AKEBONO REPORT 2015

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In fiscal 2014 ABE faced production-related problems as itscrambled to meet an unexpected up swell in orders. We havebeen rallying our strengths Companywide to address this issueand thereby improve profitability at the earliest possible date.Contributing FactorsIn 2014 automotive sales in North America were robust dueto an upturn in the economy. Reflecting this the productionvolume at ABE increased radically from June onward. As ABElaunched the production of new items due to model changes the various disc brake production lines had to bear an excessivelyhigh workload. To meet orders ABE had to maintainaround-the-clock operations instituting a three-shift laborsystem. This made it impossible to perform regular facilitymaintenance and repair. Moreover a further surge in orders inNovember led ABG to also institute three-shift 24/7 operations.Due to the continuously overloaded production schedule thefacility failure frequency and rejection rate increased at thesetwo locations leading to a decline in productivity. To supplementthe capacity of these locations we had to ship in productsproduced at other plants by air. As a result profitabilitydeteriorated even further due to air transportation fees and anincrease in labor costs.CountermeasuresTo rectify the situation we shifted some production items toother locations to utilize available capacity. Also Japaneseassociates with extensive experience were dispatched to NorthAmerica to help local staff resolve the situation.Current Status and OutlookThe productivity of the ABE and ABG manufacturing linesimproved thanks to our Companywide efforts to resolve theproblems. Currently Japanese associates are striving to furtherimprove production technologies while undertaking facilitymaintenance and staff training. Despite the expected effect ofthe situation on the Company’s performance in the first half offiscal 2015 it is anticipated that North American operationswill return to profitability on a full-year basis. Drawing lessonsfrom this experience we will strive to enhance the flexibility ofour production structure throughout the world.Special Feature 2: Looking to Our Future OperationsOur Future InitiativesExamples of our activities aimed at securing sustainable growthIn fiscal 2015 we are striving to overcome challenges confrontingus and achieve significant growth in the final year ofthe akebono New Frontier 30-2013 midterm business plan.Although we missed fiscal 2014 performance targets due tothe effect of losses in our North American business we areworking to effect a drastic improvement by fully leveragingthe wealth of technologies and experience we have accumulatedover our 85 years of operations. Here we introduceexamples of our fiscal 2015 initiatives.Improving the Production Efficiency of ABEAkebono Brake Elizabethtown Plant