| In Japan, a stable but maturing car market in terms of units produced, there
is little anticipation of a significant increase in market growth. DENSO is therefore
working to grow its domestic business by focusing on the development and production
of a new generation of high value-added products in three strategic areas: the
environment, safety, and information and communications. The year saw the launch
of a number of exciting products in all these areas. Two developments in information
and communications stood out. First was the launch of a data communications module
for Toyota's G-BOOK telematics system. Second was the creation of a joint venture
with Robert Bosch GmbH of Germany in May 2003, to develop components for car navigation
and multimedia systems. We believe this international alliance will help us to
create superior car navigation equipment, and ultimately help us to increase sales
of these products worldwide.
| In addition
to strong car production in North America, DENSO boosted earnings on the back
of new business from General Motors Corporation (GM) and Ford Motor Company (Ford).
GM has named DENSO its Supplier of the Year for the tenth consecutive year, recognizing
our advanced technological capabilities and our reputation as one of the most
trusted automotive suppliers in the industry. Motivated by these successes, we
are strengthening our supply framework in the region, particularly for engine-related
components. Actions included dividing DENSO Manufacturing Tennessee, Inc. (DMTN)
into two companies. This company's Athens facility was spun off to become DENSO
Manufacturing Athens Tennessee, Inc., and will increase production of oxygen sensors,
fuel injectors, ignition stick coils, and other components. The Maryville facility,
which will continue to be called DMTN, recently started production of segment
conductor alternators, expected to become the most common next-generation alternator
in the years ahead. Other developments in the region included the creation of
a joint venture with Group company Kyosan Denki Co., Ltd. to expand production
of fuel pump modules and other components in the United States, and the start
of production of variable camshaft timing (VCT) components in Mexico, to further
build on our leading global share in this product category. Plans are also on
the table to establish a sixth thermal product facility in North America in response
to stronger sales to the Big Three car makers.
| In Europe,
DENSO is focusing on boosting sales of car air conditioners, diesel common rail
systems, gasoline engine management systems, and car navigation systems. In car
air conditioners, we believe Europe offers great promise as a growth market. Forecasts
show that 65% of all cars on European roads will be fitted with air conditioners
by 2005, compared to around 50% at present. In order to tap this demand, we are
reinforcing our air conditioner supply framework. In addition to plants in Germany,
the U.K., and Italy, the production of car air conditioners will get under way
in the Czech Republic during 2003. We have also set up an air conditioner manufacturing
company in Turkey. Diesel-powered cars have always been popular in Europe, but
their popularity continues to growaround 40% of all new cars sold in the
region now have diesel engines. DENSO is naturally seeking to capture a larger
share of this demand with products such as its 1,800-bar diesel common rail system.
Production of these systems started at DENSO Manufacturing Hungary during the
year under review. In gasoline engine management systems, we began production
of VCT components, with the manufacture of other engine-related components set
to start before the end of 2003. Finally, supported by our new alliance with Bosch,
we hope to expand sales in the European market for car navigation systems, building
on steady sales already achieved in the past year.
|Asia & Oceania
DENSO is actively strengthening its sales and supply networks in this
region in anticipation of higher demand for automotive components in the rapidly
growing Asian market. China, which is poised to become the world's third largest
producer of automobiles after the United States and Japan, will of course be a
key market. Consequently, in order to reinforce our sales presence in the country,
we established a new regional headquarters in Beijing. Our manufacturing capabilities
were also strengthened with the creation of a joint venture in Guangzhou to manufacture
car air conditioners, DENSO's seventh manufacturing facility in China. This was
followed by the start of instrument cluster production at the DENSO plant in Tianjin.
Thailand is rapidly becoming the regional hub of the
car industry, evidenced by a dramatic increase in local production in recent years.
In response, we have upgraded our presence in the country. This included strengthening
our sales activities through the separation of the sales division of DENSO (Thailand)
Co., Ltd. into a new company, and the creation of a joint venture with Kyosan
Denki to manufacture fuel pump modules. Production of diesel common rail systems
for pick-up trucks is also set to begin in the country in 2004.
In South Korea, a market with real potential and already
the world's fifth largest producer of automobiles, we made a strategic investment
in Doowon Climate Control Co., Ltd. This move was made with a view to building
a foothold in the country's growing market for car air conditioners.