About Toyoda Gosei

Value Creation Story

Value Creation Strategy

Foundation of Value Creation

Data

Strengthening the Management Base to Support the Growth Strategy

Revitalization of People and Organizations
Corporate Culture and Human Resources to Support Achieving of the 2030 Business Plan
In order to achieve the targets in the 2030 Business
Plan, we believe it is important to embrace change
without fear of failure, and to seize and create
opportunities by taking on challenges, and we willdevelop measures for enhancing both corporate
culture and human resources.
In terms of the corporate culture, we aim to create adynamic “polymer-like organization.” Each and every
molecule with various personalities and values
stimulates each other, enhances creativity by creatingchemical reactions, and brings together power throughstrong bonds among molecules. The same stimulation
and reaction occurs among teams, groups, divisions,and affiliated companies, as well as with otherorganizations such as partner companies, suppliers,
business partners, and customers, resulting in a highlevel of creativity and productivity. We are able to freelychange our form and create new value in response tochanges in the environment. This is what we think of
as a polymer-like organization. In order to create thecorporate culture that is a foundation for this, we will
support the attainment of employee wellbeing throughSelf-realization by creating a safe and secure place towork, creating a stage where they can play an activerole, and shining a light on each and every one ofthem.
In the area of human resources, on the other hand, TG
aims to develop human resources who can ask
themselves questions about the social value andsignificance of TG’s existence and strategicallydevelop their businesses. To this end, we are working
to acquire diverse human resources and review ourbusiness portfolio.

method for increasing corporate value, our humanresource strategy to date has been based on therecognition of issues from the perspective of humanresource functionality, and so we have revised our humanresource strategy (see figure below). In FY2023, we willfurther strengthen the linkage with the management
strategy, and based on the newly formulated strategy, weare developing new measures and implementing new
initiatives in addition to the previous ones.

Become a company that pursues the possibilities of polymers
to contribute to a future of better mobility and living.

What We
Aspire to Be

To embrace change without fear of failure, and to seize
and create opportunities by taking on challenges

Mainstays of measures to achieve the human resource strategy
Enhancing Organizational Power(Transforming into a dynamic polymer-like organization)
D raw out the individuality, energy, and strengths ofeach individual and mobilize creativity and power
through organic bonding
Strengthen internal and external organizational tiesF lexibly change the shape of the organization to
respond to change in the environmentCatalyze management to speed up work andmaximize results

Self-fulfillment foreach employee
Embrace change
without fear of failure

Human resources

Corporate culture

Enhanced employee
engagement

1

2

3

Polymer-like organization where
people and organizations are connectedwith energy and enthusiasm

Train diverse human resources
capable of leading and enabling change

Acquiring the human resources
needed for growth areas

 Well-being initiatives based on the Cultivate management personnel

Establish comfortable spaces
and stages upon which to shine

Reformmanagement styleCreating a safe and secure place
to workCreating a stage where people
can play an active role

Shining a light on each and every
personDiverse human resources can recognize
each other and speak up and take onchallenges in a safe and comfortableenvironment. Vitality and trust exist in theworkplace, and people are motivated to dotheir best work with other members.

Employees can feel that they arecontributing and feel that they are
truly making a difference in their roles.
They understand the significance of
their work and feel job satisfaction.

Employees are recognized,
encouraged, and praised.
Regardless of the size of their role,
their supervisors look out for themand treat them with the respect.

keywords “place,” “stage,” and“light” Discuss and implement corporate
culture issues and reform proposals
for achieving the targets of the2030 Business Plan at allorganizations and levels bythemselves

 Clarify human resources required

who can lead challenging growthstrategies
 Train young employees with asense of growth and who want tomake a difference, and implement
the initiatives of senior employees Train local executive personnel to makeoverseas bases more autonomous

for growth strategies in terms ofboth number and capabilities(business building capabilities,
highly specialized capabilities, etc.),
and specify measures to acquirethem

Respect for human rights and diversity & inclusion (D&I)

Toyoda Gosei’s goals for employee wellbeing
Key KPIs

Our Human Resources Strategy Linked to Our Vision and Business Plan

Employee engagement
affirmation rate

75% (FY2030)

