Message from the COO of Production Division

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Review of the 13th Mid-Term Plan

Rediscovering our strengths and making steady progress in reinforcing our business foundation amid challenging conditions

Looking back on the 13th Mid-Term Management Plan (“13th Mid-Term Plan”), it was a three-year period marked by numerous challenges. At the outset, we expected it to be a time to move beyond the COVID-19 pandemic and achieve growth, as a new wave of opportunities driven by CASE* was emerging. However, the global semiconductor shortage severely disrupted automobile production, particularly in China and other parts of Asia, where production cuts were greater than anticipated. In addition, rising labor costs led to a decline in profits in North and Central America, and with business environments intensifying around the world, we were compelled to review our global portfolio.

At the same time, this sense of urgency prompted us to rediscover our strengths, which has led us to accelerate efforts to leverage them to strengthen the foundations for our business growth.

Our ability to maintain a stable position as a Tier 1 automotive parts manufacturer stemmed from the high evaluations we received from major customers in terms of quality, cost, and delivery (QCD). However, the global semiconductor shortage severely disrupted automobile production, particularly in China and other parts of Asia, where production cuts were greater than anticipated.

We believe that our customers appreciated these strengths once again through our daily proposal activities during the 13th Mid-Term Plan.

Moreover, we proactively and continuously engaged in proposal activities with both existing and new automakers, resulting in broader recognition of our decorative technologies—one of our core strengths—and the expectation of further business expansion. Despite the challenging environment, we were able to broaden our customer base, making this period a time of “sowing seeds” for the 14th Mid-Term Plan and beyond.

* CASE: A coined term created by combining the initial letters of Connected, Autonomous, Shared, and Electric (referring to advanced automotive technologies)

Vision of the 14th Mid-Term Plan

Optimize our customer and product portfolio to establish a business model for proactive and sustainable growth

Under the 14th Mid-Term Management Plan, the Resin-Treated Product Business aims to establish a foundation for growth by accelerating monetization in growth areas and creating new business models.

In this context, creating new business models means shifting from a customer volume-dependent, follower-type approach to a proactive model in which we independently select high value-added projects and pursue sustainable profitability.

Until now, the Group has expanded by establishing overseas operations aligned with the global expansion of its major customers and by locally producing and supplying parts. In recent years, however, overseas plants of Japanese companies—not only in the automotive industry—have been downsized or discontinued. We recognize that sustainable growth requires building our own business model driven by independent strategy and initiative, rather than relying on customer-dependent operations as in the past.

The key to this transformation lies in optimizing our portfolio across regions, customers, and parts. With the working population expected to continue declining and labor shortages becoming more severe, we must focus resources on growth and high-profit areas to operate effectively with limited management capacity.

First, in terms of regions, we will focus on North America and India and establish a flexible production system while minimizing costs. For customers, we will determine which regions and vehicle models to prioritize, aiming to expand business with new clients mentioned above. Finally, for parts, we will take a broad view to distinguish between high- and low-margin products and determine where to focus our efforts. To this end, we will establish clear and transparent evaluation criteria to build a sense of unity and motivation among employees.

Through this process of selection and concentration, we will enhance development efficiency, improve added value by strengthening our development capabilities contribute to customer satisfaction, and build a more resilient profit structure.

What We Aim for as an Organization in the 14th Mid-Term Plan

Building an organization in which every employee demonstrates flexibility and autonomy, creating value and driving profitability through individual initiative

To put the new business model into practice, a company-wide shift in mindset is essential. We encourage our on-site employees to “become stronger, not just larger.” In other words, securing sustainable profitability is more important than pursuing sales growth alone. To transform the Company into a stronger and more profitable organization, every employee must act with flexibility and autonomy.

Flexibility is the ability to respond swiftly to social and environmental changes. To achieve sustainable growth in an increasingly uncertain business environment, we must look ahead, continuously taking on new challenges without relying on past successes. We also believe that employees should take initiative—actively creating opportunities rather than waiting for work to be assigned—and continue demonstrating creativity and ingenuity in their respective roles.

To build such a strong organization, management will clearly communicate our growth vision, identify key challenges, and work collaboratively to explore new opportunities for advancement. We will continue to ensure that these principles are understood and practiced by all employees in their daily activities.

Message to Our Stakeholders

Strengthening collaboration with internal and external partners to evolve into an organization resilient to change

To respond swiftly to change and seize growth opportunities, we will actively collaborate with internal and external partners that possess complementary strengths, co-creating new value through innovation.

In particular, we aim to create synergies with the Chemicals Business, which has been a key theme since our recent integration. Until now, we have worked together as partners to develop sustainable materials that reduce the use of petroleum-based resins. Recent organizational reforms have further accelerated the exchange of ideas between management teams and on-site members, enabling faster and more effective joint development.

In terms of collaboration with external partners, we are exploring a wide range of opportunities, including technical alliances to further enhance our decorative technologies—one of our core strengths. We also seek to build relationships of mutual growth by encouraging suppliers to share candid opinions and ambitious proposals.

We believe it is important to clearly communicate our growth scenario to shareholders and investors to gain their understanding. The automotive industry operates on a model-change cycle, meaning it typically takes three to five years to recover upfront investments through revenue. The new initiatives under the 14th Mid-Term Plan are expected to begin producing results toward the final year, and we look forward to achieving steady medium- to long-term growth.

Going forward, we will strategically accumulate profits and strengthen our foundation to become an organization that is both strong and resilient to change. United as one, all employees will work to seize growth opportunities and enhance satisfaction among all stakeholders—including customers, suppliers, shareholders, and investors.

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