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A generous commitment of managerial resources to the quest for further growth (Masanari Yasuda / President and Representative Director)

Introduction

I would like to extend my deepest sympathy to all those who have been affected by COVID-19. I would also like to offer my heartfelt respect and gratitude to the medical personnel and essential workers who are giving their all to treat those with the virus and to all workers who help support us in our everyday lives. It is my hope that this situation will be brought under control and tranquility will return as soon as possible.

Fighting COVID-19

The impact of COVID-19 created a very challenging business environment at the beginning of fiscal 2021, with a succession of plant shutdowns in the Americas and the Asia and Europe regions. Nevertheless, profit steadily rebounded with the resumption of production in China, which recovered quickly, and the restoration of plant operations in other regions between May and July as the spread of infection slowed. Although production volume fell, impacted by the semiconductor shortages that occurred at the end of 2020, we enacted thorough cost containment measures and reviewed the timing of non-urgent capital investment. As a result, profit increased year on year in fiscal 2021, and we secured a solid profit even amid the difficult circumstances.

The response to COVID-19 inevitably changed conventional ways of working and thinking, but not all changes were negative. Even in departments where it was deemed difficult to implement a work-from-home system, the percentage of employees working on-site has been reduced thanks to creative ideas, and there has been dramatic progress in digitalizing operational workflows and in moving meetings and training online. These steps have contributed to improved labor productivity in many areas.

We expect the situation will continue to be unstable going forward. However, we will build systems for the post- COVID-19 era to ensure that our response is not merely an emergency measure but one that facilitates work-style reforms and even greater efficiency.

Partitions to prevent the spread of infection

Shift to online training

Practicing ESG Management

Under the 13th Medium-Term Management Plan (fiscal 2018–fiscal 2020), we promoted the “Creation of a foundation for ESG management” as our management policy. In the 14th Medium-Term Management Plan (fiscal 2021–fiscal 2023), which commenced in fiscal 2021, we will accelerate the implementation of various measures under our management policy of “Corporate evolution through ESG management” without shifting the axis from the previous Medium-Term Management Plan.

In fiscal 2022, the most important topic is the implementation of corporate governance reforms, which had been under consideration for some time. TS TECH’s Board of Directors has been chaired by an outside director since fiscal 2020 in order to ensure transparency and eliminate arbitrariness. In addition, following its approval at the 75th Annual General Meeting of Shareholders held on June 25, 2021, the company transitioned to a “company with an Audit and Supervisory Committee” structure, and now has directors who are Audit and Supervisory Committee members with voting rights on the Board of Directors in order to further enhance the supervisory function of the Board of Directors and the corporate governance structure. As a result, the ratio of independent outside directors on the Board of Directors has increased to one-third. At the same time, the Nomination and Compensation Committee, with a majority of independent outside directors, was also newly established as an advisory body to the Board of Directors to reflect the objective views of outside directors in management more than in the past and to improve the transparency and fairness of management. In addition to the executive officer system that was implemented previously, the Board of Directors will delegate decision-making on important matters of business execution to the directors to the extent legally permitted to ensure swift decision-making in the face of a rapidly changing business environment.

Under this new management structure, which includes greater diversity with the addition of a newly appointed female director, we will accelerate our efforts to achieve higher quality management that is not constrained by the past, increase corporate value over the medium to long term, and further enhance diversity.

Moreover, in March 2021 the TS TECH Group identified the key material issues (materiality) we will prioritize in order to achieve sustainable growth, and both internally and externally announced our main issues and goals from the three perspectives of society, environment, and corporate foundation.

We also declared our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)* in August 2021. Going forward, we will keep working hard to reduce CO2 emissions and actively disclose information based on the TCFD recommendations in order to help achieve carbon neutrality by 2050. Our disclosure of information is currently limited to the identification of material issues. However, we are working diligently to formulate key performance indicators (KPIs) for each issue in line with the TCFD and other factors.

