Koizumi: I have served as an Outside Director since the term of the previous Chief Executive Officer, Mr. Kobayashi, and since that time, I have had the impression that we can speak very freely and openly at this company. I don’t feel that this positive corporate culture changed much after Mr. Horii took over the post of Chief Executive Officer. The sense of unity between the AUTOBACS franchise chain headquarters and franchisees, which has been our strength since founding, has been firmly passed down. Mr. Horii also works actively on organizational reform. I look forward to seeing him adding his own spin to further improve the organization’s culture going forward.

 

Matsuda: I was just appointed this June, so I cannot speak to differences from the previous administration, but my impression is that Mr. Horii’s style involves absorbing everyone’s opinions and focusing on consensus-building. Even from the perspective of meetings, etc., I get the impression that the Company is very open and allows everyone to actively speak out. I look forward to seeing how Mr. Horii’s style impacts the Company going forward.

 

Kanamaru: It’s difficult for me to compare with the previous administration as well, but I feel that Mr. Horii strongly expresses his desire to “change” and “transform the company,” but takes the stance of listening attentively to the opinions of those around him rather than simply proceeding with force. Even as Chairperson of the Board of Directors, his style is to solicit everyone’s opinion before proceeding. I don’t feel that it is difficult to speak out at this company. Going forward, I look forward to seeing how he responds when the time comes that we have to push for reforms.

 

Mimura: As everyone has said, I don’t think that Mr. Horii has held back in putting his own spin on things out of respect for Chairman, Mr. Kobayashi. Generally, Mr. Horii’s style is to let everyone voice their candid opinions and take the time to listen to them carefully, even to an overly cautious extent. He is the type to move things along carefully and steadily. The same was true of Mr. Kobayashi, but I think that attitude has gotten stronger under Mr. Horii. For precisely this reason, as an Outside Director, I look forward to seeing how Mr. Horii materializes his own ideas going forward. As he initiates various new efforts, he appears to be struggling with whether they properly make sense in the field, what the opinions of next-generation leaders are, and whether there is a way to better adopt them.

Mimura: Unfortunately, we were not able to reach the target numbers in the Five-year Rolling Plan. However, this plan was put in motion under the initiative of the previous Chief Executive Officer, Mr. Kobayashi, and Mr. Horii’s success will be determined based on the results of the next Medium-term Business Plan. I hope that Mr. Horii will use the results of this plan as a point of reflection, carefully reflect this in the implementation plan on site, and push forward as a leader in his own right. Convincing the employees is an important part in achieving a plan, and will test whether there is an organizational infrastructure to support it. I hope that he will incorporate the reforms that are currently underway, such as changing the organizational structure from a vertically-divided one to a business-based one and establishing retail and wholesale as axes, on a group-wide level so that we can achieve results as soon as possible.

 

Kanamaru: Changing the franchise chain package meant making fundamental changes to the method we had been using for years, and it was one of the biggest initiatives. Raising the royalty rate for franchisees is a situation that not only calls for reexamining the business structure itself, but calls into question whether we can provide value to franchisees commensurate with those royalties. Convincing each franchisee and changing the franchise chain package is an extremely difficult task. There were times I was afraid that things would go poorly, but Mr. Horii and everyone involved explained things carefully, resulting in a smoother-than-expected transition. It is important not to stop with wholesaling the products to the franchisees, but to ensure that the franchisee and headquarters consistently move in the same direction until the products are ultimately delivered to customers. I think the franchisees’ resistance was gradually chipped away by the message that “The headquarters will not receive royalties until the product is retailed to a customer. Until then, let’s think in unison and look in the same direction.”

 

Matsuda: I think a key point will be how to achieve the next Medium-term Business Plan, considering that we did not achieve the numbers of the Five-year Rolling Plan. On top of that, there is a quite challenging aspect to the next Medium-term Business Plan, in that we are aiming for something that is not an extension of previous efforts. We do have the knowledge gained through the Fiveyear Rolling Plan, so in light of that, I would like to focus on how to achieve non-consecutive growth. For example, DX will require the use of completely different muscles and completely different ideas from our past retail and wholesale businesses. I look forward to seeing how Mr. Horii exhibits leadership.

 

Koizumi: The majority of our profits come from the Domestic AUTOBACS Business, but the Domestic AUTOBACS Business itself is facing severe conditions under which it is not continuing to grow in the same manner as before. Although we are challenging ourselves with the launch of various brands, I have the impression that, with each brand and business being operated individually, the expected amount of horizontal synergy is not being generated. Additionally, in the domestic market, which is not expected to expand going forward, I don’t think we could have envisioned an idea of what axes to develop our businesses around, even based on the failure to meet the initial quantitative targets of the Five-year Rolling Plan. On the other hand, the Six Networks and Five Business Infrastructures established in the Five-year Rolling Plan are the basis for achieving the long-term vision and the next Medium-term Business Plan set forth by Mr. Horii. This is what I consider to be the results of the Five-year Rolling Plan.

