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Copyright (C) 2016 Panasonic Corporation All Rights Reserved.

Automotive & Industrial Systems Company

Business Policy

May 18, 2016

Panasonic Corporation

Automotive & Industrial Systems Company President Yoshio Ito

Notes: 1. This is an English translation from the original presentation in Japanese.

2. In this presentation, “FY17” refers to the year ending March 31, 2017.

Automotive & Industrial Systems Company Business Policy 1/16

FY16 Results


Automotive & Industrial Systems Company Business Policy

Sales and profits decreased due to heavy slump in ICT business whilst business in automotive and industrial areas was promoted

(-3% vs. FY15)

FY16 Results

(yen: billions/ US GAAP)

FY15 FY16

116.4 (4.2%)

102.7 (3.8%)

Sales

OP

- Automotive: Products for the North American market spurred overall sales.

- Industrial: The power storage business is now on a growth path.

- Upfront development expenses increased (automotive and power storage businesses).

- The marginal profit ratio improved as a result of the withdrawal from underperforming businesses and products.

- Existing: Decreased ICT demand had a large impact.

(FY15: 36.6% FY16: 37.4%)

2/16

2,708.6 2,796.8

Automotive

Industrial

Existing

Sales

OP (%)

(yen: billions)


Steadily rearrange the business portfolio

Strategic Move to Growth

<New Dalian automotive battery factory in China>

(rendering)

Investment for growth

- Invested in Ficosa International S.A. in Europe.

- Established a joint automotive battery company (China).

Continuation of reforms

- Decided to transfer the lead-acid storage battery business.

- Discontinued the optical disk drive business.

3/16



FY17 Business Policy


Increase net sales on a currency-neutral basis and make a turnaround in the automotive and industrial businesses

FY17 Management Targets: Sales

FY16 FY17 (f)

5/16

Exchange rate

Existing Automotive

Industrial

2,707.3

2,640.0

(-2% vs. FY16)

<Analyses of sales changes (vs. FY16)>

(yen: billions / IFRS)

Net sales increase

(+2% vs. FY16)



Make investments for future growth based on a clear policy

FY17 Management Targets: OP

6/16

Exchange rate effects

Increase in fixed costs

135.2 (5.0%)

Sales increase

Price declines, streamlining, etc.

117.0 (4.4%)

Increased investment

50.2 (1.9%)

100.0 (3.8%)

Ad

jus

ted

OP

Ad

jus

ted

OP

IFR

S

IFR

S

<Analyses of OP changes (vs. FY16)>

(yen: billions)

FY16 FY17 (f)

-11.2

-41.3 +33.9

+0.4


FY17 Capital Investment Strategies

Concentrate investments on the automotive and industrial businesses

<Capital investment plan>

Low profitability businesses

Stable growth

businesses

High growth businesses

Existing

Automot-ive

Industrial

<Business configuration>

Sales: 2,640 billion yen

FY17 (f)

85%

70%

15%

<Major capital investment categories>

Automotive

Industrial

- Automotive batteries - Automotive infotainment

systems - Automotive electronics

products

- Power storage systems - Labor saving solutions - Electronic materials - Industrial devices

Au

tom

oti

ve

Ind

us

tria

l

FY17

185 billion yen

30%

7/16

Automotive & Industrial

Existing



Sales

(yen: billions)

<Sales and OP targets>

8/16

Sales

OP

To be reflected in order from FY18 onward

Continue investments in development for future growth.

Establish a development platform with car makers.

506.1 (-5% vs. FY16)

534.1

IFRS US GAAP

34.0 (6.4%) 25.5

(5.0%) 17.2 (3.2%)

After development expenses are

transformed into assets

FY17(f) FY16

Prepare for a sales increase even though sales are decreasing during order-receipt transitional period.

OP (%)

Initiatives of the Automotive Infotainment Systems Business Division

Although sales and profits are decreasing, continue efforts to win orders and accelerate product development


Reestablish management foundations and achieve the next phase of growth

(yen: billions)

Initiatives of the Rechargeable Battery Business Division* * Rechargeable Battery Business

Division + Tesla BU

<Sales and OP targets>

9/16

366.8 (+4% vs. FY16)

352.8

IFRS US GAAP

-63.1 (-17.9%)

3.5 (1.0%) 0.1

(0.0%)

After recording temporary expenses

FY17(f) FY16

Sales

OP (%)

- Automotive: Increase sales by responding to increased demand.

- Industrial: Develop and enhance the power storage business.

- Existing: Clearly classify businesses from a profitability perspective.

- Strengthen profit structures in automotive and industrial fields.

* FY16: Temporary expenses (for handling lawsuits and market quality issues) were recorded.

- Increase profits during FY17.

Sales

OP



Toward FY19


Management Targets toward FY19

11/16

Bottom out in FY17 and make a turnaround

3.2

2.6 2.7

FY16 FY17 (f)

5.0%

3.8%

1.9%

FY19 (f)

Existing

Industrial

- Expand the business scope from single products, to systems and services.

Automotive

- Secure profits mainly in competitive devices.

- Increase orders from Japanese, U.S., European and Chinese customers.

