Feb.2.2002

international competitiveness has been intensifying. Yanmar, in order to beat the competition, is striving to reduce production costs through expanded overseas sourcing of materials, some production overseas and to establish a system less vulnerable to exchange rate fluctuations.

For engines and transmissions, cast iron products represent important parts and comprise a major cost portion, which naturally has a large effect on the quality and cost of the finished products.

On the other hand, the cast iron industry in Japan has long suffered from almost chronic labor shortage and cost hikes. In the long term, a cheap and stable supply of cast iron products has become a major concern.

More concretely, Yanmar will invest in China Metal Products Co., Ltd. (Hong Kong) [CMP (H.K)] and Suzhou CMS Machinery Co., Ltd. (Suzhou, China). With this participation, Yanmar aim to secure its production base of cast iron products in China and to reduce costs of cast iron materials.

The outline of the project is as follows:

1. Purpose of Capital Participation

1. To secure the production base of cast iron materials overseas for Yanmar group
2. Cost reduction of cast iron materials
3. To secure cast iron quality that is equivalent to Japan
4. To establish stable supply system of cast iron parts by the joint venture.

2. Capital Participation

l   US$2,100,000 to CMP (H.K.)
l   US$2,000,000 to CMS

3. Procured Part Items

Major cast iron parts for engines, tractors and construction machinery.

4. Outline of the Joint Venture

1. Dispatch of supervisor from Yanmar
2. Technical guidance by Yanmar and Yanmar’s resident casting engineer
3. Order processing of cast iron parts for Yanmar group
4. Joint purchase of cast iron materials by Yanmar and CMS