Mimura: Car ownership has changed in Japan along with the declining birthrate. The domestic market does not have a tailwind. Considering this, we must create a “new AUTOBACS” in the medium to long term. We must work from various angles to figure out how to materialize a market that has been completely invisible thus far. We are now in the middle of such a period, so the consolidated net sales target of 280 billion yen set forth in the 2024 Mediumterm Business Plan might seem like a bit of a stretch. However, compared to the target of 500 billion yen established in the longterm vision, this number is still in the preparatory stage. Going forward, market conditions may change or an unexpected rival may appear. It is important to prepare ahead of time for those possibilities. For example, the shift to EVs is taking longer than expected due to factors such as delays in infrastructure establishment. However, the shift will eventually happen, and conversion to electric power is likely to accelerate in the domain of commercial vehicles, which have higher operating ratios than privately owned vehicles. Moreover, with regard to EVs, it is important to create businesses not only for vehicles, but also for surrounding areas. Where to place our priorities is an important question for us. Now is the time when we must carefully discuss what preparations to make for the eventual full-fledged spread of EVs.

 

Kanamaru: When new technology and businesses like EVs and autonomous driving come out, they are followed a bit later by legal issues, particularly legal restrictions. Troubles may come up in the future that could not be foreseen, but that is the risk borne by all those involved in that business. It’s not just a risk borne by us, or one unique to us. As we proactively venture into new businesses, in order to stick to our convictions in “supporting the mobility lifestyles of customers,” we must constantly be on the lookout for information and firmly clarify our own position.

 

Matsuda: With regard to DX, people are saying that as the shift to EVs progresses, the inside of cars will become entertainment spaces. I think there is something interesting in the question of how to design in-vehicle user interfaces (UIs). However, as it was said earlier, DX requires us to use completely different muscles than wholesale and retail, and we must significantly change our way of thinking, so I think a key point will be how Mr. Horii wants to change the Company’s culture. Mr. Horii has a strong desire to “change the company,” which I think requires me to provide the perspective of a completely different industry, that of games and entertainment. Having a diverse range of perspectives from various angles will be our strength as a company. Businesses will not expand if we keep thinking in the same way.

 

Koizumi: When formulating the Medium-term Business Plan, the opinion that we should actively move forward with “selection and concentration” and “portfolio restructuring” was mainly expressed by Outside Directors. This is relatively easy to understand for businesses with a high affinity with the Domestic AUTOBACS Business, but there are also some businesses that do not have that. We should conduct selection and concentration. The strategy outline of the Medium-term Business Plan consists of “increasing touch points with customers,” “developing attractive products and solutions,” and “establishing new business domains.” I think that “increasing points of contact with customers” is important. We have opened dealerships and repair shops based on the idea of creating as many points of contact as we can during the car life cycle of “purchasing,” “repairing,” and “replacing,” but, ultimately, we must connect each of these points. Furthermore, with the intense changes occurring in the automotive aftermarket, I think we should carefully examine our businesses, particularly those that are unprofitable, in the lead-up to our next Medium-term Business Plan and determine whether or not to continue each one.

 

Mimura: We cannot conduct business transformation by continuing our current businesses as usual. In order to change our portfolio, we must change the shape of our organization and methods of personnel assignment. I have previously proposed such ideas as an Outside Director, but from the standpoint of an officer, some proposals are accepted and some are not. However, in order for the company to undergo great change, we cannot avoid making significant changes to our way of thinking.

 

Kanamaru: In order to make big leaps, how we allocate our limited resources is important, which requires “selection and concentration.” Establishing a brand new structure may also lead to negative effects within the Company, and I think there were many struggles in the process of putting together the Medium-term Business Plan.

Mimura: The widely reported fraud by a major used car seller has undeniably raised suspicions about the nature of the industry as a whole. There were even apparently cases at our stores where mistrust from customers arose, which were reported to the Board of Directors. However, we are the polar opposite of companies like that, to the point that we are earnest to a fault. Our departments that handle used cars in particular have received the high praise that “AUTOBACS can be trusted.” I hope to strengthen this area going forward by being even more honest to a fault. However, as the number of group companies and franchisees further increases going forward, ensuring that compliance permeates every corner will be very hard work. It is difficult enough within the Company, but we must ensure that it spreads throughout new companies that join the group through M&As. With regard to this work, I think the only thing we can do is learn the methods of leading companies and thoroughly implement them. Furthermore, speed will be required. Even beyond the current used car problem, it only takes an instant for brand value to be damaged.

 

Kanamaru: I think we were able to learn a big lesson from this problem. We already have a compliance checking function in place as well as a mechanism for how to structure the reporting line when a problem occurs, but we were able to use this problem as an opportunity to reexamine them. It is important to regularly review whether such mechanisms are functioning in an effective manner. We confirmed whether fraud was occurring in our departments that conduct businesses related to insurance companies, and we found no problems. Moreover, we continuously confirm what problems would be conceivable and whether compliance is widespread. As for franchisees, although they are difficult to completely control since they are basically different companies than us, we are working with an awareness of the issue of how to ensure the permeation of AUTOBACS chain’s compliance policy.

