COMPANY IN BOTH NAME AND SUBSTANCE, THE · PDF file · 2014-12-01• Hydraulic...

THE PINNACLE OF PERFORMANCE Annual report 2007

PAGE INDEX

Profile

Sales by Business Segment and Major Products

Financial Highlights

Message to Our Shareholders

An Outline of the MTP 2007

Special Feature

The Pinnacle of Safe, Eco-Friendly Technology

Ensuring Safety at the Critical Moments of a Flight

Expanding into the Tire Solutions Business

A Critical Component of Clean Energy

Review of Operations

Motorsports Activities

Corporate Governance, Compliance and

Risk Management

Corporate Social Responsibility (CSR)

Research and Development (R&D)

Operational Risks

Financial Section

Major Subsidiaries and Affiliates

Board of Directors, Corporate Auditors and

Corporate Officers

Shareholder Information

01

02

03

04

08

10

12

14

16

18

30

32

35

40

42

45

76

78

79

FORWARD-LOOKING STATEMENTS

The descriptions of projections and plans that appear in this annual report are “forward-looking statements.” They involve known and unknown risks and uncertainties in regard to such factors as product liability, currency exchangerates, raw material costs, labor-management relations and political stability. These and other variables could cause the Companies’ actual performance and results to differ from management’s projections and plans.

01Bridgestone annual report 2007

The Bridgestone Group (the parent company Bridgestone Corporation

and its consolidated subsidiaries) constitutes the world’s largest

manufacturer of tires and rubber products. The parent company was

established in 1931 in the small town of Kurume on the island of

Kyushu. Today, the Bridgestone Group has about 180 manufacturing

plants in 26 countries and sells products in over 150 markets

worldwide. Tires made up about 80% of consolidated sales in 2007,

with the remainder derived from a broad range of industrial and

consumer products and services, together with bicycles and other

sporting goods.

Amid major ongoing change in the external business climate, the

Bridgestone Group has embarked on reforms intended to realize a

robust earnings base with stable, long-term growth potential.

Organizational reforms and a new Mid-term Management Plan (MTP)

have been the central elements in this drive to optimize worldwide

operations with the aim of cementing the Bridgestone Group’s leading

global position. Always seeking to attain a higher level, the Group

remains focused on its mission of “Serving society with superior

quality” through a lineup of products and services that satisfy the

needs of the customer, society and the environment as a whole.

TO BE THE WORLD’S UNDISPUTED

NO. 1 TIRE AND RUBBER

COMPANY IN BOTH NAME AND

SUBSTANCE, THE BRIDGESTONE

GROUP IS COMMITTED TO

ATTAINING THE PINNACLE OF

PERFORMANCE THROUGH ITS

PRODUCTS, SERVICES, PEOPLE

AND OPERATING RESULTS.

02

Industrial productsBelts• Steel cord conveyor belts• Fabric conveyor belts• Belt-related commodities• Pipe conveyor systems

Hoses• Braided hoses• Hydraulic hoses• Automobile hoses

Antivibration and noise-insulating materials• Air springs• Dampers• Noise-insulating systems

Waterproofing materials• Water stoppers• Waterproof sheets for civil

engineering

Rubber tracks

Multi-rubber bearings

Marine products• Dredging hoses• Oil booms• Silt barriers

Antivibration componentsFor vehicles, railway cars,industrial machinery

Chemical productsBuilding materials andequipment• FRP panel water tanks• Unit flooring systems• Steel fiber for concrete

reinforcement• Roofing materials• Unit bath systems• Polybutylene pipes and fitting for

plumbing systems• Sealing materials for buildings

and housing

Thermal insulating polyurethanefoam productsFor general building, housing

Flexible polyurethane foamproductsFor bedding, furniture, vehicles,industry

Ceramic foam

Electro-materials• Semiconductive rollers• Other semiconductive

components

Performance film products• Performance films for plasma

display panels• Photovoltaic module

encapsulants• Interlayer adhesive films for

laminated glass

Sporting goods• Golf balls• Golf clubs• Tennis shoes• Tennis rackets• Tennis balls• Golf swing diagnostic system

Bicycles

Other productsPurebeta ceramic dummywafers, holders, rings, heaters,electrodes and other items forsemiconductor manufacturing

Tires and tubesFor passenger cars, trucks, buses, construction andmining vehicles, industrial machinery, agriculturalmachinery, aircraft, motorcycles and scooters, racingcars, karts, utility carts, subways, monorails

Automotive partsWheels for passenger cars, trucks, buses

Retreading materials and services

Automotive maintenance and repair services

Raw materials for tires

DIVERSIFIED PRODUCTS

TIRES

81%19%

SALES BY BUSINESS SEGMENT

AND MAJOR PRODUCTS

Bridgestone Corporation and SubsidiariesYear ended December 31, 2007


FINANCIAL HIGHLIGHTS

Bridgestone Corporation and SubsidiariesYears ended December 31, 2007 and 2006

Net sales

Overseas sales

Operating income

Net income

Total equity

Total assets

Per share in yen and U.S. dollars

Net income

Basic

Diluted

Shareholders’ equity (Note 2)

Cash dividends

Capital expenditure

Depreciation and amortization

Research and development costs

Net return on shareholders’ equity

Net return on total assets

2007

$29,699,685

22,680,736

2,189,768

1,153,132

12,354,139

29,428,428

1.48

1.48

15.39

0.23

2,386,167

1,520,675

759,947

—

—

2006

¥2,991,275

2,213,880

190,876

85,121

1,221,846

3,053,440

109.10

109.07

1,511.43

24.00

261,335

145,349

86,687

7.4

3.0

2007 / 2006

+13.3

+16.9

+31.0

+54.6

+15.4

+10.0

+54.6

+54.6

+16.3

+8.3

+4.2

+19.4

+0.1

—

—

2007

¥3,390,219

2,589,006

249,962

131,630

1,410,225

3,359,255

168.69

168.65

1,757.23

26.00

272,381

173,585

86,748

10.3

4.1

Millions of yen Percent changeThousands of

U.S. dollars (Note 1)

Note 1: Solely for the convenience of readers, the Japanese yen amounts in this annual report are translated into U.S. dollars at the rate of ¥114.15 to $1, theapproximate year-end rate.

Note 2: Shareholders’ equity is equity excluding stock acquisition rights and minority interests.

04

POISED FOR SUSTAINED GROWTH

2007 business reviewDespite an increasingly difficult business environmentcaused by changes in the global structure of demand andcompetition, consolidated net sales increased by 13% to¥3,390.2 billion. Gains were recorded across allgeographical segments. The primary reasons for thisgrowth were company-wide efforts to reinforce strategicproduct lines from development to production and sales,the introduction of appealing new products worldwide andthe enhancement of our portfolio of highly competitiveproducts and businesses. Operating income was up 31%to ¥250.0 billion, due in particular to initiatives aimed atmitigating the impact of increasing raw material costs,while net income surged 55% to ¥131.6 billion. The resultsfor both net sales and operating income represent historichighs for the Bridgestone Group.

Based on these results, we are well on track to achievethe targets set out in the Mid-term Management Plan,which will be described later.

For a more detailed review of our performance in 2007,please refer to the Management’s Discussion & Analysissection (pp. 46-51).

Reflections on progress to dateWhen I became president two years ago, I set a goal forthe Bridgestone Group to be recognized as the world’sundisputed No. 1 tire and rubber company in both nameand substance. The progress that we have made sincethen has afforded me greater insight into the challengesthat we face in attaining this goal.

One thing is clear: size is critical for achieving sustainedgrowth in a business such as tires where products areinternationally standardized. In the 20 years since weacquired Firestone — a move that catapulted theBridgestone Group into the top three of the tire industry —our efforts to blend the best of each firm into an integratedwhole have helped to forge a new company culture. Interms of scale of operations we have become one of theworld leaders today.

Yet the rapidly changing global market in which weoperate differs vastly from the conditions back in 1988.Tire demand has shifted to either side of the spectrum,

away from the middle. Today, the market segments thatare growing are state-of-the-art high-performance tiresand low-priced general-purpose tires. The gains in marketshare being made by low-priced tires from low-costmanufacturers point to fundamental shifts in the structureof competition. The earnings structure of the tire industryhas undergone wrenching change as well, due to thepressures applied by inexorably rising raw material costs.

To succeed in the face of such change, I see my role asone of creating a strong Bridgestone Group with a robustearnings structure capable of generating sustained growthinto the future. I believe that this goal translates into threeaims. First, we must develop a trim global structure thatcan react swiftly to change. Second, our performancetargets for the short, medium and long term — as well asall other aspects of business performance — must beowned by the whole Bridgestone Group. Third, we mustfind the correct balance. Developing advanced technologyto lead market change is, of course, vital. At the sametime, however, we must also strive to overcome thecompetition by providing customers with value-addedsolutions, rather than merely making and selling tires andother consumable goods.

Finally, we cannot regard the quest to be the world leaderin both name and substance as merely a question ofachieving the highest sales and profits. To be the bestcompany, the Bridgestone Group must also displayleadership in areas such as the environment, quality,product safety, compliance, risk management (inclusive offire prevention and occupational safety), internal controls,human resource development and corporate citizenshipactivities. That is why we have positioned corporate socialresponsibility (“CSR”) activities at the heart of what we do.In short, we must aim to be a world leader in all aspectsof our activities as a company. By achieving a productivebalance among these various elements, I believe that theBridgestone Group has the strength to build on thesehealthy foundations to create a truly global andsustainably successful enterprise.

Toward optimized global operationsAmong the risks that large-scale international operationsface is lowered earnings due to individual parts of thegroup merely pursuing sales expansion. It is therefore



Shoshi Arakawa

Chairman of the Board, CEO and President

critical that we optimize the use of global managementresources and strive to eliminate waste. We refer to this asthe “total optimization” of Bridgestone Group operations.The ultimate goal is that organizations, systems andprocesses are all engineered to create maximum value, toavoid waste and to react to change quickly.

There are two things involved in realizing this goal. First,we need to create optimal global coordination. Second,we must ensure that the Mid-term Management Plan iscompletely integrated across the Bridgestone Group.Structure and planning are essential to the formulation ofclear targets and policies to achieve these objectives.These two tasks have been my priority since myappointment. With the announcement of our latest plan inOctober 2007, I believe that our organization andplanning are now working well together and in tandem.

A reformed and optimized global structureOur organizational reforms have involved theestablishment of eight strategic business units (SBUs)supported by a Global Management Platform (GMP). SixSBUs focus mainly on the tire business in differentgeographic regions and the other two SBUs consist ofour specialty tire and diversified product operations. Inaddition, the Global Head Office (GHO) sets policy for theBridgestone Group and plays an organizational andvisionary role in optimizing global operations.

Within the GMP framework, we have also created anentity called the GLC (Global Logistics Center) to sethigh-level policy for core functions such as productplanning, business development, materials purchasing,facility procurement, and global tire supply chainplanning. The GLC enables the Bridgestone Group toimprove its response to market trends by analyzing andapproaching projects beginning at the product planningstage, helping the Group make optimal decisions from aglobal perspective about what raw materials to buy,where to produce and which markets to supply withwhich products. Beginning in 2008, I am confident thatthe practical benefits of our reconfigured organization willstart to emerge in terms of accelerated productintroductions.

Globally integrated business planningThe details of the five-year Mid-term Management Planthat we released in October 2007 are discussedelsewhere in this Annual Report. Just as important as thenumbers in the plan is the process by which weformulated it.

06


to ensure our competitiveness over the long term. This isthe case in many specialty tire areas, including radial tiresfor construction and mining vehicles, aircraft andmotorcycles. Third, we are continuing to developenvironment-friendly products, both in our tire anddiversified product operations. Examples of thesestrategic products include runflat tires, ECOPIA brand tiresfor better fuel economy, electronic paper displays andEVA (ethylene vinyl acetate) film for solar modules. We arealso focusing attention on strengthening the DiversifiedProducts business and increasing our fundamentalcompetitiveness in raw materials development andproduction technology.

By focusing development resources on these strategicareas, we aim to expand our global business while alsopromoting greater vertical integration within theBridgestone Group, which is one of our competitivestrengths. Although our development is primarily product-focused, we are also seeking to build our reputation as a“solutions provider”. In May 2007, the Bridgestone Groupacquired US-based Bandag, Incorporated, a leadingcompany within the retreading industry. We will nowprovide even better service to our customers by offeringa comprehensive tire maintenance solution, backed by acomplete line of new and retread truck tire offerings.

Antimonopoly investigation and improperpayments to foreign agentsIn news releases on May 4, 2007 and February 12, 2008,Bridgestone Corporation disclosed that Japanese, US,European and other authorities have been investigatingthe Company and certain of its employees in connectionwith international cartel activities and/or improper moneypayments to foreign agents respectively. We haveappointed an Investigation Committee consisting of ourexternal attorneys who have been involved in the ongoinginvestigation of these matters. This investigation iscontinuing and may expand. The Company willinvestigate the whole picture of these improper activitiesand will take this opportunity to speedily resolve thefundamental problems and issues presented by anymisconduct that we may uncover. In addition, theCompany will employ our best efforts to establishpreventive measures to stop future misconduct.

Enhancing shareholder valueThe Bridgestone Group is committed to generating valuefor its shareholders through improved financial returnsbased on sustained business expansion. Our policy is tomaintain a stable and steady dividend, taking into account

The plan summarizes where the Bridgestone Groupwants to be throughout the period up to 2012, along withthe measures that we will implement to get there. Thisplan was not a top-down, target-setting exercise.Instead, it involved extensive discussions with managersthroughout the Group to ensure that targets are feasibleand that, more importantly, the measures developed willoptimize the global operations of the Bridgestone Group.We also developed a series of Key PerformanceIndicators (KPIs) to track progress within each business.

Each SBU and GMP function has full managementresponsibility and functional ownership. Each also retainsorganizational autonomy to enable an effective yet flexibleresponse to business conditions and performance. Thestructure is thus one of independently operating SBUsand GMP functions working within a GHO-defined policyframework, based on a coherent and optimized businessplan and close communication between these three partsof the overall organization. I believe that this arrangementallows an optimal mix of motivation, accountability andflexibility across all Group operations.

One final aspect of our business planning is the fact thatwe will update the plan each year to take account ofchanges in the business environment. The purpose ofthis rolling plan mechanism is not to keep moving thegoalposts but rather to allow us to revise our measureswhere necessary to respond to changes as they arise.The integrated revision of measures is a critical part ofmaking sure that our global operations are fully optimizedand remain that way going forward.

Targeting the pinnacle of development toensure enhanced products and servicesThe Bridgestone Group is currently developing variousmeasures in line with this structure and plan. A particularfocus concerns the continuing enhancement ofBridgestone products as a means to drive sustainedgrowth. To this end, we continue to focus our efforts oncertain strategic areas based on our concept of “aimingfor the higher level.”

Our goals in strategic product development are basicallythreefold. First, we aim to reinforce our competitiveadvantage in those areas where the Bridgestone Grouphas preceded its competitors, such as runflat tires, wintertires, ultra-high-performance tires and ultra-low-profileGREATEC tires for commercial vehicles. Our second aimis to gain an overwhelming competitive edge throughadvanced technology and sophisticated business models


growth in earnings and any changes in financialcondition. We also seek to balance the level ofshareholder return against the accumulation of capitalreserves required to invest in the reinforcement of thebusiness base for the long term. This requiresinvestments in domestic and overseas productionfacilities, sales and marketing systems and R&Dprograms, among other things. For the fiscal yearended December 2007 we will pay a final dividend of¥13 per share, bringing total dividends for the year to¥26 per share.

The Bridgestone Group has always had immensepotential by virtue of the talent within its individualfunctions. In the future, we will look to maximize returnsby optimizing our global operations. I hope to harnessall of the Group’s resources more efficiently so that wecan boost returns by quickening our response andincreasing our competitiveness. Our goal is to createan organization with a truly global structure, supportedby genuinely global planning capabilities. Thismanagement formula is rare within corporate Japan —so rare that we hope others will strive to emulate the“Bridgestone model” of global development.

I ask for your continued support and understanding as we work to raise the value of the Bridgestone brandworldwide.

April 2008

Shoshi ArakawaChairman of the Board, CEO and President

TRAVERSING A PATH TO THE

PINNACLE OF PERFORMANCE:

Objectives and Measures of the

Mid-term Management Plan 2007 and a

Focus on Strategically Important Products

08

Management goalTo be the world’s undisputed No. 1 tire and rubbercompany in both name and substance

MTP development frameworkThe Bridgestone Group has formulated a coherent Mid-term Management Plan (MTP) to achieve the totaloptimization of Group business resources, based onpolicies established by the Global Head Office (GHO).Each Strategic Business Unit (SBU) seeks to realize theseplans using specialized support provided by the functionalunits of the Global Management Platform (GMP).

Key strategies1. Always aim for the higher level

(1) Strategic tire products

Enhance tire business domain with high growth potentialwhere the Bridgestone Group has a unique competency.

A. Areas where the Bridgestone Group can precede itscompetitors through reinforcement of products• Runflat tires for passenger cars; UHP (ultra-high-

performance) tires; winter tires• High-value-added tires for commercial vehicles

(GREATEC, low-profile)

B. Areas where the Bridgestone Group can achieve long-term competitive advantage through technology andbusiness modelSpecialty tires• Large off-the-road radial tires for construction and

mining vehicles• Aircraft radial tires• Motorcycle radial tires

(2) Eco-friendly products and services

Position eco-friendly products and services as strategicbusinesses in support of the Group’s CSR initiatives.

A. Eco-friendly productsa. Tires b. Diversified products• Runflat tires • Electronic paper displays• ECOPIA brand products • EVA film for solar modules

B. Eco-friendly servicesA business model that supplies products and servicesto promote greater resource conservation• Retread business (Bandag)

The Bridgestone Group plans to supply tiremanagement solutions to commercial fleetcustomers through its Bandag brand (acquired inMay 2007) while at the same time aiming to make asubstantial contribution to environmental protectionand resource conservation.

(3) Diversified products

The Bridgestone Group plans to generate about 20% ofconsolidated sales and operating profit from diversifiedproducts. The aim is to boost profitability byconcentrating resources on high-margin products suchas high-performance films.

AN OUTLINE OF THE FIVE-YEAR MID-TERM

MANAGEMENT PLAN (2008-2012)

Contribution of specialty tire operations[Ratio of net sales/operating profit](FY07 est. at time of MTP2007 release)

Outer ring: Net sales

Specialty tires Other tires

An Outline of the MTP 2007

5%

18%

Inner ring:Operating profit


(4) Reinforce fundamental competitiveness

The Bridgestone Group aims to develop highly competitivematerial and production technologies to continuesupplying the quality demanded by the market whilecreating improved material cost profiles.

(5) Enhancement of corporate governance structure

Plans call for the further development of governance andcompliance systems to ensure that both management andoperational execution are efficient and goal-oriented.

(6) Basic systems to reinforce the Group’s CSR initiatives

• Establishment of the Integrated CSR EnhancementCommittee (January 2007)

• Aim of CSR activities: To realize its corporatephilosophy to serve society with superior quality andsupport ongoing development of a healthyBridgestone Group

• Focus on 22 specific themes on a global basisacross the Bridgestone Group in order to reinforceCSR activities

(7) Environmental management

Targeting environmental issues at the global, regional andworkplace levels, the Bridgestone Group maintains itsleadership position in this area and will create specific plansfor a diverse program of environmental managementactivities to cover a broader range of business domains.

2. Integrate and expand business domains based on

clear long-term strategy

The Bridgestone Group is working to strengthen verticalintegration placing an emphasis on the integrated andeffective use of resources. This will allow the Group tobuild an optimized supply chain and supply society withhigh-quality products and services.

The Global Logistics Center (GLC) was established inOctober 2006 with the aim of raising supply-chaincompetitiveness for the global tire business.

3. Achieve truly global development through SBUs

Over the plan period, the Bridgestone Group aims toincrease consolidated net sales by about 20% byaggressively targeting growth in overseas and specialtytire markets, while at the same time boosting operatingprofit by 80% through increased sales of strategicproducts and rationalization efforts. Another key goal is todevelop supply systems to support this growth.

Major production expansion plans:

• India (passenger car tires: capacity increase)• Indonesia (passenger car tires: capacity increase)• Mexico (passenger car tires: new plant (operations

started))• Hungary (passenger car tires: new plant (operations

started))• Poland (truck and bus tires: new plant)

Net sales growth by tire SBUs (2007 E 2012)

(Black bar: exch. rate adjusted )

4. Target optimum group management based on MTP

To realize the MTP goals, the Bridgestone Group continuesto develop planning and management structures tooptimize the integrated use of Group resources in amanner consistent with its basic strategy. This involves ashift away from the current resource model to a policystance defined as “Lean and Strategic.”