In order to further accelerate these initiatives, we plan to establish a new Sustainability Committee. As an advisory body to the Executive Committee, it will serve as the basis for considering, implementing, and leading the measures the TS TECH Group should work on with respect to sustainability-related issues. Going forward, the entire TS TECH Group will continue working to help achieve a decarbonized society and resolve social issues related to sustainability.

  1. * Task Force on Climate-related Financial Disclosures
    A task force on climate-related financial disclosures established by the Financial Stability Board (FSB) at the request of the G20. The task force recommends assessment of the financial impact of climate change risks and opportunities on management and presents a framework for climate change-related disclosure structured around the areas of governance, strategy, risk management, and metrics and targets.

Driving Further Corporate Growth

Although our 2030 Vision faced major challenges from the outset in the form of COVID-19, we have made no changes to the approach and policies at this time.

As “Innovative quality company―Continued creation of new value” stipulates, our mission is to create unprecedented new value by leveraging the technologies that the Group has cultivated over many years in a changing business environment, and to achieve continuous growth together with society.

However, over the past few years, technological innovation in the automobile industry geared toward new forms of mobility in society has advanced at a remarkable place. This has had a significant impact not only on automobile manufacturers but also on the automobile component industry.
Manufacturers of components related to engine drivetrains are developing their businesses using technological and capital alliances to survive this era of upheaval.

The automotive interior component domain to which the TS TECH Group belongs is no exception. To date, we have been creating new value by seeking to improve the safety and comfort of individual seats and add greater appeal to door components. In the future, however, automotive interior components will play a more important role than ever before as the human–machine interface (HMI) that connects the occupants with a vehicle. Looking ahead to the advent of automated driving, there will soon be a time when the entire cabin space will be considered a single module, rather than separate components, such as seats and doors.

In order to achieve sustainable growth in such a changing business environment, we believe that we must transform our company into a “car interior manufacturer” that can coordinate and propose an automobile cabin space as a whole. In order to achieve this, we will identify our strengths and weaknesses, and then expand our business domains by considering what can evolve within the Group using existing resources and how to efficiently bring the missing parts in-house, acting swiftly to make adjustments as necessary. The TS TECH Group has pursued safety and comfort in automotive interior components for more than 60 years. Our greatest assets are the technical capabilities and know-how we have cultivated over the years as well as the source of these capabilities, the skills of our employees, and our solid financial base. In addition to this, we aim to realize our vision through a generous commitment of managerial resources, including alliances with other companies and active utilization of venture companies.

Moreover, as the result of some 10 years of proactive efforts to expand sales beyond our main customers in order to grow our business, we have begun to gain greater trust from European and American automakers. The number of inquiries we receive has increased significantly, and we are gradually starting to win substantial orders. As a result, the scale of our business in Europe and the Americas has been steadily expanding. However, in drawing up our growth strategy, we believe we need to move swiftly to grow sales even further.

In the face of unavoidable competition with the global mega-suppliers in each region, we believe we must not only expand using the Group’s resources alone but also form strong alliances with new business partners to grow sales. To this end, we will quickly ascertain the business environment and any changes in each region around the world and make the most of our strong financial base to carry out the necessary investment for business expansion. One way we intend to achieve this is by actively pursuing friendly M&As and alliances.

14th Medium-Term Management Plan
Order Targets for New Commercial Rights by Region from Customers Other than Main Customers

  1. Note:  Amounts show the target scale of orders. Actual annual revenue will differ due to differences in the timing of the start of mass production.

To Our Stakeholders

The environment surrounding the TS TECH Group is constantly changing, illustrated by the demands of society, the structure of the automotive industry, and new risks such as COVID-19. Considering the speed of these and other changes, the Group has now started to review the specific strategies and the KPIs at each stage from the management vision to the Medium-Term Management Plan and single-year business plans of each department, as well how we should address non-financial areas.

In an era when it is rather difficult to anticipate the future, we believe corporate management must constantly look ahead and always make the utmost effort to do what is needed at the time without closely following precedents.

One of my favorite words is yuzumuge, which means being able to respond flexibly to a situation based on various perspectives without being bound by a single viewpoint or approach. We do not fear change; it is by leveraging change that we will become a company whose presence is appreciated by even more stakeholders.

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