Yamaha Motor and Sakura Kogyo Agree on Consolidation of Exhaust-related Business Production reform aimed at enhancing global competitiveness

Yamaha Motor Co., Ltd. and Sakura Kogyo Co., Ltd. (president: Shintaroh Hirano, location: Hamamatsu City, Shizuoka Prefecture), a company specializing in the manufacture of mufflers and other exhaust components, have agreed on the consolidation of their exhaust-related business. The business merger is scheduled for April 2004.
Pursuant to this consolidation, Yamaha Motor will increase its capital in Sakura Kogyo, raising its share from the current 20% to 33.4%.

The integration involves transferring the development and manufacturing functions of Yamaha Motor's exhaust business for two-wheel vehicles (scooters and motorcycles) and power products (such as ATVs and snowmobiles) to Sakura Kogyo, and establishing a comprehensive exhaust component production system at Sakura Kogyo, equipped to handle all functions from development through manufacture.
Yamaha Motor will complete the relocation of its welding and assembly equipment by September 2004. It will also provide technology transfer support, including the loan of 50 to 100 employees, over the next four years.

Yamaha Motor and Sakura Kogyo aim 1) to boost product competitiveness by enhancing their joint development capabilities; 2) to accelerate global operations for motorcycle components production; 3) to strengthen cost competitiveness by integrating development and production functions; and 4) to improve profitability through business expansion.

Presently, some of Yamaha Motor's exhaust components are manufactured in-house by the Exhaust SyS unit - which combines development, manufacture and procurement functions - while others are purchased from three outside companies, including Sakura Kogyo. The total scale of the exhaust business is about 12 billion yen, with in-house purchases accounting for 30%, and the remaining 70% derived from outsourcing.

Once the business consolidation is complete, Yamaha Motor will purchase 90% of its exhaust components from Sakura Kogyo. Yamaha Motor and Sakura Kogyo aim to boost product competitiveness by enhancing their joint development capabilities; to accelerate global operations for motorcycle components production; to strengthen cost competitiveness by integrating development and production functions; and to improve profitability through business expansion. The two companies have set their cost reduction target at a minimum of 30%. Sakura Kogyo will strive to increase its net sales to approximately 15 billion yen in five years (the fiscal year ending March 31, 2008 ), and boost the ratio of recurring profit to net sales to at least 5%.

Exhaust components are important elements that dramatically affect a motorcycle's engine performance and external style. However, as they have improved in recent years to provide cleaner emissions, quieter sound, smaller size and lighter weight, their cost relative to the total vehicle has correspondingly increased. Amid rising costs for parts and components, Yamaha Motor has been implementing manufacturing reform, aimed at speedy, more cost-efficient production of quality parts and components. In the effort, Yamaha Motor has been reviewing its production system from a global perspective, and promoting a system supplier (SyS) system, with integrated development, production and procurement functions.

The exhaust business consolidation is an element of the drive to enhance the SyS system. It is designed to create an organization capable of autonomous development and production of exhaust components.
Special efforts will be made to maximize the strengths of the two companies, in order to realize significant improvements in design, evaluation, cost, quality and engineering. The alliance's synergy will also enable development and manufacturing to respond quickly to changes in the market and in user requirements. Furthermore, the new consolidated exhaust business will provide development and manufacturing support to Yamaha Motor's overseas plants. As it expands the scope of its activities overseas, the consolidated unit will be moving toward becoming a mother plant for the exhaust business of the entire Yamaha Motor Group.

Exhaust components for motorcycles (A muffler of YZF-R1)