Message of Commitment from the President

Becoming “an ever-better company”

President, Takahiro Fujioka

I believe Aichi Steel’s goal of becoming “an ever-better company” comprises the following elements.

  1. Our materials improve the quality of manufacturing of our customers.
  2. Every employee adopts the attitude of “I Will” to express a sense of ownership in their work.
  3. Our workplaces are lively, vibrant places to be.
  4. Local communities are happy with us and want us to stay.

Through honest, steady and thorough efforts to manufacture materials, we will contribute to society.

Fiscal 2016 marked the dawn of a new era for Aichi Steel, a year in which we thanked our loyal stakeholders for their support following the explosion at our Chita Plant on January 8, 2016, allowing us to carry out reliable manufacturing.

January 8, a Big Wake-up for Aichi Steel

Our weaknesses exposed

I believe that the January 8 accident was the result of the interaction of human, work, culture, and facility related factors. I believe that with regard to the human aspects, we lacked a culture where supervisors and workers could openly discuss the difficulties of the work and there was a lack of communications.

With regard to our facility, it was not designed with human fallibility in mind. We immediately set about reviewing all of our production facilities, and adopted facility improvements based on fail-safe*1 concepts.

Issues with production management in our integrated forging and steelmaking process*2, one of Aichi Steel’s strengths, were also highlighted in the review. Our steel products start in a huge 150 ton per lot steelmaking process, but without clear inventory management and traceability between the final forged products and the steel material, it was not immediately possible in the event of an accident to know which parts on the customer’s production line would run out of stock and when it would happen, and which types of steel to prioritize production for. To resolve this issue, more than 100 of us gathered in a meeting room to create individual manufacturing diagrams for each steel material showing forged product numbers, users and pathways. When we thought something was unacceptable, we shared it with the group. Despite the difficulties, rearranging the production plans together was a valuable experience for us. This leads to all employees being involved in manufacturing activities for our integrated forging and steelmaking process.

Prior to the accident, we relied on our BCM and BAP plans*3 but an important point we learned from this was that these plans were not enough. At the same time though, we found new inspiration in the “iron bonds” we share within the steel industry. We were really grateful for the willingness of other steelmakers across Japan to help when we needed to outsource alternative production. In one respect, perhaps the best BCM and BAP plans we can have are good relationships with other companies in our industry. We wish to use such alternative production arrangements in other cases as well to improve our BCM and BAP plans.

*1 Fail-safeA method for always reverting to a safe condition in the event of a failure caused by an operating error or malfunction.

*2 Integrated forging and steelmaking processAichi Steel’s production system, and source of competitive strength, comprising an integrated in-house process for making steel material, from development and production to forging.

*3 BCMBusiness Continuity Management.
BAPBackup Action Plan, enables the securing of facilities, procedures and spare parts to allow for production at alternative locations if production at Group facilities becomes impossible.

Aichi Steel’s roles and responsibilities

Standing as leaders at the companywide headquarters to ensure the accident of January 8, 2016 does not reoccur
Standing as leaders at the companywide headquarters to ensure the accident of January 8, 2016 does not reoccur

Although the January 8 accident caused our customers considerable inconvenience, we can look at it from a different viewpoint. Rather than just being another product category of the Toyota Group, it showed that our products play a significant role within manufacturing in Japan. I think our employees realized this, too. I appealed to everyone at Aichi Steel to help make us a great company again in the eyes of our customers, to start over from zero. We are currently implementing a number of reforms companywide as part of our Step Up Plan, but to fully implement the lessons we learned from the accident, I have to step up myself and lead the team as the head of Aichi Steel.

Ready to Transform into a New Aichi Steel

Goals of the in-house company system

In April 2017, we implemented an in-house company system as the organizational structure that will carry the new Aichi Steel forward, with the aim of enabling faster decision-making and stronger business promotion as a product-centered company.

An important element of this new structure is that it becomes a matrix organization with the three companies and the Corporate Office function, which provides groupwide support and checks and balances between each company.

Using easy-to-understand yet somewhat unique names like “Steel Company,” “Forging Company” and “Smart Company” for our new in-house companies, we wanted every employee to share management’s dream and create workplaces that are exciting, vibrant places to be, under the leadership of each company.

