July 31, 2008

From August 1, 2005 toJuly 31, 2007

From August 2, 2004 toJuly 31, 2006

Exercise period of the stock options

From August 1, 2008 to
July 31, 2013

From August 1, 2007 to
July 31, 2012

From August 1, 2006 to
July 31, 2011

2.0%

2.0%

￥

2006

2007

Expected rate of return on pension plan assets

68

371

312

2007

2008

(3,246)

(274)

(135)

(5) Amortization of unrecognized prior service cost

$

(308)

(539)

(4) Amortization of unrecognized actuarial losses

980
563

(325)

(3) Expected return on pension plan assets(8) Total

￥

-

2008

Thousands of U.S. Dollars
2007

578

(2) Interest cost

¥

$

31

For the year ended March 31, 2008(c) The components of retirement benefit expenses for the years ended March 31, 2008 and 2007 are as follows:
Millions of Yen￥(1) Details of stock option(14,186)(90,081)37

2008(b) Details, number and state of fluctuation of stock options

Year of issue

139,225

12,9182007

31

Other selling, general and administrative expenses

62,941389(1,554)

13,922(6) Prepaid pension cost

(289,884)(9,920)(1,419)(5) Unrecognized prior service cost$

(29,464)
15,31939(4) Unrecognized actuarial (gains)losses

2008

44,783

6,294(3) Subtotal [(1)+(2)]Thousands of U.S. Dollars
2007

￥

¥

Salaries and allowances and welfare expenses
Personnel expenses(b) Projected benefit obligation at March 31, 2008 and 2007 are as follows:

Thousands of U.S. Dollars

Millions of Yen

2008

Financial Section

15. Employees’ Retirement Benefit Liabilities

2.0%

75

Notes to Consolidated Financial Statements

Financial Section(2) Number of stock options and state of fluctuation
Stock options outstanding at the end of the year are listed as the number of shares.

For the year ended 31 March, 2007
Yen

① Number of stock options
For the year ended March 31, 20082007

Year of issue

2008

Year of issue
Non-exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Stock options granted
Forfeitures
Conversion to exercisable stock options
Stock options outstanding at the end of the fiscal year

2007

2006

Average market price of the stock at the time of exercise

470,000
470,000

490,000

450,000--

Exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Conversion from non-exercisable stock options
Stock options exercised
Forfeitures
Stock options outstanding at the end of the fiscal year￥

Exercise price

2005

-

-

-

5,000

-

-

-

450,000-

485,000

-

-

-

-

396,000-

450,000--

48,00086,000----402,000

310,000

Fair value of stock options on the grant date2007

Non-exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Stock options granted
Forfeitures
Conversion to exercisable stock options
Stock options outstanding at the end of the fiscal year
Exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Conversion from non-exercisable stock options
Stock options exercised
Forfeitures
Stock options outstanding at the end of the fiscal year2006-

450,000

870,000

490,000

-

-

-

-

-

-

-

870,000

490,000

450,000

-

-

-

-

-

-

870,000--

474,000

-

-

-

-

-

396,000

￥

503

-

805

189

-

-

Black-Scholes model① Valuation method used
② Principal basic values and estimation methods
Year of issue
Share price fluctuations (Note 1)

Non-risk interest rate (Note 4)

2005

630

-

The method for estimating fair value of stock options during the year ended March 31,2008 and 2007 are as follows;

Projected dividend (Note 3)

Year of issue

￥

800

2005

(c) Method for estimating fair value of stock options

Projected remaining period (Note 2)
For the year ended March 31, 2007

2006

2008

2007

32.86%

34.01%

4 years 6 month

4 years 6 month¥10 per share¥10 per share

1.561%

1.484%

Notes:
1. Computed based on actual share prices during a four-year and six-month period (from February 2003 to July 2007 for the year ended March 31,
2008 and from February 2002 to July 2006 for the year ended March 31, 2007).
2. Because of a lack of accumulated data and difficulty in making rational estimates, it is assumed the stock options are exercised at the middle ofthe exercise period.
3. Based on the estimated dividend for the year ended March 31, 2008 and 2007 on the grant date.
4. Yields on government bonds for the period corresponding to the projected remaining period.

(d) Method for estimating the number of confirmed stock options
A method that reflects actual past expirations has been basically adopted, because it is difficult to rationally estimate the number of
expired rights in the future.

② Unit price of options
For the year ended 31 March, 2008
Yen
Year of issue
Exercise price
Average market price of the stockat the time of exercise
Fair value of stock options on the grant date

76

¥

2008

698
-

143

2007
￥

2006
800

￥

2005
630

￥

503

-

619

610

189

-

-

77

Notes to Consolidated Financial Statements

Financial Section(2) Number of stock options and state of fluctuation
Stock options outstanding at the end of the year are listed as the number of shares.

