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SDK to Produce Automotive Heat Exchangers in China

November 5, 2004

Showa Denko K.K. (SDK) has concluded a joint venture agreement with Grand Ocean Auto Air Conditioning Engineering (Dalian) Co., Ltd. of China to participate in the fast-growing automotive heat exchangers market in that country.

SDK will own 35% of Grand Ocean Auto Air Conditioning Engineering by buying shares from its two parent companies: Grand Ocean Manufacturing Co., Ltd., a Hong Kong-based investment company engaged in automotive piping and bus air-conditioning businesses in China, and Dalian Refrigeration Co., Ltd., the core of the influential Bingshan Group.

Upon completion of the investment, the company will change its name to Grand Ocean-Showa Auto Air Conditioning (Dalian) Co., Ltd. SDK will provide its latest heat exchanger production technology and know-how to the new company and send one employee as Deputy General Manager of the new company.

SDK is currently supplying the Volkswagen Group with approximately two million units a year of automotive heat exchangers that meet the Group’s worldwide specifications, delivering the products to the Group’s plants in Europe and Mexico. Based on SDK’s technology, Grand Ocean-Showa will, in early 2005, start supplying the latest models of heat exchangers to its two existing customers within the Volkswagen Group, namely, FAW-VW (Changchun) and Shanghai VW. Grand Ocean-Showa will gradually expand its yearly production capacity from 250,000 units at present to 650,000 units by 2007.

SDK is producing automotive heat exchangers in Japan, the United States, Thailand and the Czech Republic. Under the current medium-term consolidated business plan, the “Sprout Project,” SDK is putting emphasis on the heat exchanger operation as one of the “strategic growth businesses” and allocating substantial resources. SDK aims to increase its volume of supply to the Volkswagen Group, and expand its share in the Chinese market as well.

Profile of Grand Ocean-Showa Auto Air Conditioning (Dalian) Co., Ltd.

Head office Dalian Economic & Technology Development Zone, Dalian, China
Chairman Mr. Zhang He (concurrently chairman of Dalian Refrigeration Co., Ltd.)
Establishment: 1993
Capital US$8 million
Shareholders Grand Ocean Manufacturing (40%);
SDK (35%);
Dalian Refrigeration (25%)
Annual sales 150 million yuan (approx. ¥2 billion) (2003 results)
Scope of business Production and sale of automotive heat exchangers such as evaporators, condensers, and related parts
Employees 180

For further information, contact:
Marketing Department, Heat Exchanger Division (Phone: 81-285-30-1431)

[Reference]

Outline of Grand Ocean Manufacturing Co., Ltd.

Head office Kwai Tak Industrial Centre, New Territories, Hong Kong, PRC
Chairman Mr. Walujo Santoso
cope of business Businesses in China pertaining to car/bus air-conditioners and refrigerator cars
Employees 700

Outline of Dalian Refrigeration Co., Ltd.

Head office Xinan Road, Shahekou District, Dalian
Chairman Mr. Zhang He
Establishment 1930
Capital 350 million yuan (approx. ¥5 billion)
Annual sales 1.5 billion yuan (approx. ¥20 billion)
Scope of business Production and sale of large refrigerators, compressors, air-conditioning equipment and cold-chain equipment
Employees 1,950