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Issues to be Addressed

Regarding the various issues we face, including the response to the production issues which began to occur at our North American business in 2014, initiatives for the global common platforms of automobile manufacturers, and the establishment of a business of high performance brakes (brakes for mass produced higher performance vehicles) through the differentiation of our technology, following various measures taken as part of initiatives in the first year of the new mid-term business plan "akebono New Frontier 30 - 2016" (hereinafter referred to as the "aNF30-2016") that ends in fiscal year 2018, we have already seen some level of results.

Aiming for further recovery in results and sustained growth, we will strive to accomplish the goals set out in aNF30-2016.

The Akebono Brake Group maintains a goal of achieving its long term target of "Global 30" (Acquire 30% of the worldwide OEM disc brake pad market) identified within its "aNF30-2016" mid-term business plan, which was announced in May 2016. "aNF30-2016" maintains the goals of "Rebuilding the North American operations," "Establishing global networks based on product-based business units," and "Expanding high performance brake (brakes for mass produced higher performance vehicles) business and recreating European operations" as a means of "Restoring health to our financial structure" and achieving sustainable growth.

Results of the various measures of the mid-term business plan are described below.

Rebuilding the North American business

Due to the additional costs arising from the production issues which occurred from the middle of 2014, our North American business incurred large losses in fiscal year 2015. The Company has identified the resolution of this issue as its top priority of our group, and we are currently conducting measures to rebuild our business foundations as quickly as possible. The various measures planned to rebuild the North American business (reinforcing the management system, reducing sales, general and administrative expenses and indirect costs, and improving profitability) are currently producing results faster than planned, and we are on track to hit profitability in fiscal year 2017. We will continue to work to stabilize production through improved and more efficient operations, aiming to realize our objectives as soon as possible.

Establishing a global network, through implementation of a product category specific business structure

Along with the diversification of business, the Company is deepening collaboration among its business operations in Japan, North America, Europe and Asia. To further enhance global competitiveness, we have launched five product-specific business units. The establishment of a new network and implementation of a product category specific business structure are expected to be completed by the final year of the new mid-term business plan (End March 2019). Akebono Brake will accelerate its process of extracting key issues by business segment and establishing corresponding resolutions as a means of increasing its competitive strengths and raising profitability on a product by product basis and firmly establishing its global network at an early stage.

Business Units (BU) Establishment Date Corresponding Product Responsibility
HP BU January 2016 High performance disc brakes, brake pads
Foundation BU January 2016 Disc brakes, drum brakes, mechanical parts, etc.
Infrastructure and Mobility BU April 2016 Products for rolling stock, industrial machinery and sensors
Friction Material BU October 2016 Brake pads, lining and other friction materials
Aftermarket BU October 2016 Aftermarket parts

Expanding high performance brakes (brakes for mass produced higher performance vehicles) business, creating new European business

The expansion of the high performance brake business is proceeding smoothly and in line with plans. Demand for the Company’s products, including friction materials manufacturers, is increasing. In the high performance brake caliper business, we are aiming to improve productivity by transferring production from the Columbia Plant in South Carolina to the Slovakia Plant.

Restoring a sound financial structure

The various measures to rebuild the North American business are producing results faster than planned, and earnings in the first year showed greater improvement than planned. Pursuing improved profitability from rebuilding the business platform to put the North American business back in the black from fiscal year 2017, we will continue to improve profitability by eliminating unprofitable items throughout the group after implementing thorough cost management, and will restore a sound financial structure by reducing interest-bearing debt, etc. These efforts will lead to sustainable growth.