For the year ended 31 March, 2007
Yen

① Number of stock options
For the year ended March 31, 20082007

Year of issue

2008

Year of issue
Non-exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Stock options granted
Forfeitures
Conversion to exercisable stock options
Stock options outstanding at the end of the fiscal year

2007

2006

Average market price of the stock at the time of exercise

470,000
470,000

490,000

450,000--

Exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Conversion from non-exercisable stock options
Stock options exercised
Forfeitures
Stock options outstanding at the end of the fiscal year￥

Exercise price

2005

-

-

-

5,000

-

-

-

450,000-

485,000

-

-

-

-

396,000-

450,000--

48,00086,000----402,000

310,000

Fair value of stock options on the grant date2007

Non-exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Stock options granted
Forfeitures
Conversion to exercisable stock options
Stock options outstanding at the end of the fiscal year
Exercisable stock options
Stock options outstanding at the end of the previous fiscal year
Conversion from non-exercisable stock options
Stock options exercised
Forfeitures
Stock options outstanding at the end of the fiscal year2006-

450,000

870,000

490,000

-

-

-

-

-

-

-

870,000

490,000

450,000

-

-

-

-

-

-

870,000--

474,000

-

-

-

-

-

396,000

￥

503

-

805

189

-

-

Black-Scholes model① Valuation method used
② Principal basic values and estimation methods
Year of issue
Share price fluctuations (Note 1)

Non-risk interest rate (Note 4)

2005

630

-

The method for estimating fair value of stock options during the year ended March 31,2008 and 2007 are as follows;

Projected dividend (Note 3)

Year of issue

￥

800

2005

(c) Method for estimating fair value of stock options

Projected remaining period (Note 2)
For the year ended March 31, 2007

2006

2008

2007

32.86%

34.01%

4 years 6 month

4 years 6 month¥10 per share¥10 per share

1.561%

1.484%

Notes:
1. Computed based on actual share prices during a four-year and six-month period (from February 2003 to July 2007 for the year ended March 31,
2008 and from February 2002 to July 2006 for the year ended March 31, 2007).
2. Because of a lack of accumulated data and difficulty in making rational estimates, it is assumed the stock options are exercised at the middle ofthe exercise period.
3. Based on the estimated dividend for the year ended March 31, 2008 and 2007 on the grant date.
4. Yields on government bonds for the period corresponding to the projected remaining period.

(d) Method for estimating the number of confirmed stock options
A method that reflects actual past expirations has been basically adopted, because it is difficult to rationally estimate the number of
expired rights in the future.

② Unit price of options
For the year ended 31 March, 2008
Yen
Year of issue
Exercise price
Average market price of the stockat the time of exercise
Fair value of stock options on the grant date

76

¥

2008

698
-

143

2007
￥

2006
800

￥

2005
630

￥

503

-

619

610

189

-

-

77

Notes to Consolidated Financial Statements

18. Related Party Transactions

The following transactions were carried out with related parties:

The significant components of deferred tax assets and liabilities at March 31, 2008 and 2007 are as follows：
Millions of Yen

2008

Thousands of U.S. Dollars(a) Transactions with Toyota Motor Corporation for the years ended or at March 31, 2008 and 2007 are as
follows;

2008

2007

Millions of Yen

Deferred tax assets:¥

Supplies adjustments
Tax losses carry forward in subsidiaries

2,433

￥

2,246

Reserve for retirement benefits of directors andcorporate auditors

583

1,115

(2,516)(2,634)

701

5,825

105,612

10,981

8,045

Deferred tax assets(25,159)

8,347

80,453(6,415)(41,292)

Deferred tax liabilities:(4,129)Unrealized gains on available-for-sale securities(575)

in overseas subsidiaries

Deferred tax liabilities
Net deferred tax assets¥(4,932)

3,113

￥

1,100

￥

27,754

￥

3,686

$
$

300,538
40,901

Notes:
1. Toyota Motor Corporation directly and indirectly held 24.6% of the Company’s equity interests at March 31, 2008. The above transactions werecarried out on commercial term and conditions.
2. Every year, the Company present their favorable sales price and negotiate it with Toyota Motor Corporation. The procedure is the same as othercommon transactions.

(b) Purchase of service with Aichi Steel Health Insurance Society for the years ended March 31, 2008 and2007 are as follows;
Millions of Yen
Purchase of service

¥

2008

Thousand of U.S. Dollars
2007

9

￥

9

$

2008

86

Notes:
1. The Company pays a portion of a claim of medical fee from Aichi Steel Health Insurance Society by the approval by the Board of Directors
meeting held on May 30, 2006.
2. Chairmen of Aichi Steel Health Insurance Society were Takayuki Ito, directors of the Company and holds 0.0% to the Company’s shares at
March 31, 2008 and Kikuo Kito, managing directors of the Company and holds 0.0% to the Company’s shares at March 31, 2007.

(1,295)(165)(7,247)

4,090

(8)

(3)

(130)

Other

30,054

2008

(972)

(98)

(1)

Reserve for special depreciation

¥

¥

2007

(5,751)

(566)

(97)

Reserve for advanced depreciation

At the year-end : Accounts receivable

1,248

32

10,561

Less, valuation allowance

1,613

147

70

Other

2,755

296

125

Loss on derivatives

2,913

228

161

Loss on disposal of property, plant and equipment

For the year : Sales of goods

2008

Thousand of U.S. Dollars

3,137

181

275

Accrued enterprise taxes

4,804

312

291

Depreciation

6,665

546

314

Impairment loss on fixed assets

7,332

780

480

Write-down on investment securities

22,458
7,449

811

667

Goodwill

24,33014,382578

733

Software and other assets

$

1,369

745

Inventories

2,256
2,330

1,438

Provision for employees’ bonuses

Depreciation of property

Financial Section

17. Deferred Tax$(49,318)

31,135The differences between the Japanese statutory tax rate and the actual effective income tax rate in pretax income for the year
ended March 31, 2008 are as follows:

Japanese statutory tax rate
Increase(decrease) due to:Tax credit of R&D expenses and otherDiﬀerences of tax rates on foreign subsidiaries
OthersActual eﬀective income tax rate

2008
40.0

%

(3.0)
(1.8)
(1.3)
33.9

The differences between the statutory tax rate and the actual effective income tax rate in pretax income for the year ended March
31, 2007 are immaterial and the reconciliation of those rates is not disclosed.

