Special Feature 1

Chairman, President and CEO Hiroya Kawasaki Discusses the Challenges on the Road to 2020

We will establish a solid business enterprise based on the three core areas of materials, machinery and electric power, as well as contribute to the environment and society while achieving sustainable growth.

The new Kobe Steel Group medium-term management plan to fiscal 2020 began in April 2016. Following a five-year growth plan starting from fiscal 2016, in what way will the Group undertake business and promote environmental and social contributions? Kobe Steel, Ltd.'s Chairman, President and CEO Hiroya Kawasaki's discusses of these issues.

Hiroya Kawasaki

Hiroya Kawasaki
Chairman, President, CEO and Representative Director
Kobe Steel, Ltd.

Based on the three core business areas of materials, machinery and electric power, we will focus on the medium- to long-term growth fields of weight savings in transportion and energy and infrastructure.

The Kobe Steel Group contributes to society through manufacturing in a variety of fields. The Group operates in a wide range of industries. The materials field comprised iron and steel, welding, and aluminum and copper, while the machinery field includes industrial and construction machinery, engineering and environmental solutions. Another important area is the electric power business. From these businesses, we offer original added value tailored to meet society's needs.
In formulating this medium-term management plan we looked to maximize the competitive advantage of the Group's products, technologies and services, so as to meet important societal needs. As a result, we identified three societal needs and two growth fields to focus on.

The first two needs are for "global environmental regulations" and the "development of industrial infrastructure in emerging nations." The third need is for "diversifying the power supply mix" in order to secure future energy sources for Japan, which is currently reliant on energy imports. The two growth fields we identified for the Group, correlating to these needs, are "weight savings in transporation" and "energy and infrastructure." We will focus on these growth fields through the three core business areas of materials, machinery and electric power.

New initiatives begin for KOBELCO VISION "G+"

The basic policies laid out in the 2010 KOBELCO VISION "G" medium-term management vision remain unchanged, but you may notice the new plus sign after the "G." This represents two things: further intensifying the Group's strength in fields such as our materials and machinery businesses and bringing our electric power business into full swing. In other words, the core approach of KOBELCO VISION "G+" is to expand business and strengthen our management foundation in growth fields, establish a solid business enterprise, and achieve sustained growth beyond fiscal 2020.

We will contribute to lighter cars and planes through technology solutions that make the use of multimaterials possible.

Pursuing initiatives for weight savings in transportion in our materials businesses is the first of three foundational strategies for business growth.

As part of our competitive advantage in automotive materials, we manufacture cutting-edge materials that combine lighter weight with strength, such as ultra high-strength steel sheet and aluminum products. We also possess sophisticated technologies to join different materials. This allows us to offer original total solutions that help our clients use multimaterials—a strength that no other company can imitate.

A drastic increase in the number of airplanes is expected in the aircraft industry, especially in Asia. Likewise, as with automobiles, lighter plane are required due to new environmental regulations. Our Group's titanium, aluminum and magnesium materials help contribute in this field.

In titanium we have steadily strengthened upstream operations from melting to casting and forging, making full use of a 50,000-ton press—one of the world's largest. We also have plans to install a new, cutting-edge melting furnace.
In the future, we aim to integrate downstream processes such as machining and surface treatment as well, so as to meet increased demand in the aircraft industry with reduced transport costs and shorter delivery times.

The Group is cooperating on important hydrogen-related businesses to help realize a hydrogen-based society.

Pursuing energy and infrastructure initiatives in our machinery businesses is the second of our three foundational business growth strategies. Regarding the hydrogen-related business, the Ministry of Economy, Trade and Industry has expressed 2030 targets for the creation of new hydrogen fueling stations, so as to help realize a hydrogen-based society. We are developing new, more compact, lower-cost hydrogen station units to meet these societal needs, aiming to increase our share of sales.