Performance targets

2007 2011 2012Net sales ¥3.4 trillion ¥3.8 trillion ¥4.0 trillion

Operating profit increase (2007 E 2012)

Expansion of strategic products +¥100 billionRationalization +¥50 billionDiversified products business +¥25 billionVolume, others +¥10 billion

+¥185 billion

2007 2011 2012ROA 4.1% Over 5.0% 6.0%

Exchange rates 100JPY/US$ (2007 forecast: 118JPY/US$)

130JPY/EURO (2007 forecast: 155JPY/EURO)

0

40

80

120

160

200

(135)

ChinaEuropeTheAmericas

Japan SpecialtyTire

(105)

(150) (150)

(185)(%)

10

Bridgestone runflat tiresrepresent an advanced and eco-friendly solution for enhancedvehicle safety.

Special Feature


THE PINNACLE OF

SAFE, ECO-FRIENDLY

TECHNOLOGY

The Bridgestone Group has been developingrunflat tires for more than 20 years as a saferdriving solution. They represent the pinnacle ofefforts to develop technology that embraces thethree core elements of safety, comfort and theenvironment. In recent years, increasingnumbers of passenger car models have beenfitted with runflat tires, notably in Europe, theUnited States and Japan.

Runflat tires function safely at a specified speedfor a specified mileage even after a loss of airpressure. By eliminating the need to carry aspare, runflat tires help to reduce vehicle weight,promoting better fuel economy while helping toconserve resources. They also afford cardesigners greater freedom to utilize theincreased space.

In 2007, Bridgestone Corporation unveiled a newtechnology called “COOLING FIN” that enhancesthe post-puncture durability of sidewall-reinforced runflat tires*1. The new fins are radialprotrusions located on the external tire surface.These work by promoting increased airturbulence, which in turn helps to cool the tiresidewall. This new technology paves the way fordeveloping runflats for vehicles such as minivans,large passenger sedans and some SUVs. Suchvehicles have larger tire cross-sections*2 thatgenerate greater sidewall heat at lower tirepressures. COOLING FIN technology also opensup the possibility of reducing the thickness ofrubber used to reinforcethe tire sidewall, leadingto a reduction in weightas well as morecomfortable ridecharacteristics.

Height of cross-sections *2

Sidewall-reinforced runflat tire *1

Shape of tire after puncture

Sidewall-reinforcingrubber

ENSURING SAFETY

AT THE CRITICAL

MOMENTS OF A FLIGHT

During take-off and landing the tires fitted to theAirbus A380 (pictured) support a gross weight ofup to 560,000kg traveling at speeds of up to370km/h. As in Formula One racing, suchextreme conditions demand tires that feature a fullrange of advanced tire technologies. The next-generation Boeing 787 will also be delivered withBridgestone tires as fully standard fitments.

Bridgestone aircraft tires are based on the triple-R concept, which stands for RevolutionarilyReinforced Radial. Based on cutting-edge beltconstruction, this unique structural designprovides four key benefits: increased resistanceto external damage; a reduced chance of tiredestruction through bursting or tread separationeven if damage occurs; reduced tire weight forbetter fuel economy; and improved abrasionresistance, which allows for more takeoff andlanding cycles between tire replacement.

Bridgestone Corporation is one of the very fewcompanies with the design and productioncapabilities to supply these kinds of tires.Bridgestone Corporation is investing in newaircraft radial production capacity at its TokyoPlant, with production slated to start in thesecond half of 2008 while the Kurume Plantcontinues to produce aircraft radial tires. Totalproduction capacity of radial tires for aircraft willbe 2.5 times the current level. BridgestoneCorporation also has retread aircraft tire plants inNorth America, Europe, Asia and Japan to offera comprehensive range of products and servicesfor the commercial aircraft market.

12

Special Feature

Bridgestone radial tires are fitted to the AirbusA380, which carries 555 passengers in itsstandard cabin configuration.


14

The retread tire business extendsthe presence of the BridgestoneGroup into eco-conscious tiremanagement solutions forcommercial customers worldwide.

Special Feature


EXPANDING INTO

THE TIRE SOLUTIONS

BUSINESS

At the end of May 2007, Bridgestone AmericasHolding, Inc., the U.S. subsidiary of BridgestoneCorporation, completed its acquisition of Bandag,Incorporated, one of the world’s top companies inthe retread tire sector. US-based Bandagmanufactures retreading materials and equipmentfor a global network of more than 900 franchiseddealers across 90 countries that produce andmarket retread tires and supply tire managementservices. Bandag’s traditional business servesend-users via a wide variety of products offeredby dealers, ranging from tire retreading and repairto the outsourcing of tire management systemsfor commercial truck fleets. Bandag owns tenproduction bases located in the United States,Belgium, Brazil and Mexico.

Retreading involves removing used tire treads andapplying freshly vulcanized new treads so that thebody of the tire can be reused safely. It is a widelyused solution in Europe and North America for thetires that are fitted to trucks, buses and aircraft.Retreading not only helps to reduce the total costof tires, but also makes a major environmentalcontribution in terms of the more effectiveutilization of natural resources.

The integration of Bandag enables theBridgestone Group to enhance the level ofservice and technology for customers, whileproviding the same great level of quality. Theglobal Bridgestone Group will now provide evenbetter service to customers by offeringcomprehensive tire maintenance solutions,backed by a complete line of new and retreadtruck tire offerings.

A CRITICAL

COMPONENT OF

CLEAN ENERGY

In the Diversified Products business, BridgestoneCorporation is pursuing a policy of selection andconcentration in order to drive optimumcorporate growth. One promising area for thefuture is EVA (ethylene vinyl acetate) film for use in the production of solar power modules.

EVA film is used to attach the silicon cell whichconverts solar rays into electricity to the backingsheet and glass surface of the solar module viaheat-induced molecular binding. This process relieson the property of EVA film to become transparentupon heating. EVA film is also waterproof and UV-resistant, which makes it an ideal adhesive film forsolar modules installed outdoors.

To cater to growing global demand for solarpower modules, Bridgestone Corporation isinvesting to increase production capacity for EVAfilm at its Iwata Plant located in ShizuokaPrefecture, Japan. The monthly productioncapacity of EVA film is scheduled to double to2,000 tons by late 2010.

Global demand continues to rise for photovoltaiccells, which offer a clean alternative powersource to help in cutting CO2 emissions. TheBridgestone Group places a high priority onenvironmental activities as an important meansof achieving higher sustainable long-termperformance growth. EVA film is therefore adoubly important product in this regard.

16

Special Feature

EVA film is a critical component ofsolar modules, which are inincreasing demand as a cleanenergy source.


18

BETTER FINANCIAL PERFORMANCE VIA

GREATER EMPHASIS ON COMPETITIVE

PRODUCTS IN GROWTH AREAS

Consolidated sales in the tire business segment totaled ¥2,750.4 billion (net of inter-segmenttransactions) in fiscal 2007, an increase of 15% compared with the previous year. Operatingincome rose 40% to ¥195.0 billion, mainly due to successful efforts across the BridgestoneGroup to mitigate the effects of high raw material costs. The focus remained on maximizingsales momentum via the introduction of appealing products worldwide and on engineeringfurther improvements in the product mix through higher sales of high-value-added productlines. Segment capital expenditures totaled ¥240.8 billion, reflecting investment in variousBridgestone Group production sites worldwide that are the supply bases for strategic products.

Review of Operations l Tires

Sales (net of inter-segment transactions)

¥ billion

Operating income¥ billion

2007

2006

2005

2004

2003

2007

2006

2005

2004

2003

2,750.4 195.0

2,393.2

2,153.0

1,928.0

1,836.4

139.1

167.9

160.3

148.3

JAPAN TIRE SBU

Although unit tire sales were on a par with the previousyear, most of the growth was generated by sales ofstrategic products and high-value-added lines. Sales oftires for the original equipment market were up over2006. However, high fuel prices remained a significantdampening factor on demand in the replacement tiremarket. Additionally, in the passenger car segment of thereplacement tire market, demand for summer tires wasflat, while demand for winter tires dropped sharply amidan exceptionally mild winter across Japan.

In the original equipment market, BridgestoneCorporation (“Bridgestone”) focused on improvingproduct mix by expanding sales of high-performance tireswhile at the same time seeking to boost the image of theBridgestone brand by promoting the use of such tires inluxury and up-market vehicles. Bridgestone also soughtto enhance its presence in all automobile sectors inJapan, including mid-market passenger car models.

In the replacement tire market, Bridgestone pursueda strategy of “quality-led growth” by seeking to expandsales of high-value-added products while obtainingacceptance for a higher selling price in the marketplace.Bridgestone implemented price increases in Japan during2007 across most tire categories in an attempt to offsetthe effects of sustained high raw material prices. Price

increases were between 5% and 10%.Bridgestone continued to position itself in the

Japanese tire market as a premium brand offering arange of benefits in terms of quality, safety andenvironmental performance. The major strategic productswere runflat tires, UHP (ultra-high-performance) tires andwinter tires in the passenger car segment, as well as low-profile truck and bus radial tires and the eco-friendlyECOPIA brand tires in the commercial vehicle segment.

Creating a solid domestic business platformThe shift to a single strategic business unit (SBU) tomanage the Japanese tire business promises to generatesignificant benefits over the medium to long term. Thekey goal is to create a solid domestic business platformthrough the integrated optimization of tire production andsales operations within Japan.

The development of the Japan Tire SBU involvesintegration on a number of levels: production and sales;the original equipment and replacement tire operations;decision-making processes; and operational planning.The Bridgestone Group’s basic stance is to proceed withgroup and global business development on top of thestrong Japanese business. Throughout its history,Bridgestone has developed advanced capabilities in bothproduction and sales operations, which has helped tosupport and enhance its business performance.


Bridgestone is focusing onboosting sales of strategicproducts such as UHP (ultra-high-performance) tires.

Efforts are being made to expandsales of high-value-added productlines in the truck and bus tiresector.

Cockpit is a chain of highlyspecialized stores designed to meet individual customerneeds.

However, in order to further enhance thesecapabilities to develop a more secure footing,Bridgestone continues to seek improvements acrossall functions. Bridgestone will promote the integratedoptimization of tire production and sales operations toensure that these improvements provide the bestpossible result for the organization as a whole. Thebenefits promise to materialize over time throughenhanced competitiveness in terms of costs,technology and sales presence.

The major challenges in the Japanese tirebusiness can be summarized in terms of changes inthe structures of demand, earnings and competition.These in turn are translating into downward pressureon prices combined with upward pressure on rawmaterial costs. Bridgestone remains focused onfollowing the “quality-led growth” strategy to boost itscompetitive edge by leveraging technical superiorityto develop high-quality differentiated tire products.This strategy also plays a central role in thedevelopment of a solid domestic business platform.

Growing demand for eco-friendly, fuel-efficient tiresCommercial vehicle fleet operators the world over aremainly concerned with procurement and operatingcost. Eco-friendly tires with reduced rolling resistancethat deliver better fuel economy are thus anincreasingly popular solution for truck and busoperators in Japan. Bridgestone provides ECOPIAbrand products to cater to this growing demand.Feedback from commercial customers that haveadopted this product has been especially positive,with user surveys confirming the economic benefits interms of lower fleet operating costs.

Outlook for fiscal 2008Automobile production levels in Japan are projectedto remain high in fiscal 2008, with export productionincreasing to compensate for the flat domesticmarket. Bridgestone will respond more swiftly tochanges in the original equipment sector, whileenhancing the quality of its products. In thereplacement tire sector, demand is expected toincrease slightly overall.

Bridgestone will continue focusing on improvingprofitability by promoting sales of strategic products,such as runflat tires, UHP tires and winter tires, togenerate a higher-value sales mix. As SBU integrationcontinues, increased cooperation between the salesand marketing teams in the original equipment andreplacement tire sectors is expected to contribute tohigher sales and increased returns. The plannedreinforcement of the retreading business in theJapanese market offers further potential for newgrowth within the tire management services sector.

20


The Bridgestone Group primarily operates in the Americasthrough a wholly owned subsidiary and holding company,Bridgestone Americas Holding, Inc. (“BSAH”). BSAH is theparent company to several subsidiaries, includingBridgestone Firestone North American Tire, LLC (“BFNT”),BFS Retail & Commercial Operations, LLC (“BFRC”), BFSDiversified Products, LLC (“BFDP”) and a new member —Bridgestone Bandag, LLC (“BSBD”). BSAH also has anumber of other subsidiaries based in North, South andCentral America.

*Note: Refer to page 28 for details on the diversified products

business in the Americas.

North AmericaWithin the tire business, the best-performing sectors werereplacement tires for passenger cars and off-the-road tiresfor mining and construction equipment. Sales of radial tiresfor commercial vehicles (trucks and buses) were negativelyaffected by soft demand, especially in the original equipmentsector. Reduced production of light trucks and SUVs withinthe US and Canada resulted in lower tire shipments tosupply OEM contracts. However, the consumerreplacement sector benefited from better brand and productmix resulting from an emphasis on strategic categories suchas high-performance tires. Higher selling prices were anotherfactor contributing to growth in sales revenue.

Overall sales of tires in the North American marketwere ahead of fiscal 2006. Sales of tires by BFNT, which isBSAH’s tire manufacturing and wholesaling operation inNorth America, were less than originally expected due tosofter demand in the commercial vehicle and passengercar original equipment sectors. BFNT recorded positivegrowth in operating profit compared with the previous yeardue to a solid performance across most business units.Sales of replacement tires by BFRC, which remained thelargest automotive retailer in the world, exceeded both theprior year and internal projections.

During fiscal 2007, BFNT completed the sale of itsclosed Oklahoma City plant. A plot of vacant land of morethan 240,000m2 on the edge of the plant site was donatedto the local school system to serve as a wildlife habitat areaas well as a site for a new elementary school building.

In other developments, BFNT began construction of anew distribution facility in Jacksonville, Florida, which isexpected to be complete by mid-2008. BFNT alsoannounced a multi-year integrated marketing partnershipwith the National Football League (NFL). Under theagreement, the Bridgestone brand is designated as theNFL’s first “Official Tire.” The partnership promises toincrease exposure for the brand through programs such asthe Super Bowl, which attracts some of the highest ratingsfor any television program in the US and is also watchedby a worldwide audience in excess of 100 million. In

March, 2008, BFNT and Bridgestone Firestone CanadaInc. (“BFCA”) also announced a new global multi-yearpartnership with The National Hockey League (NHL) andthe National Hockey League Players’ Association (NHLPA)in which the Bridgestone brand will serve as the “OfficialTire of the NHL, NHLPA and the Hockey Hall of Fame.”

Strategy and outlookOverall, BSAH continues to strengthen its operations inthe Americas and is focusing efforts on the manufactureand sale of premium value-added products such as high-performance, ultra-high-performance and runflatpassenger car tires. In addition, the company continuesto position itself for the future in the retail automotive tireand service sector by committing to growth indemographically desirable locations.

Continually seeking to provide customers with evenbetter quality and value, BSAH continues to pursueincreased cost competitiveness through targeted capitalinvestments towards those goals, while closing thosefacilities that have proven to be obsolete or non-competitive.

Unprecedented ongoing escalation in raw materialcosts — especially those related to petroleum — presentedthe major challenge in 2007. BSAH continues to look forways to enhance productivity as well as quality while strivingto mitigate the impact of these rising costs. Based on closemonitoring of the marketplace, BSAH evaluates its coststructure on an ongoing basis to determine appropriatecountermeasures as necessary. This issue is expected toremain a key operational factor in fiscal 2008.

The prospects of an economic slowdown in the UnitedStates during 2008 imply a possible negative impact onconsumer spending. BSAH will make appropriateadjustments to operating expenses in line with changingeconomic conditions. BSAH expects growth in sales andprofit during 2008 versus 2007 despite challenging economicconditions that may affect some portions of its business.

A major force in the tire retreading marketBandag represented a significant addition to theBridgestone Group during 2007, particularly in NorthAmerica. The company was a strong contributor to salesduring the seven-month period following the completion ofthe acquisition in May 2007. Bandag also celebrated themajor milestone of 50 years in business during the year.

Boasting an outstanding corporate culture, a talentedworkforce and superior quality products, the Bandagbusiness makes the Bridgestone Group a major force withinthe markets for tire retreading and tire managementservices. Significant synergies and market opportunities withthe Bridgestone Firestone Truck & Bus group have alreadybeen identified. Subsequently, on March 31, 2008, BSAHannounced a reconfiguration of the Bandag operationswithin the global Bridgestone Group to take betteradvantage of the combined strengths of our globaloperations that a unified new truck and retread tire business

AMERICAS SBU


BSAH celebrates the grandopening of the state-of-the-arttire facility in Monterrey,Mexico.

BFRC continues to be thelargest automotive retailer inthe world.

The Bridgestone Group hascompleted the Bandagacquisition and will nowprovide even better service tocustomers by providingcomprehensive tiremaintenance solutions backedby a complete line of new andretread truck tire offerings.

The new Hungary plant is vitalto achieve the objective ofsteady, profitable growth inEuropean business.

can deliver. In North America, BFNT’s truck and bus tiresales and marketing groups will be combined withBandag’s North American retreading operations and willbe aligned as a division of BFNT. The newly combinedoperations will be known as Bridgestone Bandag TireSolutions. In Europe, Bandag’s operations will beintegrated with Bridgestone Europe to similarly facilitatefurther development of existing synergies. In Asia, theBandag retread operations have already been alignedwith Bridgestone Corporation operations.

Central & South AmericaBridgestone Firestone Latin American Tire Operations(“BFLA”), an operating unit through which the LatinAmerican subsidiaries report to BSAH, experiencedrobust sales growth over the prior year, mainly due tostrong performances in the Brazilian and Mexicanmarkets. Although operating income did not achieveprojected levels due to strong offshore competition,higher expenses and the impact of currencyexchange, the results still significantly exceeded theprevious year’s performance.

New tire plants in Bahia, Brazil, and Monterrey,Mexico, began production in 2007. BridgestoneFirestone de Mexico, S.A. de C.V. (“BFMX”)announced plans to close a tire plant in Mexico City inthe second half of 2008 while separately undertaking acapacity expansion at its plant in Cuernavaca.

Market trends and performanceThe European tire market recorded a decline indemand in the passenger car segment during fiscal2007. Demand was firm, however, in the commercialvehicle segment, supported by brisk economicgrowth in East European markets.

Bridgestone Europe NV/SA (“BSEU”) notched upgains in share across both market segments,particularly in truck and bus radial tires (originalequipment) and targeted high-value-added productareas such as winter and UHP (ultra-high-performance)tires. Unit sales of passenger car and light truck tireswere strong, exceeding levels recorded in fiscal 2006.Unit sales of runflat tires, winter tires and UHP tires rosesignificantly and contributed to product miximprovement. Sales of truck and bus tires were alsohigher than in the previous year.

BSEU posted a double-digit increase in salesrevenue in 2007. Profits increased despite high rawmaterial costs.

Strategy and outlookThe core strategy in Europe focuses on raising profitsthrough product mix improvements by boosting

EUROPE SBU

22


Bridgestone’s presence in strategic products such asUHP tires, runflat tires, winter tires for passenger cars,and GREATEC and low-profile truck and bus tires. Other aspects of the strategy are the development ofhigher-value customer sales and service channels andregional production capacity upgrades to increaseregional self-sufficiency.

Raw material prices are expected to reach historichighs in 2008. While EU market GDP growth is projectedto be around 2%, BSEU expects competition in Europe to intensify as emerging Asian tire manufacturerscontinue to make inroads into the market. The strategyfor generating higher profits revolves around continuing toimprove the sales mix while working to mitigate theimpact of increasing raw material prices.

Regional infrastructure developmentBSEU is investing in production and logistics infrastructure inEurope to boost regional self-sufficiency of supply and addgreater manufacturing value at the local level.

During 2007, BSEU’s new plant for passenger cartires near Tatabánya in Hungary completed allcertification procedures. Production began in January2008. This plant employs Bridgestone’s revolutionaryBIRD (Bridgestone Innovative and Rational Development)production system. BIRD is the first tire productionsystem that automates the entire manufacturingsequence from processing raw materials to theinspection of finished tires.

Construction of another new plant for truck and bustires in Stargard, Poland is underway. Together with theexisting facility in Poznan, once operational these twoplants in central Europe are expected to bring significantbenefits to BSEU in terms of increased supply self-sufficiency and through a supply system that enablesenhanced sales of strategic products.

In other developments during 2007, the final phase of the European proving ground was completedand the European Technical Center was expanded.BSEU also began operating a new logistics facility inMadrid, Spain.

Channel strategyBSEU continues to follow a medium-term channeldevelopment strategy. The centerpiece of this strategy forthe passenger car tire market is the First Stop retail chain.The number of First Stop outlets in the region increasedfrom around 1,560 to 1,740 during 2007.

BSEU is also developing its presence in Europe as asolutions provider to commercial truck fleets. During 2007,several large pan-European transport fleets signed up toBridgestone’s Total Fleet Management program, to benefitfrom services delivered by the pan-European network ofTruckpoint outlets. BSEU will further strengthen its retreadbusiness by facilitating further development of existingsynergies of new and retread truck tire offerings.

