Innovation in IHI’s V2500 Engine Program By changing sourcing to oversea SMEs

Outline  Japanese aerospace business today  V2500 Engine program  How to made the V2500 into a profitable program

Japanese Aerospace Industry Turnover (Billions of Yen) Turnover of Major Countries – Aircraft & Space Aircraft 1,086 Space 270 Turnover in 2009 Total 1, ,000 1,200 1,400 1, Space 270 Aircraft 1,086 Total 1, ,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20, USA 0908 UK 0908 France 0908 Germany 0908 Canada 0908 Japan 09

Space Sector Aircraft Sector (Billions of Yen) Employment ,000 1,200 1, ,086 Equipment Airframe Engines Total Defense CivilExpor CivilDomestic Software 14 Ground Facility 30 Space Vehicle Total 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40, Space 6,341 Aircraft 25,220 31,561 employees Total

Foreign Trade of Aircraft ImportExport Japan ⇔ USA / EU

ExportsImports Exports & Imports – By Type

Boeing 787 Program (Source: JADC) Kawasaki Heavy Industries ◇ forward fuselage ◇ main landing gear wheel well & main wing fixed trailing edge Mitsubishi Heavy Industries ◇ main wing box Fuji Heavy Industries ◇ center wing box ◇ integration of center wing box with main landing gear wheel well (Parts Supplier) ◇ Bridgestone (tires) ◇ GS Yuasa/Thales (lithium-ion battery system) ◇ JAMCO (lavatories, flight deck interiors, flight deck door & bulkhead assembly) ◇ Nabtesco/HamiltonSandstrand (rack & panel) ◇ Panasonic Avionics (cabin services system) ◇ Sumitomo Precision Products (APU oil cooler) ◇ Tamagawa-Seiki (sensor, DC motor) ◇ Toray (TORAYCA®prepregcomposites)

A380 Program ShinMaywa (Filet Fairing, etc) JAMCO (Vertical Stabilizer Structure, Galley, etc.) Fuji Heavy Industries (Vertical Tailplane Edge & Fairing) Mitsubishi Heavy Industries (CargoDoor) NIPPI (Horizontal Tailplane) YRC (Tank ) Casio (TFT Panel) Yokogawa (Display Module for Cockpit) Nikkiso (Cascade) SPP (Equipment for Main Landing gear) Bridgestone (Landing gear, Tire) Koito Industries (New Designed Seat) Panasonic Avionics (Entertainment System) Sumitomo Metals (Titanium Sheet) Mitsubishi Rayon (Composite Material) Toray / Toho Tenax (Carbon Fiber) Showa Aircraft Industry (Aramid Honeycomb) Komy (Fantastic Flat Mirror) Makino Milling Machine (Machining Center) Minebea (Bearing)

Aircraft – Product Models  Indigenous Development and Production First Delivery Year ModelApplicationDevelopment & ManufactureNo. of Aircraft KAL-1/-2 KAT LM-1 KM-2 T-1 KH-4 YS-11 MU-2 FA-200 PS-1 P-2J C-1 T-2 US-1 FA-300 F-1 T-3 MU-300 T-4 T-5 OH-1 MH2000 T-7 Piston liaison Piston trainer Piston liaison Piston trainer Intermediate jet trainer General-purpose helicopter Turboprop transport Business turboprop Piston light plane Turboprop antisubmarine patrol Turboprop antisubmarine Jet transport Supersonic jet trainer Turboprop rescue amphibian Business piston Jet support fighter Primary piston trainer Business jet Intermediate jet trainer Primary turboprop trainer Observation helicopter Multi-purpose helicopter Primary turboprop trainer KHI FHI KHI NAMCO MHI FHI SMIC KHI Dev.: NAMCO, Mfg.: KHI MHI SMIC FHI MHI FHI MHI KHI FHI KHI MHI FHI

Aircraft – Product Models  Production under Technical License First Delivery Year ModelApplicationDevelopment & ManufactureNo. of Aircraft 1953 Bell 47 Small general-purpose helicopterKHI B-45 (T-34) Single-engined propeller trainer Beech AircraftFHI F-86F Jet fighter North AmericanMHI T-33A Jet trainer LockheedKHI L-19 Single-engined propeller liaison CessnaFHI S-55 (H-19) Large general-purpose helicopter SikorskyMHI P2V-7 Large antisubmarine patrol LockheedKHI F-104J Jet fighter LockheedMHI V-107 Large general-purpose helicopter Boeing HelicoptersKHI S-62 Medium general-purpose helicopter SikorskyMHI Bell 204B Medium general-purpose helicopterFHI127 (HU-1B) 1964 S-61 (HSS-2) Large general-purpose helicopter SikorskyMHI Hughes 369 Small general-purpose helicopter McDonnell DouglasKHI387 (OH-6) 1972 F-4EJ Jet fighter McDonnell DouglasMHI UH-1H Medium-size general-purpose helicopterFHI F-15J/DJ Jet fighter McDonnell DouglasMHI P-3C Large antisubmarine patrol LockheedKHI AH-1S Medium-size antitank helicopterFHI CH-47J/JA Large general-purpose helicopter Boeing HelicoptersKHI SH/UH-60J Large antisubmarine helicopter / SikorskyMHI214 & SH-60K general-purpose helicopterFHI 1993 UH-1J Medium-size general-purpose helicopterKHI MCH-101 Minesweeping and heavy-lift helicopter Agusta WestlandFHI AH-64D Battle helicopter Boeing9