7879Notes to Consolidated Financial Statements

18. Related Party Transactions

The following transactions were carried out with related parties:

The significant components of deferred tax assets and liabilities at March 31, 2008 and 2007 are as follows：
Millions of Yen

2008

Thousands of U.S. Dollars(a) Transactions with Toyota Motor Corporation for the years ended or at March 31, 2008 and 2007 are as
follows;

2008

2007

Millions of Yen

Deferred tax assets:¥

Supplies adjustments
Tax losses carry forward in subsidiaries

2,433

￥

2,246

Reserve for retirement benefits of directors andcorporate auditors

583

1,115

(2,516)(2,634)

701

5,825

105,612

10,981

8,045

Deferred tax assets(25,159)

8,347

80,453(6,415)(41,292)

Deferred tax liabilities:(4,129)Unrealized gains on available-for-sale securities(575)

in overseas subsidiaries

Deferred tax liabilities
Net deferred tax assets¥(4,932)

3,113

￥

1,100

￥

27,754

￥

3,686

$
$

300,538
40,901

Notes:
1. Toyota Motor Corporation directly and indirectly held 24.6% of the Company’s equity interests at March 31, 2008. The above transactions werecarried out on commercial term and conditions.
2. Every year, the Company present their favorable sales price and negotiate it with Toyota Motor Corporation. The procedure is the same as othercommon transactions.

(b) Purchase of service with Aichi Steel Health Insurance Society for the years ended March 31, 2008 and2007 are as follows;
Millions of Yen
Purchase of service

¥

2008

Thousand of U.S. Dollars
2007

9

￥

9

$

2008

86

Notes:
1. The Company pays a portion of a claim of medical fee from Aichi Steel Health Insurance Society by the approval by the Board of Directors
meeting held on May 30, 2006.
2. Chairmen of Aichi Steel Health Insurance Society were Takayuki Ito, directors of the Company and holds 0.0% to the Company’s shares at
March 31, 2008 and Kikuo Kito, managing directors of the Company and holds 0.0% to the Company’s shares at March 31, 2007.

(1,295)(165)(7,247)

4,090

(8)

(3)

(130)

Other

30,054

2008

(972)

(98)

(1)

Reserve for special depreciation

¥

¥

2007

(5,751)

(566)

(97)

Reserve for advanced depreciation

At the year-end : Accounts receivable

1,248

32

10,561

Less, valuation allowance

1,613

147

70

Other

2,755

296

125

Loss on derivatives

2,913

228

161

Loss on disposal of property, plant and equipment

For the year : Sales of goods

2008

Thousand of U.S. Dollars

3,137

181

275

Accrued enterprise taxes

4,804

312

291

Depreciation

6,665

546

314

Impairment loss on fixed assets

7,332

780

480

Write-down on investment securities

22,458
7,449

811

667

Goodwill

24,33014,382578

733

Software and other assets

$

1,369

745

Inventories

2,256
2,330

1,438

Provision for employees’ bonuses

Depreciation of property

Financial Section

17. Deferred Tax$(49,318)

31,135The differences between the Japanese statutory tax rate and the actual effective income tax rate in pretax income for the year
ended March 31, 2008 are as follows:

Japanese statutory tax rate
Increase(decrease) due to:Tax credit of R&D expenses and otherDiﬀerences of tax rates on foreign subsidiaries
OthersActual eﬀective income tax rate

2008
40.0

%

(3.0)
(1.8)
(1.3)
33.9

The differences between the statutory tax rate and the actual effective income tax rate in pretax income for the year ended March
31, 2007 are immaterial and the reconciliation of those rates is not disclosed.

7879Notes to Consolidated Financial Statements

Financial Section

19. Segment Information(1)Business segment information

Notes:The operations of the Company and its subsidiaries are primary engaged in manufacturer and sales of specialty steel business,forging business, electro-magnetic components business and other business. Special steel segment is consisted of specialty ironsteel, stainless steel and tool steel. Forging segment is consisted closed die forging for automobile parts and free forging products. A
part of materials of this segment are used production goods of specialty steel segment. Electro-magnetic components segment is
consisted of material of electronics parts, dental-use magnetic attachments, magnetic powder and magneto-impedance sensor.
Other segment is consisted of information processing, service, nursing care service and other service business.

1. Corporate assets in corporate or elimination consist mainly of cash and deposit and investment securities held by the Company. Corporate
assets are ¥35,531 million ($355,307 thousand) and ¥47,371 million at March 31, 2008 and 2007, respectively.