Market trends and performanceTire demand in both the passenger car and commercialvehicle segments continues to expand at around 10%per year, in line with the underlying growth of the Chineseeconomy. The market also has outstanding long-termgrowth potential owing to the fact that the process ofmotorization is still at a relatively early stage.

The market is highly competitive, with many localsuppliers competing against overseas manufacturers.Locally produced bias tires still account for a large part ofthe market by volume.

Overcoming the challenging market conditionsthrough efforts to expand sales and to mitigate theimpact of higher raw materials costs, Bridgestone (China)Investment Co., Ltd. (“BSCN”) posted a substantial year-on-year improvement in performance during fiscal 2007.Sales volume, revenue and profits were all significantlyhigher than in 2006.

Strategy and outlookBSCN is following a “quality-led growth” strategy in Chinafrom a long-term perspective. By placing the emphasison quality in terms of not only the performance andtechnical aspects of the product but also the distributionchannel and customer service, the aim is to differentiatethe Bridgestone brand as the driver’s first choice for high-performance radial tires both in the passenger car tireand truck and bus tire sectors.

In recent years, China has witnessed an explosion in thenumber of motorists purchasing and driving passengercars. BSCN is deliberately targeting the high-performancesegments of the original equipment and replacement tiremarkets. Coverage of the F1TM Shanghai Grand Prixcontinues to heighten the visibility and awareness of theBridgestone brand within China, while also helping toenhance our technological advantage and product reliability.

In the truck and bus tire sector, BSCN aims to offer abroad range of high-quality products to target the needs offleet operators facing highly demanding conditions onChina’s expanding road network.

Regional infrastructure developmentReflecting the market’s high growth potential, theBridgestone Group continues to invest in a verticallyintegrated production and distribution chain in China.Major production facilities include tire plants in Tianjin,Shenyang and Wuxi and a steel cord plant in Shenyang.Production of truck and bus radial tires and steel cordbegan in 2007 at new facilities in Huizhou. A syntheticrubber plant in the same part of the country is due tocome on stream in 2008.

In 2007, underlining the commitment to establish along-term presence as a quality brand in China, BSCNcompleted the construction of a proving ground to test

CHINA TIRE SBU


Continuous efforts are being madeto expand the retail network inEurope, while enhancing quality.

The first truck and bus tireproduced at the new plant inHuizhou, China.

A more extensive retail networkwill ensure a higher level ofsales and service quality in theAsia and Oceania region.

products for the local original equipment andreplacement tire markets. The facility opened in March2008. Covering about an 84-hectare site, the provingground is specifically designed to test high-performance tires. It includes a 900-meter high-speedstraight as well as stretches designed to test tire safety,handling and performance under various high-speedconditions. Besides development testing, BSCN plansto use the facility for various promotional and trainingpurposes. The Bridgestone Group views China as a keymarket, and is therefore implementing comprehensivemeasures spanning production, sales and technology.

Market trends and performanceSustained high raw material costs were a commonfeature of markets across the region due to highprices for oil and natural rubber. Automobile salesdipped in volume terms in some markets, especiallyThailand, Malaysia and Taiwan. Market conditionswere particularly challenging in Thailand, where acombination of political instability, high oil prices, asluggish economy and a rising local currency servedto depress domestic demand as well as exports.Low-priced tires from low-cost manufacturers,especially Chinese producers, made inroads into anumber of markets across the region.

The regional SBU posted higher sales and profitsthan in fiscal 2006 despite the various financialpressures on the top and bottom line. Performanceswere good in Thailand, Indonesia and India, whereassales declined compared with the previous year inTaiwan and New Zealand. In Thailand, ThaiBridgestone Co., Ltd. was able to overcomeincreasingly harsh market conditions by enhancingproductivity while boosting sales. This involvedincreasing prices, improving the mix and reinforcing thein-market retail presence of the Bridgestone Group.

Strategy and outlookThe strategy for the Asia & Oceania region remains inline with the global approach of “quality-led growth.”Bridgestone Group companies are working to move up-market to differentiate the brand by focusing on productand service quality, while raising prices. The successfulresults achieved in Thailand during 2007 in the face of adifficult market epitomize this strategy in action.

At the product level, Bridgestone Groupcompanies focused on upgrading the sales mix byincreasing the proportion of strategic products sold,especially UHP (ultra-high-performance) and runflattires. In the commercial vehicle sector, BridgestoneGroup companies aim to promote a shift to radialtires while also selling more tubeless products.

ASIA & OCEANIA TIRE SBU

24


Regional infrastructure developmentBridgestone Group companies continue to invest in higherproduction capacity in the region to support a strategy ofupgrading the sales mix to include a greater proportion ofhigh-performance tires. Increasing production capacity isalso important for optimizing the region’s role as a globalexport base for strategic products.

During 2007, Bridgestone Corporation announcedplans to increase daily capacity for passenger car and lighttruck radial tires at the Indore plant in India (by 4,500 unitsto 15,000 units) and at the Karawang plant in Indonesia (by8,400 units to 27,000 units). In January 2008, ThaiBridgestone Co., Ltd finalized plans to increase productioncapacity for passenger car radial tires at the Nong Khaeplant in Thailand. Daily capacity is scheduled to rise by6,000 units to 36,500 units by late 2010.

Elsewhere, Thai Bridgestone Co., Ltd beganconstruction on a new proving ground located near theNong Khae plant. The new facility, which will be roughlyten times the size of the existing course, will be used totest tires for the original equipment and replacementsectors specifically for the Thai market, and to enhance thespeed and efficiency of development assessment andperformance verification. The facility will also be used forlocal sales promotion activities and training exercises forpeople inside and outside the company. Additionally, theestablishment of a development structure focused on othercountries in Asia other than Thailand will contribute to theadvancement of motorization in the entire Asian region.

Channel developmentIn February 2008, an agreement was announced underwhich Bridgestone Group companies in the Asian regionwill acquire Shell Autoserv retail stores — 64 stores inThailand and eight in Malaysia. This move promises tofurther strengthen the Bridgestone Group’s retail presenceand enhance its ability to respond to continuing growth intire demand in those markets. The existing retail networkcomprises 178 stores in Thailand and 201 stores inMalaysia, consisting of both company-owned stores andfranchise shops. These provide car maintenance services,with a primary focus on tire sales.

Supported by the high price of oil, strong economicexpansion and high levels of construction activitycontinued to drive growth in regional demand for tires in2007. Some of the best-performing markets for theBridgestone Group within this region were oil-producingnations in the Middle East. Sales volume and revenuewere ahead of the prior year. Product launches such asthe POTENZA Adrenaline and Dueler Sports helpedboost sales of strategic tire products.

Bridgestone’s strategy in the Middle East and Africa is to

increase sales prices and improve the product mix to offsetthe effects of high raw material prices and the strength of theyen. Such factors are expected to persist in 2008.

Bridgestone South Africa (Pty) Ltd., a wholly-ownedsubsidiary of Bridgestone South Africa Holdings (Pty)Ltd., started mass production and shipping of runflat tiresat its tire plant in Brits in October 2007. With this, theBridgestone Group now boasts a quadripartiteproduction system of runflat tires spanning Japan, theUnited States, Poland and South Africa. The runflat tiresbeing produced are 205/55R16 TURANZA ER300, andapproval has been gained to use them on new BMW 3Series automobiles produced in South Africa.

RussiaBrisk economic expansion continues to support robustgrowth in unit sales within the Russian passenger carmarket, and demand for foreign tire brands has risensteadily. The market for imported winter passenger cartires is a particular target for Bridgestone Corporation.For example, the new BLIZZAK WS60 studless winter tirewas introduced to critical acclaim during 2007.

Bridgestone is investing in sales and distributioninfrastructure in the Russian market to build sales torespond to growing demand.

Specialty tires are key strategic products for theBridgestone Group. These sectors are ones where theBridgestone Group aims to translate cutting-edgetechnical superiority and an outstanding business modelinto high-value-added brand differentiation, therebyproviding a competitive edge over the long term.

Off-the-road tiresRapid growth in China, India and other emergingeconomies is driving demand for mineral resources,supporting a boom in mining worldwide. Underpinned bythese factors, demand for off-the-road tires used inconstruction and mining equipment, especially large andultra-large off-the-road radial tires, continued to outstripsupply during 2007.

Sales grew by more than 25% in fiscal 2007compared with the previous year. This reflected theexpansions in capacity at the Hofu and Shimonosekiplants in Japan along with successful efforts to improvemanufacturing efficiency and thus maximize productivity.Operating profits were significantly higher, due in part tothe effects of yen depreciation and higher selling prices.

With the expansions in capacity at the Hofu andShimonoseki plants, sales are forecast to grow further in2008 due to continuing strong demand. While aneconomic slowdown in the United States could depressdemand for small and medium-sized radial tires used on

MIDDLE EAST & AFRICA TIRE SBU

SPECIALTY TIRE SBU


Bridgestone tires for constructionand mining equipment areemployed at resourcedevelopment sites worldwide.

High-quality services promoteincreased sales of POTENZAAdrenaline, Dueler Sports andother strategic products.

construction equipment, Bridgestone Corporation(“Bridgestone”) expects robust demand fromconstruction machinery makers. Yen appreciationand high raw material costs are expected to putpressure on profitability.

Responding to growing global demandThe Bridgestone Group is one of the few companieswith the technical and production capabilities to makelarge and ultralarge off-the-road radial tires, which areidentified as competitive and strategic products.Based on projections of sustained growth in globaldemand in this market, Bridgestone is constructingan entirely new production facility in the Japanese cityof Kitakyushu to ensure a stable future supply ofultralarge radial tires for construction and miningequipment applications. The new plant is due tocommence operations in the second half of 2009. Inline with the extended mining boom, Bridgestoneannounced plans in 2007 to expand the capacity ofthe Kitakyushu plant beyond the original plan.

Aircraft tiresSales grew by more than 30% compared with theprevious year. This demonstrated the success of theBridgestone Group strategy over the past few yearsto secure a major share of the growing market forradial tires based on the incorporation of advancedtechnology into the product lineup.

Although the US economic slowdown impliessome uncertainty, prevailing growth trends areexpected to continue in 2008. Bridgestone expects afurther double-digit advance in sales, in part reflectingthe start-up of production of aircraft radial tires at itsTokyo Plant in addition to its Kurume Plant in Japan.

A long-term shift to radialsProjections by Boeing and Airbus show the growth incommercial airline passenger traffic over the next 20years will average about 5% per year. Demand foraircraft tires continues to expand in line with thistrend. Within this market, demand for aircraft radialtires is growing at double-digit rates as airlinesincreasingly opt for the benefits of radial tires overbias tires when new aircraft models join a fleet.

Compared with bias tires, aircraft radial tires havelower weight and require less frequent retreading.Such factors promote reduced operating coststhrough savings in fuel and maintenance. For thesereasons, demand for aircraft radials — and for relatedretreading services — is expected to generate solidgrowth over the long term.

Strengths of the Bridgestone GroupHarsh usage conditions demand the incorporation of a full range of advanced technologies into aircraft

The Karawang Plant of ourIndonesian subsidiary aims toincrease production capacity ofhigh-performance tires tostrengthen its position as a keysupplier of strategic productswithin the Bridgestone Group.

26


Bridgestone’s outstandingtechnological expertise is alsoreflected in radial tires formotorcycles.

tires — an area where Bridgestone excels. Bridgestonehas also developed a sophisticated business modeland global supply chain featuring production basesaround the world to satisfy retreading demand. In ahighly competitive market, Bridgestone has won praisefrom customers for its overall business packagesolutions developed for this sector.

Augmenting the regional coverage ofBridgestone’s supply infrastructure, a new retreadingfacility began operations in Qingdao, China, withmass-production starting in July 2007. Bridgestonealso relocated its retreading plant in January 2007, toMayodan, North Carolina (USA). This furtherexpanded the presence of Bridgestone in the keyChinese and US markets.

Equipping a new generation of aircraftBridgestone radial tires are standard equipment on anew generation of airliners that promise to carrypassengers around the world for many years tocome. The Airbus A380 made its maiden commercialflight in October 2007. Bridgestone’s RRR(Revolutionarily Reinforced Radial) tire is also beingfitted to the Boeing 787, for which Bridgestoneserves as a sole supplier.

Motorcycle tiresDemand for motorcycle radials was strong in Europeand North America in 2007, although sales droppedoff somewhat later in the year in the United States.Demand was flat in Japan. Boosted by buoyant levelsof exports and currency factors, sales were morethan 15% higher than in fiscal 2006. Sales areexpected to remain on a par with this level in 2008,reflecting a projected slowdown in OEM demand.

The long-term trend remains positive formotorcycle radial tires, especially in the road sportsmarket, where most new high-performancemotorcycle models are now fitted with radial tires.Bridgestone is investing in sales and marketinginfrastructure for motorcycle radial tires to build salesover the medium to long term.

Since 2002 Bridgestone has sponsored teams inthe MotoGP class of the FIM Road RaceChampionship, which represents the pinnacle of two-wheel road racing. Casey Stoner of Australia won theMotoGP series championship in 2007 on aBridgestone-shod Ducati. This astonishingachievement helped to demonstrate the technicalexcellence of Bridgestone high-performance radialtires. In 2008, Bridgestone will begin worldwide salesof the BATTLAX BT-016 HYPERSPORT motorcycleradial tire, which incorporates technology amassedthrough the development of tires for MotoGP. Thisnew tire displays excellent performance, includingbraking, cornering and acceleration.

The first production model ofthe latest next generationjetliner by Airbus known asthe A380 has been equippedwith Bridgestone’s aircraftradial tires.

© AIRBUS S.A.S. 2007 _ photo by exm company / H. GOUSSÉ

Sales of anti-seismic rubberhave been brisk in Japan.


CONCENTRATING RESOURCES ON HIGH-

VALUE-ADDED PRODUCTS IN AREAS WITH

GROWTH POTENTIAL

The diversified products segment comprises a broad range of chemical and industrial products,the diversified products business of Bridgestone Americas, bicycles and sporting goods.

Consolidated segment sales amounted to ¥639.8 billion (net of inter-segment transactions) infiscal 2007, an increase of 7% relative to the previous year. Operating income rose 6% to ¥54.7billion. Business was particularly strong in automotive components and the commercial buildingmaterials operations in the United States. Segment capital expenditures totaled ¥31.5 billion.

Review of Operations l Diversified Products

Sales (net of inter-segment transactions)

¥ billion

Operating income¥ billion

2007

2006

2005

2004

2003

2007

2006

2005

2004

2003

639.8 54.7

598.1

538.4

488.7

467.5

51.8

45.9

36.5

34.6

DIVERSIFIED PRODUCTS SBU

Besides tires, Bridgestone Corporation manufactures awide variety of rubber and chemical products. In theautomotive sector, these products include polyurethanefoam seat pads, antivibration rubber and othercomponents. Bridgestone also supplies industrialproducts and construction materials, including buildingmaterials, conveyor belts and related ore-transportingsystems for mining applications.

Multi-rubber bearings, which are fitted to buildings tohelp absorb seismic shock during an earthquake, areanother example of cutting-edge Bridgestone technologywith practical safety applications. Other applied industrialrubber products include rubber tracks for specializedvehicles and office equipment products such assemiconductive rollers.

Bridgestone is also a leading company in a number ofapplied materials fields, including interlayer adhesive filmsfor laminated glass (used in solar cells) and performancefilms used in plasma display panels.

Fiscal 2007 business performanceBridgestone’s diversified products segment reportedhigher sales on a consolidated basis. This marked the fifthconsecutive year of growth and once again demonstratedthe effectiveness of Bridgestone’s strategy of selectionand concentration of resources. Higher sales prices, salesgrowth and efforts to mitigate higher raw material costs

enabled Bridgestone to overcome continued high prices forkey raw materials such as natural rubber and steel products.Profits exceeded the prior year’s results (when 2006results are adjusted to account for organizational changes).

High-performance films were a major contributor togrowth. PDP filters and adhesive films for solar moduleswere two globally marketed products that achievedsubstantial growth in sales. Targeting the constructionindustry in Japan, Bridgestone posted significantly highersales growth of multi-rubber bearings for absorbingseismic vibrations and components for residential waterand air piping systems. However, sales of materials formarine civil engineering applications were downcompared with the previous year due to a decrease inpublic works investment.

Business strategy and outlookBridgestone possesses a varied portfolio of diversifiedproducts based on its expertise in rubber and relatedmaterials. Bridgestone is in the process of undertaking astrategic review to identify those products andbusinesses with the greatest future growth potential.Going forward, the strategy is to concentrate resourceson these areas of growth. By developing new productsbased on original, advanced technology and by creatingnew business models that generate added value throughexceptional quality delivered using market-orientedsolutions, the ultimate objective is to contribute to higherearnings growth at the consolidated level.

28

Review of Operations l Diversified Products

In the applied materials sector, Bridgestone has anumber of emerging businesses with great promise thatare in late-stage technical development, including ultra-high-purity silicon carbide (PureBeta) and liquid powderfor creating electronic paper displays.

Market conditions are expected to be more difficult infiscal 2008 due to the strength of commodity prices andthe sub-prime crisis on the US house-building sector.Bridgestone plans to focus on enhancing productivitywhile mitigating the effects of high raw material costs.

EVA adhesive film for solar modulesWith global demand for solar power continuing to growsteadily, demand for materials used in the production ofsolar modules is on the rise. Bridgestone supplies EVA(ethylene vinyl acetate) film as an adhesive material forbinding the silicon-based photovoltaic cell to a glasssubstrate in solar modules. Bridgestone plans to doublemonthly production capacity of EVA film by late 2010.Please refer to the Special Feature section (p. 16) forfurther details on this strategic growth product.

The diversified products business in the Americas mainlyconsists of roofing and building materials, vehicle andindustrial air springs, fibers and textiles, natural rubber andpolymers. In North America, BFS Diversified Products,LLC (“BFDP”) (a subsidiary of Bridgestone AmericasHolding, Inc.) is the market leader in thermoplastic andrubber roofing materials, as well as air springs.

Performance in 2007BFDP’s sales continued to grow in 2007 and exceededthe prior year’s results, although growth was not at thelevel originally projected due mainly to lower demandwithin the construction products segment. Operatingincome declined due to the impact of higher raw materialcosts and a softening in the construction productsbusinesses. This was somewhat offset by a goodperformance in the polymers and air spring business units.

Outlook for 2008Sales in the construction products businesses are expectedto grow in 2008 although not as significantly as 2007 as theNorth American commercial construction markets continueto soften. The continuing economic slowdown and higherraw material costs are expected to also impact the air springand polymers businesses, although the expected salesgrowth in the construction products and fibers and textilesbusinesses is projected to offset this impact.

Although slower than in prior years, BFDP expectspositive sales growth in 2008. In addition to the overall

anticipated increase in sales in the construction productssector, sales are expected to grow as the result ofincreased market penetration for items such as theGenFlex line of commercial roofing products.

Bridgestone Cycle Co., Ltd. (“Bridgestone Cycle”), themain Bridgestone Group firm in this sector, has been theleading domestic manufacturer of bicycles in Japan formore than 40 years.

Market trends and business performanceLow-priced imports, mainly from China, continued tomake inroads into the Japanese market in 2007 whiledomestic output in Japan declined by about 20%.

Although unit sales of bicycles were slightly lowerthan in the previous year, Bridgestone Cycle recordedsales growth of 5% over fiscal 2006 due to significantlyhigher sales of high-value-added electric power-assistedmodels, along with an increase in average sales pricesacross the range.

Business strategy and outlookBridgestone Cycle’s aim is to increase sales and profitsby upgrading the sales mix while maintaining a steadyshare of the Japanese market. This involves promotinghigher-value-added models such as the Assista andencouraging consumers to trade up by stimulatingdemand for fashionable and eco-conscious models.Bridgestone Cycle is promoting bicycles as a healthy andeco-friendly transport alternative for environmentallyconcerned consumers living in Japan’s major cities.

Bridgestone Cycle expects market conditions toremain harsh in fiscal 2008. The company aims toimprove the sales mix by selling more high-value-addedproducts such as electric power-assisted models.

Smart eco-friendly technologyIn 2007, Bridgestone Cycle introduced models featuringan original intelligent belt-drive system that can even befitted to 8-gear sports bicycles. The new “Smart Belt”mechanism allows smooth, noiseless gear changes.Bridgestone Cycle has incorporated the new technologyinto some luxury models.

Quality firstResponding to concerns about the number of accidents,in 2004 the Japan Bicycle Association (JBA) introducedthe BAA (Bicycle Association Approved) mark as avoluntary quality standard to address perceived safetyproblems. Bridgestone Cycle is leading the way indesigning and manufacturing models that conform to theBAA quality standard. The approach is also beingextended to sports bikes.

BRIDGESTONE AMERICAS’

DIVERSIFIED PRODUCTS BUSINESS

BICYCLES


Ave Maria is a new 5,000 acreCatholic community located justeast of Naples, Florida. The designof the Oratory (featured in thephoto) includes both BFDP’sroofing and panel systems.