<Sales and OP targets (IFRS)>

(yen: trillions)

Sales

OP (%)



Automotive Business: Market Environment

Our effective demand will significantly increase in line with the development of electrification and electronization

<Effective demand forecast (amount by area)>

25.8

20.7

(yen: trillions)

Source: Panasonic estimate

12/16

FY16 FY17 FY18 FY19

22.7

Comfort

Safety

Environ-ment

Background of the demand increase (Major trends in countries and

regions) Average annual growth rate: +8%

* KT Act: Kids and Transportation Safety Act

* NCAP: New Car Assessment Program

* CAFC: Corporate Average Fuel Consumption

- KT Act (rear view cameras)

- Tightening of the NCAP assessment standards

(Crash reduction and automatic emergency brake systems)

- Tightening of CO2 regulations

- Fuel consumption regulations (CAFC)


FY19 2.0 trillion

yen

Achieve growth that exceeds the industry's average by expanding businesses into systems

Comfort

Safety

Environment

* ADAS: Advanced Driver Assistance System

*

Sales

570 billion yen

360 billion yen

350 billion yen

FY16 1.3 trillion

yen

750 billion yen

600 billion yen

650 billion yen

Automotive Business: Growth Strategies

13/16

Average annual growth rate: +16%

* ADAS: Advanced Driver Assistance System

Advantages: Automotive and consumer digital AV technologies

Actions: Develop systems and achieve links to ADAS.

Advantages: Sensing and image processing technologies

Actions: Accelerate development through collaboration with other companies.

Advantages: Advanced battery and power supply technologies

Actions: Increase capacities and receive orders for a larger number of vehicle models.



Become the No. 1 Cockpit Supplier

Obtain a larger number of system orders by leveraging our group's technical assets

540 570

750 billion yen

<Comfort area: sales targets>

Comfort

FY16 FY17(f) FY19(f) FY18(f)

14/16

Next-generation cockpits

Gradually deliver products from FY18

- Center displays - Head-up displays

- IVI units

Utilize digital consumer electronics technologies. - Image processing - Downsizing - Optical lenses

Develop products with car makers by leveraging the experience of

having developed Linux- and Android-based software.

* IVI: In-Vehicle Infotainment Unit


Demonstrate our strength in ADAS in low- and medium-speed ranges

Expand the systems business by focusing on perimeter monitoring and in-vehicle ADAS

350 360

<Safety area: sales targets>

Safety

FY16 FY17(f) FY19(f) FY18(f)

15/16

New integration systems

Perimeter monitoring ADAS

In-vehicle ADAS Our group's technical assets

- Image processing

- Vehicle communication

- Artificial intelligence

Competitive devices

- Sonars - Camera modules - Camera ECU - Automotive switches

×

Co

llab

ora

tio

n a

nd

jo

int

develo

pm

en

t

Eye movement detection

Grip sensors

Driver monitoring

Emergency brakes (Scheduled delivery: FY17)

Self-parking

600 billion yen

DeepLearning.wmv



Leading the Market as the Top Automotive Battery Manufacturer

Stay closer to customers and meet increasing demand in world's three zones

390 350

650 billion yen

<Environment area: sales targets>

FY16 FY17(f) FY19(f) FY18(f)

FY18

FY17

Pri

sm

ati

c

Batt

ery

bu

sin

ess

Oth

ers

Environment

Cylin

-d

rical

Automotive battery performance improvement plan

Number of vehicle models

(: Start of operations)

45 + 41 models

Results

As of Mar. 2016

Underway

FY17 Sumoto Factory's new production lines

New Dalian Factory

New Nevada Factory

16/16


Disclaimer Regarding Forward-Looking Statements This presentation includes forward-looking statements (that include those within the meaning of Section 27A of the U.S. Securities Act of 1933, as

amended, and Section 21E of the U.S. Securities Exchange Act of 1934), as amended about Panasonic and its Group companies (the Panasonic Group). Panasonic discloses its consolidated financial forecasts for fiscal 2017 based on International Financial Reporting Standards (IFRS). To the extent that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently avai lable to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Panasonic Group's actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings under the Financial Instrument and Exchange Act of Japan (the FIEA) and other publicly disclosed documents.

The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the Americas, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; the possibility that excessive currency rate fluctuations of the U.S. dollar, the euro, the Chinese yuan and other currencies against the yen may adversely affect costs and prices of Panasonic’s products and services and certain other transactions that are denominated in these foreign currencies; the possib ility of the Panasonic Group incurring additional costs of raising funds, because of changes in the fund raising environment; the possibility of the Panasonic Group not being able to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the possibility of not achieving expected results or incurring unexpected losses in connection with the alliances or mergers and acquisitions; the possibility of not being able to achieve its business objectives through joint ventures and other collaborative agreements with other companies, including due to the pressure of price reduction exceeding that which can be achieved by its effort and decrease in demand for products from business partners which Panasonic highly depends on in BtoB business areas; the possibility of the Panasonic Group not being able to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; fluctuations in market prices of securities and other assets in which the Panasonic Group has holdings or changes in valuation of long-lived assets, including property, plant and equipment and goodwill, deferred tax assets and uncertain tax positions; future changes or revisions to accounting policies or accounting rules; the possibility of incurring expenses resulting from a leakage of customers’ or conf idential information from Panasonic’s systems due to unauthorized access or a detection of vulnerability of network-connected products of the Panasonic Group; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group. The factors listed above are not all-inclusive and further information is contained in the most recent English translated version of Panasonic’s securities reports under the FIEA and any other documents which are disclosed on its website.

In order to be consistent with generally accepted financial reporting practices in Japan, operating profit (loss) is presented in accordance with

generally accepted accounting principles in Japan. The company believes that this is useful to investors in comparing the company's financial results with those of other Japanese companies. Under United States generally accepted accounting principles, expenses associated with the implementation of early retirement programs at certain domestic and overseas companies, and impairment losses on long-lived assets are usually included as part of operating profit (loss) in the statement of income.

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Automotive & Industrial Systems Company Business Policy · PDF fileAutomotive & Industrial Systems Company Business Policy Automotive Business: ... Automotive & Industrial Systems