The table below summarizes the business segment information for the years ended March 31, 2008 and 2007 are as follows:
Millions of Yen

Specialty steel

Electro-magnetic
components

Forgings

Other

Corporate or
elimination

Total

Consolidated

For the year 2008:
Net sales:
External customers￥ 140,282￥ 104,324￥ 4,4174,439￥ 253,462

Inter-segment sales

31,691

-

-

3,420

35,111

Total net sales

171,973

104,324

4,417

7,859

163,507

100,137

6,321

7,737

Operating costs and expenses
Operating income (loss)
Identifiable assets

￥

￥

-

￥ 253,462(35,111)-

288,573(35,111)

253,462

277,702(35,124)

242,578

4,187￥ (1,904)￥122￥ 10,871￥

13￥ 10,884￥ 131,144￥ 84,479￥ 9,991￥3,940￥ 229,554￥ 34,494￥ 264,048

6,394

7,310

984

66

14,754-

14,754

67

80

3

-

150

127

277

6,289

5,432

1,239

205

13,165-

13,165￥ 128,079￥ 100,164￥ 2,975

4,419￥ 235,637-￥ 235,637

Depreciation
Impairment loss on fixed assets
Capital expenditures

8,466

￥

￥

2. As described in Note 2(f) (Accounting change), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries havechanged their depreciation methods for the property, plant and equipment acquired on or after April 1, 2007. As a result of the change, operating
income of specialty steel business segment, forging business segment, electro-magnetic component business segment and other businesssegment decreased by ¥120 million ($1,201 thousand), by ¥128 million ($1,286 thousand), by ¥42 million ($418 thousand) and by ¥2 million($16 thousand) , respectively, as compared with the previous accounting method.
As described in Note 2(f) (Additional information), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries
depreciate the property, plant and equipment acquired before April 1, 2007 from 5% of their cost to ¥1 by the straight-line method for 5 years
from the following year the property, plant and equipment reach 5% of their cost calculated by pre-revised depreciation method. As a result of thechange, operating income of specialty steel business segment, forging business segment, electro-magnetic component business segment andother business segment decreased by ¥868 million ($8,677 thousand), by ¥200 million ($2,001 thousand), by ¥18 million ($178 thousand) andby ¥1 million ($9 thousand) , respectively, as compared with the previous accounting method.
3. As described in Note 2(j) (Accounting change), effective from the year ended March 31, 2007, the Company adopted Financial AccountingStandard No.4 “Accounting Standard for Directors’ Bonus” issued on November 29, 2005 by the Accounting Standards Board of Japan. As aresult of adoption, operating income of specialty steel business segment, forging business segment, electro-magnetic component businesssegment and other business segment decreased by ¥194 million, by ¥56 million, by ¥2million and by ¥43 million , respectively, as comparedwith the previous accounting method.
As described in Note 3(b) (Accounting change), effective from the year ended March 31, 2007, the Company adopted Financial AccountingStandard No.8 “Accounting Standard for Share-based Payment” issued on December 27, 2005 by the Accounting Standards Board of Japan and
its Implementation Guidance No.11 “Guidance on Accounting Standards for Share-based Payment ” issued on May 31, 2006 by the AccountingStandards Board of Japan. As a result of adoption, operating income of specialty steel business segment, forging business segment, electromagnetic component business segment and other business segment decreased by ¥20 million, by ¥11 million, by ¥0million and by ¥0 million,
respectively, as compared with the previous accounting method.

For the year 2007:
Net sales:
External customers￥￥

Inter-segment sales

27,789

-

-

3,808

31,597(31,597)-

Total net sales

155,868

100,164

2,975

8,227

267,234(31,597)

235,637

143,033

100,774

4,892

8,062

256,761(610)￥ (1,917)￥

165￥ 10,473￥

138￥ 10,611￥ 132,096￥ 83,110￥ 9,155￥

3,888￥ 228,249￥ 46,359￥ 274,608

4,930

6,019

991

61

12,001-

12,001

Operating costs and expenses
Operating income (loss)
Identifiable assets￥ 12,835￥

Depreciation
Impairment loss on fixed assets
Capital expenditures(31,735)

225,026

44

-

-

-

44

25

69

8,433

17,3032,571

53

28,360-28,360Thousands of U.S. Dollars

For the year 2008:
Net sales:
External customers$1,402,823$1,043,238$ 44,17244,390$2,534,623

Inter-segment sales

316,909--34,203351,112

Total net sales

1,719,732

1,043,238

44,17278,593

1,635,068

1,001,371

63,21577,371$$

Operating costs and expenses
Operating income (loss)
Identifiable assets
Depreciation
Impairment loss on fixed assets
Capital expenditures

80

84,664

41,867$1,311,441$ 844,796

63,94873,099666

799

62,891

54,320$$-$2,534,623(351,112)-

2,885,735(351,112)

2,534,623

2,777,025(351,246)

2,425,779$ (19,043)

$

1,222

$ 108,710$

134$ 108,844$$

39,401$2,295,546$ 344,938$2,640,484

9,839

658

147,544-

147,544

30

-

1,495

1,276

2,771

12,391

2,049

131,652-

131,652

99,90881

Notes to Consolidated Financial Statements

Financial Section

19. Segment Information(1)Business segment information

Notes:The operations of the Company and its subsidiaries are primary engaged in manufacturer and sales of specialty steel business,forging business, electro-magnetic components business and other business. Special steel segment is consisted of specialty ironsteel, stainless steel and tool steel. Forging segment is consisted closed die forging for automobile parts and free forging products. A
part of materials of this segment are used production goods of specialty steel segment. Electro-magnetic components segment is
consisted of material of electronics parts, dental-use magnetic attachments, magnetic powder and magneto-impedance sensor.
Other segment is consisted of information processing, service, nursing care service and other service business.

