Message of Commitment from the President

Contributing to Sustainable Earth and Society Through Vision 2030

President Takahiro Fujioka

Aichi Steel and the COVID-19 Pandemic

Due to the spread of the novel coronavirus disease (COVID-19), and an economic slowdown in China caused by trade friction between the U.S. and China, Aichi Steel production dropped during FY2019 in an environment of rapidly deteriorating demand in the global economy. Nevertheless, the falling price of raw materials and efforts to improve profits by managing with Genryou Management (managing with limited order quantity), which we have been encouraging company-wide since last year, have yielded results and while experiencing a slight drop in revenues, our profits have increased.

The impact of COVID-19 on our business was only minor in FY2019, but with production during the first quarter of FY2020 falling below the break-even point, the situation has become extremely difficult.

To overcome this crisis, we have adopted the policies of (1) Ensuring safety and quality, (2) Protecting the health of employees and ensuring no one gets infected, (3) Ensuring customer production never stops, and (4) Containing the impact on profits to a minimum across the whole company. We have also worked to achieve continuous and optimal operations by reviewing our operating systems and adjusting production.

To stop the spread of COVID-19, we leveraged our crisis management capabilities, built on our experience including the January 8, 2016 accident and natural disasters, to launch an Emergency Control Headquarters and quickly implement appropriate measures. We were also proactive in adopting working from home and staggered work hours for our employees. As a result of this disaster, we have had the opportunity to identify challenges with flexible workstyles and explore future directions, and we have had considerable help in driving workstyle reform.

On the other hand, I think our second quarter will be a turning point for us. With customer production gradually recovering, this next phase will see increased production. We will beat this COVID-19 pandemic by building flexible production systems and accelerating workstyle reform. And in the new normal of a post-COVID world, we will continue contributing to the future by adapting appropriately to the new environment.

What We Should Do to Transform the Industry

Our response to CASE

Right now, the automotive industry is experiencing a major once-in-a-century transformation.

As CASE (Connected, Autonomous, Shared & Services, and Electric) technologies accelerate and automakers reinvent themselves as “mobility companies,” providing all kinds of mobility-related services, we also have to change to be able to provide high value-added components and systems.

We consider autonomous driving and vehicle electrification in particular to be areas in which we can make contributions. For autonomous driving, we have developed systems for commercializing our GMPS (Global Magnetic Positioning System), an autonomous driving support system that uses magnetic markers that we are developing for practical use. For electrification, we are focusing on developing electronic components and forged products for electric vehicles, and new products for EV motors.

GMPS autonomous driving support systemGMPS autonomous driving support system
MI Sensors (ultra high sensitive magnetic sensors) used for the GMPSMI Sensors (ultra high sensitive magnetic sensors) used for the GMPS
Electronic componentsElectronic components
Magnet rotor with high strength gearMagnet rotor with high strength gear

Efforts to strengthen our business foundation

The electrification of vehicles will certainly result in reduced demand for our specialty steels in the future. For this reason, the company as a whole has started efforts to manage with Genryou Management starting last year as part of activities to strengthen our business foundation. Our Companies have been focused on lowering the break-even point, and consolidating equipment to build lean production systems that are always profitable due to our "volume-matched costs" approach and as a result we have seen a great improvement. When the results of your efforts start to become visible like this, it really boosts motivation among employees.

We are also actively working to strengthen connected earnings capacity on a global basis. Starting with our investment in, and technical support of, India’s Vardhman Special Steels Limited in August 2019, we are building the foundations for future steel supplies within India and to the ASEAN region.

We are also actively driving organizational reform. We introduced our in-house company system in 2017 to improve the speed of decision-making in the CASE era. In April 2020, we also added the Stainless Steel Company to the system, as a spin-off of the stainless steel business from the Hagane Company, to become a new pillar of our business. We did this in response to the infrastructure crisis and hydrogen society expected in the future and in anticipation of increasing expectations and demands from society for stainless steel. We also split our Manufacturing and Future Planning Headquarters into a Research and Development Headquarters and a Manufacturing Innovation Headquarters to increase the speed of commercialization for development projects and to strengthen the business foundation for our manufacturing functions.