A large number of fans comeout to enjoy Bridgestone Openin Japan.

Not only tires but otherproducts such as antivibrationrubber are also supplied foruse in automobiles.

The Anchor RHM9 Pro is a top-end sports bike featuring a ruggedfull-carbon frame.

Bridgestone Sports Co., Ltd. (“Bridgestone Sports”)is the market leader in Japan in sales of sportinggoods such as golf balls. The main BridgestoneGroup firm in this sector, Bridgestone Sports alsosupplies sporting goods aimed at tennis enthusiasts.

Market trends and business performanceThe Japanese market for golfing products postedpositive growth in 2007. This reflected higheradmissions at golf courses and the increasedpopularity of the sport among women. The apparelsegment of the market saw the best growth. Incontrast, the market for tennis-related goods shrankrelative to the previous year.

Bridgestone Sports posted lower profits on flatsales during 2007. This was mainly due to aslowdown in sales of Bridgestone’s premium golfballs and clubs, which was exacerbated by asustained increase in the cost of raw materials.

Business strategy The golfing population in Japan is growing modestlyat present and is expected to decrease over the longterm due to the impact of a dwindling birthrate andan aging population. Competition is also intensifyingwith the entry of foreign brands into the market, whilethe market pull of large retail chains is increasing. Asa result, the environment surrounding the sportsindustry is expected to remain tough.

In response, Bridgestone Sports seeks to furtherstrengthen the foundations of its golf business andsecure a competitive edge over rivals through higherquality and services. To achieve these goals,Bridgestone Sports will bolster new productdevelopment competency, enhance a qualityassurance system that includes subcontract factories,implement a channel strategy aimed at boostingsatisfaction at sales companies and of customers ingeneral, and expand into business that combinessoftware and product sales, such as at golf schools.

A measurably superior golf ballIn March 2007, Bridgestone Sports introduced thelatest product in the “Newing”-branded series of golfballs. The super NEWING LS330 range is based onthe latest advances in macromolecular chemistry tocreate a material with increased repulsion for a givenlevel of hardness. This patented “HR-drive”technology translates into greater distanceirrespective of the shot type and club speed. As anextra benefit, the new material also helps to reduceunwanted spin.

SPORTING GOODS

30

Bridgestone was the sole tire supplier in the prestigiousF1TM for the second time in 2007. Similarly, all theteams ran on Bridgestone-brand tires in the GP2TM

Series, where young and talented drivers strive to climbthe motor-racing ladder and become F1TM stars of thefuture. Bridgestone has been the official tire of theChamp Car World Series and Firestone the official tireof the Indy Racing League, which is best known for theworld-famous Indianapolis 500 Mile Race, known asthe “Greatest Spectacle in Racing”. These two serieswill unify in 2008 under a single banner. Bridgestonewill also be the official tire supplier to the new GP2TM

Asia Series starting in 2008.

Besides such premier events, Bridgestone is involvedin feeder series in Japan, such as Formula Nippon andthe Super GT Series. Bridgestone has also developeda reputation for high quality in the motorcycling sportsworld, supplying tires for global road-race competitionsin the MotoGP. Furthermore, Bridgestone supplies tiresfor professional motocross competition.

Participation in motorsports is a core element ofBridgestone’s ability to demonstrate the superiority ofits proprietary tire technologies in no uncertain terms.Bridgestone was chosen by the FIA as the official tiresupplier to F1TM for the three years beginning 2008,marking an exciting step and demonstrating the highregard in which Bridgestone is held by the sport.

RIDING THE WAVE OF

SUCCESS IN MOTORSPORTS

The Bridgestone Group supplies tires to racing drivers, riders and teams in a sweeping rangeof motorsports events, beginning with the FIA Formula One World Championship (F1TM), thepinnacle of motorsports, and the MotoGP World Championship. The consistent performanceof Bridgestone tires has supported the victories of drivers, riders and teams across numerouscategories, earning the company preferred supplier status in many sporting situations wheretires are put to the ultimate test.

F1TM: As the sole tire supplier to Formula One in2007, fans were treated to a dramatic and excitingseason with very close competition. It was an epicbattle in which Kimi Raikkonen and Ferrari took boththe drivers’ and the constructors’ championshiptitles on Bridgestone POTENZA tires. Bridgestonetakes on the role as official tire supplier from 2008 to2010, which will ensure equally exciting battles overthe next three seasons.

Bridgestone l Motorsports Activities


Safety remains a top priority for Bridgestone and this is something that will never becompromised in pursuit of performance on the racetrack. Bridgestone prides itselfon the strong relationships it has with its teams and always aims to service themfairly. The 2008 season will bring new challenges, and in F1TM in particular,Bridgestone will address the issue of environmental impact and cost efficiencies byretaining the limits on testing mileage and tire quantities.

Tires for the GP2TM Asia Series will be produced in Japan, but in an excitingdevelopment for 2008, tire production for the GP2TM Series (Europe) has now movedto the Bridgestone Europe Technical Center in Rome.

MotoGP: In motorcycle racing, Casey Stoner and theDucati Team scored the first ever MotoGPchampionship title on Bridgestone tires. In 2007,Bridgestone riders posted 12 wins, six poles and fivepodium clean sweeps. The final round of the season inValencia marked Bridgestone’s 100th MotoGP race.

INDY: IndyCar racing’s flagship event is the storiedIndianapolis 500. Firestone-brand tires took thecheckered flag at the inaugural Indy 500 in 1911, andhave captured more than 50 victories since.Firestone-brand tires were supplied to every IndyCarteam in 2007.

GP2TM Series: In the GP2TM Series, which is a trainingground for prospective F1TM drivers from around theworld, all competitors in 2007 were on Bridgestonetires. Many drivers on Bridgestone tires have graduatedfrom this series to F1TM seats, including the serieschampion for 2007, Timo Glock.

Champ Car World Series: Starting in 1996, the CARTSeries (*precursor of Champ Car) quickly became a globalracing phenomenon with events staged around the world.Since 2002 and through the final Champ Car race whichwas held in April 2008, all competitors were equipped withtires under our global racing brand, Bridgestone POTENZA.

32

Corporate Governance, Compliance and Risk Management

The Bridgestone Group’s ultimate goal is to become theworld’s undisputed No.1 tire and rubber company in bothname and substance. In an environment where the entireindustry is undergoing immense change in terms ofdemand, competition and earnings structures, theBridgestone Group realizes that achieving this goalmeans aiming for world-class performance across a widerange of corporate activities.

Fundamental philosophy of corporategovernanceContinually enhancing corporate governance is viewed asone of management’s most important challenges toensure that the Bridgestone Group fulfills the foundingmission as stated in the corporate philosophy of “Servingsociety with superior quality.”

Separation of oversight and operationalexecutionBridgestone Corporation develops and communicatesfair, transparent decision-making and managementpolicies that govern behavior in all areas of businessexecution in accordance with responsibility and authoritythat Administrative Authority Rules delineate as well aswith Policy Management Rules.

Bridgestone has adopted a corporate officer system tomore clearly distinguish between management andoperational responsibilities. It allows directors and theBoard of Directors to focus more effectively on overseeingthe execution of business operations. The number ofdirectors was eight as of December 31, 2007.

Internal audit functionsBridgestone employs a corporate auditor governancemodel as laid down in the Corporate Law in Japan. Thecorporate auditors conduct audits of the execution ofbusiness operations by the directors, while the Board ofDirectors oversees the directors. As of December 31,2007, the Board of Corporate Auditors had six members,including three outside auditors. A substitute corporateauditor was elected at the General Meeting ofShareholders held on March 27, 2008.

The corporate auditors conduct internal audits based onpolicies determined by the Board of Corporate Auditors.Directorial conduct oversight involves a number ofauditing activities, including attendance at the meetings ofthe Board of Directors and other executive meetings,interviews with directors to ascertain the status ofoperations, review of important business documents andvisiting business offices for auditing.

The corporate auditors also undertake annualexaminations of the operations of BridgestoneCorporation and its major subsidiaries, based on closeliaison with full-time internal auditors of the leadingdomestic subsidiaries. Such activities can includemeetings with representative directors to exchangeinformation and opinions. A dedicated support staff unitassists the corporate auditors in the execution of theirvarious duties.

The Internal Auditing Office, which reports directly to theCEO, and internal auditing departments within theCompany’s divisions and major subsidiaries, conductinternal accounting and operational audits. The InternalAuditing Office makes annual audit plans as well asvisiting audits to each function, division and subsidiary. Itemployed 19 people as of December 31, 2007. SinceMay 2006, the Internal Auditing Office and its internalauditing departments have conducted audits at thoseGroup companies that have instituted organizationalchanges in line with the provisions of the Company Lawof Japan, with the aim of ensuring a more robust internalcontrol system.

Independent financial auditDeloitte Touche Tohmatsu performs the independentaudit of the Company’s financial statements. Theindependent financial audit team in fiscal 2007 includedfour Certified Public Accountants, seven assistantCertified Public Accountants, six assistant accountantsand six others.

CORPORATE GOVERNANCE, COMPLIANCE AND RISK MANAGEMENT


Corporate governance structuresThe Executive Operational Committee is a seniormanagement body that operates in a consultative anddeliberative capacity to the Board of Directors. It ischaired by the CEO and is composed of several directors,corporate officers and divisional heads (also titleddirectors (non board members) within Bridgestone,Honbuchou in Japanese). It is a forum for discussing andreporting on specific matters set forth in Company policyas well as other important matters.

Nominees for executive appointments and executiveremuneration packages for all directors and corporateofficers are determined by the Directorial Personnel andCompensation Committee. Selected directors (with theexception of the CEO), corporate officers, divisional heads(also titled directors (non board members) withinBridgestone, Honbuchou in Japanese) and corporateauditors serve on this committee. Nominations, executivecompensation and retirement and severance benefits areall within the overview of this committee. Mattersconsidered and reported by this committee aredeliberated on before a decision is made by the CEO, theBoard of Directors, the Board of Corporate Auditors orthe General Meeting of Shareholders. This helps toensure transparency and objectivity.

Compliance structures and supervisionBridgestone implemented and developed new internalcompliance systems in December 2002 to facilitate

ethical supervision of operations in line with corporateethics based on the spirit of “Trust. And Pride” and themission of “Serving society with superior quality” as wellas to further promote ethical corporate behavior bydirectors and employees alike. The ComplianceCommittee led by the Chief Compliance Officer (CCO)has responsibility for a compliance counseling office thatincludes a helpline to provide employees confidentialchannels in seeking advice about compliance-relatedmatters, as well as for promoting compliance-relatededucation for directors and employees. In January 2007,recognizing the CSR-related importance of complianceactivities, Bridgestone established the Integrated CSREnhancement Committee, which is chaired by the CEO.The Compliance Committee, which is chaired by the CCO,operates as a sub-committee of the Integrated CSREnhancement Committee.

Risk managementRisk management activities focus on the identification andmitigation of operational risks and the implementation ofmeasures — as outlined in a basic risk managementmanual — designed to prevent both small-scaleaccidents and large-scale incidents. Contingencyplanning activities include the formulation and reviewing ofbusiness resumption plans aimed at restoring operationsas quickly as possible in the event of any disruption.

The Risk Management Committee is chaired by the ChiefRisk Management Officer (CRO), with responsibility for

As of March 1, 2008

Board of Corporate AuditorsCorporate auditors (6)

(includes 3 outside auditors)In

depe

nden

t aud

itors

Board of Directors (8) Audit

Accountingaudit

Inquiry/report

CorporateAuditors’ Office

Directorial Personnel and Compensation Committee Management oversight

Operational execution

Executive Operational CommitteeCEO (Chairman of the Board)

Corporate officers(includes those serving concurrently as Board members)

Operating and supervisory divisions

Integrated CSR Enhancement Committee

Compliance Committee

Risk Management Committee

Societal and Educational Committee

Environmental and Conservation Committee

Internal Auditing Office

Internal audit

General Meeting of Shareholders

34

Bridgestone’s risk management system. Since January2007, in line with the recognition of the importance of riskmanagement in CSR, it has operated as a sub-committeeof the Integrated CSR Enhancement Committee.

Protection of personal dataBridgestone has formulated internal policy guidelines onthe protection of personal data. Besides developing amanagement system based on this policy, all employeesundergo privacy training and related awareness programsto address this important issue.

Internal control systems developmentOn May 1, 2006, the Board of Directors instituted anofficial company policy governing internal control systemsand initiated moves to establish and develop relatedstructures. In fiscal 2006, Bridgestone also created a newdivision responsible for developing internal controlsystems. In particular, this move was designed to complywith the provisions of the Financial Instruments and

Exchange Law that govern the evaluation of the internalcontrol systems to assure the reliability of financialreporting and related information. This law, which cameinto force in June 2006 and is commonly referred to asthe Japanese Sarbanes-Oxley Act, provides formandatory filing of internal control reports that will beaudited by the independent auditors beginning with fiscal 2009.

Disavowal of anti-social elementsBridgestone has no connection whatsoever with anti-social forces or groups that threaten public order andsafety, and takes a resolute stand against any suchelements. A department has been established to manageinformation received regarding such matters, and effortshave been made to build relationships of trust andcooperation with external institutions such as the policeand other related organizations. Bridgestone will continueto enhance internal systems aimed at eliminating anti-social influences.


Corporate Social Responsibility (CSR)

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The firm’s core essence on display

CSR is one area where the Bridgestone Group iscommitted to always aim for a higher level ofachievement. The emphasis on CSR reflects the attitudethat such activities display the real qualities of a company.In addition, this is an area where both the vigilance anddemands of society vis-á-vis enterprises are expected toincrease over time. It is therefore critical for any leadingcompany to strive continually toward a higher level ofinvolvement and performance.

Another reason why it is critical to enhance the level of CSRactivities from a management standpoint is that suchactivities are a vital part of reinforcing the capabilities of thecompany as well as realizing the corporate philosophy.

CSR-related activities set-up

In January 2007, the Bridgestone Group established theIntegrated CSR Enhancement Committee, which ischaired by the CEO. This committee sets CSR policies forthe Bridgestone Group and oversees an integratedmanagement approach towards CSR-related issuesaffecting the Group. This helps the Bridgestone Group tostrike a more effective balance in focusing on the triplebottom line of economy, environment and society.

The committee serves a visionary role with respect toBridgestone Group activities across a wide range ofareas. These include environmental protection, productsafety, compliance, risk management (inclusive of fireprevention and occupational safety), internal controls,human resource development and corporate citizenshipactivities. In all these areas, the Bridgestone Group aimsto enhance the effectiveness of its activities.

Environmental activitiesEnvironmental activities are a key aspect of CSR at theBridgestone Group. Recognizing the global importance ofenvironmental issues, the Bridgestone Group began anenhanced environmental management program in 2003.This program features a diverse range of activities toreflect the involvement of Bridgestone Group companiesin a wide range of business areas throughout many partsof the world.

Environmental program overview

Environmental management activities at the BridgestoneGroup currently divide into three programs running inparallel. These programs acknowledge externalenvironmental issues and help to define the BridgestoneGroup’s relationship with such issues as the basis forongoing action. The risk management program aims tominimize the environmental risks associated withbusiness activities. The “eco-rank-up” program focuseson the development of products and services that canmake a positive contribution to the global environment.Finally, the environmental management program aims toenhance Bridgestone Group infrastructure worldwide tosupport ongoing environmental activities.

Reflecting the fact that environmental issues need to betackled at each of the global, regional and localworkplace levels, each of these three programs coversactivities spanning the five domains of “eco-Management”, “eco-Production”, “eco-Products”, “eco-Projects” and “eco-Communication”. This matrix-typestructure ensures that the Bridgestone Group adopts acomprehensive and multifaceted approach in planningand implementing environmental measures.

Since they are vertically integrated, Bridgestone Groupoperations encompass each stage of the cycle from rawmaterials to production, distribution, product use anddisposal. Each of these stages poses its own uniqueenvironmental challenges, which means that acoordinated program of activities is required to reduce theenvironmental impact of business processes.

“eco-Management”

Environmental management activities are organized on aglobal basis using systems that conform to the ISO14001 standard.

“eco-Production”

The operating environment for the Bridgestone Groupincludes the production and procurement of raw materials,all manufacturing processes, as well as distribution andsales activities. The Bridgestone Group continually worksto reduce the environmental impact of operations throughvarious measures such as the installation of energy-efficient co-generation systems at all tire plants in Japan.

36

Based on the rating system introduced by the JapanEnvironmental Management Association for Industry(JEMAI), which is concerned by the Ministry of Economy,Trade and Industry (METI), Bridgestone Corporation(“Bridgestone”) became the first manufacturer of tires andrubber products in Japan to gain official registration as a“Gold Governance” supplier. This is the highest level ofrating under the JEMAI system.

“eco-Products”

Bridgestone continues to develop energy-efficient tiressuch as the ECOPIA brand products for commercialvehicles, as well as other products that can contribute toa reduction in environmental impact. The DiversifiedProducts business has developed a number of productswith outstanding potential in this respect, including EVAfilm for solar modules.

“eco-Projects”

The Bridgestone Group is involved in a number ofprojects dedicated to helping areas with specialenvironmental significance. In Japan, Bridgestone is acorporate sponsor and a working partner of a projectconducted in cooperation with the World Wide Fund for

Nature (WWF) to promote aquatic biodiversity in andaround Lake Biwa, Japan’s largest stretch of inlandwater. Bridgestone has also loaned a piece of land in the Nasu Shiobara region to provide a space forforestation efforts. This “corporate forest” also enablesnature experiences for families in the local area.

“eco-Communication”

The Bridgestone Group’s program of environmentalcommunications activities seeks to increase awareness ofenvironmental issues among employees and to provideinformation on environmental activities across theBridgestone Group both to internal and external audiences.

Bridgestone Corporation promotes freshwater ecologicalsurveys in and around Lake Biwa in cooperation with WWF.

External EnvironmentalFactors

Relation betweenBridgestone and Environment

Risk Management ProgramEnvironmental Management

Program Eco-Rank-Up Program

Preconditions

Environmental Policy

The Bridgestone Group’s Environmental Management Activities

3 E

nviro

nmen

tal

Pro

gram

s3

Env

ironm

enta

lA

reas

Working Environment

Regional Environment

Global Environment

eco-

Pro

duct

ion

eco-

Pro

duct

s

eco-

Pro

ject

s

eco-Management

eco-Communication

Scale and total ability of contribution to the environment by

the Bridgestone Group

• Raw material procurement• Products (Tire + Diversified products)• Manufacturing processes• Distribution and Sales• Environmental Management

(System, Infrastructure)• Social Contribution

(Fund, Collaboration with externalpartners)5 Environmental Activity Areas


CDM initiatives under the Kyoto Protocol framework

The Kyoto Protocol, which gained legal force in 2005,features a number of innovative mechanisms forpromoting initiatives that can reduce or offset globalemissions of CO2 and other greenhouse gases.

The Clean Development Mechanism (CDM) aims topromote cooperation between developed and developingcountries by allowing firms in advanced nations to accruetradable emissions credits by investing in economicprojects in developing nations that help to reducegreenhouse gas emissions. CDM projects must first beaccredited by the secretariat for the UN FrameworkConvention on Climate Change to allow reductions inemissions generated by the project to be claimed astradable credits or offsets.

In line with the Kyoto agreement, Bridgestone has set agoal of cutting its consolidated CO2 emissions by 6%relative to fiscal 1990 levels by the end of 2012.Bridgestone plans to make use of CDM projects tocomplement ongoing efforts to reduce the CO2 emissionsof Bridgestone Group operations in absolute terms.

In specific terms, Bridgestone is investing in thedeployment of co-generation systems, which havealready been installed successfully in all nine domestic tireplants. These systems not only use clean fuels togenerate electricity for onsite usage, but also recycle thewaste heat by using it to create steam. This designmakes co-generation systems a highly energy-efficientalternative for manufacturing operations of a certain size.

Bridgestone’s first CDM project is scheduled to begin infiscal 2008 with the installation of a co-generation systemat the Karawang plant of a tire production subsidiary inIndonesia. The system is due to become operational inFebruary 2009. The project will not only help to reduceCO2 emissions, but will also contribute to sustainableeconomic development within the region.

“Make Cars Green” initiative

In March 2008, Bridgestone announced a plan tocollaborate with the Fédération Internationale del’Automobile (FIA) on a new environmental campaigncalled “Make Cars Green.” Bridgestone will support andpromote this campaign on a worldwide basis as a globalpartner of the FIA.

Working with automobile and driving associations invarious countries, the Make Cars Green initiative aims toreduce the impact of motoring on the environment bypromoting more eco-friendly and fuel-efficient driverbehavior. A central element of the campaign is a list of tenpractical pointers for greener motoring.

More eco-friendly manufacturing operations

The Bridgestone Group continued efforts during fiscal2007 to reduce the environmental impact caused bymanufacturing facilities worldwide.

In Europe, new technologies were introduced in plants torestrict the amounts of volatile organic compounds(VOCs) used in production. A 75% reduction wasachieved at the Bethune plant in France. Similartechnologies are being installed at other BridgestoneGroup plants in Europe.