1. Corporate assets in corporate or elimination consist mainly of cash and deposit and investment securities held by the Company. Corporate
assets are ¥35,531 million ($355,307 thousand) and ¥47,371 million at March 31, 2008 and 2007, respectively.

The table below summarizes the business segment information for the years ended March 31, 2008 and 2007 are as follows:
Millions of Yen

Specialty steel

Electro-magnetic
components

Forgings

Other

Corporate or
elimination

Total

Consolidated

For the year 2008:
Net sales:
External customers￥ 140,282￥ 104,324￥ 4,4174,439￥ 253,462

Inter-segment sales

31,691

-

-

3,420

35,111

Total net sales

171,973

104,324

4,417

7,859

163,507

100,137

6,321

7,737

Operating costs and expenses
Operating income (loss)
Identifiable assets

￥

￥

-

￥ 253,462(35,111)-

288,573(35,111)

253,462

277,702(35,124)

242,578

4,187￥ (1,904)￥122￥ 10,871￥

13￥ 10,884￥ 131,144￥ 84,479￥ 9,991￥3,940￥ 229,554￥ 34,494￥ 264,048

6,394

7,310

984

66

14,754-

14,754

67

80

3

-

150

127

277

6,289

5,432

1,239

205

13,165-

13,165￥ 128,079￥ 100,164￥ 2,975

4,419￥ 235,637-￥ 235,637

Depreciation
Impairment loss on fixed assets
Capital expenditures

8,466

￥

￥

2. As described in Note 2(f) (Accounting change), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries havechanged their depreciation methods for the property, plant and equipment acquired on or after April 1, 2007. As a result of the change, operating
income of specialty steel business segment, forging business segment, electro-magnetic component business segment and other businesssegment decreased by ¥120 million ($1,201 thousand), by ¥128 million ($1,286 thousand), by ¥42 million ($418 thousand) and by ¥2 million($16 thousand) , respectively, as compared with the previous accounting method.
As described in Note 2(f) (Additional information), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries
depreciate the property, plant and equipment acquired before April 1, 2007 from 5% of their cost to ¥1 by the straight-line method for 5 years
from the following year the property, plant and equipment reach 5% of their cost calculated by pre-revised depreciation method. As a result of thechange, operating income of specialty steel business segment, forging business segment, electro-magnetic component business segment andother business segment decreased by ¥868 million ($8,677 thousand), by ¥200 million ($2,001 thousand), by ¥18 million ($178 thousand) andby ¥1 million ($9 thousand) , respectively, as compared with the previous accounting method.
3. As described in Note 2(j) (Accounting change), effective from the year ended March 31, 2007, the Company adopted Financial AccountingStandard No.4 “Accounting Standard for Directors’ Bonus” issued on November 29, 2005 by the Accounting Standards Board of Japan. As aresult of adoption, operating income of specialty steel business segment, forging business segment, electro-magnetic component businesssegment and other business segment decreased by ¥194 million, by ¥56 million, by ¥2million and by ¥43 million , respectively, as comparedwith the previous accounting method.
As described in Note 3(b) (Accounting change), effective from the year ended March 31, 2007, the Company adopted Financial AccountingStandard No.8 “Accounting Standard for Share-based Payment” issued on December 27, 2005 by the Accounting Standards Board of Japan and
its Implementation Guidance No.11 “Guidance on Accounting Standards for Share-based Payment ” issued on May 31, 2006 by the AccountingStandards Board of Japan. As a result of adoption, operating income of specialty steel business segment, forging business segment, electromagnetic component business segment and other business segment decreased by ¥20 million, by ¥11 million, by ¥0million and by ¥0 million,
respectively, as compared with the previous accounting method.

For the year 2007:
Net sales:
External customers￥￥

Inter-segment sales

27,789

-

-

3,808

31,597(31,597)-

Total net sales

155,868

100,164

2,975

8,227

267,234(31,597)

235,637

143,033

100,774

4,892

8,062

256,761(610)￥ (1,917)￥

165￥ 10,473￥

138￥ 10,611￥ 132,096￥ 83,110￥ 9,155￥

3,888￥ 228,249￥ 46,359￥ 274,608

4,930

6,019

991

61

12,001-

12,001

Operating costs and expenses
Operating income (loss)
Identifiable assets￥ 12,835￥

Depreciation
Impairment loss on fixed assets
Capital expenditures(31,735)

225,026

44

-

-

-

44

25

69

8,433

17,3032,571

53

28,360-28,360Thousands of U.S. Dollars

For the year 2008:
Net sales:
External customers$1,402,823$1,043,238$ 44,17244,390$2,534,623

