Interview with the President

Preserving the planet and creating a safe, secure automotive society. President and CEO Nobuaki Katoh

Q1 What’s your assessment of fiscal 2013, the first year of DENSO Group’s Global Mid-term Policy? And can you let us know how the policy is progressing?

A We are making steady progress. Through reforms in our manufacturing process and bolstering of technological development, aftermarket and new businesses, we are working to achieve our targets.

A We are making steady progress. Through reforms in our manufacturing process and bolstering of technological development, aftermarket and new businesses, we are working to achieve our targets.

At the end of fiscal 2012, we drew up the DENSO Group Global Mid-term Policy setting targets of sales of ¥4,000 billion and an operating margin of 8% in fiscal 2016 (the year ending March 2016), aiming to expand business to ensure continuous future growth, to evolve by continuing to develop world-first products, and to facilitate Groupwide collaboration worldwide and speed up corporate management.
 
In fiscal 2013, the first year of the new policy, automobile production in North America and Asia & Oceania increased, and there were signs of recovery in the first half of the year in Japan as an effect of the Japanese government’s eco-car subsidies and the yen’s decline from its record-high level. Net sales rose ¥426.3 billion year on year, to ¥3,580.9 billion, and operating income rose ¥101.6 billion, to ¥262.4 billion. Exchange rates, market conditions, and other aspects of the external operating environment are continually changing, but we are nevertheless making steady progress.
In terms of technological development, automobile manufacturers have been adopting our new technologies, particularly those that display environmental, security and safety features. The role of the automobile industry in preserving the planet and creating a safe, secure automotive society is growing and sales will continue to grow in the future.

Q2 Could you explain in detail what efforts you are making and what areas you are strengthening in line with the Long-term Policy 2020?

A Our goals are sustainable growth and respected individual life, and we are strengthening technological development in the fields of safety and security and the environment.

A Our goals are sustainable growth and respected individual life, and we are strengthening technological development in the fields of safety and security and the environment.

With increases in the global population, the world is likely to face many serious issues, such as energy and environmental problems and a major increase in deaths from traffic accidents accompanying the expansion of the automobile market. In this context, to ensure continued growth while contributing to society, the DENSO Group announced the DENSO Group Long-term Policy 2020.
 
Responding to expectations of a greater contribution to society from global corporations, we set the goals of sustainable growth and respected individual life. To preserve the environment, we are developing fuel-efficient technology, helping to reduce the environmental impact of society as a whole. To reduce traffic accidents, we are leveraging our core technologies and contributing to the creation of a safe, secure society.
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Q3 What’s the market outlook for different regions, and what activities are you concentrating your efforts on?

A While assessing changes in the environment in different regions, we are accelerating the implementation of our business strategies.

A While assessing changes in the environment in different regions, we are accelerating the implementation of our business strategies.

Regarding the automobile market in fiscal 2014, in Japan a downturn is expected as a reaction to the end of the government’s eco-car subsidies. The U.S. economy is likely to continue its strong recovery with a corresponding strong recovery in the auto market. Europe is in the midst of financial reform and the economy is expected to remain stagnant with market conditions unchanged from last year. In Asia & Oceania, although China has experienced a rapid slowdown it is likely to continue as the driver of the global economy. Within this environment we will remain vigilant, accelerating the implementation of our existing strategies and making concerted efforts within the Group to continue our steady progress.
 
In fiscal 2014, the second year of our Global Mid-term Policy, we will continue to press forward with technology development, transition to extremely cost-competitive “Dantotsu” plants, and expansion of new and aftermarket businesses. We aim to generate 20% of our sales from new and aftermarket businesses by fiscal 2021.

Q4 What progress are you making in activities aimed at emerging markets?

A We are working on product development and supply to meet the needs of different areas, such as localization of development and “cost-half” activities.

A We are working on product development and supply to meet the needs of different areas, such as localization of development and “cost-half” activities.

In emerging markets, which are driving overall market growth, as well as ASEAN, we are strengthening our production bases and localizing development. We already have seven development systems in place in Japan, the U.S., Europe, China, Thailand, India, and Brazil, and we plan to enhance the systems and workforce. Although core technologies are developed in Japan, application to each car model is developed entirely locally, improving supply speed and customer response.
 
We are also pursuing “cost-half” activities aimed at emerging markets. While quality is preserved, performance and functionality are adjusted according to the needs of local manufacturers and customers, thereby allowing for a reduction in the price of products. We have included 23 products in the campaign and new orders for these parts from car manufacturers is steadily increasing with planned adoption in a total of 18 more car models. We are working on product development and supply to meet the needs of different areas through technical centers in China, Thailand, India, and Brazil.

Q5 What are your views on shareholder returns?

A We are continually striving to provide a stable return of profits to shareholders.

A We are continually striving to provide a stable return of profits to shareholders.

At DENSO, we strive to meet the expectations of all shareholders through consistent increases in cash dividends, giving due consideration to a comprehensive range of factors, including consolidated performance and the dividend payout ratio. Our dividend payout ratio target is 30%. We will consider future returns after the minimum required earnings retention for appropriate investment and development, taking into account the difficult business environment.
 
In light of our recent performance and the operating environment, we declared an annual dividend of ¥64.00 per share for the reporting period, an increase of ¥18.00 from the previous year.
 
We are continually striving to provide a stable return of profits to shareholders.

Management Strategy
Interview with 
the President
DENSO Group’s Global 
Mid-term Policy
Global Management

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