In Japan, Bridgestone completely eliminated the use oflead compounds in plating processes at the Kuroisoplant, which produces steel cord for tires. Thedevelopment of alternative technology proved highlychallenging, but in the end generated extra benefits in theform of additional energy savings and reduced waste.

Co-generation systems that supply both heat andelectricity are extremely effective in boosting resourceefficiency at tire plants that use numerous heatsources. They are also an excellent means of reducingcarbon dioxide emissions.

38

Occupational safety and health activitiesIn the United States, the OSHA Voluntary ProtectionProgram STAR (Safety Through Accountability andRecognition) award is given to companies that havecomprehensive safety and health programs with injuryrates below the industry national average. Participating inthe STAR program, Bridgestone Group facilities in NorthAmerica have designed and implemented outstandingsafety and health processes that exceed the strict safetystandards of the Occupational Safety & HealthAdministration’s (OSHA) Voluntary Protection Program(VPP). Seven Bridgestone Group plants in the UnitedStates have now been recipients of this prestigious award.

Road safety activitiesOne of the most effective tools to enhance the safety andcomfort of passenger cars is routine maintenance of tiresby drivers. Simple actions such as checking tires for wearand maintaining correct tire pressures can extend tire lifeand durability, as well as save fuel. The Bridgestone Grouphas adopted a leadership role in educating drivers aboutthe importance of inspecting tires as a way of promotingsafety and helping to prevent accidents on the road.

In Japan, Bridgestone has launched “Tire Safety Project”aimed at raising the tire-related safety consciousness ofdrivers since 2003. In the Americas, BridgestoneAmericas continues to support initiatives such as Driver’sEdge, a nationally recognized program in the UnitedStates (along with an event in Toronto, Canada) foreducating teenage drivers.

The Bridgestone Group has also worked together withthe FIA Foundation to promote the “Think Before YouDrive” road safety campaign. Begun in Europe in 2005,this campaign has been promoted in more than 70countries worldwide.

In South Africa, the Bridgestone Group supported atraining program called Tyre & Brake Watch with aleading trucking magazine, “Fleet Watch” in 2007.Targeting truck and bus drivers, it aimed to promotegreater safety knowledge relating to tires and brakes.Bridgestone Group companies provided training facilitieswhere drivers could learn about checking for tire wearand identifying unsafe tire conditions on vehicles.

In China, the Bridgestone Group provided free tireinspection services to 133 major long-haul buscompanies operating out of 70 of China’s mainland citiesin the two-month promotional period from December 2007to the run-up to the Chinese New Year. This annual eventmarks the biggest movement of people around the nationas millions return to homes in the countryside. The specialcampaign served a dual purpose: besides enhancing theservices provided by the Bridgestone Group to local busfirms, it also made a social contribution by helping toimprove the safety of passengers.

The Bridgestone Group conducts safety awarenessactivities worldwide.

Bridgestone Americas’ teammates have designed andimplemented outstanding safety and health processesthat exceed the strict safety standards of the OSHAVoluntary Protection Program (VPP).

Since its introduction in 2003, Bridgestone hasexpanded the Tire Safety Project every year to increaseunderstanding of the importance of tire safety.


Children’s art competition

Bridgestone Europe NV/SA has organized the “dreams atheArt” children’s art competition for several years. Thisevent aims to encourage children from across Europe tocreate imaginative visual artwork based on the underlyingtheme of road safety. The competition’s third year in 2007attracted a record number of entries.

Corporate citizenship activitiesJapan

Under a new system introduced in 2007, Bridgestonematches any financial donations made by the group ofemployees for various good causes. The “matching gift”fund supports a broad range of employees supportingsocial contribution activities undertaken by the employeesand their families. These range from regional communitygroups, cultural exchanges and environmental causes toinitiatives and groups in areas such as education, socialwelfare and sports.

The Americas

Bridgestone Americas is committed to supporting thecommunities in which it operates through direct monetarycontributions to worthy charitable causes. The companyalso encourages employees to participate in volunteeractivities. One such cause is Habitat for Humanity, aninternational organization that is committed to buildingaffordable housing for low-income families.

Asia

In Indonesia, a Bridgestone Group manufacturingsubsidiary provides a free two-year technical trainingprogram for high-school graduates at the Bekasi plant.Covering topics ranging from mechanical and electricalequipment to vehicle maintenance and languageinstruction, the course produces numerous well-qualifiedtechnicians. Since course graduates often go on to workfor other local industrial firms as well as the BridgestoneGroup company, the initiative is making a valuablecontribution to the local economy.

In Thailand, Thai Bridgestone Co., Ltd. has donatedlibraries to local community primary schools in threeprovinces since 2002. Bridgestone also gives awards toencourage the children attending these local schools toimprove their reading skills.

Bridgestone Americas’ teammates working tocomplete a Habitat for Humanity home

“Dreams at heArt” is just one of the many activitiesBridgestone Europe carries out as part of its overall“safety at heArt” concept which encourages safe andresponsible road use.

Bridgestone’s subsidiary in Indonesia has been runningtechnical training schools since 1981, whichcontributes to higher technological expertisethroughout the local community.

The Bridgestone Group helps to educate children inthe regions it operates in, such as Thailand.

40

Research and Development (R&D)

RESEARCH AND DEVELOPMENT (R&D)

The Bridgestone Group mission of “Serving society withsuperior quality” mandates an unending quest to createhigher value added products worldwide to fulfilldiversifying social requirements and market needs. TheBridgestone Group conducts R&D activities with theobjective of establishing a business model that promotesstrong global competitiveness, which in turn facilitatesprecise responses to a business environment undergoingmajor structural change. A key challenge is to stay at theforefront of technology in each business domain in orderto achieve the goals of the Mid-term Management Planannounced in October 2007. From the development ofnew materials, products and service technologies tofuture-focused fundamental and production technologies,the Bridgestone Group advances R&D efforts in diverseand far-reaching fields. Activities also focus oncontributing to development in the package solutionsbusiness from a technological standpoint in order toprovide more than products alone.

TiresR&D programs in the tire segment share the fundamentalaim of creating tires that deliver higher added value.Besides seeking performance gains such as increasedgrip or durability, the Bridgestone Group also strives todevelop tires that are safer and provide more comfort.Reduced environmental impact is another key goal. R&Dactivities aim to further reinforce this domain as a corestrategic product group and business.

With regard to minimizing the environmental burden, theBridgestone Group strives to develop eco-consciousproducts that fulfill voluntary standards in various areas:

preventing global warming, promoting resourceconservation, recycling, reducing noise, and enhancingsafety. Bridgestone Corporation launched the ECOPIAM891 II tire for trucks and buses in March 2007 toaugment the ECOPIA series of tires that feature improvedfuel efficiency, which contributes to reduced carbondioxide emissions while driving. The ECOPIA R221 II tirefor buses was released in March 2008, while the ECOPIAEP100 tire for passenger cars is due for release in April2008. These three new products employ a uniquetechnology called NanoPro-Tech that controls themorphology of rubber compounds through structuraldesign at the molecular level to draw out the requiredcharacteristics of the tire. This technology also reducesrolling resistance by 30% in each of these tires, ascompared with conventional Bridgestone tires.

In radial tires for passenger cars,Bridgestone launched REGNOGR-9000, which incorporates theBridgestone Group’s silenttechnology that reducesunpleasant noise to achieve amore comfortable sound level.The tire also cuts rolling resistanceby 16% and boasts outstandingwet braking performance.

The Bridgestone Group is promoting the proliferation ofsidewall-reinforced runflat tires that continue to functionsafely at a specified speed for a specified mileage evenafter loss of air pressure, such as with a puncture. Theuse of these tires is becoming increasingly widespread onnumerous vehicles, beginning with BMW, particularly inEurope and North America. They are now also being

ECOPIA M891 II ECOPIA R221 II ECOPIA EP100

REGNO GR-9000

Development Philosophy

Developmentphilosophy Peace-of-mind

Safety Comfort Environment

New value

Fundamental & elemental technology development

Prerequisites

Mission(Objective)

supplied as original equipment on the Nissan GT-R.Bridgestone has developed a new technology called“COOLING FIN” that enhances the post-puncturedurability of runflats. The use of fins promotes increasedair turbulence to help cool the tire sidewall, which heatsup when driving at lower tire pressures. This newtechnology paves the way for developing runflats forvehicles such as minivans, large passenger sedans andsome SUVs, which generate greater sidewall heat atlower tire pressures.

In large off-the-road radial tires for construction andmining equipment, R&D activities are focusing on thedevelopment of a new structure that realizes greaterdurability, and proprietary rubber that reduces wear andenhances the life of the tire. These features have receivedcritical acclaim at mines around the world. Bridgestonewill push forward with further development in the field,notably the application of NanoPro-Tech, in pursuit ofeven greater performance.

With regard to R&D in the area of radial tires for aircraft,Bridgestone has developed a new radial structure thatutilizes highly elastic and superior strength cord to bringgreater safety and better fuel efficiency. The new tire hasbeen fitted on the state-of-the-art Airbus A380, and isalso being supplied as standard equipment on all next-generation Boeing 787 aircraft.

In motorsports, a rider on Bridgestone tires scored thefirst ever championship title in MotoGP, the pinnacle ofmotorcycle racing, demonstrating the cutting-edgetechnological expertise of the Bridgestone Group. TheBATTLAX BT-016 HYPERSPORTradial tire for motorcycles releasedin February 2008 employs 5-layercompound (5LC) technology in thetread of the rear tires, whichensures excellent performanceunder any conditions, notably inbraking, cornering andacceleration. This technology wasaccumulated in the development oftires for MotoGP.

Diversified productsIn the diversified products segment, R&D activitiesconcentrate on strengthening product groups positionedas core businesses and on providing products thataccurately meet ever-changing needs and bring customersatisfaction. Practical tests are currently underway in anumber of areas in the field of electronic displays.Bridgestone has developed the world’s largest full-colorelectronic paper display that is A3 size, and was the firstin the world to develop flexible full-color electronic paperequipped with an ultra-thin IC chip.

Research and development expenditures on aconsolidated basis in 2007 totaled ¥86.7 billion, including¥68.9 billion for the tire segment and ¥17.8 billion for thediversified products segment.


BATTLAX BT-016HYPERSPORT

A3-size full-color electronic paper display

With COOLING FIN

New Technology Radial Tire for Aircraft: Revolutionarily Reinforced Radial (RRR)

Without COOLING FIN

Thermo-vision

Hot

Cold

High Modules Cord

COOLING FIN

42

The status of the Bridgestone Group (BridgestoneCorporation and its consolidated subsidiaries,“Bridgestone”) as documented in this report is subject todiverse risks from both operational and accountingperspectives. This section provides an overview of themajor categories of risk that may have a bearing oninvestors’ decisions.

Management is alert to these risks, and systematic effortsare made to prevent or minimize the impact of relatedadverse events on operations. Nonetheless, the potentialexists for unforeseen or unpredictable events related to therisk factors described below to affect the operations,business results and financial position of Bridgestone. Allreferences to possible future developments in the followingtext are as of March 27, 2008.

Major categories of operational risk Demand and macroeconomic conditions

Bridgestone conducts research and development (R&D),purchasing, manufacturing, logistics, marketing, sales andother functional activities on a global basis. Operatingresults and financial position are thus subject to trends indemand, interest rates, exchange rates, share prices, andother economic variables in different countries and regions.In the fiscal year ended December 31, 2007, theconsolidated sales split by geographic segment (forexternal customers only) was 44% from operations in theAmericas, 28% from Japan and 15% from Europe. Aneconomic downturn in any of these regions could exert amajor adverse effect on the business results and financialposition of Bridgestone.

The core tire business accounts for 81% of consolidatednet sales. In addition, operations in the diversified productsbusiness segment also include a substantial volume ofbusiness in automotive products. The operating results andfinancial position of Bridgestone are thus heavily exposedto business conditions in the global automobile industry.

Demand for replacement tires in each country whereBridgestone operates is also a function of national trends inconsumer spending, automotive fuel prices, and a range ofother local market variables. Any combination of trends thatmight cause demand for replacement tires to decline, or togrow at a slower rate, could adversely affect the operatingresults and financial position of Bridgestone. For example,demand for winter tires (which make a certain contribution

to sales such as in Japan, Europe and North America) isclosely related to seasonal weather trends; lower-than-average snowfall in any of these regions could adverselyaffect to some extent the operating results and financialposition of Bridgestone.

Legal and regulatory risk

Bridgestone’s operations around the world are subject todiverse national (and, in Europe, supranational) laws andregulations governing all aspects of business activity,including trade, investment, foreign exchange transactions,anti-competitive practices, and environmental protection.New or revised laws and regulations could limit the scopeof business activities, raise operating costs, or otherwiseadversely affect the business results and financial positionof Bridgestone.

Examples of historical legal and regulatory changes thathave had an effect on Bridgestone’s tire operations includethe prohibition of spiked tires in Japan and the passage ofthe Transportation Recall Enhancement Accountability andDocumentation (TREAD) Act in the United States. Legaland regulatory developments have also affected diversifiedproducts operations in the past, such as prohibitions on theuse of chlorofluorocarbons in urethane foam.

Bridgestone continues to expand operations rapidly inemerging economies across Latin America and Asia,including China. Unpredictable legal and regulatorychanges in these markets could necessitate modificationsto investment programs and business plans. The costs ofmeasures demanded by such legal and regulatory changescould adversely affect Bridgestone’s operating results andfinancial conditions.

Operational disruptions

Natural disasters, wars, terrorist actions, civil strife, socialand political unrest Globally dispersed operations expose Bridgestone to abroad range of natural and manmade risks that couldconstitute force majeure, including natural disasters suchas earthquakes and floods, wars, terrorist actions, civilstrife, epidemics and general social or political unrest. Suchevents have the potential to affect the operating results andfinancial position of Bridgestone adversely.

The risks of such events disrupting Bridgestone’s operationscould be larger in emerging economies such as in China,

Operational Risks

Operational Risks


Asia and Latin America, where Bridgestone is rapidlyexpanding investment. The greater political and economicvolatility of these regions tends to amplify such risks.

The risk of earthquake is particularly high in Japan, whereBridgestone has numerous key facilities. Managementsystematically promotes the seismic reinforcement ofBridgestone’s facilities in Japan, based on an order ofpriority determined from the results of site analyses usingseismic diagnostics. In addition, a Business ContinuityPlan (BCP) and other measures have been created topromote swift response to a disaster and early restorationof operations.

Despite such preventive measures, a serious earthquakecould disrupt operations or cause damage to facilities,necessitating expensive repairs or restoration work. Thecosts involved could adversely affect Bridgestone’soperating results and financial condition.

Operational disruptions at those plants where productionof certain products or materials is concentrated have thepotential to cause greater problems due to the increasedpossibility of a supply interruption, which could result inclaims for compensation based on breach of supplycontracts, or in an erosion of customers’ confidence inBridgestone as reliable sources of supply. Any suchdevelopments could have a significantly adverse impacton the operating results and financial position ofBridgestone.

Information Technology (IT) systems failures

The complex operations of Bridgestone are increasinglydependent on the smooth, round-the-clock functioning ofvarious computing and IT systems. Failure of suchtechnical systems for any reason, such as a natural ormanmade disaster, or through human error, could causesignificant operational disruption, with the potential formajor adverse effects on performance. Bridgestone hasinstituted comprehensive measures to safeguard IT andcomputing systems and related data, and to upgradenetwork security on an ongoing basis in order to preventsystemic failures.

Industrial action

Prolonged strikes or other industrial action could causeoperational disruptions and thereby adversely affect theoperating results and financial position of Bridgestone.Management strives to minimize the risk of labor unrestby fostering good labor-management relations throughoutglobal operations.

Corporate and brand image

Bridgestone strives to enhance its corporate and brandimage consistently through global business activities.Systematic efforts are made to ensure compliance with all applicable laws and regulations and to promote thehighest ethical standards. Programs are in place acrossBridgestone to prevent industrial incidents, particularlyfires and any accidents that could cause occupationalinjuries, and to respond immediately to any accidents that occur.

Despite such preventive measures, serious ethical lapsesor industrial accidents, which are by their natureunpredictable, have the potential to affect the operatingresults and financial position of Bridgestone adversely bydamaging the image and reputation of Bridgestone,diminishing the general public’s confidence inBridgestone, or leading to a drop in share price.

Currency risk

The global distribution of Bridgestone’s R&D,manufacturing, logistics, marketing and sales facilitiesrequires business transactions in numerous currencies.Bridgestone employs forward exchange contracts tohedge short-term exposure to exchange rate fluctuationsbetween the yen and the dollar, euro and other leadingcurrencies. However, hedging cannot insulateBridgestone’s operations completely from foreignexchange market trends since these operations includeextensive import and export activities worldwide.Fluctuations in exchange rates can thus have an adverseeffect on the operating results and financial position of Bridgestone.

Exchange rate fluctuations also affect the consolidatedperformance of Bridgestone because results are reportedin yen. Changes in currency levels affect the valuesrecorded for sales, expenses, assets and liabilities in allcountries outside Japan when translated into yen. Ingeneral terms, yen appreciation against other leadingcurrencies tends to depress the financial results, while yendepreciation tends to have a favorable impact.

Competition

Bridgestone encounters numerous competitors in boththe tire and diversified products segments, across theentire product lineup. Competitive price pressures havethe potential to affect the operating results and financialposition of Bridgestone adversely. In addition,Bridgestone faces a constant risk of demands for pricereductions from large corporate clients.

44

Bridgestone strives to maintain profitability in the face ofdownward price pressures by continually seeking to raiseproductivity, enhance brand image, develop new markets,and launch new products that provide greater value tocustomers. However, management cannot guarantee thatsuch efforts will always be sufficient to offset the effects of competition.

Bridgestone’s strategy is based on maintaining a highlycompetitive technological edge. Bridgestone targets thedevelopment and introduction of products equipped withnew and advanced technologies, and then aims topersuade customers of the value inherent in such technicaladvances to secure prices sufficient to ensure that profitsfully offset the costs of development. Fierce competition invarious fields can sometimes prevent Bridgestone fromrecovering development costs through pricing, which canalso have an adverse effect on operating results andfinancial position.

Product defects

Bridgestone invests considerable resources in establishingand maintaining high quality standards for all productsmanufactured and sold. Management is particularlysensitive to the importance of quality assurance in tires andother products intimately associated with human safety.Bridgestone has honed its collective quality assurancecapabilities by upgrading information systems related toproduct performance, collecting pertinent marketinformation and establishing systems to provide earlywarning of any potential safety issues that may arise beforethey become problems.

Nonetheless, such efforts cannot guarantee a zero level ofproduct defects or eliminate the chance of an extensiveproduct recall at some point in the future. Any such defectsor recalls could result in customer claims for damages, aswell as associated litigation costs, replacement costs anddamage to Bridgestone’s reputation. Product liabilityclaims, class-action suits and other litigation pose aparticular risk in the United States.

Raw materials procurement

Disruption of supplies of raw materials has the potential toaffect performance adversely. Bridgestone uses largequantities of natural rubber in tires and other rubberproducts, most of which is supplied from Southeast Asia.The availability of natural rubber supplies in quantitiessufficient for manufacturing purposes is subject todisruption due to natural disasters, war, terrorist actions,civil strife and other social or political unrest, in addition to

the threat of poor harvests. Supply shortages or capacityconstraints are also a potential problem with other basicraw materials.

Bridgestone relies on in-house upstream raw materialsoperations and on third-party suppliers for important rawmaterials. Any disruption of activity at those operations orsuppliers and any other events that impede Bridgestone’splants that use those raw materials could adversely affectBridgestone’s operating results and financial condition.

Increases in the costs of raw materials due to tight supply,trade for speculation purpose and other reasons are alsopotentially detrimental to the operating results and financialposition of Bridgestone. Management cannot guaranteethat price rises can always be passed on to customers, orthat ongoing efforts to raise productivity will be sufficient tocompensate for any sharp increases in raw material costs.

Pension costs

Pension-related costs and obligations are reliant onactuarial assumptions concerning a number of variables,including discount rates and the expected rates ofinvestment return on pension assets. There could be amaterial impact on the operating results and financialposition of Bridgestone if actual results were to differsignificantly from initial assumptions, or if deterioratingconditions in financial markets or other factors were tonecessitate a change in the underlying assumptions.

Intellectual property

Bridgestone treats intellectual property as an importantbusiness resource. Systematic efforts are made to employintellectual property effectively in improving the competitiveposition of Bridgestone, to protect intellectual propertyrights from infringement, and to avoid infringing theintellectual property rights of other parties.

Despite such safeguards, any actual or alleged infringementof third-party intellectual property rights by Bridgestonecould have a negative impact on the use of certain materialsor technologies by Bridgestone, and could potentially alsotrigger the payment of compensatory damages. Any suchoutcome could have a negative effect on the operatingresults and financial position of Bridgestone.