Another goal is to improve governance within our organization. In addition to including the Audit Department among divisions reporting directly to the president, we have clarified the separate supervisory and business execution roles. We also actively seek the opinions of outside directors to receive advice from a completely new perspective.
Under this new in-house company system, we must consider our response to the structural changes and electrification of vehicles that will help create a low-carbon society. In the near future, there will be fewer engine-driven cars on our roads and therefore there will be less demand for our special steels. This will require the development of completely new business models.

We currently provide a number of products in response to the increasing use of next-generation vehicles, such as hybrid vehicles (HVs and PHVs), fuel cell vehicles (FCVs) and electric vehicles (EVs). These products include stainless steel for use with high-pressure hydrogen and environment-friendly dysprosium*4 (Dy)-free high performance magnets for EV motor applications. However, there is an urgent need for more progress in fields other than these specialty steels.

On the other hand, even without engines, the demand and importance of specialty steels for transmissions and suspension systems will not change. Key concepts that lead to improved fuel efficiency and environmental protection are “high strength” and “light weight,” so we must apply ourselves more than ever to building our technological strength in these areas.

Right now, Aichi Steel is the largest producer of forged products in Japan, with forged product plants run by our overseas subsidiary companies in North America, China and Southeast Asia as well. We want to take this further and become the largest globally, and to do that we have to become a company in tune with that goal. We also have big hopes for our Smart Company, the new core business where we are driving new initiatives using sensing technologies such as automated driving systems for vehicles.

*4 Dysprosium (Dy)A rare earth element. Generally used as an additive to raise the coercive force in neodymium (Nd) magnets, but concerns about supply stability and environmental destruction caused during the mining process led to Aichi Steel developing high-performance Dy-free magnets in 2010.

Matrix organization of in-house company system

Matrix organization of in-house company system

Working at Aichi Steel

Another new initiative for us at Aichi Steel is workstyle reform. I believe that making improvements in the work environment and in working styles so that all employee have positive feelings about working for Aichi Steel is a workstyle reform. We began to implement these changes with completion of first-stage construction of our new headquarters administration building in January 2017 (p. 11 of this report). Personally, I think the first thing we need for workplace reform is communication. Right in the middle of our new administration building is a wide-open stairwell that we call our “Communication Stairs.” With comings and goings of people through this stairwell, it gives our new office a feeling of openness.

At the end of the day though, the space is just a receptacle and it is up to our employees to see what eventual effect it will have on the new office environment. I look forward to seeing what workstyle reform everyone will achieve. As president, I aim to follow through on my mission to renew workstyles. With new workwear, enhanced public relations activities and other changes, we are working to improve the Aichi Steel brand. In this way, we are encouraging our employees to be proud of their company, which we hope will lead to improved motivation and the manufacture of ever-better products.

Through these new initiatives, we look forward to each and every employee helping us achieve a New Aichi Steel.

From Aichi Steel Japan to Aichi Steel Global

The treasure of Aichi Steel

The thing about Aichi Steel that we should never change is the thing that makes us who we are. That is the spirit of our founder Kiichiro Toyoda and his belief that “Great cars are made with great steel” which we have carried forward over the years. More than anyone, he had a passion to make Japan’s first automobile with his own hands. This is the true sense of ownership expressed in the words “I Will” (I will change the company) that I am always talking about. Other universal values that every employee should adopt, and that I want to protect, are the spirit of daring and creativity towards new things and technologies, genchi genbutsu (on-site, hands-on experience) approach, and rules and principles. I want to raise awareness of these values as the Aichi Way once more.

One slogan we are currently using is “A safer world with Aichi Steel products.” To make this happen we have to solidify our position as a global company by properly implementing our ESG*5 initiatives and being accepted by our investors and every other stakeholder. More than ever, we have to manufacture high quality, affordable products, and products that contribute to society from the perspective of creating shared value*6.

For Aichi Steel right now, our target of reaching 20 billion yen in profit by the year 2020 is not an easy one. We have to think harder and continue meeting every challenge. That is why I am continuing to lead the way, and that is why I want everyone at Aichi Steel to continue working and striving together.

*5 ESG Environmental, social and governance.

*6 The act of simultaneously addressing social issues while improving corporate competitiveness