To further accelerate executive decision-making by management, we have also consolidated the roles of Managing Executive Officer and Senior Managing Executive Officer into a single Managing Executive Officer role. We are enhancing governance as well, with the adoption of incentives to encourage the creation of sustainable corporate value and a restricted stock compensation plan to provide even greater value to shareholders.

What We Had to Do as We Celebrated Our 80th Anniversary

Four pillars raised during our 80th year

Aichi Steel celebrated its 80th anniversary in 2020. To all our stakeholders, I offer you my sincerest thank

Since I became president in 2011, I have worked to make Aichi Steel the Company of Choice Globally by strengthening the framework of the company. In 2020, as we celebrate our 80th anniversary, we have raised four important pillars as guidelines toward our vision for the Aichi Steel Group.

The first of those pillars is the Aichi Way, which we established in 2018. This is an employee-directed initiative that acts as a code of conduct and spiritual anchor for our employees to all share the common values with the same mind. This was one of my ideas, which our officers formulated through discussions and research into the history of our company to embody the three concepts of Sustain, Appreciate, and Create that are so important to us.

The second pillar is our brand slogan, “Innovate Materials. Create Tomorrow.” established in March 2020 as an outward-facing initiative to demonstrate the identity and vision of Aichi Steel. This is our declaration to society that we will become a company that expands the possibilities of manufacturing by evolving materials, as the starting point, into components and systems. Created by a project team of employees as a bottom-up initiative, the final wording was chosen through a company-wide vote. The orange dots in the logo symbolize Aichi Steel’s commitment to supporting manufacturing and future society from the center of each. In addition to being our message to others outside the company, the brand slogan will also become a unifying force within the company.

Our third pillar is the Declaration on Labor-Management Cooperation that we signed as a declaration of cooperation between unions and the company to tackle difficulties together. There are three promises that we make: to create a prosperous society; to develop talent through manufacturing; and to ensure employee happiness and company growth. In the midst of this major transition, we will work to create a happy company, with “people” as our top priority, with mutual trust between those people supporting our company, and with workers and management heading in the same direction.

Finally, the fourth of our pillars is Vision 2030, which we established this year."

Brand sloganBrand slogan
Declaration on Labor-Management Cooperation signing ceremonyDeclaration on Labor-Management Cooperation signing ceremony

Approach to creating Vision 2030

Including the above, we have been developing various systems and implementing various reforms. At one point, we felt we had to have a vision that would define future directions for the company and align all our employees. We cannot survive in the middle of a rapidly changing environment by just producing the same yearly plans that we have produced in past years. We needed a long-term vision that could act as a light; one that could be incorporated into our medium-term and annual management plans. That was when we established Vision 2030. We felt that with that vision, we could make every investment with the same unwavering focus.

It is not easy to look 10 years ahead in the middle of a period of turbulence. However, we decided to think together about what kind of company we would like to become by 2030, even if it turns out to be wrong. Our Companies and Headquarters therefore came together to create a vision.

Part of that vision is the Company of Choice Globally concept that I have been advocating since becoming president, and a basic policy to enhance earnings capacity by reforming business and manufacturing while putting ESG management into practice. We will ensure regulatory compliance, safety, quality, and stable supplies (in that order), and continue managing with Genryou Management in line with the Toyota Production System (TPS), to flexibly and smoothly respond, and improve profitability, even in a dramatically changing business environment. While ESG management is an initiative that we have been implementing for a while, the ESG perspective is becoming more and more important globally. We will therefore further enhance this initiative to remain a valued and sustainable company.

In addition, to put our ESG management into action, we also believe the SDGs are important goals to actively focus on in order to contribute to a sustainable Earth and society as a member of the global community. In formulating Vision 2030, we have shown the relationships between each of our measures and the SDGs so that every employee can be aware of how they can contribute to and address global challenges.