Aircraft – Product Models  Co-Development and Production First Delivery Year ModelApplicationDevelopment & Manufacture No. of Aircraft 1982YX/767Jet transport Dev.: CTDC -Boeing, Alenia 994 Mfg.: MHI, KHI, FHI -Boeing, ARTL 1982BK117Multi-purpose turbine helicopterKHI - Eurocopter Deutsche Jet transportDev.: JADC-Boeing910 Mfg.: MHI, KHI, FHI -Boeing 1995XF-2Jet support fighterMHI/Lockheed Martin BMulti-purpose helicopterFHI/Bell2 2000F-2Jet support fighterMHI/Lockheed Martin *787Jet transportDev.: JADC-Boeing- Mfg.: MHI,KHI,FHI -Boeing *: to be scheduled

Engine – Product Models  Indigenous Development and Production First Delivery Year ModelApplication Development & ManufactureNo. of Engines 1962 J3 Turbo jet engine T-1B NJE247 P-2J IHI 1965 JR100/J200/J220 Lift engine R&D IHI FJR710 Turbofan engine STOL (*) IHI, KHI, MHI XF3ditto XT-4 IHI F3ditto T-4 IHI XTS1 Turboshaft engine XOH-1 MHI MG5-100 Gasturbine engine MHI TS1 Turboshaft engine OH-1 MHI82 (*): Research Aircraft

Engine – Product Models  Production under Technical License First Delivery YearModelApplicationLicensor & LicenseeNo. of Engines 1961 J79-11 Turbojet F104 GEIHI(*1) T58-10 Turboshaft S-62 GEIHI(*2) T64-10 Turboprop P-2J, PS-1 GEIHI T63 Turboshaft Hughes 369 & OH-6 AllisonMHI217 KT53-11Aditto Bell 204 (UH-1B) HoneywellKHI(*3) T58-140ditto S-61 (HSS-2), V-107 GEIHI(*2) J79-17 Turbojet F-4EJ GEIHI(*1) 1970 TF40 (Adour) Turbofan T-2, F-1 RR-TurbomecaIHI JT8D-9ditto C-1 P&W (UTC)MHI T53-K-13B Turboshaft Bell 204-II (UH-1H) HoneywellKHI(*3) 1979 F Turbofan F-15 P&W (UTC)IHI447 T56-14 Turboprop P-3C AllisonIHI T53-K-703 Turboshaft AH-1S HoneywellKHI(*3) 1984 T55-K-712ditto CH-47J HoneywellKHI T Cditto SH/UH-60J/K GEIHI F Turbofan F-2 GEIHI RTM322 Turboshaft MCH-101 RR-TurbomecaKHI21

Product models of Engine  Co-Development and Production ModelApplicationDevelopment & Manufacture CF34-8/-10 Turbofan engine JAEC(IHI, KHI) –GE GEnx *ditto IHI, MHI –GE GE90ditto IHI –GE HF118/HF120 *ditto Honda/GE JT8D-200ditto MHI-P&W PW4000ditto KHI,MKHI –P&W PW6000ditto MHI –P&W RB ditto IHI, KHI –RR Trent 500ditto IHI, KHI –RR Trent 700/800ditto IHI, KHI –RR Trent 1000 *ditto KHI, MHI –RR Trent XWB *ditto KHI, MHI –RR V2500ditto JAEC(IHI, KHI, MHI) –P&W, RR, MTU, FIAT XJB/RJ500ditto (for R&D) IHI,KHI,MHI –RR *: under development

Aerospace Clusters in JAPAN NAMEREGION MEMBERS MAIN ORG. MANTEN Project All Japan 160JASPA Co., Ind. TOCHIGI Aerospace Ind.Promotion Conference TOCHIGI Prefecture 148TOCHIGI Prefecture Ind(B), Ac.. Go. TOYAMA Aerospace business Assoc. TOYAMA Prefecture 80TOYAMA Prefecture Ind. Gov. TOCHIGI Aerospace Meeting Gr. UTSUNOMIYA City 77UTSUNOMIYA City Ind. Gov. NAGANO Aerospace Project NAGANO Prefecture 58 NAGANO TECHNO FOUNDATION Ind.,Ac, Gov. Aerospace Business Study Gr. TSUBAME SANJYOU City 57 TSUBAME SANJYOU FOUNDATION Ind. YAMAGUCHI Brand Study Gr. YAMAGUCHI Prefecture 47YAMAGUTI Prefecture Ind.(B), Ac. Go. On the Wings of OSAKA OSAKA City 41OSAKA area companies Ind. Aerospace Business Study Gr. TOUHOKU 6 Prefectures 39 Ind. Eng. Promotion Gr. TOHOKU Branch Ind., Ac., Gov. HIROSHIMA Aerospace Ind. Study Gr. HIROSHIMA City 33HIROSHIMA City Ind. Gov. Wing Win OKAYAMA OKAYAMA City 28OKAYAMA Prefecture Ind. Gov. SUWA World Aerospace Network SUWA City 22NPO SUWA Ind.,Ac., Gov. AMATERAS TOKYO 10TOKYO Metropolis Ind. Gov. Aerospace IIDA IIDA City 9IIDA City area Ind. SOLAE HAMAMATSU Area 9HAMAMATSU area Ind. Remarks; Ind. = Industry Ind(B) = Industry including Bank Ac. = Academia Gov. = Government

