Issues to be Addressed

The business environment surrounding our group is influenced not only by political and economic trends in the countries where we operate, but also by global developments in regulations and technologies driven by the push for decarbonization. Furthermore, uncertainties are increasing due to factors such as natural disasters and geopolitical risks. Under these circumstances, we recognize the need to respond to long-term changes in demand for mobility—our group’s core business area—and are actively addressing the specific challenges outlined below.

Business and Financial Issues to be Addressed with Priority
Considering the management policy and the current business environment, our group recognizes the following key challenges to address:

• Contributing to the sustainability of the planet and society.
• Responding to the electrification of powertrains and diversification of energy sources.
• Ensuring continued business continuity management in the face of risks such as infectious diseases, natural disasters, geopolitical tensions and IT incidents.
• Addressing rising prices and labor costs due to global inflation.
• Promoting human capital management in anticipation of a declining working-age population due to aging and low birth rates.
• Maintaining a sound financial base.

Management Strategy
To address the above challenges, our group launched a new long-term vision, VISION 2033, in April 2024. Under the policy of strengthening our core by focusing on "enhancing competitiveness" and "challenging growth areas where we can leverage our corporate strengths," we will pursue the following initiatives:

(1) Efforts towards achieving carbon neutrality by 2050

• Promoting energy-saving activities, the use of renewable energy, and energy conversion with the goal of reducing Scope 1 and Scope 2 greenhouse gas emissions by 50% by 2030 compared to 2016 levels.
• Implementing reduction activities in the upstream and downstream of our supply chain to address Scope 3 greenhouse gas emissions.

(2) Efforts to enhance our presence in global markets

• Developing strategic products in response to electrification of powertrains and diversification of energy.
• Expanding engineering services and enhancing system proposal capabilities.

(3) Efforts to build a development and production system that can quickly adapt to changes

• Constructing a small-lot production system and a highly efficient supply chain in collaboration with suppliers.
• Reducing process times across all areas through digital development and other forms of digital transformation (DX).

(4) Efforts to address cost increases

• Appropriately passing on increases in costs such as raw materials, transportation, energy, and labor costs to sales prices.

(5) Efforts to address the declining workforce population

• Implementing various measures to alleviate the quantitative shortage of human resources by streamlining human tasks through IT utilization (AI, BI, RPA), robotics, and process improvements based on data analysis.
• Introducing programs aimed at improving employee engagement, promoting health and productivity management, and implementing recurrent education to enhance the base skill levels of all employees, thereby improving productivity.
• Changing the HR system to ensure efficiency and satisfaction in workforce allocation (switching from a functional qualification system to a role-based grading system) and ensuring smooth implementation of the new system.

(6) Efforts to maintain a sound financial base

• Optimizing assets and improving profitability to enhance return on invested capital.
• Optimizing overall resource allocation, including focused investments in growth areas and areas of expertise.