Inter-segment sales

316,909--34,203351,112

Total net sales

1,719,732

1,043,238

44,17278,593

1,635,068

1,001,371

63,21577,371$$

Operating costs and expenses
Operating income (loss)
Identifiable assets
Depreciation
Impairment loss on fixed assets
Capital expenditures

80

84,664

41,867$1,311,441$ 844,796

63,94873,099666

799

62,891

54,320$$-$2,534,623(351,112)-

2,885,735(351,112)

2,534,623

2,777,025(351,246)

2,425,779$ (19,043)

$

1,222

$ 108,710$

134$ 108,844$$

39,401$2,295,546$ 344,938$2,640,484

9,839

658

147,544-

147,544

30

-

1,495

1,276

2,771

12,391

2,049

131,652-

131,652

99,90881

Notes to Consolidated Financial Statements

Notes:The table below summarizes the geographic segment information for the years ended March 31, 2008and 2007 are as follows:

1. Corporate assets in corporate or elimination consist mainly of cash and deposit and investment securities held by the Company. Corporate
assets are ¥35,531 million ($355,307 thousand) and ¥47,371 million at March 31, 2008 and 2007, respectively.
2. Countries or areas belonging to each segment are as follows;

Millions of Yen
Japan

North America

Europe

Asia

Total

Corporate or
elimination

Consolidated

For the year 2008:
Net sales:
External customers￥ 220,095￥ 14,090

Inter-segment sales

6,879

Total net sales
Operating costs and expenses

1,708￥ 17,569￥ 253,462---

226,974

14,0901,708

218,787

13,392

1,671￥ 253,462

6,879(6,879)-17,569260,341(6,879)253,462

15,624249,474(6,896)

242,578

1,945￥ 10,867￥17￥ 10,884

698￥ 214,090

￥

8,743

￥ 1,170￥ 19,209￥ 243,212￥ 20,836￥ 264,048

External customers￥ 203,539￥ 16,040￥ 1,114￥ 14,944￥ 235,637￥-￥ 235,637

Inter-segment sales

6,068

-

-

-

6,068

(6,068)-

Total net sales

209,607

16,040

1,114

14,944

241,705(6,068)

235,637

37

￥

-

￥

Identifiable assets

￥

￥

8,187

Operating income (loss)￥￥

For the year 2007:
Net sales:

200,795

Operating costs and expenses
Operating income (loss)
Identifiable assets￥

15,636￥

1,089

13,664

231,184

1,280￥ 10,521￥￥ 15,620￥ 244,067

404

￥

25

￥

￥ 216,836￥ 11,008￥

603$ 2,200,946$ 140,904$ 17,085

8,812

Financial Section(2)Geographic segment information(6,158)225,02690￥ 10,611￥ 30,541￥ 274,608$$ 2,534,623

2007

2008

North America

U.S.A.

U.S.A.

EuropeGermany

Germany, Czech Republic

Asia

Philippine, Thailand, China, Indonesia

Philippine, Thailand, China, Indonesia, Taiwan

3. As described in Note 2(f) (Accounting change), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries havechanged their depreciation methods for the property, plant and equipment acquired on or after April 1, 2007. As a result of the change, operating
income of Japan region decreased by ¥292 million ($2,921 thousand) as compared with the previous accounting method.
As described in Note 2(f) (Additional information), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries
depreciate the property, plant and equipment acquired before April 1, 2007 from 5% of their cost to ¥1 by the straight-line method for 5 years
from the following year the property, plant and equipment reach 5% of their cost calculated by pre-revised depreciation method.. As a result of
the change, operating income of Japan region decreased by ¥1,087 million ($10,865 thousand) as compared with the previous accounting
method.
4. As described in Note 2(j) (Accounting change), effective from the year ended March 31, 2007, the Company adopted Financial AccountingStandard No.4 “Accounting Standard for Directors’ Bonus” issued on November 29, 2005 by the Accounting Standards Board of Japan. As aresult of adoption, operating income of Japan region decreased by ¥295 million. As described in Note 3(b) (Accounting change), effective fromthe year ended March 31, 2007, the Company adopted Financial Accounting Standard No.8 “Accounting Standard for Share-based Payment”
issued on December 27, 2005 by the Accounting Standards Board of Japan and its Implementation Guidance No.11 “Guidance on AccountingStandards for Share-based Payment” issued on May 31, 2006 by the Accounting Standards Board of Japan. As a result of adoption, operating
income of Japan region decreased by ¥31 million.

For the year 2008:

Thousands of U.S. Dollars

Net sales:
External customers$ 2,534,623-

Inter-segment sales

68,791---

68,791(68,791)-

Total net sales

2,269,737

140,904

17,085

175,688

2,603,414(68,791)

2,534,623

2,187,867

Operating costs and expenses
Operating income (loss)
Identifiable assets82$ 175,688$

81,870$ 2,140,902

16,710156,243375$ 19,445$$ 11,703$ 192,087$ 2,432,120

133,918$

6,986$ 87,428$

2,494,738
108,676(68,959)$168$ 208,364

2,425,779$

108,844$ 2,640,48483

Notes to Consolidated Financial Statements

Notes:The table below summarizes the geographic segment information for the years ended March 31, 2008and 2007 are as follows:

