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Message from Top Management

Celebrating the 60th anniversary

It will be 60 years since we became ShinMaywa, but we can trace our history back through more than nine decades.
We started out as an aircraft manufacturer. In the postwar period in Japan as infrastructure development got underway and economic growth took off, ShinMaywa launched the special purpose truck business and entered the industrial machinery field by deploying in these new domains technologies originally cultivated through aircraft production.
At present, our principal business segments are aircraft, special purpose truck, and industrial machinery. Although our businesses are relatively modest in scale, we derive strength from having been a pioneer in each field, the breadth of our product portfolio, and the large market shares our products command. Indeed, we offer more than 200 types of products in the special purpose truck segment alone.
I believe that customer-oriented manufacturing enables us to maintain our competitive advantage amid fierce competition with specialist manufacturers. I also believe that our continuous efforts to endow our products with functions and quality that satisfy market needs have inspired customer confidence in the ShinMaywa Group. This is what ultimately underpins our strong presence in various markets.
Although our business segments may appear to have little in common with one another at first glance, they do share underlying fundamental technologies. The Group pursues an integrated approach from product development and manufacturing to services in each business.
The worldwide recession that originated in the United States in September 2008 was a severe blow to the ShinMaywa Group. Since the performance of our businesses is closely linked with construction demand and capital investment, sales stalled. This coupled with the appreciation of the yen, resulted in significant declines in both sales and profits for fiscal 2008 compared with the previous cycle.
The special purpose truck business was affected the most. Orders for dump trucks and other mainstay products abruptly lost momentum in October 2008. Similarly, in the industrial machinery business, orders for Thin Film Coating System and Automatic Wire Terminating Machine (products closely linked with the automotive market) fell far short of expectations. Furthermore, even in the aircraft business, which is less subject to turbulence in the economic climate, international sales were substantially below what we had anticipated owing to a two-month strike at Boeing and the appreciation of the Japanese currency.
Nonetheless, light began to appear at the end of the tunnel. The impact of our company-wide initiative to reform production systems, SHIP (ShinMaywa Innovation for Productivity), is becoming evident at workplaces. For example, the amount of overtime worked at certain plants has been halved. In another positive development, orders substantially increased for the CNW series, Hiefficiency and Good Particles Passage Performance Submersible Pump, products for which we have high expectations. These pumps received public recognition in the form of an award for their energy-conserving performance.

Long-term management plan: "Value Up 200!"

Shortly after we had set new targets in the "Value Up 200!" long-term management plan in July 2008, the worldwide recession struck. This underlined the necessity of enhancing intrinsic corporate value, the action theme of "Value Up 200!"
There is a large disparity between the management targets we initially set and current profit levels. However, as I have already mentioned, our initiatives have started to bear fruit. Moreover, there are various other measures that we are considering or are already implementing. Therefore, we intend to revise the management targets once the economic climate stabilizes, but continue working on the action theme, enhancement of intrinsic corporate value, without any major changes.

Growth strategies

As an initiative to enhance intrinsic corporate value, we are laying the foundations for business expansion overseas. Kailash ShinMaywa Industries Ltd., established in Pune, India, in June 2009, will manufacture and sell special purpose trucks in that country whose economy is expected to continue growing dramatically. Depending on the region, we pursue overseas development of the special purpose truck business either through exports or local production. Regarding local production, our immediate task is to get the joint-venture companies recently established in India and Chongqing, China, on track as soon as possible.
We have also established a new joint-venture company for industrial machinery in Singapore, ShinMaywa JEL Aerotech Pte. Ltd., which will design and manufacture Aircraft Passenger Boarding Bridges in addition to providing after-sales services in response to boosting demand for these products in Asia. Our principal objective in establishing this local subsidiary is to differentiate ShinMaywa from European and American competitors by adding cost competitiveness to our brand power in Asia, where we already have the largest market share.
In Japan, with the aim of focusing resources on core businesses, on June 1st, 2009, ShinMaywa Industries absorbed ShinMaywa Engineering, Ltd. which designs, sells and maintains mechanical car parking systems. As a result, the operations of the two companies are now fully integrated. This merger is intended to increase ShinMaywa's competitive advantage in the industry. Moreover, while the Japanese market is expected to shrink, the merger will strengthen our ability to seize opportunities in promising markets overseas.
These are examples of what we are doing to achieve the vision articulated by "Value Up 200!" Going forward, we will continue to closely monitor the operating environment and apply a flexible management style in line with the current times.

Keep challenging in fiscal 2009 to accomplish "Value Up 200!"

Since there is little prospect of a decisive recovery of the business environment in fiscal 2009, the ShinMaywa Group will work to secure orders and sales, which are the sources of profits, while endeavoring to reduce fixed costs.
Let me comment on our priorities in each business. In the aircraft business, while executing projects for the Ministry of Defense as planned, we are working to secure more orders for components for the new aircraft that will follow the Boeing 787.
In the special purpose truck business, we expect a greater decline in domestic demand than in the previous fiscal year amid intensifying competition with industry peers. In fiscal 2009, we will work to increase the ratio of in-house production based on a review of personnel deployment and capital investment, while striving to increase our market share in order to improve profitability.
In the industrial machinery business, our priority is to commercialize a stream of hit products comparable to the CNW series of submersible pumps so that we are in a position to advance rapidly once the market recovers. Furthermore, we received an order for a refuse transfer station system for Shanghai. We have already started construction of this system with the aim of completing it before Shanghai Expo. Capitalizing on this project, we will step up overseas marketing of our environmental systems.

ShinMaywa's vision for the future

Throughout its history, ShinMaywa has evolved by advancing into new business fields whenever an opportunity arose. Our development is based on technological expertise, which brings about a realization of the requirements of our customers; and service capabilities, which enable us to maintain the performance and safety of our products. Recognition that our business is a combination of products and services allows us to identify aspects of products requiring improvement as well as new customer needs. The plan-do-check-action (PDCA) cycle not only enables us to maintain the position we have cultivated in the market over the years but also leads to further development of the business. While strong demand for environmentally friendly, high value-added products has emerged in Japan in recent years, ShinMaywa's existing products retain great appeal in many overseas markets. Aspiring to be an enterprise that fully utilizes its technological expertise and management resources in the global marketplace to create new value, we will strive to make "ShinMaywa" synonymous with these qualities around the world.

The current economic recession, whose depth has exceeded anything we had anticipated, has dealt our business a severe blow. However, this ordeal has been imposed equally on virtually every manufacturer. I am determined to fulfill my responsibilities at the helm of ShinMaywa based on the conviction that our future success hinges on the extent to which the initiatives I have referred to take root and nourish our intrinsic corporate vitality before the economy bottoms out and a decisive recovery gets underway.