Vision 2030: three management guidelines

There are three management guidelines that we will follow: Contribution to a sustainable global environment; Creation of a prosperous society through business reform; and Employee happiness and corporate development.

(1) Contribution to a sustainable global environment

As per the “challenge towards zero-carbon steel” being pursued by the Japan Iron and Steel Federation, we believe it is our obligation to reduce CO2 emissions in the iron and steel industry, so we are implementing a range of initiatives to contribute toward a low-carbon society. Specifically, we will further reduce CO2 emissions through initiatives including improving energy efficiency through 4S Re-Engineering, finally achieving industry-first exhaust heat recovery systems, and heat storage systems undergoing the world’s first in-plant trials. At the same time, we will further improve recycling technologies toward a zero-emission future to fulfill our environmental responsibilities as a company.

We will also contribute to maintaining biodiversity through the “Forestation to create a forest for beetles” initiative that we have been implementing since 2012.

(2) Creation of a prosperous society through business reform

In addition to reforming existing businesses, we will improve profitability by quickly moving new businesses to a commercial standing. As we break away from our history as a material manufacturer, we will add further value to our products as we focus on transforming from a materials manufacturer into a components manufacturer.

For example, we will combine material development with forging technologies to supply the components required for electric cars—but as components that are almost finished products—so that we can reduce costs and shorten the processes for customers. We have also manufactured a prototype of a high-speed motor, packed with Aichi Steel technologies, that brings together magnets, high strength materials and gears into a single motor unit for electric vehicles. As we drive such practical applications, we will continue to create new value that exceeds our customers’ expectations.

We plan to commercialize new businesses with a global focus, including our GMPS autonomous driving support system using magnetic markers and iron fertilizers that are expected to help improve soils, as well as amorphous wire products for use in medical and security fields, to help address global challenges.

Directions for future businesses

(3) Employee happiness and corporate development

We believe that mutual growth is possible if we link targets for personal growth with targets for the company, so we are driving initiatives that can increase engagement with employees.

The main prerequisite for this is ensuring the safety and security of our employees. Therefore, we will create a culture of mutual awareness to develop places, people, and systems that can remain accident-free. In addition, we will continue developing environments where we can support diversity in order to further evolve as an organization that recognizes and utilizes the individuality and strengths of all employees.

To improve individual productivity, we have also expanded education at Aichi Steel to enable everyone to understand the “Jikotei Kanketsu” (defect-free process completion) approach and problem-solving methods. This year, I have also been involved directly as an instructor to focus on developing human resources.

We are creating workplaces that are more comfortable for our employees through a series of tangible initiatives, which will include rest facilities, bathhouses, and parking lots at our production sites, in addition to the already completed administration building and Ai-terrace recreation hall.

The most important factors for implementing Vision 2030 are a sense of ownership and a change of the mindset for every employee. The vision will be meaningless if there is a miscommunication between management and employees because management’s approach was not properly communicated. For this reason, every Company President needs to communicate this vision in his own words to enable each and every employee to understand, and then work together to put it into practice.

Vision for Aichi Steel on Our 90th, 100th and Other Future Anniversaries

These days, in addition to improving profitability, companies must also contribute to a sustainable Earth and society on a global scale. The SDGs have become a common language globally for use in evaluating those efforts. By contributing to the achievement of the SDGs through the realization of our Vision 2030, we will be able to continue providing new value to society through our belief that “A great society comes from great materials.” which has evolved from our founder’s belief that “Great cars are made with great steel.”

In 20 years’ time, when we reach our 100th anniversary, I want Aichi Steel to still be a company of happy, smiling employees. To achieve this goal, survive this major transition, and achieve steady growth, we will all work together with one mind and with one force to improve our manufacturing capabilities and implement ESG management.

The Aichi Steel Group is looking forward to a great future.