OMRON to spin off automotive electronic components business

TOKYO, JAPAN: Following a resolution at a board of directors meeting, OMRON Corp. announced its intention to spin off its automotive electronic components business into a new company, to be established in April 2010, through a corporate split.

Details will be announced following approval at the board of directors meeting scheduled for the second half of January 2010.

1. Background and Purpose
OMRON has designated the period from February 2009 through March 2011 as a “revival stage” in which sweeping profit structure reform will be implemented throughout the entire Group.

As part of this profit structure reform, OMRON will reorganize its business domains over the medium-term, focusing on its three control-based businesses (industrial automation, electronic components and automotive electronic components). The spin off of the automotive electronic components business is intended to improve profitability by allowing independent management of this unique business.

OMRON entered the automotive electronic components business in 1983. In 2003, after Omron instituted an internal company system, this division was reorganized as the Automotive Electronic Components (AEC) Company. OMRON worked to strengthen the burgeoning business, and sales increased rapidly on a global basis alongside the expansion of the automobile market.

The automobile industry is now feeling the effects of the global recession that began in the United States last year. With little hope of recovery in the short term and the future remaining unclear, alliances between automakers have accelerated, creating a spillover effect on suppliers of automotive systems and components.

AEC sees the changes currently taking place within the global automobile industry as an opportunity to transform itself into a company that can respond quickly and boldly to change.

In recent years, there has been a shift in what consumers require from their vehicles, resulting in the increasing adoption of automotive electronics. As an independent company, AEC will build on OMRON's core competence, sensing and control technology, and further strengthen the electronics technology and auto know-how and technology that it has cultivated to date.

AEC will focus these strengths on electronic control systems used in automotive bodies and work to respond to increasingly sophisticated and complex customer needs. At the same time, it will take a proactive and agile approach in considering partnerships and collaboration with other companies in order to respond to customer needs as quickly as possible.

In consideration of the above, OMRON determined that independent management capable of understanding and responding to movements in the automobile industry was needed to further strengthen AEC.

2. Outline of Split
1) Timeline
Schedule finalized: Second half of January 2010 (planned)
Plans approved at BOD meeting: Second half of January 2010 (planned)
Split date (effective date): April 1, 2010 (planned)

OMRON has not yet determined which assets will be transferred to the new company or their value; however, as they are not expected to exceed one-fifth of OMRON’s total assets, OMRON will not seek shareholder approval for the split in accordance with Article 805 of the Corporate Law of Japan.

2) Method
This is a simple corporate split in which OMRON is the transferring company and the new company is the assuming company.

3) Share allocation
Upon the corporate split, the new company will issue shares of common stock and allocate all of those shares to OMRON, making it a wholly owned subsidiary of OMRON.

4) Other
OMRON plans to announce information regarding the treatment of new stock acquisition rights and corporate bonds issued as a result of the corporate split, the increase or decrease of capital as a result of the split, rights and obligations to be assumed by the new company, and outlook for the fulfillment of obligations after plans for the split are approved at the board of directors meeting scheduled for the second half of January 2010.

What is drving market for electrical motors in automotive?

WELLINGBOROUGH, UK: Light vehicles are an important market for suppliers of electrical motors. According to a new report from IMS Research, the average vehicle featured over 30 electrical motors in 2008. In the same year, 66 million vehicles were produced.

Overall, the market for electrical motors in automotive applications is forecast to grow at an average rate of around 7 percent over the next seven years (although the market will shrink in 2009 as the downturn will mean lower vehicle production volumes). However, the report finds that demand for electrical motors in some applications will grow much faster than the average rate.

So, which applications will drive growth? According to report author, Jon Cropley: "A range of powertrain applications are becoming more common and this is partly due to stricter standards on emissions and fuel economy. Many of these powertrain applications use electrical motors. Examples include exhaust gas recirculation valves, dual-clutch transmissions, automated manual transmissions and electric power steering systems."

IMS Research forecasts the market for motors in electric power steering systems will grow by an average of over 12 percent a year, over the next seven years.

The trend to hybrid and electric vehicles is also driving growth in demand for motors. Motors are required for vehicle propulsion, for the air conditioning compressor pump and, in hybrids, for engine cooling pumps.

Many convenience and comfort applications that use electrical motors are also becoming more popular, bolstering the growth of sales for electrical motors, particularly those applications using multiple motors. One example is hard-top electric roof systems and these tend to feature around six motors.

Another example is climate control systems which use motors for controlling air mix doors. Furthermore, climate control systems are becoming advanced. Some of them feature automatically moving air outlet grilles. Some high-end vehicles now also feature a separate climate control system in the rear of the vehicle.

Not that the market for motors in every type of automotive application is growing. Demand is stagnant for some; for others, motor suppliers are only able to charge commodity prices. Nevertheless, the report finds that there are opportunities. Suppliers just need to have the right products for the right applications.