JVC 2008 Annual Report Download - page 7

•Enhancing competitiveness and profitability through evolving
a new foundation for corporate survival
We can enhance our competitiveness and profitability through
evolving a new foundation for corporate survival as a consolidated
corporate entity under the administration of a joint holding company.
•Synergy
We project to contribute to profits by expanding sales for the car
electronics business and developing sales from new businesses.
Due to cost synergies, we project increased profits from
reducing development costs through joint development, also
reduced procurement costs through joint parts procurement,
reducing subcontract processing and logistics costs through mutual
subcontracting, optimizing manufacturing locations and sharing of
infrastructure, and reducing patent-related fees through mutual use
of intellectual property, rights, and so forth. Expanding economies of
scale through common businesses and utilizing mutual production
consignment to reduce outsourced manufacturing.
As for balance sheet status, both companies will work to reduce
net debt by utilizing improved cash flow. Both companies will also
reduce inventories and accounts receivable by promoting group wide
production innovation and marketing reforms.
•Effects on Finance and Accounting
The Share Transfer will be treated as an acquisition under the
accounting standard for business combinations, and therefore will
be subject to purchase method accounting. From this, negative
goodwill is expected to be recorded on the Joint Holding Company’
s consolidated balance sheet and subsequent depreciation will
contribute to non-operating profit, thereby increasing such line items
as current net income and return on equity.
Furthermore, since the Joint Holding Company adopts the
consolidated tax system used by Kenwood, cash flow and current net
income are expected to improve through the tax advantage of netting
group companies’ taxable income and loss.
Effects of Management Integration
Results of joint development
As the first product to adopt joint
development technologies, the
commercialized KENWOOD brand
AV Control Center (an AV amplifier
for home cinema) adopts J&K
Technologies HDMI/DSP modules.
Joint development areas at J&K Technologies
• Car navigation systems, engines
• Car multimedia, terrestrial digital TV tuners, etc.
• Car audio and home audio
• Devices (CD/DVD drives, BD drives, etc.)
Progress of JVC and KENWOOD Collaboration
AV Control Center
FYE’08/3
• Commenced manufacturing KENWOOD brand automobile-
mounted CD receivers at JVC’s factory in Indonesia.
FYE’09/3
• Commenced manufacturing KENWOOD brand automobile-
mounted terrestrial digital radio tuners at JVC’s factory in
Indonesia.
• Commenced manufacturing KENWOOD brand automobile-
mounted DVD receivers at JVC’s factory in Indonesia.
• Commenced manufacturing part of KENWOOD brand home
audio at JVC’s factory in Indonesia.
• Commenced manufacturing JVC brand automobile-mounted
CD receivers at Kenwood Malaysia Plant.
Collaboration in manufacturing and procurement
Annual Report 2008 5