Conversely, if claims by Bridgestone of intellectual propertyrights infringement against third parties are not upheld,Bridgestone could also suffer direct or indirect lossesthrough the diminished differentiation or competitiveness oftheir products in global markets.


Financial SectionThe Bridgestone Corporation is referred to as the “Company,” andthe Company and its subsidiaries are referred to as the “Companies”in the second half of this Annual Report (pages 45-74).

46

Unless otherwise noted, all figures are taken from the consolidated financial statements and notes. TheU.S. dollar figures have been translated solely for the convenience of readers at US$1 = ¥114.15, theprevailing exchange rate on December 31, 2007. Financial disclosures by the Company are in accordancewith accounting principles generally accepted in Japan.

Results of operations

Business environment

A defining trend of the business environment in fiscal 2007 was the persistent global upward movement inthe cost of crude oil and other raw materials. Despite signs of an economic slowdown in the second half ofthe year stemming from the sub-prime housing loan problem in the United States, the effect of this crisiswas limited to certain sectors on a full-year basis. The Japanese economy continued to recover graduallyas a result of improving corporate earnings and increases in capital spending. In the United States, theeconomy for the most part (excluding those sectors directly affected by the sub-prime situation) showedsolid expansion in fiscal 2007. This economic performance was based on sustained strength in consumerspending, despite a slowdown in housing construction and residential mortgage activity. Economicrecovery continued in Europe, supported by increasing capital investment. Strong economic growthcontinued in China while other Asian economies expanded steadily.

Net sales

Consolidated net sales increased by ¥398.9 billion ($3.5 billion), or 13% year-on-year, to ¥3,390.2 billion($29.7 billion), due in part to an increase in unit sales, a higher-valued product mix, and exchange gainsarising from the weaker yen. Sales increased in both business segments (tires and diversified products) inevery geographic segment.

The average yen/dollar exchange rate in fiscal 2007 was ¥118, compared with ¥116 in fiscal 2006, whilethe average yen/euro exchange rate in fiscal 2007 was ¥162, compared with ¥146 in the previous year.

Operating income

Substantial gains in sales helped to partially offset higher operating costs, which were principally attributableto sharp increases in raw material prices. Consolidated operating income increased by ¥59.1 billion ($518million), or 31%, to ¥250.0 billion ($2,190 million). The operating margin increased by 1.0 percentage point,from 6.4% to 7.4%.

Performance by business segment

The tire segment includes tires for passenger cars, trucks and buses, construction and mining vehicles,aircraft and motorcycles, as well as tubes, wheels, related accessories, retreading business and automotivemaintenance services.

Including inter-segment transactions, in the tire segment, the Companies’ sales in fiscal 2007 increased15% over the previous year to ¥2,756.0 billion ($24.1 billion), while operating income increased 40% to¥195.0 billion ($1,709 million). This reflected the success of various efforts to mitigate the impact of higherraw material costs. The Companies worked to maximize their sales momentum by introducing appealingnew products worldwide, while at the same time improving and expanding strategic production sites

131137

146

162¥/€

¥/$

134

116

108 110

116 118

2003 2004 2005 2006 2007

Net sales

¥ billion

Currency exchange rates(annual average rates)

¥

Financial Section | Management’s Discussion & Analysis

183.

3

197.

7 213.

9

190.

9

250.

0

2003 2004 2005 2006 2007

Operating income

¥ billion

Operating income margin

FY 2007 2006 2005 2004 20037.4 6.4 7.9 8.2 8.0

(% of net sales)

Management’s Discussion & Analysis

2,30

3.9

2,41

6.7

2,69

1.4

2,99

1.3 3,39

0.2

2003 2004 2005 2006 2007


around the world in support of those products that have been identified as strategic and important to theCompanies’ future growth.

In Japan, unit sales of tires remained on a par with those in the previous year, while unit sales of strategicproducts and high-value-added products expanded steadily.

In the Americas, although unit sales of passenger car and light truck tires in the North American tirebusiness decreased in the original equipment sector relative to the previous year, sales in the replacementsector were brisk, exceeding those in the previous year. Unit sales of strategic products, led by UHP (ultra-high-performance) tires, increased considerably over the previous year. Unit sales of truck and bus tiresdecreased markedly year-over-year due primarily to the expected impact of reduced sales in the originalequipment sector on account of pre-buy activities in 2006 in response to new emission regulations whichtook effect in 2007.

In Europe, unit sales of passenger car and light truck tires were strong, exceeding those in the previousyear, due primarily to a considerable increase in unit sales of strategic products, led by runflat tires* andwinter tires. Unit sales of truck and bus tires posted a significant increase over the previous year.

In the specialty tires business, unit sales of large and ultra-large off-the-road radial tires greatly exceededthe previous year on the back of continued strong demand.

The diversified products segment includes functional chemical products, a wide range of industrial items,sporting goods and bicycles. Many of these products are made from rubber or rubber-derived materials.

Including inter-segment transactions, in the diversified products segment, the Companies’ operatingincome in fiscal 2007 rose 6% over the previous year to ¥54.7 billion ($479 million) on an increase of 5% insales to ¥656.3 billion ($5.7 billion). Growth parts of the business included automotive components and thecommercial building materials operations in the United States.

*Runflat tires continue to function safely at a specified speed for a specified mileage even after a loss of air pressure.

Performance by geographic segment

Including inter-segment transactions, sales in Japan increased 9% relative to the previous year to ¥1,371.7billion ($12.0 billion). Operating income gained 25% to ¥147.5 billion ($1,292 million), despite increasing rawmaterial costs. Sales in Japan were generally robust in both the tire and diversified products segments.

In the Americas, sales increased 13% to ¥1,510.7 billion ($13.2 billion) over the previous year. Operatingincome increased 23% to ¥51.5 billion ($451 million), despite increasing raw material costs. Sales in almostall operations in both the tire and diversified products segments surpassed those in the previous year.Additionally, Bridgestone Americas Holding, Inc., the U.S. subsidiary of Bridgestone Corporation,completed the acquisition of Bandag, Incorporated (currently Bridgestone Bandag, LLC) in late May 2007.

1,83

6.4

1,92

8.0

2,15

3.0

2,39

3.2 2,

750.

4

2003 2004 2005 2006 2007

467.

5

488.

7 538.

4 598.

1

639.

8

2003 2004 2005 2006 2007

Sales of tires(net of inter-segment transactions)

¥ billion

Sales of diversified products(net of inter-segment transactions)

¥ billion

Composition of sales by business segment(net of inter-segment transactions)

FY 2007 2006Tires 81.0 80.0Diversified products 19.0 20.0

100.0 100.0

(% of net sales)

48

Sales in Europe increased 23% over the previous year to ¥516.0 billion ($4.5 billion), due in part to anincrease in unit sales coupled with the exchange gain on the weaker Japanese yen. Operating income grewby 16% to ¥17.2 billion ($151 million), despite increasing raw material costs.

In other regions, sales grew by 24% to ¥548.7 billion ($4.8 billion), reflecting vigorous marketing activities,efforts to improve and expand production sites in strategic areas and for strategic products, and theexchange gain on the weaker Japanese yen. Operating income soared 86% to ¥37.6 billion ($330 million),despite increasing raw material costs.

Other income and expenses

Total of other income and expenses equaled a loss of ¥34.3 billion ($300 million), which was less than thecorresponding loss of ¥50.7 billion in the prior year. Higher interest-bearing debt pushed up net interest-related expense by ¥7.2 billion ($63 million) to ¥22.5 billion ($197 million). Furthermore, a loss of ¥3.3 billion($29 million) relating to voluntary tire replacement programs was recorded, while in the previous year, plantclosure charges in the Americas amounting to ¥21.7 billion was recognized.

Income before income taxes and minority interests increased by ¥75.5 billion ($662 million), or 54%, to¥215.7 billion ($1,889 million).

Net income

Income taxes increased by 51% relative to fiscal 2006, rising to ¥77.6 billion ($680 million). Minorityinterests increased to ¥6.5 billion ($57 million).

As a result, net income grew by ¥46.5 billion ($407 million), or 55%, to ¥131.6 billion ($1,153 million). Thenet return on sales improved by 1.1 percentage points, from 2.8% to 3.9%.

Financial condition

Assets

Current assets grew by ¥115.0 billion ($1,007 million), or 8%, compared with the prior year-end, to¥1,565.6 billion ($13.7 billion). The major components of this growth were increases of ¥52.3 billion ($458million) in cash and cash equivalents, of ¥34.3 billion ($300 million) in notes and accounts receivable due tohigher sales, and of ¥14.2 billion ($124 million) in inventories.

Net property, plant, and equipment rose by ¥171.9 billion ($1,506 million) compared with the previous year-end, mainly reflecting the fact that capital expenditures of ¥272.4 billion ($2,386 million) exceededdepreciation, which equaled ¥173.6 billion ($1,521 million).

Net return on sales

FY 2007 2006 2005 2004 20033.9 2.8 6.7 4.7 3.9

(% of net sales)

88.7

114.

5

180.

8

180.

885

.1

131.

6

102.6

138.9

226.9

109.1

168.7

Diluted net income per share (¥)

2003 2004 2005 2006 2007

Net income

¥ billion

2,22

0.6

2,33

3.7 2,71

0.0

3,05

3.4

3,35

9.3

2003 2004 2005 2006 2007

Total assets

¥ billion

Composition of sales by geographic segment(company location, net of inter-segment transactions)

FY 2007 2006Japan 27.8 30.0Americas 44.2 44.3Europe 15.1 13.8Other 12.9 11.9

100.0 100.0

(% of net sales)


Other assets in investments and other assets category increased by ¥44.8 billion ($392 million) to ¥128.8billion ($1,128 million), in part due to an increase of intangible assets.

Total of “property, plant and equipment” and “investments and other assets” rose by ¥190.8 billion ($1,672million), or 12%, compared with the previous year-end, to ¥1,793.6 billion ($15.7 billion). A significantportion of the growth was attributable to the acquisition of shares in Bandag, Incorporated and itssubsidiaries, whose fixed assets at the year-end totaled ¥91.1 billion ($798 million).

Total assets increased by ¥305.8 billion ($2,679 million), or 10%, compared with the previous year-end, to¥3,359.3 billion ($29.4 billion).

Liabilities

Current liabilities increased by ¥109.6 billion ($960 million), or 11%, compared with the previous year-end,to ¥1,088.1 billion ($9.5 billion). This reflected a net increase of ¥62.6 billion ($549 million) in short-term debtand the current portion of long-term debt. Notes and accounts payable increased by ¥29.6 billion ($260million), mainly reflecting sharply higher raw material prices.

Total long-term liabilities amounting to ¥861.0 billion ($7.5 billion) were increased slightly from the previousfiscal year-end. Accrued pension and liability for retirement benefits declined by ¥48.8 billion ($428 million)to ¥280.9 billion ($2,460 million). This was offset by an increase in long-term debt on a net basis of ¥59.5billion ($521 million) due to higher long-term borrowings.

Including commercial paper and corporate bonds, total interest-bearing debt increased by ¥122.1 billion($1,070 million), or 17%, compared with the prior year-end, to ¥827.0 billion ($7.2 billion).

Equity

Total equity at December 31, 2007 amounted to ¥1,410.2 billion ($12,354 million). This was ¥188.4 billion($1,650 million), or 15%, higher than at the previous year-end. Growth in retained earnings mainly reflectednet income of ¥131.6 billion ($1,153 million) and a charge of ¥42.9 billion ($376 million) relating to a declinein retirement benefit obligations. Other offsetting factors included dividend payments totaling ¥19.5 billion($171 million).

The ratio of shareholders’ equity, excluding stock acquisition rights and minority interests, to total assets atthe end of December 2007 was 40.8%, an increase of 2.2 percentage points from the previous year-end.

At 0.38, the ratio of total debt to debt and shareholders’ equity was virtually unchanged at December 31,2007 compared with the previous year-end.

Net return on shareholders’ equity (ROE) was 10.3%, compared with 7.4% in fiscal 2006. Net return ontotal assets (ROA) equaled 4.1%, an increase of 1.1 percentage points compared with the previous year.

888.

0

935.

0 1,12

8.6

1,22

1.8 1,

410.

2

2003 2004 2005 2006 2007

Equity

¥ billion

40.0 41.6

38.6

40.8

40.1

2003 2004 2005 2006 2007

Ratio of shareholders’equity to total assets%

Net return on shareholders’ equity

FY 2007 2006 2005 2004 200310.3 7.4 17.5 12.6 10.5

(% of simple average of year-end shareholders’ equity)

Net return on assets

FY 2007 2006 2005 2004 20034.1 3.0 7.2 5.0 4.1

(% of simple average of year-end total assets)

Note: By adoption of the new accountingstandard for presentation of equity,minority interests and deferred gainon derivative instruments areincluded in equity for the year endedDecember 31, 2006.

50

Cash flow

Consolidated cash and cash equivalents grew by ¥52.3 billion ($458 million) in fiscal 2007, to ¥250.6 billion($2,195 million).

Net cash provided by operating activities increased by ¥184.4 billion ($1,616 million) to ¥333.6 billion($2,922 million). Income before income taxes and minority interests was the major factor.

Net cash used in investing activities totaled ¥377.6 billion ($3,308 million), increasing by ¥121.8 billion($1,067 million) compared with the previous year. The major cash-absorbing items of expenditure werepayments for purchases of property, plant and equipment, and payments for acquisition of newlyconsolidated subsidiaries.

Net cash provided by financing activities totaled ¥94.1 billion ($824 million), increasing by ¥12.7 billion($111 million) relative to fiscal 2006. This reflected a major contribution from proceeds of long-termborrowings.

Capital financing and liquidity

Besides borrowings from financial institutions, the Company taps financial markets in Japan and othercountries directly through the issuance of bonds (principally medium-term notes in overseas markets) andcommercial paper. The Company continues to seek to diversify risk and to reduce funding costs throughmethods such as securitization of receivables and the use of leases.

Management believes that liquidity remains ample. In addition to cash and cash equivalents totalingapproximately ¥250 billion, the Company also has access to various commitment lines and overdraftfacilities.

258.

1

238.

7

149.

0

149.

1

333.

6

2003 2004 2005 2006 2007

Cash flow(net cash provided by operating activities)

¥ billion

Eleven-year summaryBridgestone Corporation and SubsidiariesYears ended December 31

Net sales:Overseas salesTires (net of inter-segment transactions)Diversified products (net of inter-segment transactions)

Operating incomeNet incomeTotal equityTotal assetsRatio of total equity to total assetsPer share in yen:

Net incomeBasicDiluted

Shareholders’ equity Cash dividends

Capital expenditureDepreciation and amortizationResearch and development costs

2005

¥ 2,691,3761,945,2832,152,950

538,426 213,851180,796

1,128,5972,709,962

41.6

226.92226.86

1,443.4324.00

203,670127,609 79,415

2004

¥ 2,416,6851,700,5991,927,989

488,696197,697114,453934,981

2,333,70840.1

138.96138.94

1,163.8219.00

191,000111,49172,898

2006

¥ 2,991,2752,213,8802,393,165

598,110190,87685,121

1,221,8463,053,440

38.6

109.10109.07

1,511.4324.00

261,335145,34986,687

2007

¥ 3,390,2192,589,0062,750,374

639,845249,962131,630

1,410,2253,359,255

40.8

168.69168.65

1,757.2326.00

272,381173,58586,748

Note 1: Solely for the convenience of readers, the Japanese yen amounts in this annual report are translated into U.S. dollars at the rate of ¥114.15 to $1, the approximate year-end rate.

Note 2: By adoption of the new accounting standard for presentation of equity, minority interests, stock acquisition rights and deferred gain on derivative instruments are included in equityfrom fiscal 2006.


Dividends

Comprising interim and final dividends of ¥13 ($0.11) per share each, annual dividends for fiscal 2007totaled ¥26 ($0.23) per share.

Projections for fiscal 2008

Management expects a persistently challenging operating environment in 2008. Raw material and energycosts are anticipated to continue to increase. Concurrently, concerns about a possible economicslowdown in Japan and the United States have heightened. Changes in demand and increasingcompetition are also expected to contribute to these global business challenges.

In Japan, management expects positive growth from unit tire sales for the domestic original equipmentmarket in 2008, with unit sales of replacement tires remaining on a par with the previous year. Flat growth inunit sales of export tires is also projected.

In the Americas, management projects unit sales of passenger car and light truck tires on a par with theprevious year. Unit sales volumes are expected to increase in the market for truck and bus tires.

In Europe, management expects further unit sales gains in tires for passenger cars, light trucks, trucks andbuses compared with fiscal 2007 levels.

Management forecasts consolidated net sales in fiscal 2008 of ¥3,560 billion, an increase of 5% over fiscal2007. Management expects operating income to decline by 22% to ¥195.0 billion, with net income falling32% to ¥90.0 billion. Projected annual dividends in fiscal 2008 are ¥26 per share.

These performance forecasts are based on assumed average exchange rates of ¥110 against the dollarand ¥155 against the euro, compared with the full-year average rates recorded in fiscal 2007 of ¥118 and¥162, respectively.

155.

7 191.

0

203.

7

261.

3

272.

4

2003 2004 2005 2006 2007

Capital expenditure

¥ billion

2001

¥ 2,133,8251,377,4331,687,235

446,590118,02317,389

835,1442,443,793

34.2

20.2020.19

970.2016.00

104,313132,92062,755

2000

¥ 2,006,9021,248,1851,560,182

446,720161,78517,741

778,7132,038,578

38.2

20.6020.59

904.4016.00

137,772119,92561,116

2002

¥ 2,247,7691,508,1121,797,598

450,171183,86245,379

796,0132,143,928

37.1

51.9751.89

924.4816.00

116,764119,46668,161

2003

¥ 2,303,9171,593,8631,836,395

467,522183,29488,720

887,9872,220,613

40.0

102.75102.56

1,056.5416.00

155,742104,38370,967

1998

¥ 2,236,6991,480,0441,772,226

464,473248,318104,626697,424

1,830,14938.1

126.28123.01831.3614.00

220,625107,474

N.A.

1997

¥ 2,170,8031,353,3671,685,389

485,414222,29839,159

641,3821,800,659

35.6

48.2346.83

779.9914.00

160,468200,831

N.A.

1999

¥ 2,085,7201,322,9141,638,304

447,416236,77788,690

743,0691,792,744

41.4

103.98102.96862.8014.00

175,495118,464

N.A.

Millions of yen

52

Bridgestone Corporation and SubsidiariesDecember 31, 2007 and 2006

Assets

Current Assets:

Cash and cash equivalents

Notes and accounts receivable (Note 7), less allowance for doubtful accounts of

¥16,176 million ($141,708 thousand) in 2007 and ¥16,875 million in 2006

Inventories (Note 5 and 7)

Deferred tax assets (Note 14)

Other current assets

Total Current Assets

Property, Plant and Equipment (Note 7):

Land

Buildings and structures

Machinery and equipment

Construction in progress

Accumulated depreciation

Net Property, Plant and Equipment

Investments and Other Assets:

Investments in securities (Note 6)

Investments in and advances to affiliated companies

Long-term loans receivable, less allowance for doubtful accounts of

¥757 million ($6,632 thousand) in 2007 and ¥812 million in 2006

Deferred tax assets (Note 14)

Other assets

Total Investments and Other Assets

Total

See notes to consolidated financial statements.