HAISG Industry StudyGroup Hiroshima Aerospace Precision MachiningComposites Surface Treatment Electronics BTA / Gun DrillingSensor Technologies Sheet Metal Working Plasma WeldingSpherical Machining EDM Hiroshima has a long thriving history in automobile, ship and aircraft manufacturing. There are many hi-tech companies, notably in the areas of precision machining and composite manufacturing, concentrated here. 33 Hiroshima companies participate in Hiroshima Aerospace Industry Study Group (HAISG).

Regional Industry Tie-Up Program (RIT) ● Hiroshima JETRO Hiroshima CoordinationSupport CoordinationSupport Region Ville de Montréal, CRIAQ, AQA, NRC, ETS, DFAIT, Embassy of Canada to Japan, Gouvernement du Québec…etc. Region Hiroshima City, HAISG (Hiroshima Aerospace Industry Study Group), Hiroshima University, SJAC, METI …etc. ● Montreal JETRO Toronto Business Agreements Develop of New Products Collaborative Research…etc. Inter-Regional Exchange （ Experts – Companies ） Investigation ▪ Missions Seminars ▪ B2B Meetings Company Visits

V2500 work sharing among IAE members

V2500 Engine Program  History  RR joined RJ500 program  JAEC built  P&W, MTU and FIAT joined program  IAE built  A1 started being used in flight  A5 and D5 received certification  Share  RR 33.5%  P&W 32.5%  JAEC 23.0% (IHI 62%, KHI 26%, MHI 12%)  MTU 11.0%

Cost Reduction Process and Results  Process ( Cost Reduction ):  Re-examined parts target cost using 2 methods. IHI original and other should cost formula.  Identified parts for cost reduction.  Conducted VE for parts should cost reduction.  Cost reduction negotiations.  Source ( supplier ) changes.  Results ( Cost Reduction ):  Change sourcing to oversea SMEs 65%  Cost reduction negotiations 20%  VE activities 10%

Changing Sourcing Steps  How we found good suppliers  Searched candidates from…  International Aerospace Exhibition: PARIS, FARNBOROUGH, SINGAPORE, JA…  Partners information: GE, P&W…  Trading house information  Data base: Aviation Week " World Aerospace Database“  Others

RecommendOption Aerospace Exhibitions Name Paris Air Show Farnborough Int. ILA Singapore Air Show FIDAE ASIAN AEROSPACE AUSTRALIAN INT. AIR SHOW SEOUL AIR SHOW JA MAKS Dubai AERO INDIA LIMA NBAA Name (Venue) IICDES (India, New Delhi) Aviation EXPO CHINA (Beijing) International Air Show (Poland) SAE Aerospace (USA) Defense (Thailand, Bangkok) Aeromart (France, Toulouse) ANA (Canada, USA) HELITECH (USA) LABACE (Brazil) AIRSHOW (Turkey) AERO-ENGINE EXPO (UK) AIRTEC (Germany) ZHAZHAHAI AIR SHOW （ CHINA ） CANADIAN AVIATION EXPO(Canada)

Changing Sourcing Steps  How to sourcing good suppliers  Selection process to finding the best suppliers  Make a list of as many candidates as possible  Comparison Chart: Certification, Customer, Cost, Finance, Company Policy, Facilities, Technologies…  Pre-audit: Visit the plant  Cost negotiations at IHI office: C.L.C., L.O.P., S.S.,V.E. and Win-Win

Selected Suppliers  Thornton Precision Forging (UK)  H.D.A. (UK)  Macrodyne (France)  Forge de Bologne (France)  Techspace Aero (Belgium)  A.P.P. (USA)  VIKING (USA)  SHULTZ (USA)  STERLING (USA)  UTICA (USA)  P.C.C. (USA)  FORGED METAL (USA)  FLAMECO (USA)

Conclusion  Display your company in Aviation Week's World Aerospace Database (WAD)  Market at large international aerospace exhibitions  Have your own booth to exhibit your products and technologies  Request B2B meetings during exhibitions and also partake in "after 5pm" personal relationship building activities.  Utilize government support such as embassy, province and state offices.  Seek assistance from Trading Houses or Expert Coordinators  Contact large size companies such as OEMs and Tier 1 companies rather than SME organizations.

Thank you for your attention and I hope to see you again in Japan on business Merci beaucoup! Made by HATADA. Co., Ltd.