We regard the use of diverse human resources andrespect for human rights as one of our materiality (keyissues), and have been focusing on the three pillars of ourhuman resource strategy: promotion of human resource
development, active participation of diverse humanresources, and creation of a comfortable work
environment, and have been working to provide
educational opportunities to acquire problem solving
methods and the PDCA cycle, which are fundamental to

how work is conducted, as well as specialized knowledge
in areas such as technology and materials, to create anenvironment where women, people with disabilities, andpeople with diverse values can demonstrate their abilities,
and to improve engagement, where job satisfaction and asense of growth overlap with our efforts to achieve ourcorporate vision.
However, when examined in light of human capitalmanagement, which today is expected to be a significant

50 (FY2030)

70%
56%

Ratio of local executives

Number of female managers

60% (FY2030)

100 (FY2030)

50

59%

40%
31%

45

32%
30

33

16
3
FY2021 FY2022 FY2025(Target)40

Number of expatriate
employees for training

FY2021 FY2022 FY2025(Target)FY2021 FY2022 FY2025(Target)FY2021 FY2022 FY2025(Target)T OYODA GOSEI REP OR T 20 23

41

About Toyoda Gosei

Value Creation Story

Value Creation Strategy

Foundation of Value Creation

Data

Strengthening the Management Base to Support the Growth Strategy

Financial Policy

Revitalization of People and Organizations

Achieving Sustainable Growth through Highly Strategic Execution of Operations
The auto industry is undergoing a major transformation
with the conversion to electrification and automateddriving. Moreover, the future is unclear and difficult topredict due to changes in people’s values, worsening
environmental and social issues, geopolitical risks, andother factors, making it extremely difficult for
management to steer the ship.

We will turn uncertain situations into opportunities for
growth through speedy and highly strategic executionof operations, such as by accepting uncertain eventswith a high level of sensitivity, changing management
approaches in line with the times, and adopting new
initiatives.

Adoption of CxO (Chief Officer) system
We adopted the CxO (Chief Officer) system uponenactment of the new executive structure in June
2023. By transferring some of the president’s authority
and responsibilities to the CxOs, we will manage key

functions globally, going beyond the framework ofbusiness and regional operation bases, to realize
highly strategic execution of operations and speed up
management.

CxO

In a rapidly changing businessenvironment, we are committed to
improving our corporate value byreviewing our business portfolio andimproving capital efficiency.

Role

CEO (Chief Executive Officer)

Determines medium- to long-term policies for sustainable growth of thecompany (Maximize corporate value)

CFO (Chief Financial Officer)

Formulates strategies and allocates resources to realize medium- to long-term
policies

CRO (Chief Risk Officer)

Evaluates, takes countermeasures against, and controls various risks facing
the company

CSMO* (Chief Strategic Marketing Officer)

Conducts market, competitive, and customer research and analysis, anddevelops and oversees global sales strategies

CTO (Chief Technology Officer)

Directs product and manufacturing method development to achieve mediumto long-term policies

CMO (Chief Manufacturing Officer)

Directs strategies and measures to improve SQDC of manufacturing toenhance competitive advantages* Introduced in November 2023

Revitalization of people and organizations through the CoE (Center of Excellence) concept
In order to achieve sustainable growth even in an
uncertain business environment, it is essential to
speedily and reliably implement functional and businessstrategies, and it is important to strengthen cooperation
among production bases and organizations.
We will adopt the new CoE concept and implement a
management style in which each of the 16 countries/
regions and 62 locations globally are united, and eachregion and location will be more actively involved in
the decision-making processes for conducting
business than ever before.

Furthermore, we will deploy globally from Japan, theAmericas, China, ASEAN, India, and Europe thetechnologies and methods that are our strengths andhave been cultivated and developed in each region,and create synergies throughout our Group
companies, thereby drawing out the motivation andpower of each region and organization. We aim tofurther strengthen our global network, which is one of
our competitive advantages, and to realize
management based on regional autonomy that is
tailored to the characteristics of each region.