2007

$ 2,194,945

5,107,052

4,938,064

645,546

829,987

13,715,594

1,311,099

6,022,654

16,382,532

1,375,769

25,092,054

(14,796,163)

10,295,891

2,815,935

215,515

99,877

1,157,442

1,128,174

5,416,943

$ 29,428,428

2006

¥ 198,270

548,706

549,526

74,835

79,303

1,450,640

137,485

600,274

1,715,075

128,934

2,581,768

(1,578,355)

1,003,413

320,047

20,553

11,545

163,262

83,980

599,387

¥ 3,053,440

2007

¥ 250,553

582,970

563,680

73,689

94,743

1,565,635

149,662

687,486

1,870,066

157,044

2,864,258

(1,688,982)

1,175,276

321,439

24,601

11,401

132,122

128,781

618,344

¥ 3,359,255

Millions of yenThousands of


Consolidated Balance Sheets

Financial Section | Consolidated Financial Statements


Liabilities and Equity

Current Liabilities:

Short-term debt (Note 7)

Current portion of long-term debt (Note 7)

Notes and accounts payable

Income taxes payable

Accrued expenses

Provision for voluntary tire recall (Note 18)

Deferred tax liabilities (Note 14)

Other current liabilities

Total Current Liabilities

Long-term Liabilities:

Long-term debt (Note 7)

Accrued pension and liability for retirement benefits (Note 8)

Deferred tax liabilities (Note 14)

Provision for environmental remediation

Other liabilities

Total Long-term Liabilities

Total Liabilities

Contingent Liabilities and Commitments (Notes 16 and 18)

Equity (Notes 3 and 9):

Common stock

Authorized—1,450,000,000 shares, issued—813,102,321 shares in 2007and 2006

Capital surplus

Stock acquisition rights

Retained earnings

Net unrealized gain on available-for-sale securities

Deferred gain on derivative instruments

Foreign currency translation adjustments

Treasury stock—at cost, 32,751,102 shares in 2007 and 32,945,108 shares in 2006

Total

Minority Interests

Total Equity

Total

2007

$ 2,469,593

944,713

3,635,383

327,297

1,646,903

49,619

23,636

434,683

9,531,827

3,830,241

2,460,403

613,964

21,857

615,997

7,542,462

17,074,289

1,106,912

1,069,461

350

9,130,109

1,608,217

1,104

(356,548)

(546,500)

12,013,105

341,034

12,354,139

$ 29,428,428

2006

¥ 294,638

32,476

385,341

30,757

180,665

6,482

1,409

46,676

978,444

377,743

329,676

77,240

4,419

64,072

853,150

1,831,594

126,354

122,079

—

887,217

170,250

23

(64,021)

(62,747)

1,179,155

42,691

1,221,846

¥ 3,053,440

2007

¥ 281,904

107,839

414,979

37,361

187,994

5,664

2,698

49,619

1,088,058

437,222

280,855

70,084

2,495

70,316

860,972

1,949,030

126,354

122,079

40

1,042,202

183,578

126

(40,700)

(62,383)

1,371,296

38,929

1,410,225

¥ 3,359,255



54

Net Sales (Note 17)

Cost of Sales

Gross profit

Selling, General and Administrative Expenses

Operating income (Note 17)

Other Income (Expenses):

Interest and dividend income

Interest expense

Foreign currency exchange loss

Gain on sales of property, plant and equipment (Note 13)

Gain on sales of investments in securities

Gain on return of substitutional portion of the governmental

pension program (Note 8)

Impairment loss on assets (Note 13)

Plant restructuring costs in the Americas (Note 13)

Loss on provision for environmental remediation (Note13)

Loss related to voluntary tire replacement (Notes 13 and 18)

Other—net

Total

Income before income taxes and minority interests

Income Taxes (Note 14):

Current

Deferred

Total

Income before minority interests

Minority Interests

Net Income

Per Share of Common Stock:

Basic (Note 11)

Diluted (Note 11)

Cash dividends applicable to the year


2007

$ 29,699,685

19,791,056

9,908,629

7,718,861

2,189,768

92,072

(289,505)

(30,741)

—

—

—

—

—

—

(29,242)

(42,926)

(300,342)

1,889,426

665,099

14,428

679,527

1,209,899

(56,767)

$ 1,153,132

$ 1.48

1.48

0.23

2005

¥ 2,691,376

1,751,941

939,435

725,584

213,851

6,030

(15,227)

(2,588)

4,318

—

78,572

(4,010)

—

(5,887)

(26,503)

(3,961)

30,744

244,595

58,466

1,794

60,260

184,335

(3,539)

¥ 180,796

¥ 226.92

226.86

24.00

2006

¥ 2,991,275

2,005,536

985,739

794,863

190,876

7,588

(22,920)

(5,512)

6,357

1,733

—

(5,774)

(21,743)

—

—

(10,453)

(50,724)

140,152

56,669

(5,404)

51,265

88,887

(3,766)

¥ 85,121

¥ 109.10

109.07

24.00

2007

¥ 3,390,219

2,259,149

1,131,070

881,108

249,962

10,510

(33,047)

(3,509)

—

—

—

—

—

—

(3,338)

(4,900)

(34,284)

215,678

75,921

1,647

77,568

138,110

(6,480)

¥ 131,630

¥ 168.69

168.65

26.00



Yen U.S. dollars (Note 2)

Bridgestone Corporation and SubsidiariesYears ended December 31, 2007, 2006 and 2005

Consolidated Statements of Income



Balance at January 1, 2005

Net income for the year

Cash dividends

Bonuses to directors

Retirement of treasury stock

Increase due to revaluation of fixed

assets in overseas subsidiaries

Minimum pension liability adjustments

Net unrealized gain on available-

for-sale securities

Foreign currency translation adjustments

Purchase of treasury stock, net of sales

Balance at December 31, 2005

Reclassified balance at

December 31,2005 (Note 3)


Cash dividends

Bonuses to directors

Retirement of treasury stock

Retirement benefit obligations


Net Change in the year



Cash dividends





Balance at December 31,2006


Cash dividends






¥ (101,529)

50,494

(46,773)

(97,808)

38,081

(3,020)

(62,747)

364

¥ (62,383)

$ (549,689)

3,189

$ (546,500)

¥ (152,301)

50,263

(102,038)

38,017

(64,021)

23,321

¥ (40,700)

$ (560,850)

204,302

$ (356,548)

¥ 102,613

41,574

144,187

26,063

170,250

13,328

¥ 183,578

$ 1,491,459

116,758

$ 1,608,217

¥ 837,765

180,796

(16,772)

(699)

(50,494)

4,318

(19,054)

(37)

935,823

85,121

(20,300)

(784)

(38,081)

(74,536)

(26)

887,217

131,630

(19,506)

42,880

(19)

¥ 1,042,202

$ 7,772,378

1,153,132

(170,880)

375,646

(167)

$ 9,130,109

—

¥ 40

¥ 40

—

$ 350

$ 350

¥ 126,354

126,354

126,354

¥ 126,354

$ 1,106,912

$ 1,106,912

802,776

(21,422)

781,354

(1,197)

780,157

194

780,351

Treasury stock

Foreign currency

translation adjustments

Net unrealizedgain on

available-for-sale securities

Retained earnings

—

¥ 23

23

103

¥ 126

$ 202

902

$ 1,104

Deferred gain on

derivative instruments

Deferred gain on

derivative instruments

Stock acquisition

rightsCommon

stock

Treasury stock

¥ 934,981

180,796

(16,772)

(699)

—

4,318

(19,054)

41,574

50,263

(46,810)

1,128,597

—

85,121

(20,300)

(784)

—

(74,536)

(3,046)

64,103

1,179,155

131,630

(19,506)

42,880

345

36,792

¥ 1,371,296

$ 10,329,873

1,153,132

(170,880)

375,646

3,022

322,312

$ 12,013,105

Total

Total

¥ 34,932

7,759

42,691

(3,762)

¥ 38,929

$ 373,990

(32,956)

$ 341,034

Minority Interests

Minority Interests

¥ 934,981

180,796

(16,772)

(699)

—

4,318

(19,054)

41,574

50,263

(46,810)

1,128,597

34,932

85,121

(20,300)

(784)

—

(74,536)

(3,046)

71,862

1,221,846

131,630

(19,506)

42,880

345

33,030

¥ 1,410,225

$ 10,703,863

1,153,132

(170,880)

375,646

3,022

289,356

$ 12,354,139

Total equity

Total equity

Foreign currency

translation adjustments

Net unrealizedgain on

available-for-sale securities

Retained earnings

Stock acquisition

rights

¥ 122,079

122,079

122,079

¥ 122,079

$ 1,069,461

$ 1,069,461

Capital surplus

Capital surplus

Commonstock

Outstanding number ofshares of

common stock

Millions of yen

Thousands of U.S. dollars (Note 2)

Thousands


Consolidated Statements of Changes in Equity

56

Cash Flows from Operating Activities:Income before income taxes and minority interestsAdjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:Depreciation and amortizationIncrease (decrease) in accrued pension and liability forretirement benefits

Interest and dividend incomeInterest expenseGain on sales of property, plant and equipmentGain on sales of investments in securitiesImpairment loss on assetsPlant restructuring costs in the AmericasLoss on provision for environmental remediationLoss related to voluntary tire replacement Change in assets and liabilities:

Increase in notes and accounts receivable(Increase) decrease in inventoriesIncrease in notes and accounts payable

Bonuses paid to directorsOther

SubtotalInterest and dividends receivedInterest paidPayments related to voluntary tire replacementIncome taxes paid

Net Cash Provided by Operating ActivitiesCash Flows from Investing Activities:Payments for purchase of property, plant and equipmentProceeds from sales of property, plant and equipmentPayments for investments in securities, subsidiaries and affiliated companies

Payments for acquisition of newly consolidated subsidiariesOtherNet Cash Used in Investing ActivitiesCash Flows from Financing Activities:Net increase (decrease) in short-term debtProceeds from long-term debtRepayments of long-term debtCash dividends paidProceeds from sale on assets of sale-leaseback transactionsPayments for repurchase of assets on sale-leaseback transactionsPayments for purchase of treasury stockRepayments of lease obligations under capital leaseOtherNet Cash Provided by Financing ActivitiesEffect of Exchange Rate Changes on Cash and Cash EquivalentsNet Increase (Decrease) in Cash and Cash EquivalentsCash and Cash Equivalents at Beginning of YearCash and Cash Equivalents at End of YearSee notes to consolidated financial statements.

Supplemental Information

Bridgestone Americas Holding, Inc. acquired all outstanding shares of Bandag, Incorporated, which was newly consolidated in 2007.The breakdown of assets and liabilities of Bandag, Incorporated at the date of acquisition was as follows:

Current AssetsFixed AssetsCurrent LiabilitiesFixed LiabilitiesMinority InterestsNet assets acquiredCash and cash equivalentsPayments for acquisition of newly consolidated subsidiaries

2007

$ 1,889,426

1,520,675

75,865(92,072)

289,505—————

29,242

(103,189)73,045

232,212—

(265,414)3,649,295

92,010(289,260)(29,242)

(500,578)2,922,225

(2,353,307)30,276

(92,930)(959,834)

68,244(3,307,551)

(175,050)1,533,797(340,210)(170,486)

———

(12,028)(11,836)

824,18719,159

458,0201,736,925

$ 2,194,945

2005

¥ 244,595

127,609

(100,839) (6,030)

15,227 (4,318)

— 4,010

— 5,887

26,503

(47,235) (57,482) 47,942

(699) 285

255,455 6,057

(14,740) (29,213) (68,577)

148,982

(196,494) 7,700

(20,472) —

(7,649) (216,915)

120,398 49,013 (90,806) (16,772)

6,681 (2,904)

(46,966) (7,643)

(745) 10,256 7,532

(50,145) 263,726

¥ 213,581

2006

¥ 140,152

145,349

20,846 (7,588)

22,920 (6,357) (1,733) 5,774

21,743 — —

(16,782) (64,622)

6,088 (784)

(41,300) 223,706

7,441 (21,060)

— (60,945)

149,142

(250,223) 10,834

(13,091) —

(3,228) (255,708)

68,412 69,052 (29,169) (20,308)

— —

(3,377) (2,053) (1,160)

81,397 9,858

(15,311) 213,581

¥ 198,270

2007

¥ 215,678

173,585

8,660(10,510)33,047

—————

3,338

(11,779)8,338

26,507—

(30,297)416,56710,503(33,019)(3,338)

(57,141)333,572

(268,630)3,456

(10,608)(109,565)

7,790(377,557)

(19,982)175,083(38,835)(19,461)

———

(1,373)(1,351)94,0812,187

52,283198,270

¥ 250,553



$ 500,710798,196(138,073)(69,777)(1,542)

1,089,514(129,680)

$ 959,834

¥ 57,15691,114(15,761)(7,965)

(176)124,368(14,803)

¥ 109,565




Consolidated Statements of Cash Flows



Note 1— Nature of operations

Bridgestone Corporation (the “Company”) and its subsidiaries(hereinafter referred to collectively as the “Companies”) engage indeveloping, manufacturing and marketing tires and diversifiedproducts. The Companies market their products worldwide andoperate manufacturing plants in every principal market.Development activities take place primarily in Japan, the UnitedStates of America (the “U.S.”) and Europe. Tire operations

include retread business, automotive maintenance and repairs,retail business and raw material supplies, as well as tiredevelopment, manufacturing and marketing. Diversified productsinclude industrial products, chemical products, automotivecomponents, construction materials, electronic equipment,bicycles and sporting goods.

Note 2— Basis of presenting consolidated financial statements

The accompanying consolidated financial statements have beenprepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Law and itsrelated accounting regulations, and in conformity with accountingprinciples generally accepted in Japan (“Japanese GAAP”), whichare different in certain respects as to application and disclosurerequirements of International Financial Reporting Standards andthe accounting principles generally accepted in the U.S.

The consolidated financial statements are stated in Japanese

yen, the currency of the country in which the Company isincorporated and operates. The translations of Japanese yenamounts into U.S. dollar amounts are included solely for theconvenience of readers outside Japan and have been made atthe rate of ¥114.15 to $1, the approximate rate of exchange atDecember 31, 2007. Such translations should not be construedas representations that the Japanese yen amounts could beconverted into U.S. dollars at that or any other rate.

Note 3— Summary of significant accounting policies

(a) Consolidation

The consolidated financial statements include the accounts of theCompany and all of its subsidiaries in which the Company haseffective control. All significant intercompany balances andtransactions have been eliminated in consolidation. All materialunrealized profits included in assets resulting from transactionswithin the Companies are eliminated.

Investments in affiliated companies, primarily those owned20% to 50%, are accounted for under the equity method withappropriate adjustments for intercompany profits and dividends.Equity in earnings of the affiliated companies is included in otherincome (expenses) in the consolidated statements of income.

The number of consolidated subsidiaries and affiliatedcompanies for 2007 and 2006 is summarized below:

2007 2006 Consolidated subsidiaries 449 441Affiliated companies 182 184

(b) Cash equivalents

Cash equivalents are short-term investments that are readilyconvertible into cash and that are exposed to insignificant risk ofchanges in value. Cash equivalents include highly liquidinvestments with original maturities of three months or less.

(c) Allowance for doubtful accounts

Allowance for doubtful accounts is established in amountsconsidered to be appropriate based on the Companies’ pastcredit loss experience and an evaluation of potential losses in thereceivables outstanding.

(d) Inventories

Inventories are substantially stated at cost determined by themoving-average method, while inventories held by subsidiaries inthe Americas are substantially stated at the lower of cost, which isdetermined principally by the last-in, first-out method, or market.

(e) Investments in securities

Marketable and investment securities are classified andaccounted for, depending on management’s intent, as follows:(i) trading securities, which are held for the purpose of earningcapital gains in the near term, are reported at fair value, and therelated unrealized gains and losses are included in income; (ii)held-to-maturity debt securities, which are expected to be held tomaturity with the positive intent and ability to hold to maturity, arereported at amortized cost; and (iii) available-for-sale securities,which are not classified as either of the aforementionedsecurities, are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported in a separate componentof equity. Non-marketable available-for-sale securities are stated

Bridgestone Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Financial Section | Notes to Consolidated Financial Statements

58

at cost determined by the moving-average method. For otherthan temporary declines in fair value, investments in securities arereduced to net realizable value by a charge to income.

The Companies do not hold securities for trading purposes.

( f ) Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment of the Company and its domesticsubsidiaries is computed substantially by the declining-balancemethod at rates based on the estimated useful lives of the assets,while the straight-line method is applied to property, plant andequipment of the Company’s overseas subsidiaries. Maintenance,repair and minor renewals are charged to income as incurred.

(g) Impairment of long-lived assets

In August 2002, the Business Accounting Council (“BAC”) issueda Statement of Opinion, “Accounting for Impairment of FixedAssets”, and in October 2003, the Accounting Standards Boardof Japan (“ASBJ”) issued ASBJ Guidance No.6, “Guidance forAccounting Standard for Impairment of Fixed Assets”. These newpronouncements were effective for fiscal years beginning on orafter April 1, 2005 with early adoption permitted for fiscal yearsending on or after March 31, 2004.

The Company and its domestic subsidiaries adopted the newaccounting standard for impairment of fixed assets as of January1, 2005. Their long-lived assets are reviewed for impairmentwhenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not berecoverable. An impairment loss would be recognized if thecarrying amount of an asset or asset group exceeds the sum ofthe undiscounted future cash flows expected to result from thecontinued use and eventual disposition of the asset or assetgroup. The impairment loss would be measured as the amountby which the carrying amount of an asset or asset group exceedsits recoverable amount, which is the higher of the discountedcash flows from the continued use and eventual disposition of theasset or asset group, or the net selling price at disposition.

The effect of adoption of the new accounting standard forimpairment of fixed assets was to decrease income beforeincome taxes and minority interests for the year ended December31, 2005 by ¥3,042 million.

The impairment of long-lived assets for certain overseassubsidiaries is accounted for in accordance with Statement ofFinancial Accounting Standards (“SFAS”) No.144, “Accountingfor the Impairment or Disposal of Long-Lived Assets,” orInternational Accounting Standard No.36, “Impairment ofAssets,” which requires long-lived assets and certain identifiableintangibles to be held and used by an entity be reviewed forimpairment whenever events or changes in circumstances

indicate that the carrying amount of an asset may not berecoverable.

(h) Goodwill

Goodwill recorded by subsidiaries and, the excess of cost of theCompany’s investments in subsidiaries and affiliated companiesover its equity at the respective dates of acquisition, is mainlybeing amortized on a straight-line basis over reasonableeconomical life up to twenty years.

( i ) Provision for product warranties

The provision for product warranties, included in other liabilities,is estimated and recorded at the time of sale to provide for futurepotential costs, such as costs related to after-sales services, inamounts considered to be appropriate based on the Companies’past experience.

( j ) Provision for environmental remediation

The provision for environmental remediation is estimated andrecorded to provide for future potential costs, such as costsrelated to removal and disposal of asbestos based on relatedlegal requirements.

(k) Retirement and pension plans

Employees serving with the Company and its domestic subsidiariesare generally entitled to a lump-sum payment at retirement and, incertain cases, annuity payments, provided by funded definedbenefit pension plans based on the rates of pay at the time oftermination, years of service and certain other factors. TheCompany and its domestic subsidiaries account for the liability forretirement benefits based on projected benefit obligations and planassets at the balance sheet date. The transitional obligation, priorservice costs, and actuarial gain/loss are being amortized over tenyears, respectively.

Employees serving for certain of the Company’s overseassubsidiaries are entitled to funded defined benefit pension planswhich are accounted for primarily in accordance with SFASNo.87, “Employers’ Accounting for Pensions”.

Postretirement benefits other than pensions for health careand life insurance provided by the Company’s overseassubsidiaries in the Americas are accounted for in accordancewith SFAS No.106, “Employers’ Accounting for PostretirementBenefits Other Than Pensions.”

Certain of the Company’s overseas subsidiaries adopted SFASNo.158, “Employers’ Accounting for Defined Benefit Pension andOther Postretirement Plans - An Amendment of FASB Statements,No.87, 88, 106 and 132 (R)” for fiscal years ending on and afterDecember 31, 2006. The effect of the adoption of the newaccounting standard was to increase liability by ¥116,966 million



and decrease equity by ¥73,491 million for the year endedDecember 31, 2006.

The liability for lump sum payment at retirement to directors(members of the Board of Directors) and corporate auditors isprovided by the Company and its domestic subsidiaries at theamount which would be required, based on the Company’sregulations, in the event that all directors and corporate auditorsterminated their offices at the balance sheet date. Any amountspayable to directors and corporate auditors at retirement aresubject to approval at the general shareholders meeting.

( l ) Presentation of equity and consolidated statements of

changes in equity

On December 9, 2005, the ASBJ published a new accountingstandard for presentation of equity, which is effective for fiscalyears ending on or after May 1, 2006. Under this accountingstandard, certain items which were previously presented asliabilities are now presented as components of equity. Such itemsinclude stock acquisition rights, minority interests and anydeferred gain on derivative instruments.

On December 27, 2005, the ASBJ published another newaccounting standard for the statement of changes in equity,which is effective for fiscal years ending on or after May 1, 2006.The consolidated statement of shareholders’ equity, which waspreviously voluntarily prepared in line with the internationalaccounting practices, is now required under Japanese GAAP and has been renamed “the consolidated statement of changesin equity”.

(m) Leases

Finance leases are capitalized, and the present value of the relatedpayments is recorded as a liability. Amortization of capitalizedleased assets is computed substantially by the declining-balancemethod at rates based on the term of the lease.

(n) Bonuses to directors and corporate auditors

Bonuses to directors and corporate auditors continued to besubject to approval at the general shareholders meeting in Japan.On November 29, 2005, ASBJ issued a new accountingstandard for bonuses to directors and corporate auditors, whichis effective for fiscal years ending on or after May 1, 2006. Thisnew standard requires Japanese companies that give bonuses todirectors and corporate auditors expense and accrue suchbonuses in the year to which they are attributable and are nolonger allowed to directly charge them to retained earnings. TheCompany and its domestic subsidiaries adopted the newstandard and the effect of the adoption was to decrease incomebefore income taxes and minority interests for the year endedDecember 31, 2006 by ¥758 million.

(o) Income taxes

The provision for income taxes is computed based on incomebefore income taxes included in the consolidated statements ofincome. The asset and liability approach is used to recognizedeferred tax assets and liabilities for the expected future taxconsequences of temporary differences between the carryingamounts and the tax bases of assets and liabilities. Deferredincome taxes are measured by applying currently enacted taxlaws to the temporary differences. A valuation allowance isprovided for any portion of the deferred tax assets where it isconsidered more likely than not that they will not be realized.

