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2009 New Year's Message from President Yasuo Inubushi

January 5, 2009

On January 5, the first working day of the New Year, President and CEO Yasuo Inubushi gave a new year's message to company employees. Here is a summary of his remarks translated from the Japanese.
1. Progress of the Medium-Term Business Plan
Our three-year Medium-Term Business Plan, based on "stability and growth," is drawing to a close. Looking back, we can say that "we have worked hard, but not enough." We were able to achieve our profit targets in the first two years of the plan, but in fiscal 2008, we have suffered from cost increases caused mainly by higher raw material prices and profit decrease due to changes in the accounting system. We have also been facing a sharp drop in demand since the middle of fiscal 2008. On the other hand, we have made certain achievements in some of the key areas of the Medium-Term Business Plan, in particular strengthening our production base and increasing sales and creating more Only One products. We have been able to lay down the groundwork for future growth by investing in equipment and R&D at each of our plants and also by expanding our overseas locations. In the Iron and Steel segment, for example, we completed the refurbishment and rebuilding of some of our blast furnaces.
2. Current Economic Conditions and Our Basic Policy
The financial crisis has engulfed the world at a furious speed, dealing a crushing blow to the real economy. The bottom is not in sight and it will be long before the economy recovers. This year will be a tough one and we must brace ourselves. What we have to do now is to prepare for fiscal 2009, so that we can weather this tough time. For this purpose, we will focus on drawing up a budget for fiscal 2009 and on placing our full efforts into successfully operating our business within this budget. At the same time, we will work to increase profits to the greatest extent to meet the expectations of our stakeholders, as well as for our own sake. We will also put together the next Medium-Term Business Plan after we assess the changes in the economic situation. However, our basic policy remains unchanged. And that is to decisively pursue sustainable growth by supplying society with our Group's unique and distinctive products, technologies and services and thereby improving our competitiveness. The immediate measures are as follows:
(1) Strengthening Our "Monozukuri" Capabilities
The first is "monozukuri," which literally means manufacturing, the foundation for competitiveness in a manufacturer. We will exhaustively pursue more stable production, higher quality and stronger cost competitiveness. I would like you to devote yourselves to become experts in equipment and technologies and utilize both skillfully. I would also like you to renew and deepen your understanding that all of you, including those in R&D and marketing, are playing an integral part in monozukuri.

(2) Increasing Profits

Second, there is no magic wand that enables us to deal with dramatically changing situations. All we can do is make steady efforts. In drawing up the fiscal 2009 budget, our highest priorities are generating cash flow and increasing profits. In addition to our ongoing efforts such as cutting costs, keeping or raising sales prices, and expanding our Only One products, we will immediately and vigorously push forward flexible measures such as reviewing our capital investment plans and investment and financing plans and reducing inventory. In implementing these measures, our group-wide working group called the Profit Improvement Committee will play a leading role.
(3) Respecting Harmony within the Kobe Steel Group
Third, one of the unique qualities of the Kobe Steel Group is that we run diverse businesses. Each of our segments has fine technologies and human resources of great individuality. If all of you interact flexibly like one organic body, I am confident that we can create unparalleled advantages. For that to happen, I would like you to communicate closely with one another to fill the gaps between organizations and people. I hope you will mutually improve your ability and performance by sharing information and values. Let us join hands, face forward and make steady progress together.