 Sharing the regional strengths we have cultivated on a global scale
We will strive to revitalize people and organizations by adopting the best of each region and implementing a cycle of
Change and Challenge.
Examples of CoE (Global expansion from overseas regions)• Low-cost, energy-saving production automation technology• National human resource development and recruitment methods

42

Message from the CFO

Progress of the 2025 Business Plan
Under the 2025 Business Plan prepared in May 2018,
we have been working to achieve our managementtargets of 1 trillion yen in sales revenue, 8% in
operating profit ratio, and 10% in ROE.
Although automobile production volume was lower
than expected, we are still expecting to reach oursales revenue target because of expanding sales to
new customers. However, it will take some time toachieve our operating profit ratio and ROE targets due
to significant changes in the business environment
surrounding our company, including the COVID-19
pandemic, semiconductor supply shortages, andsoaring raw material prices.
On the financial side, we have set forth our financial
policy in line with the 2025 Business Plan from thethree perspectives of shareholder returns, capital
investment, and cash on hand. For shareholder
returns, we have maintained a consolidated dividend
payout ratio of 30% or more, but the dividend pershare has remained the same and has not met the
expectations of our shareholders. Capital investment
continued at an annual pace of approximately 50
billion yen, and we secured 30 billion yen in cash on
hand as risk-response funds in our consolidated
monthly sales, which contributed to sales expansion,
but left us with challenges in improving profitability andefficiency.
In preparing the 2030 Business Plan, we haveformulated a new financial policy that balances growth,soundness, and efficiency while enhancing corporate
value. In particular, we will focus on B/S management
to improve efficiency based on our recognition ofcurrent issues.

Hiroshi Yasuda
Vice President

CFO

New Financial Policies to Support the2030 Business Plan
2030 Business Plan
The 2030 Business Plan sets forth our vision of
becoming a company that pursues the possibilities ofpolymers to contribute to a future of better mobility andliving by setting our basic policy to focus on areas thatcombine social value and economic value. As priority
measures, we will (1) implement structural reforms toachieve growth in priority businesses, regions, andcustomers, (2) forge strategic alliances to accelerate
growth globally and strategically reinforce development
and intellectual properties (IP), and (3) revamp
management through a polymer-like organization inwhich people and organizations are organically bonded.
We have set management targets of sales revenue of
1,200 billion yen, operating profit of 100 billion yen,operating profit ratio of 8%, and ROE of 10%.

T OYODA GOSEI REP OR T 20 23

43About Toyoda Gosei

Value Creation Story

Value Creation Strategy

Foundation of Value Creation

Data

Strengthening the Management Base to Support the Growth Strategy

Financial Policy

2030 Business Plan: Toward Greater Growth

Soundness

The new financial policy is based on the idea of aiming
to boost growth and increase corporate value througha balance of growth potential, soundness, andefficiency, and strengthening balance sheet
management to achieve an ROE of 10%.

In order not to miss out on growth opportunities, wewill ensure that we have the sufficient funds and thefund-raising capacity to respond flexibly to any
investment opportunities. While there has been nochange in our emphasis on soundness in terms ofcash on hand, the global cash situation has beeninefficient, with both cash and debt being used. With
the adoption of Group financing, the head office hastaken the initiative in streamlining and equalizing
funds, and after reviewing the situation, cash on hand
was set at one month’s worth of consolidated sales
volume.

Growth potential
Investment resources, including R&D, will be allocatedwith priority to areas where high growth andprofitability can be expected. On the business side,these are safety systems and interior and exterior
components, and on the regional side, these are theAmericas and India.
For example, in India, which is growing rapidly, we
expect further growth, especially in the field of safetysystems. A new regulation will soon require the use of
six airbags, which will make it mandatory to install side
airbags and curtain airbags in addition to the existing
driver and front passenger airbags. We expect demand
to double in terms of both quantity and quality, and wewill expand our R&D and production systems as well
as strengthen our marketing efforts by taking regional
characteristics into account.

