DENSO works with customers and suppliers around the world. And we are constantly striving to keep the high value and trust that those partners have bestowed on us. We maintain strong ties with partners in Japan and are always on the lookout for new partners in new markets.

Partners play an important role in localizing production. DENSO tries to maintain access to necessary parts and materials close to the production site. That requires working closely with local suppliers to maintain and improve quality.

Constant attention to quality has earned the company special recognition from customers. Every year, automakers worldwide present DENSO with awards for quality. And to prove our commitment, DENSO is striving to earn QS 9000 recognition for all of our plants across the globe.

Working Locally

Our people work closely with suppliers of subcomponents. We design parts locally for local markets. And we put the same high value on quality wherever we operate.

Highly autonomous local operations are the driving force in our global expansion. Working closer to the customer helps us adapt products more quickly and more precisely to customer needs.

Engineers at our Michigan operation, for example, work with the Big Three and Japanese automakers to design air conditioners and other components and systems for their vehicles. When customers require changes and improvements, our local engineers sit down with them and discuss the options. We then translate the customers' requests promptly into refined products. We speed the design and development process further by testing and evaluating parts locally.

Along with localizing design and manufacturing work, we are localizing our purchasing of subcomponents and materials. Local sourcing insulates our business from fluctuations in exchange rates and fulfills the expectations of automakers in regard to local content. Our local content in North America, for instance, already exceeds 70%.

A big challenge in raising local content is cultivating relationships with suppliers able to fulfill our requirements for quality, cost, and timely delivery. We work directly with suppliers who ask for assistance in attaining our standards. Engineers from DENSO plants identify issues in products and processes and suggest improvements.

The result of our close work with local suppliers is a growing range of quality sources of subcomponents and materials. That is good news for the suppliers, for us, and for our customers.

New Frontier

Yantai Shougang DENSO started producing air conditioners in November.

China will be the next giant market for international manufacturers. And DENSO is riding the crest of the wave of big business developments in that nation. We have set up four production operations and are helping Chinese industry with transfers of important automotive component technology.

Through our joint venture operations in China, we are actively promoting DENSO technologies and management practices. In that spirit, we are looking into localizing production of increasingly complex products such as electronic equipment for making vehicles cleaner and safer.

In November, production of air conditioners started at Yantai Shougang DENSO. We founded that joint venture with Shougang Corporation in 1994. At full production, the plant will deliver up to 160,000 units a year.

In August, we announced the addition of our forth China operation, Chongqing DENSO. That new joint venture will start making ignition units for motorcycles towards the end of 1997. And we anticipate even more business in China in the very near future.

Worldwide Recognition

Rover's Gold Award is evidence of DENSO's commitment to quality worldwide.

Customer opinion is one of the best ways to measure how good we are. Awards are proof of automakers' trust in and reliance on DENSO. In the past year, customers worldwide have recognized us for both high technology and quality production.

Toyota presented us with its technological development award for injectors and sensors that are crucial to engine performance. Mitsubishi Motors recognized DENSO for our work in standardizing parts. Reducing redundant parts resulted in cost reductions for the automaker.

Our Tennessee operation took the Quality Award for the third year in a row at Toyota's North American Import Supplier Conference. The automaker sponsors that conference for suppliers who ship parts to its Japanese factories.

For overall excellence, Rover presented us with its Gold Award. The British automaker recognized us from among 600 other suppliers for our quality, cost performance, technology, and service. And General Motors named our operation in Michigan supplier of the year for its oxygen sensors.

Meeting Expectations

All of our principal operations are working towards earning QS 9000 certifications.

Our industry leadership in crucial automotive components rests on leadership in quality and reliability. Most importantly, it rests on being globally consistent in that reliability and quality. Our customers get the same quality products and service wherever we make and sell parts. Recently, we have been earning third-party recognition--namely QS 9000 certification--for our efforts.

The U.S. Big Three automakers created the QS 9000 for the automobile industry. Those strict guidelines, applied worldwide, are based on the International Organization for Standardization's ISO 9001 and include special requirements pertaining to automobiles.

We lead the industry in commitment to earning that certification. All of our principal operations have set upon the task of earning QS 9000 recognition for their efforts to make DENSO components the best in the world. Presently 14 DENSO operations in Japan, North America, and elsewhere are QS 9000-certified. And the rest will earn certification before the turn of the century.

Safeguarding the environment gets the same commitment at our operations that providing quality parts and service does. By the end of 1999 every principal DENSO operation in the world will have ISO 14001 recognition for manufacturing with the least impact to the natural environment.