AKEBONO REPORT 2016

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In addition, in our endeavor to enter a new field by providing high-performance brakes to European manufacturers, our products were so highly regarded that we won more orders than anticipated. Because we had expected to launch production on a small scale, we were unable to build out our production capacity in Europe in time to handle these large-scale orders, forcing us to take on production at our plant in Columbia, South Carolina, with a resulting increase in transportation costs as products were shipped from North America to Europe. Given these results, and to return Akebono once again to a path to growth, we have established a new midterm business plan, akebono New Frontier 30 – 2016, covering the three years through fiscal 2018. The plan aims to break away from an emphasis on achieving sales targets, and focus on rebuilding our management foundations for the future. Goals of the new midterm plan include “rebuilding the North American operations”, “establishing global networks based on product-based business units”, and “expanding high performance brake business and recreating European operations”. By achieving these goals, Akebono aims to return the company to a sound financial condition and facilitate sustainable growth. In terms of rebuilding our North American operations, we strengthened our management structure with local leadership, first by welcoming a new CEO with experience in corporate turnarounds to Akebono Brake Corporation in April 2016, and then by hiring a new CFO as well. With the assistance of outside consultants, we also began working to understand a wide range of management and financial data and identify issues. Going forward, we will tie this information into efforts to optimize our production sites, reduce SG&A expenses, develop human resources management and rationalize personnel.Establishing global networks based on product-based business units essentially means shifting from a region-centric to a product-centric business. By establishing akebono New Frontier 30 – 2016 Midterm Business Planfive product-specific business units, each with its own sales, R&D, purchasing , production and manufacturing engineering capabilities, and by formulating a global strategy not limited by region, we will enhance product-by-product profitability and strengthen our global competitiveness. While this represents a major challenge for Akebono, we believe that restructuring our business this way is imperative.As for the third goal of expanding the high performance brake business and recreating European operations, ramping the Slovakia Plant up to full production will enable us to create an integrated structure for producing and supplying disc brakes in Europe. By applying the technology we have accumulated in the development and production of high-performance brakes to brakes for other vehicles, we hope to further differentiate our products. We will work to rebuild our business as quickly as possible and achieve sustainable growth, by devoting all of our energies to creating a new structure in response to market changes, and to implementing strategies designed to enhance corporate value. The entire group is working together to quickly return to be profitable and earn back the trust of our stakeholders. To accomplish this, we must take full advantage of our unique position as a small, specialized, independent manufacturing company. By taking advantage of the swift decision-making capability that comes with our small organization. We will leverage our deep, specialized knowledge of friction and vibration as we take on the challenge of further expanding the range of our business. We will attempt to break into new fields by taking advantage of the freedom that comes with being independent, creating something from nothing through a focus on manufacturing. And because human resources are so important to the company, we will work to develop truly global personnel. With an unwavering commitment to delivering safety and peace of mind, Akebono is poised to take on the challenge of a new phase in global management. We ask for your understanding and ongoing support with those efforts.June 2016Hisataka Nobumoto, President and CEOLeveraging Our Unique Position as a Small, Specialized, Independent Manufacturing CompanyTop Message10AKEBONO REPORT 2016