Growth potential

Growthpotential(Profit growth)

Priority investment inhigh-growth, high-profit
areas (R&D/capital
investment)

Operating profit¥100.0 bn
Efficiency

Soundness
Maintain sufficient funds
and fund-raising capacity
to respond flexibly to any
investment opportunities

Enhancementof corporate valueSoundness

Balance of growthpotential, soundness,and efficiency

Consolidated
monthly sales(Asset efficiency andcapital efficiency)
Efficient business
operations with anawareness of the costof capital

Efficiency
ROE
10%

TG-ROIC*
20%

Efficiency
The most significant point for improvement on thefinancial aspect of the 2025 Business Plan was, in thedisproportionate emphasis placed on the P/L, a lack of
B/S-conscious management and not enoughconsideration of asset and capital efficiency.
Based on our recognition of these issues, one of ourpolicies is to promote efficient business operations
with a renewed awareness of the cost of capital.
First, we have named it TG-ROIC, and we will pursue
returns commensurate with our resources, such as
non-current assets and inventories in each businessand region, while promoting efficiency. We will set atarget of 20% for TG-ROIC on a consolidated basis toachieve 10% in ROE by 2030, and set targets for eachbusiness and region to improve our business portfolio.
For shareholder returns, we will meet investors’
expectations by increasing dividends stably andcontinuously, flexibly repurchasing shares, and being
more conscious than ever about improving capitalefficiency.
In addition, we will strive to reduce the cost ofshareholders’ equity by proactively disclosing
information, including non-financial information, anddiversifying our shareholder composition, especially byincreasing the number of individual shareholders.

Cash Allocation

To Our Stakeholders

Assuming that we will achieve the 2030 managementtargets, we estimate that the operating cash flow to begenerated from now until 2030 will be approximately
650 billion yen. At the same time, we will streamline
our operations by reducing cross-shareholdings andother measures.
First, we will invest 350 billion yen in capital
investments, mainly in our priority businesses andregions. We will make capital investments in abalanced manner using TG-ROIC as a metric. For
shareholder returns, as I explained earlier, we willsecure 100 billion yen as a source of funds for stable
and continuous dividend increases.
With the remaining 250 billion yen in cash, we intend
to make additional investments in highly profitableprojects, as well as in discontinuous growth areas
such as M&A and alliances, depending on the businessenvironment and growth opportunities.
In the absence of such investments, we will strategicallyallocate the cash to be used for additional shareholder
returns from the perspective of improving capitalefficiency.

FY2030management targets

Revenue¥1,200.0 bn

Operating profit

Operating profit¥100.0 bn

Operating profit ratio
8%

ROE
10%

Cash allocation (Total from FY2023 to FY2030)

Operating cash flow
¥650.0 bn
Assumes achievementof an operating profit
ratio of 8% by FY2030

Capital investment¥350.0 bn

Priority businesses and regions(within scope of depreciation)

Reshuffle our business portfolio by strategically allocating resources to newforms of mobility, decarbonization, non-Toyota sales, etc.

(Carbon neutrality
investment)(safety systems and interior and exterior businesses; North America, India, and China)

Strategic investment(including M&A
and alliances)¥250.0 bn

Additional returns
to shareholders

R&D expenses,
HR investment
Improve the balance sheet* TG-ROIC =Until now, we have grown by responding to thedemands and expectations of our customers, theautomobile manufacturers. However, we have enteredan era in which we cannot survive on this basis alone,
and we strongly recognize that we must formulate ourown issues and clarify our goals before proceedingwith our business. We will strive to combine economic
value in areas that contribute to the social values ofsafety, comfort, and decarbonization.
We will disclose more information than ever before toyou on how we conduct our business and contributeto society, and I hope that you will look forward to the
future of the Toyoda Gosei Group.

¥50.0 bn

Enhance efficiency in utilization of non-current
assets and inventories
Reduce cross-shareholdings, etc.

Strategic allocation
Strategically allocate cash in response to ouroperating environment and growth opportunities

Dividends¥100.0 bn

Maintain a dividend
payout ratio of 30%
or higher

Non-current assets + Inventories
A simplified, easier-to-use version of the typical formula

44

T OYODA GOSEI REP OR T 20 2345