Our work on hydrogen stations is designed to meet the needs of government policy and society. It is important that we provide low-cost, high-performance products. This is why we built a hydrogen station comprehensive test center at our Takasago Works in Takasago, Hyogo Prefecture, which allows for testing under a variety of conditions. We will seek cooperation throughout the Group to pursue hydrogen-related R&D.

We will contribute to local communities through our power supply business.

Our third foundational strategy for growth is to pursue initiatives to stabilize earnings in the electric power supply business. Electric power is indispensable to modern lifestyles, which is why the Group made a full-scale entry into the independent power producer (IPP) business in 2002, contributing to society through the generation of electricity.

Furthermore, we have plans to construct a 1.25 million kW gas-fired power plant in Moka, Tochigi Prefecture. Construction is scheduled to finish in 2019-2020. We are also pursuing construction of a 1.3 million kW power plant on the site of Kobe Works' blast furnace in Kobe, Hyogo Prefecture, with feedback and support from local residents. If construction goes according to plan, together with our existing IPP facility, we expect to be capable of producing a total of 3.95 million kW by fiscal 2022. Additionally, the power plant in Moka has been selected for inclusion in the Cabinet Secretariat's list of private-sector initiatives for national resilience against disaster. As an inland facilitity, the power plant will be safe from risk of tsunami. Our most important mission at the moment is to implement these plans according to schedule.

Selected for 2015 Nadeshiko Brand:
The importance of cultivating employees and strengthening the management foundation

Improving technological development and manufacturing capabilities is what will give us the strength to pursue these business strategies. That is why we are reinforcing our management foundations—for instance by strengthening R&D activities, and establishing the Transportion Materials Planning Section responsible for gathering and disseminating information related to weight savings in transportation.

Securing and training personnel is also a significant issue. In 2014, in order to attract diverse human resources, we established a Diversity Development Section. We also pursued policies such as increased employment of women and systems to support the early return to work after childcare leave. In recognition of our initiatives to promote women in the workplace we were included in the 2015 Nadeshiko Brand selection. Being chosen for the Nadeshiko Brand is a great honor, as only one company is selected per industry. In the future we will continue to aim to be a company where women can flourish. We will also focus on transforming workstyles, training global leaders, health and safety management, and other initiatives.

Our employees are at the center of activities that contribute to local communities.

With offices and plants throughout Japan and the world, each Kobe Steel Group location contributes as a member of the local community to the region and local quality of life. Each location carries out a wide range of activities such as road cleanup drives, events hosted at plants, and creation of green belts and biotopes.

In fiscal 2013 we began the KOBELCO GREEN PROJECT, which includes activities to contribute to the environment, such as forest maintenance carried out by Group employees. We also started the KOBELCO Forest Fairy Tale Prize, which is designed to foster an appreciation for nature in the children responsible for our future. Prizewinners are selected from submissions from elementary, middle and high schools throughout the country, and the books are donated to educational institutes and libraries in Hyogo Prefecture and other sponsoring municipalities. The Kobe Steel Group plans to intensify efforts, such as these, to contribute to society and the environment.

We also contribute to society through rugby and other sports.

After Japan's performance in the 2015 Rugby World Cup, rugby has been growing in popularity throughout the country. The Kobe Steel Group supports high school rugby, expanding horizons for the sport and training stronger high school athletes. The Group promotes Japanese rugby through activities such as the KOBELCO Cup summer tournament and support for women's sevens rugby, which has been chosen as an official event for the Rio de Janeiro Olympics. Additionally, our own company rugby club engages in a variety of recovery efforts in response to the Great East Japan Earthquake. We will continue to contribute to society through rugby in this way in the future.

Improving governance and compliance in response to new standards

Stringent corporate governance and compliance form the bedrock of our new medium-term management plan and our contributions to society. The Group is working to promote compliance with our new governance code and strengthen our corporate governance framework. We are also promoting new business strategies and CSR activities, with a focus on the importance of action by each employee.

We hope you will look forward to what the Kobe Steel Group will bring, both in 2020 and in years to come.

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