AKEBONO REPORT 2018

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03 AKEBONO REPORT 2018In an automotive industry undergoing changeThe automotive industry, Akebono's main business field, is undergoing a major shakeup. The symbolic keyword is "CASE". This acronym of "Connected (progress of connectivity/connection)," "Autonomous (realization of automatic driving)," "Shared & Service (development of shared services) " and "Electrification (electrification of mechanisms)" represents the wide range of new value that automobiles can provide.While a major trend is occurring in the electrification of automobiles, demand for internal combustion engines in emerging countries and other regions is expected to remain strong. Due to consumer preferences, the hot-selling vehicle model has shifted from Sedan to SUV. In urban areas, the automobile market has changed substantially, with the emergence of a sharing economy, as seen in the shift from ownership to shared ownership of vehicles. With various changing factors related to technology and markets occurring simultaneously, for us suppliers to survive, we need to reaffirm our strength as "small, specialized, independent manufacturing company" and further reinforce our management foundation while producing creative value with a medium- to long-term perspective and achieving sustainable growth.Progress of Akebono New Frontier 30 - 2016 Midterm Business PlanAkebono has finished the second year of its three-year midterm business plan, of which fiscal 2018, the current fiscal year, is the final year. In the plan, we are working on initiatives based on three basic policies under the theme of "sustainable growth."• Rebuilding the North American operations: We have Balancing Medium- to Long-Term Growth with SustainabilityAs seen by the adoption of the United Nation’s "Sustainable Development Goals (SDGs)" and the international "Paris Agreement" on the mitigation of climate change, companies are now being strongly encouraged to preserve the global environment. Given these circumstances, Akebono will seek sustainable implemented four measures to rebuild from the manufacturing problems that occurred in our North American business, and business performance is gradually recovering. In "Fundamental organizational reforms," we seek to change key personnel and send experts in manufacturing and quality assurance from Japan to speed up the reforms. In “Productivity improvement,” we improved yields and raised productivity by transferring production items, reviewing processes, and other measures. In "Manufacturing capacity increase," we introduced new production facilities, primarily at ABCS* and ABG*. In "Improvement of earnings structure," we have reduced purchasing costs and labor costs, and optimized inventory.* ABCS: Columbia Plant in Columbia, South Carolina, USA* ABG: Glasgow Plant in Glasgow, Kentucky, USA• Establishing global networks based on product-based business units: In fiscal 2016, Akebono launched five product-based business units with marketing, research and development, purchasing, production and sales functions. In fiscal 2017, the Company standardized product specifications that vary according to customer and region by strengthening collaboration among business units. We will further strengthen collaboration among business units, functions and regions, and seek to further generate cash through the optimal allocation of business resources. We are now building a global database, which will form the foundation of this collaboration.• Expanding high performance brake business and recreating European operations: In fiscal 2017, we completed the installation of the manufacturing line at the Slovakia Plant and the transfer of the high performance brake caliper business from ABCS. Furthermore, the number of customers are increasing, mainly in Europe. In fiscal 2018, we will work to improve production quality at the Slovakia Plant and develop the business in the US and Japan.Amid change, with a medium- to long-term perspective, we will proactively carry out measures that leverage Akebono's strengths.