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Establishment of Daikin-Sauer-Danfoss

To Integrate Sales Function of Mobile Oil Hydraulic Equipment at the Manufacturing Subsidiary and Strengthen Business in China

31 October 2012

Daikin Industries, Ltd. and Sauer-Danfoss Inc. (US) have established Daikin-Sauer-Danfoss, Ltd., a Group company to perform all activities of product development, manufacturing, and sales with the aim of expanding business in China in the field of agricultural machinery, a market sector experiencing remarkable growth in the area of mobile oil hydraulic equipment. Operations at the subsidiary are scheduled to begin from January 1, 2013.

The new company reorganizes and integrates the Japanese sales functions of Sauer-Danfoss-Daikin Ltd (35% investment by Daikin), a product development and sales subsidiary, with those of Daikin-Sauer-Danfoss Manufacturing Ltd. (55% investment by Daikin), a manufacturing subsidiary producing oil hydraulic equipment used in mobile equipment. The two companies were established based on a joint venture agreement in 2001 between Daikin and Sauer-Danfoss. The new company is expected to raise the level of product development, manufacturing, and sales know-how attained by both companies and to accelerate business expansion in Japan and overseas countries, beginning with China.

In recent years, mechanization of agricultural machinery for rice farming and labor-saving operations have advanced in China, and demand for agricultural machinery such as rice-planting machines and combines is expected to expand. Together with performing product development, manufacturing, and sales of hydrostatic transmissions (HST) that are being targeted in this Chinese agricultural machinery market, the new company will also expand business globally and aim for sales in the overall business of mobile oil hydraulic equipment amounting to 16 billion yen in fiscal year 2015.

Although currently manufacturing is performed only in Japan, China is also being seen as a future production base for mobile oil hydraulic equipment, and there are plans to expand business in the Chinese agricultural machinery market as well as in the markets of Asia /Oceania, Europe, and the United States.

Furthermore, continuing in the field of agriculture, Daikin is promoting expansion of new applications for HST. Leveraging the experience gained in the joint venture business, Daikin has yet again raised the level of its proprietary technology, such as that used in special mobile equipment systems and fan drive systems that are effective in reducing engine exhaust, and advanced further in development of differentiated products.

Summary of New Company

1) Name Daikin-Sauer-Danfoss, Ltd.,
2) Head Office Settsu City, Osaka, Japan (on premises of the Daikin Yodogawa Plant)
3) Capital 400 million yen
4) Investment Ratio Daikin 55%, Sauer-Danfoss Inc. 45%
5) Establishment January 1, 2013
6) Description of Business Product development, manufacturing, sales, after sales service, etc., of hydrostatic transmissions (HST)
7) Number of Employees Approximately 150 people

Schematic of New JV Organization

Established new JV company to integrate product development, manufacturing, and sales functions.
Accompanying this, the current product development and sales JV companies will be dissolved.

Outline of Sauer-Danfoss Inc. (JV Partner)

Sauer-Danfoss Inc is a global oil hydraulic manufacturer with approximately 6,500 employees and sales of 164.6 billion yen (2011 results, 1$=80 yen) and is a global leader in oil hydraulic HST for use in mobile equipment and oil hydraulic operational systems.

1) Name Sauer-Danfoss Inc.
2) Head Office Ames, Iowa, USA, Neumunster, Germany, and Nordborg, Denmark
3) Representative Eric Alstrom (President & Chief Executive Officer)
4) History The parent company Sundstrand established an oil hydraulic division.
In 1987, the Germany company Sauer Getriebe acquired it and established Sauer-Sundstrand. Later, from the merger with the Danfoss oil hydraulic division in May 2000, the name of the company changed to its current name Sauer-Danfoss Inc.
5) Description of Business Product development, manufacturing, and sales of oil hydraulic equipment and systems for use in mobile equipment as well as electronic controls
6) Manufacturing Locations Europe (9 plants centered on the head office plants in Germany and Denmark), US (7 plants centered on the head office plant) , Asia (3 bases in China, India, and Japan)
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