1. Corporate assets in corporate or elimination consist mainly of cash and deposit and investment securities held by the Company. Corporate
assets are ¥35,531 million ($355,307 thousand) and ¥47,371 million at March 31, 2008 and 2007, respectively.
2. Countries or areas belonging to each segment are as follows;

Millions of Yen
Japan

North America

Europe

Asia

Total

Corporate or
elimination

Consolidated

For the year 2008:
Net sales:
External customers￥ 220,095￥ 14,090

Inter-segment sales

6,879

Total net sales
Operating costs and expenses

1,708￥ 17,569￥ 253,462---

226,974

14,0901,708

218,787

13,392

1,671￥ 253,462

6,879(6,879)-17,569260,341(6,879)253,462

15,624249,474(6,896)

242,578

1,945￥ 10,867￥17￥ 10,884

698￥ 214,090

￥

8,743

￥ 1,170￥ 19,209￥ 243,212￥ 20,836￥ 264,048

External customers￥ 203,539￥ 16,040￥ 1,114￥ 14,944￥ 235,637￥-￥ 235,637

Inter-segment sales

6,068

-

-

-

6,068

(6,068)-

Total net sales

209,607

16,040

1,114

14,944

241,705(6,068)

235,637

37

￥

-

￥

Identifiable assets

￥

￥

8,187

Operating income (loss)￥￥

For the year 2007:
Net sales:

200,795

Operating costs and expenses
Operating income (loss)
Identifiable assets￥

15,636￥

1,089

13,664

231,184

1,280￥ 10,521￥￥ 15,620￥ 244,067

404

￥

25

￥

￥ 216,836￥ 11,008￥

603$ 2,200,946$ 140,904$ 17,085

8,812

Financial Section(2)Geographic segment information(6,158)225,02690￥ 10,611￥ 30,541￥ 274,608$$ 2,534,623

2007

2008

North America

U.S.A.

U.S.A.

EuropeGermany

Germany, Czech Republic

Asia

Philippine, Thailand, China, Indonesia

Philippine, Thailand, China, Indonesia, Taiwan

3. As described in Note 2(f) (Accounting change), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries havechanged their depreciation methods for the property, plant and equipment acquired on or after April 1, 2007. As a result of the change, operating
income of Japan region decreased by ¥292 million ($2,921 thousand) as compared with the previous accounting method.
As described in Note 2(f) (Additional information), effective from the year ended March 31, 2008, the Company and its domestic subsidiaries
depreciate the property, plant and equipment acquired before April 1, 2007 from 5% of their cost to ¥1 by the straight-line method for 5 years
from the following year the property, plant and equipment reach 5% of their cost calculated by pre-revised depreciation method.. As a result of
the change, operating income of Japan region decreased by ¥1,087 million ($10,865 thousand) as compared with the previous accounting
method.
4. As described in Note 2(j) (Accounting change), effective from the year ended March 31, 2007, the Company adopted Financial AccountingStandard No.4 “Accounting Standard for Directors’ Bonus” issued on November 29, 2005 by the Accounting Standards Board of Japan. As aresult of adoption, operating income of Japan region decreased by ¥295 million. As described in Note 3(b) (Accounting change), effective fromthe year ended March 31, 2007, the Company adopted Financial Accounting Standard No.8 “Accounting Standard for Share-based Payment”
issued on December 27, 2005 by the Accounting Standards Board of Japan and its Implementation Guidance No.11 “Guidance on AccountingStandards for Share-based Payment” issued on May 31, 2006 by the Accounting Standards Board of Japan. As a result of adoption, operating
income of Japan region decreased by ¥31 million.

For the year 2008:

Thousands of U.S. Dollars

Net sales:
External customers$ 2,534,623-

Inter-segment sales

68,791---

68,791(68,791)-

Total net sales

2,269,737

140,904

17,085

175,688

2,603,414(68,791)

2,534,623

2,187,867

Operating costs and expenses
Operating income (loss)
Identifiable assets82$ 175,688$

81,870$ 2,140,902

16,710156,243375$ 19,445$$ 11,703$ 192,087$ 2,432,120

133,918$

6,986$ 87,428$

2,494,738
108,676(68,959)$168$ 208,364

2,425,779$

108,844$ 2,640,48483

Notes to Consolidated Financial Statements

For the years ended March 31, 2008 and 2007,overseas sales which included export sales from Japan and net sales of overseas
consolidated subsidiaries other than Japan were summarized as follows;
Millions of Yen¥

North America
Europe2008

Thousands of U.S. Dollars
2007

14,928￥16,885

2,148

1,166

27,858Asia
Other area
Total consolidated net sales
Percentage of overseas sales to total
consolidated net sales¥¥$

20,826354

341

45,288

253,462￥

39,218￥

235,637

17.9%

16.6%

$

2008

Germany, Netherlands, Switzerland

Asia

Thailand, Philippines, Indonesia

Others

Oceania

Net income

¥

5,693
-

￥

4,922

5,693

4,922

278,580

Average number of common stock during
the fiscal year(Thousands of shares)

196,310

197,1194

4

Effect of dilutive Securities (Thousands of shares)

20,903

21,179Convertible bonds with subscription rights to shares(Thousands of shares)