 

Matsuda: Compliance is the core of products and services. It can be considered a part of the quality that our products and services have. When providing a service, we must raise its quality. Compliance goes without saying; it is the bare minimum required, and the lowest level of fulfilling quality. This is the same for every industry. When providing a service, it must meet the expectations of the customer.

 

Koizumi: I think the fraud problem caused a loss of trust in the automotive industry as a whole. We have a lot of honest employees and a full infrastructure in place to support them such as internal control, compliance, risk management, and other systems, as well as the Code of Conduct and Guidelines for Action. While all publicly listed companies have such mechanisms, the important thing is their “effectiveness,” or, in other words, whether they function properly. I think that fraud occurs when systems and manuals are in place, but they are taken for granted and not executed properly. It is important to constantly reexamine this and increase their effectiveness. I think there are difficulties in increasing effectiveness as an overall group including franchisees, but Mr. Horii is highly aware of the issue of fraud, and has expressed a policy of working to prevent fraud across the group through the Franchise Manager Committee and other channels. We must ensure that the same level of compliance permeates directly managed stores and franchisees.

Matsuda: I am actually right in the middle of studying our “ESG & SDGs Project.” I see the ingenuity in replacing the members every term, and in establishing a team to laterally promote each KPI and having the project and regional headquarters work together to promote KPIs. I look forward to closely listening to future reports on what specific initiatives are implemented and what results they yield.

 

Mimura: Once every three months, the leaders of each team have an opportunity to report their progress at the General Managers Committee meeting. I am always amazed by the candid way the reports are given. However, we cannot forget the ultimate goal of ESG, or, in other words, why we are doing it. I think that ESG must be something that ultimately leads to a company’s performance and growth. Otherwise, it will not take root, and there will be no shared sense of achievement. Various KPIs have been established, but I think that before they are implemented, we should ensure that each person understands that the ultimate goal is the company’s performance and growth.

 

Kanamaru: I make sure to focus on diversity initiatives, particularly those relating to women’s advancement, for example, the ratio of female managers. There are some categories that struggle and do not meet the KPIs, but each department takes responsibility and makes a report, so I look forward to monitoring the continued progress.

 

Koizumi: I appreciate that we created a project team at an early stage, involved the General Managers in charge of the actual businesses, and moved forward in association with the businesses. ESG is connected to our vision and long-term strategy, and it leads to corporate earnings and contributes to profits for all stakeholders. My perception is that, going forward, we will create a cycle of continuously increasing corporate value.

Mimura: We must further promote the “determination to quit businesses.” In order to grow a big tree, it is necessary to cut the weeds underneath it. It is important to firmly establish a corporate culture of deciding to quit, and once that decision is made, creating milestones and following through on implementation. Backcasting means creating implementation milestones based on a specifically established future plan and moving forward with them until the plan is achieved. While we have the numbers, there is no clear implementation plan like this in sight. I look forward to creating business plans based on newer ideas. We cannot build a strategy with an extension of our current efforts. Additionally, since human resources cannot be developed instantaneously, for a time, we may need to bring in people with experience in creating such plans in order to strengthen our strategic foundation.

 

Kanamaru: When conducting preliminary consideration of new businesses and initiatives, rather than the department concerned working solo, I think it is important to cooperate laterally on a company-wide level. Without lateral cooperation, the big picture cannot be drawn. I think we can grow more by developing skills and human resources that can do this.

 

Matsuda: This might be a harsh way of putting this, but the Medium-term Business Plan appears to be a bit all-encompassing. Ideally, there should be a clear strategy, and the plan should be executed in accordance with that policy, leading to numbers. I would like the essential strategy to be outlined more clearly. For example, with regard to how M&A cases are addressed, there is a big picture, and each case of M&A is implemented to achieve this big picture. However, the current handling method of “we have this M&A case, so we will stick it here” is suboptimal. It appears that each case is being thought about separately, making it impossible to paint a picture of the company’s overall equity story. I believe that it may appear that way to our investors, too. I think that it would deepen investors’ understanding if, in our future disclosures and financial results explanatory materials, we actively communicated whether the M&As create an equity story with clear strategic intent.

 

Koizumi: In offensive governance, I make sure that I can support the decision-making of the Executive Directors as an Outside Director. On the other hand, in M&A cases for which it is not clear whether they will contribute to shareholder profits, I give my opinion after confirming the true motive of aims and objectives and the rationality of investment recovery. In defensive governance, there is the concern that beginning something new such as M&A will increase compliance risk, which will lead to more work for the accounting department and other increased management costs, thereby increasing the risk of a major scandal. I am keeping a close eye on this, too, as an Outside Director. It is necessary to balance the offensive maneuver of advancing business strategy with the defensive maneuver of strengthening governance, and to connect this to improving corporate value through healthy risk-taking.