AKEBONO REPORT 2017

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1 Rebuilding North American operations2 Establishing global networks based on product-based business unitsEarnings have improved considerably as a result of measures to rebuild North American operations having an impact quicker than expected. Protability is also in sight To further deepen collaboration between our regional businesses in Japan, North America, Europe and Asia, and reinforce global competiveness, Akebono has established ve product-based business units (BU) responsible for sales, R&D, purchasing, production, and manufacturing Specic InitiativesResultsStrategy 1Fundamental organizational reformsStrengthening local management• Appointed new CEO with turnaround track record and experienced CFO• New plant managers at ABG, ABE and ABCS• New Program Manager• Appointed CEO, CFO, Plant Managers, Project Manager, Division head of production and procurement• Appointed Division head of HR and ABCS Plant Manager in February 2017• Re-establishment of organizations through key persons in each devision/depertment/plant• Improvement of working environmentStrategy 2Productivity improvementReduction of manufacturing burden• Certain programs transferred to other Akebono manufacturing locations• Improvement activities implemented• Kaizen and preventive maintenance implemented• Shifting partial production of brake pads to Japan and Thailand• Reduction from 3 shifts, 7 days a week to 3 or 2 shifts, 6 days a week, with the exception of some production linesStrategy 3Manufacturing capacity increaseIntroduction of new production lines• New manufacturing equipment for aluminum calipers at ABCS• Expanded manufacturing facilities for aftermarket friction materials at ABG• Start of operations in October 2016 at ABCS for further enhancement of production capabilities expected• Full operations of additional manufacturing lines scheduled in February 2017 and around the end of 2017 at ABG Strategy 4Optimizationof sales and purchase pricesImprovement of earnings structure• Negotiations for optimization of sales and purchase pricing since early 2016• Achieved price optimization with major automotive companies and improvement in SCM expenses above original plansBusiness Units (BU)Start-upMain ProductsStrategyHP BUJanuary 2016HP (High Performance) disc brakes, brake padsIncrease market share through competitiveness in terms of performance and cost, mainly in EuropeFoundation BUJanuary 2016Disc brakes, drum brakes and other mechanical parts Sales increase and protable growth by utilizing Akebono’s manufacturing excellence among global locationsInfrastructure and Mobility (AIMS) BUApril 2016Products for industrial machinery, rolling stock, and sensorsIncrease competitiveness through innovation and technological fusion, resulting in sales increaseFriction Material BUOctober 2016Brake pads, lining and other friction materialsIncrease competitiveness through Akebono’s strengths in material knowledge and NVH* technologiesAftermarket BUOctober 2016Aftermarket partsIncrease global protability in emerging and niche markets*NVH: Noise, vibration and harshness, which are factors that undermine braking comfortIncrease protability on a product basis leading to competitiveness on a global level• Establish product-based business units responsible for sales, R&D, purchasing, production, manufacturing engineering and other functions• Establish a global strategy through enhanced regional marketing functions• Carry out a global product strategy based on the concept of standardization and topping* (S+t)• Further rationalization effects achieved through global purchasing activities*Topping: Enhancing our product features that are tailored specically to local market needs.from scal 2017 onward. Akebono aims to entrench a protable structure by working to increase the efciency and productivity of plant operations. engineering functions. This will accelerate efforts to identify issues for each business unit and help construct mechanisms to address them. We aim to increase the protability of individual products while rapidly establishing a global network.AKEBONO REPORT 2017 22Part 2 Review of Operations