20,833

20,83370

346

Stock option issued
on August 1,2005,
2006 and 2007:
1,362 units

Stock option issued
on August 1,2006:
490 units

3,538

452,883$ 2,534,623
17.9%

Diluted net income per share
Adjustment for net income (After tax deduction)
Management fee for convertible bonds

Stock option (Thousands of shares)
Outline of dilutive Securities not included in
the calculation of diluted net income per sharebecause they do not have any dilutive effect

4

-

4

$

56,929-56,92936
36

21. Subsequent Event
On June 20, 2008, shareholders of the Company approved the payment of year-end cash dividends to shareholders of record as ofMarch 31, 2008, of ¥5.0 ($0.05) per share, or a total of ¥981 million ($9,810 thousand), and payments of bonuses to directors andcorporate auditors of ¥129 million ($1,294 thousand). As the result, cash dividends for the year totaled ¥10.0 ($0.10) per share,including interim dividend of ¥5.0 ($0.05).

20. Per Share Data
Per share data for the years ended March 31, 2008 and 2007 are as follows:Yen
Net assets per share

2008

2007

Basic net income per share

Net income attributable to common stock

21,4842008 and 2007
U.S.A.

2008

Thousands of U.S. Dollars

149,281Significant countries or areas belonging to each segment are as follows;

EuropeMillions of Yen

Net income not attributable to common stock

Note:

North America

Financial Section(b) Basic net income per share and diluted net income per share(3) Sales to overseas customers¥

Basic net income per share2008

624.49U.S. Dollars
￥

29.00

$

618.99
24.97

26.23

Diluted net income per share

2008

2007

6.2

0.3
0.3

22.56

Basics used in calculation(a) Net assets per share
Millions of Yen
Net assets
Deduction from net assets
Subscription rights to shares
Minority interests
Net assets attributable to common stock
Number of common stock at the end of theﬁscal year used for the calculation of net
assets per share (Thousands of shares)

84

¥

2008

128,155
5,629
99

5,530

Thousands of U.S. Dollars
2007￥

127,329
5,346
31
5,315

122,526

121,983

196,201

197,069$2008

1,281,555
56,295993

55,302

1,225,26085

Notes to Consolidated Financial Statements

For the years ended March 31, 2008 and 2007,overseas sales which included export sales from Japan and net sales of overseas
consolidated subsidiaries other than Japan were summarized as follows;
Millions of Yen¥

North America
Europe2008

Thousands of U.S. Dollars
2007

14,928￥16,885

2,148

1,166

27,858Asia
Other area
Total consolidated net sales
Percentage of overseas sales to total
consolidated net sales¥¥$

20,826354

341

45,288

253,462￥

39,218￥

235,637

17.9%

16.6%

$

2008

Germany, Netherlands, Switzerland

Asia

Thailand, Philippines, Indonesia

Others

Oceania

Net income

¥

5,693
-

￥

4,922

5,693

4,922

278,580

Average number of common stock during
the fiscal year(Thousands of shares)

196,310

197,1194

4

Effect of dilutive Securities (Thousands of shares)

20,903

21,179Convertible bonds with subscription rights to shares(Thousands of shares)

20,833

20,83370

346

Stock option issued
on August 1,2005,
2006 and 2007:
1,362 units

Stock option issued
on August 1,2006:
490 units

3,538

452,883$ 2,534,623
17.9%

Diluted net income per share
Adjustment for net income (After tax deduction)
Management fee for convertible bonds

Stock option (Thousands of shares)
Outline of dilutive Securities not included in
the calculation of diluted net income per sharebecause they do not have any dilutive effect

4

-

4

$

56,929-56,92936
36

21. Subsequent Event
On June 20, 2008, shareholders of the Company approved the payment of year-end cash dividends to shareholders of record as ofMarch 31, 2008, of ¥5.0 ($0.05) per share, or a total of ¥981 million ($9,810 thousand), and payments of bonuses to directors andcorporate auditors of ¥129 million ($1,294 thousand). As the result, cash dividends for the year totaled ¥10.0 ($0.10) per share,including interim dividend of ¥5.0 ($0.05).

20. Per Share Data
Per share data for the years ended March 31, 2008 and 2007 are as follows:Yen
Net assets per share

2008

2007

Basic net income per share

Net income attributable to common stock

21,4842008 and 2007
U.S.A.

2008

Thousands of U.S. Dollars

149,281Significant countries or areas belonging to each segment are as follows;

EuropeMillions of Yen

Net income not attributable to common stock

Note:

North America

Financial Section(b) Basic net income per share and diluted net income per share(3) Sales to overseas customers¥

Basic net income per share2008

624.49U.S. Dollars
￥

29.00

$

618.99
24.97

26.23

Diluted net income per share

2008

2007

6.2

0.3
0.3

22.56

Basics used in calculation(a) Net assets per share
Millions of Yen
Net assets
Deduction from net assets
Subscription rights to shares
Minority interests
Net assets attributable to common stock
Number of common stock at the end of theﬁscal year used for the calculation of net
assets per share (Thousands of shares)

84

¥

2008

128,155
5,629
99

5,530

Thousands of U.S. Dollars
2007￥

127,329
5,346
31
5,315

122,526

121,983

196,201

197,069$2008

1,281,555
56,295993

55,302

1,225,260

85

86

87