NEWS RELEASE

Oct 31, 2019

R&I View: , to Merge Four Automotive Parts Companies

Hitachi, Ltd. (Sec. Code: 6501, Issuer Rating: AA-), Honda Motor Co., Ltd. (Sec. Code: 7267, Issuer Rating: AA, Honda), Hitachi Automotive Systems, Ltd. (unlisted, no Issuer Rating), Keihin Corp. (Sec. Code: 7251, no Issuer Rating), Showa Corp. (Sec. Code: 7274, no Issuer Rating) and Nissin Kogyo Co., Ltd. (Sec. Code: 7230, Issuer Rating: A-) announced on October 30 that they agreed on a merger of Hitachi Automotive Systems and Honda-affiliated Keihin, Showa and Nissin Kogyo in which Hitachi Automotive Systems be a surviving company. The merged company will be a consolidated subsidiary of Hitachi and an equity-method affiliate of Honda, owned 66.6% and 33.4%, respectively. The merger is subject to approvals by authorities in relevant countries and other customary conditions. It may take one year or so before the merger is completed. Hitachi has been working on a structural reform of its automotive systems business by selling non-core businesses such as car navigations and automotive batteries, while acquiring a leading automotive brake manufacturer based in Europe. The merger of Hitachi Automotive Systems with the above-mentioned three companies, which offer competitive products, will expand its product portfolio. Moreover, a closer business relationship with Honda will affect the evaluation of its customer base favorably. The merger will have only a limited positive impact on the rating for Hitachi given the company's overall earnings base, but would help strengthen the competitiveness of its automotive systems business. Honda will pay cash in tender offers for shares of the three affiliated parts companies. Even so, the financial impact will be small because it is in a substantial net cash position, excluding sales finance operations. Stronger competitiveness of the merged company, which will ultimately become a joint venture with the Hitachi Group, may have positive implications for Honda's earnings base in the future through development of advanced technologies and parts procurement, among others. Eyes are on developments in this regard. Nissin Kogyo is a manufacturer of brake systems and other components for motorcycles and automobiles. More than 70% of total sales come from Honda. It will capitalize on the merger to build more efficient development and production structures, reinforce development of next-generation technologies, and reduce procurement and production costs through expansion of sales to companies other than Honda. The creditworthiness of the merged company, including Nissin Kogyo, is expected to strongly reflect the creditworthiness of Hitachi, which will become a parent company. This would have a significant positive impact on the rating for Nissin Kogyo.

Lead Rating Analyst (Hitachi, Ltd.): Toru Murase (Honda Motor Co., Ltd.): Soichiro Nagai (Nissin Kogyo Co., Ltd.): Yuta Fukui

■Contact : Sales and Marketing Division, Customer Service Dept. TEL. +81-(0)3-6273-7471 E-mail. [email protected] ■Media Contact : Corporate Planning Division (Public Relations) TEL. +81-(0)3-6273-7273 Rating and Investment Information, Inc. TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, https://www.r-i.co.jp Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment. R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details, please refer to https://www.r-i.co.jp/en/docs/policy/site.html. ©Rating and Investment Information, Inc.