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2008 New Year's Message from President Yasuo Inubushi

January 7, 2008

On January 7, the first working day of the New Year, President and CEO Yasuo Inubushi gave a speech to company employees. Here is a summary of his remarks translated from the Japanese.

Progress of the Medium-Term Business Plan

In the second fiscal year of the Kobe Steel Group Medium-Term Business Plan, we expect to attain strong business performance, with consolidated ordinary income of 150 billion yen and net income of 90 billion yen. I believe that we are on the way to fulfilling the plan. However, in order to achieve our target of consolidated ordinary income of 180 billion yen or more in fiscal 2008, our profit must increase by 30 billion yen or more from fiscal 2007.

In addition, raw material prices, energy costs and ocean freight rates are rising at a high magnitude and this may hit us hard. Whatever the situation turns out to be, however, fulfilling our Medium-Term Business Plan is a pledge we made to our stakeholders.

To honor this pledge, we will actively work to increase our profits by cutting costs, raising our sales prices and developing a wide-range of "Only One" upper-end products. Each one of us must face up to his or her own goals, while sharing a sense of crisis.

Strengthening Our "Monozukuri" Capabilities

The word "monozukuri," which literally means manufacturing, connotes every element that forms the foundation for competitiveness in a manufacturer: safety and accident prevention; stable production; technological development; quality improvement; cost cuts; and the competence of staff to realize all these elements. Improving this manufacturing strength is closely linked to increasing our profitability. Therefore, I expect all employees to do everything they can with a sense of urgency and to take charge so that we can build up a solid strength in manufacturing.

Customers are highly sensitive to market needs. We have to successfully match the seeds of our business with market needs to relate well with customers. By doing so, we can improve our technology and products and thus contribute to upgrading our customers' products.

For that to happen, we need to closely communicate with our customers. Within the Kobe Steel Group, we also need to share information and values; keep in close and continuous communication with each other; and create new values by making the best use of our inventiveness.

The Kobe Steel Group's Corporate Philosophy

The Kobe Steel Group's corporate philosophy says that we must:

- provide reliable technologies, products and services;
- respect mutual cooperation within the Kobe Steel Group; and
- enhance our corporate values through continuous efforts for innovative change.

In particular, the word "reliable" has profound significance here. I sincerely hope that we will be able to build a corporate culture that emphasizes most the reliability of our Group for our customers and society as a whole.

The mission of the Kobe Steel Group is to meet the needs of our customers by providing products, technology and services. Bearing this in mind, we must do our utmost to sharpen our competitive edge, improve our financial performance and achieve sustainable development in harmony with society.

In order to increase the value of the KOBELCO brand, I expect all employees to work everyday with a fresh spirit and further contribute to improving our business results.