(p) Foreign currency transactions

Short-term and long-term monetary receivables and payablesdenominated in foreign currencies are translated into Japaneseyen at the exchange rate at the balance sheet date. The foreigncurrency exchange gain and loss from translation are recognizedin income.

(q) Foreign currency financial statements

The balance sheet accounts of the Company’s overseassubsidiaries are translated into Japanese yen at the currentexchange rate at the balance sheet date except for equity, whichis translated at the historical rate. Differences arising from suchtranslation are shown as foreign currency translation adjustmentsin a separate component of equity. Revenue and expenseaccounts of the Company’s overseas subsidiaries are translatedinto Japanese yen at the average annual exchange rate.

( r ) Derivatives and hedging activities

The Companies use derivative financial instruments to managetheir exposures to fluctuations in foreign currency exchange rates,interest rates and commodity prices. Foreign currency forwardcontracts, currency swap contracts and currency option contractsare utilized by the Companies to reduce foreign currencyexchange risks. Interest rate swaps are utilized by the Companiesto reduce interest rate risks. Also, commodity future contracts are utilized by the Companies to reduce commodity price risks.The Companies do not enter into derivatives for trading orspeculative purposes.

Derivative financial instruments and foreign currencytransactions are classified and accounted for as follows: (i) allderivatives are recognized as either assets or liabilities andmeasured at fair value, and gain or loss on derivative transactionsis recognized in income and (ii) for derivatives used for hedgingpurposes, if derivatives qualify for hedge accounting because ofhigh correlation and effectiveness between the hedginginstruments and the hedged items, gain or loss on derivatives isdeferred until maturity of the hedged transactions.

60

The foreign currency forward contracts which are designated ashedging exposure to variable cash flows of forecasted transactionsare measured at the fair value and the unrealized gain or loss isdeferred until the underlying transactions are completed. Otherforeign currency forward contracts, currency swap contracts andcurrency option contracts employed to hedge foreign currencyexchange exposures to changes in fair value and in cash flow arealso measured at the fair value but the unrealized gain or loss isrecognized in income. Short-term and long-term debt denominatedin foreign currencies for which foreign currency forward contractsand currency swap contracts are used to hedge the foreign currencyfluctuations are translated at the contracted rate if the foreigncurrency forward contracts and currency swap contracts qualify forhedge accounting. The interest rate swaps which qualify for hedgeaccounting and meet specific matching criteria are not remeasuredat market value, but the differential paid or received under the swapagreements is recognized and included in interest expenses orincome. The gain or loss on commodity future contracts in a hedgeto fluctuations of commodity prices is recognized currently in income.

(s) Per share of common stock

Basic net income per share is computed by dividing net incomeavailable to common shareholders by the weighted-averagenumber of common stock outstanding for the period,retroactively adjusted for stock splits.

Diluted net income per share reflects the potential dilutionthat could occur if securities were exercised or converted intocommon stock. Diluted net income per share of common stockassumes full conversion of the outstanding convertible notes andbonds at the beginning of the year (or at the time of issuance)with an applicable adjustment for related interest expense, net oftax, and full exercise of outstanding warrants.

Cash dividends per share presented in the consolidatedstatements of income are dividends applicable to the respectiveyears, including dividends to be paid after the end of the year.

(t) Reclassification

In preparing the consolidated financial statements, certainreclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form which is more familiar to readersoutside Japan.

(u) Accounting Change

Business Combination

In October 2003, the Business Accounting Council (“BAC”) issued aStatement of Opinion, “Accounting for Business Combinations”,and on December 27, 2005, the ASBJ issued ASBJ StatementNo.7, “Accounting Standard for Business Separations” and ASBJ

Guidance No.10, ”Guidance for Accounting Standard for BusinessCombinations and Business Separations”. These new accountingpronouncements are effective for fiscal years beginning on or afterApril 1, 2006.

The accounting standard for business combinations allowscompanies to apply the pooling of interests method of accountingonly when certain specific criteria are met such that the businesscombination is essentially regarded as a uniting-of-interests. Forbusiness combinations that do not meet the uniting-of-interestscriteria, the business combination is considered to be anacquisition and the purchase method of accounting is required.This standard also prescribes the accounting for combinations ofentities under common control and for joint ventures.

Stock option

On December 27, 2005, the ASBJ issued ASBJ Statement No.8,“Accounting Standard for Stock Options” and related guidance. Thenew standard and guidance are applicable to stock options newlygranted on and after May 1, 2006. This standard requirescompanies to recognize compensation expense for employee stockoptions based on the fair value at the date of grant and over thevesting period as consideration for receiving goods or services. Thestandard also requires companies to account for stock optionsgranted to non-employees based on the fair value of either thestock option or the goods or services received. In the balancesheet, the stock option is presented as a stock acquisition right as aseparate component of equity until exercised. The standard coversequity-settled, share-based payment transactions, but does notcover cash-settled, share-based payment transactions. In addition,the standard allows unlisted companies to measure options at theirintrinsic value if they cannot reliably estimate fair value.

The effect of adoption of the new accounting method onincome before income taxes and minority interests is not material.

Accounting Method for Depreciation of Property, Plant and

Equipment

The Company and its domestic subsidiaries changed thedepreciation method for the property, plant and equipmentacquired on or after April 1, 2007 due to the revision of JapaneseCorporation Tax Law and its regulation. The effect of adoption ofthe new accounting method on income before income taxes andminority interests is not material.

(v) New Accounting Pronouncements

Measurement of Inventories

Under Japanese GAAP accounting principles in Japan, inventoriesare currently measured either by the cost method, or at the lowerof cost or market. On July 5, 2006, the ASBJ issued ASBJStatement No.9, “Accounting Standard for Measurement of



Note 5— Inventories

Inventories at December 31, 2007 and 2006 consist of the following:

Finished productsWork in processRaw materials and supplies

Total

2007

$ 3,123,522348,524

1,466,018$ 4,938,064

2006

¥ 355,446 35,946

158,134 ¥ 549,526

2007

¥ 356,55039,784

167,346¥ 563,680


U.S. dollars

Inventories”, which is effective for fiscal years beginning on or afterApril 1, 2008 with early adoption permitted. This standard requiresthat inventories held for sale in the ordinary course of business bemeasured at the lower of cost or net selling value, which is definedas the selling price less additional estimated manufacturing costsand estimated direct selling expenses. The replacement cost maybe used in place of the net selling value, if appropriate. Thestandard also requires that inventories held for trading purposes bemeasured at the market price.

Unification of Accounting Policies Applied to Foreign

Subsidiaries for the Consolidated Financial Statements

Under Japanese GAAP, a company currently can use the financialstatements of foreign subsidiaries which are prepared inaccordance with generally accepted accounting principles in theirrespective jurisdictions for its consolidation process unless they areclearly unreasonable. On May 17, 2006, the ASBJ issued ASBJPractical Issues Task Force (PITF) No.18, “Practical Solution onUnification of Accounting Policies Applied to Foreign Subsidiariesfor the Consolidated Financial Statements”. The new task forceprescribes: 1) the accounting policies and procedures applied to aparent company and its subsidiaries for similar transactions andevents under similar circumstances should in principle be unifiedfor the preparation of the consolidated financial statements, 2)financial statements prepared by foreign subsidiaries in accordance

with either International Financial Reporting Standards or thegenerally accepted accounting principles in the United Statestentatively may be used for the consolidation process, 3) however,the following items should be adjusted in the consolidation processso that net income is accounted for in accordance with JapaneseGAAP unless they are not material;

(1) Amortization of goodwill (2) Actuarial gain and loss of defined benefit plans recognized

outside profit or loss(3) Capitalization of intangible assets arising from

development phases(4) Fair value measurement of investment properties, and the

revaluation model for property, plant and equipment, andintangible assets

(5) Retrospective application when accounting policies arechanged

(6) Accounting for net income attributable to a minority interestThe new task force is effective for fiscal years beginning on or

after April 1, 2008 with early adoption permitted. The Company has not completed the process of evaluating the

impact that will result from adopting this new accounting standard,which is effective in 2009, and is therefore unable to disclose theimpact that adopting this new accounting standard will have on itsconsolidated financial position and results of operations.

Note 4— Business combination

On May 31, 2007, Bridgestone Americas Holding, Inc. acquiredall outstanding shares of Bandag, Incorporated stock forconsideration of $1,022 million. This acquisition was made tooffer a comprehensive tire maintenance solution, backed by acomplete line of new and retread tire offerings. The results of

operations for Bandag, Incorporated are included in theconsolidated financial statements of income from June 1, 2007 toDecember 31, 2007.

This business combination was accounted by the purchasemethod of accounting.

62

Note 6— Investments in securities

Information regarding each category of available-for-sale securities at December 31, 2007 and 2006 is as follows:

Securities classified as:Available-for-sale:

Equity securitiesDebt securities

¥ 313,8304,986

¥ (87)(3)

¥ 262,50676

¥ 51,4114,913

Fair value Unrealized lossUnrealized gainCost

Millions of yen

2007



¥ 311,934 2,997

¥ (49) (3)

¥ 261,771 —

¥ 50,212 3,000


Millions of yen

2006



$ 2,749,27743,679

$ (762)(27)

$ 2,299,658666

$ 450,38143,040


Thousands of U.S. dollars

2007

Available-for-sale securities whose fair value is not readily determinable at December 31, 2007 and 2006 are mainly as follows:

Available-for-sale:Equity securities

2007

$ 39,816

2006

¥ 5,057

2007

¥ 4,545

Millions of yen

Carrying amount

Thousands of U.S. dollars

Proceeds from sales of available-for-sale securities for theyears ended December 31, 2007, 2006 and 2005 are ¥552 million($4,836 thousand), ¥2,404 million and ¥360 million, respectively.Gross realized gain and loss on these sales, computed on themoving average cost basis, are ¥245 million ($2,146 thousand)

and ¥3 million ($26 thousand), respectively, for the year endedDecember 31, 2007, ¥1,710 million and ¥0.1 million, respectively,for the year ended December 31, 2006 and ¥270 million and ¥5million, respectively, for the year ended December 31, 2005.

The carrying values of debt securities by contractual maturities for securities classified as available-for-sale at December 31, 2007are as follows:

Available-for-sale:Debt securities:

Due 2008Due 2009 to 2012Due 2013 to 2017Due 2018 and thereafter

Total

17,424—

$ 26,255—

$ 43,679

1,989—

¥ 2,997—

¥ 4,986


U.S. dollars


Long-term debt at December 31, 2007 and 2006 consists of the following:

Borrowings from banks, insurance companies and others,weighted average interest rate of 4.5% at December 31, 2007 and 3.1% at December 31, 2006 denominated mainly in Japanese yen, U.S. dollars and Euros:

SecuredUnsecured

1.7% yen unsecured straight bonds, due 20072.0% yen unsecured straight bonds, due 20100.6% yen unsecured straight bonds, due 20100.9% yen unsecured straight bonds, due 2013

Unsecured Euro Medium Term Notes due 2008—2010 with interest ranging from 0.3% to 1.2%at December 31, 2007 and due 2007—2010 with interest 0.3% to 1.1% at December 31, 2006

TotalLess current portionLong-term debt, less current portion

2007

$ 4,0303,613,097

—262,812262,812438,020

194,1834,774,954(944,713)

$ 3,830,241

2006

¥ 2,315 256,382 20,000 30,000 30,000 50,000

21,522410,219(32,476)

¥ 377,743

2007

¥ 460412,435

—30,00030,00050,000

22,166545,061(107,839)

¥ 437,222


U.S. dollars

Note 7— Short-term and long-term debt

Short-term debt at December 31, 2007 and 2006 consists of the following:

Short-term bank loans, weighted average interest rate of 5.1% at December 31, 2007 and 5.5% at December 31, 2006

Commercial paper, weighted average interest rate of 4.7% atDecember 31, 2007 and 3.7% at December 31, 2006

0.5% yen unsecured medium term note, due 20070.8% yen unsecured medium term note, due 2008Unsecured Euro Medium Term Notes due 2007-2008 with interest ranging from 0.8% to 1.0% at December 31, 2007 and interest from 0.4% to 0.6% at December 31, 2006

Total

2007

$ 2,164,521

173,009

43,802

88,261$ 2,469,593

2006

¥ 275,630

8,9991,000

—

9,009¥ 294,638

2007

¥ 247,080

19,749—

5,000

10,075¥ 281,904


U.S. dollars

Annual maturities of long-term debt at December 31, 2007 are as follows:

200820092010201120122013 and thereafter

Total

$ 944,713508,655

1,116,715960,894275,103968,874

$ 4,774,954

¥ 107,83958,063

127,473109,68631,403

110,597¥ 545,061

Millions of yenYear ending December 31,Thousands of

U.S. dollars

Notes and accounts receivable, inventories, and property, plantand equipment were pledged as collateral for certain bank loans.The aggregate carrying amount of the assets pledged as collateralfor short-term bank loans of ¥2,173 million ($19,036 thousand) andlong-term bank loans of ¥460 million ($4,030 thousand) at

December 31, 2007 is ¥17,926 million ($157,039 thousand).General agreements with respective banks provide, as is

customary in Japan, that additional collateral must be providedunder certain circumstances if requested by such banks and thatcertain banks have the right to offset cash deposited with them

64

Note 8— Retirement and pension plans

Employees serving with the Company and its domesticsubsidiaries are generally entitled to a lump-sum payment atretirement and, in certain cases, annuity payments at retirement,provided by funded defined benefit pension plans based on therate of pay at the time of termination, years of service and certainother factors. There are defined contribution pension plansavailable for the employees as well provided by the Company andcertain of its domestic subsidiaries. There are escalated paymentplans for voluntary retirement at certain specific ages prior to themandatory retirement age.

Employees serving for certain of the Company’s overseassubsidiaries are entitled to either or each of a lump-sum paymentat retirement, funded defined benefit pension plans as well asdefined contribution pension plans.

In accordance with the Defined Benefit Pension Plan Lawenacted in April 2002, the Company applied for an exemption fromthe obligation to pay benefits for future employee services relatedto the substitutional portion managed on behalf of the government.The Company obtained approval for exemption from the futureobligation from the Ministry of Health, Labor and Welfare onJanuary 1, 2004.

The Company and certain of its domestic subsidiaries appliedfor return of the substitutional portion of past pension obligations tothe government and obtained approval from the Ministry of Health,Labor and Welfare on April 1, 2005.

The Company and certain of its domestic subsidiaries thereafterreturned the subsutitutional portion of the pension obligations andrelated assets to the government in July 2005 and recognized¥78,572 million as income for the difference between the balance ofthe retirement benefit liabilities brought forward and the amountactually returned for the year ended December 31,2005.

According to the enactment of the Defined ContributionPension Plan Law in October 2001, the Company and certain of itsdomestic subsidiaries implemented a defined contribution pensionplan and a retirement benefit prepayment plan in April 2005 bywhich the former lump-sum payment at retirement plan was partiallyreplaced. The Company and certain of its domestic subsidiariesapplied accounting treatments specified in the guidance issued bythe ASBJ. The effect of this transfer was to increase income beforeincome taxes and minority interests by ¥496 million and wasrecorded as other income in the consolidated statement of incomefor the year ended December 31, 2005.


against any long-term or short-term debt or obligation thatbecomes due and, in case of default and certain other specifiedevents, against all other debt payable to the banks. The Companyhas never been requested to provide any additional collateral.

Effective January 28, 2008, Bridgestone Americas Holding, Inc.(“BSAH”) and its major subsidiaries in the U.S. entered intoseparate sixth amended and restated revolving credit agreementswith a syndicate of banks providing an aggregate borrowingcommitment of $1.4 billion. These agreements expire on January26, 2009. These agreements contain certain customary affirmativeand negative covenants, the most restrictive of which includes (i)

the maintenance by BSAH and its major subsidiaries of theirconsolidated tangible net worth; (ii) restrictions on entering intoadditional debt arrangements and the sale of assets. Further, anevent of default under these agreements by any of the majorsubsidiaries in the U.S. cause an event of default under the BSAHsixth amended and restated revolving credit agreement. The aboveagreements replace the separate fifth amended and restatedrevolving credit agreements expired on January 28, 2008, of whichthe terms were substantially the same as those of the sixthagreements discussed above.

The liability for employees’ retirement benefits at December 31, 2007 and 2006 consist of the following:

Projected benefit obligationFair value of plan assetsUnrecognized prior service costUnrecognized actuarial gain (loss)Unrecognized transitional obligationPrepaid benefit costOtherNet liability

2007

$ 5,094,726(3,921,726)

159,781(7,622)

(28,533)110,399

(7,481)$ 1,399,544

2006

¥ 583,739(410,339)

21,1731,435(4,403)3,730(3,676)

¥ 191,659

2007

¥ 581,563(447,665)

18,239(870)

(3,257)12,602

(854)¥ 159,758


U.S. dollars


Service costInterest costExpected return on plan assetsAmortization of transitional obligationRecognized actuarial lossAmortization of prior service cost

Net periodic benefit costsGain on return of substitutional portion of the governmental pension programGain on transfer from the severance lump-sum payment to a definedcontribution pension plan and a retirement benefit prepayment plan

Total

2007

$ 153,342219,510(215,506)

9,54064,477(14,639)

216,724—

—$ 216,724

2005

¥ 16,752 21,866 (21,110)

1,317 9,017 (1,881)

25,961 (78,572)

(496) ¥ (53,107)

2006

¥ 18,259 23,490 (21,999)

1,101 7,475

(314) 28,012

—

— ¥ 28,012

2007

¥ 17,50425,057(24,600)

1,0897,360(1,671)

24,739—

—¥ 24,739


U.S. dollars

The components of the net periodic benefit costs for the years ended December 31, 2007, 2006 and 2005 are as follows:

Certain subsidiaries adopt a simplified method in calculating theirretirement benefit obligation.

Of the accrued pension and liability for retirement benefitsnoted above, a liability for postretirement benefits of ¥121,097million ($1,060,859 thousand) and ¥138,017 million is included inthe consolidated balance sheets at December 31, 2007 and2006, respectively.

In addition to the above, certain subsidiaries also participate ina multi-employer pension plan covering all of their employees.There existed ¥291 million ($2,549 thousand) and ¥300 million atDecember 31, 2007 and 2006, respectively, of pension assets atfair value in the multi-employer pension plan; however, the portionof these assets belonging to the subsidiaries could not bereasonably calculated.

The Companyand domestic

subsidiariesOverseas

subsidiaries

Discount rateExpected rate of return on plan assetsAmortization period of prior service costRecognized period of actuarial gain or lossAmortization period of transitional obligation

2.5%0.7% to 3.0%

10 years10 years10 years

5.5 to 6.2%5.5 to 9.0%

3 to 12 years7 to 12 years

—

2007The Companyand domestic


subsidiaries

2.5%0.7% to 3.0%


5.2% to 5.9%7.0% to 9.0%3 to 12 years 7 to 12 years

—

2006The Companyand domestic


subsidiaries

2.5%0.7% to 3.0%


5.2% to 6.0%7.0% to 9.0%3 to 12 years 7 to 12 years

—

2005

Assumptions used for the years ended December 31, 2007, 2006 and 2005 are set forth as follows:

Net periodic benefit costs noted above do not includepayment costs for defined contribution pension plans provided bythe Company and certain of its domestic and overseassubsidiaries of ¥7,141 million ($62,558 thousand), ¥6,204 millionand ¥5,296 million for the years ended December 31, 2007,

2006 and 2005, respectively. In addition to the above, the Company’s overseas

subsidiaries in the Americas recorded ¥4,544 million of temporalcosts for plant closures at December 31, 2006.

Note 9— Equity

On May 1, 2006, a new corporate law (the “Law”) becameeffective, which reformed and replaced the Commercial Code ofJapan with various revisions that would, for the most part, beapplicable to events or transactions which occur on or after May 1,2006 and for the fiscal years ending on or after May 1, 2006. Thesignificant changes in the Law that affect financial and accountingmatters are summarized below;

(i) Dividends: The Law allows Japanese companies to paydividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. ForJapanese companies that meet certain criteria such as; having theBoard of Directors, having independent auditors, having the Boardof Corporate Auditors, and the term of service of the directors isprescribed as one year rather than two years of normal term by its

66


articles of incorporation, the Board of Directors may declaredividends (except for dividends in kind) if the company hasprescribed so in its articles of incorporation. The Law permitsJapanese companies to distribute dividends-in-kind (non-cashassets) to shareholders subject to certain limitations and additionalrequirements. The Law continues to provide certain limitations onthe amounts available for dividends or the purchase of treasurystock. The limitation is defined as the amount available fordistribution to the shareholders, but the amount of equity afterdividends must be maintained at no less than ¥3 million.

(ii) Increases/decreases and transfer of common stock, reserveand surplus: The Law requires that an amount equal to 10% ofdividends must be appropriated as a legal reserve (of retainedearnings) or as additional paid-in capital (of capital surplus)depending on the equity account charged upon the payment ofsuch dividends until the total of aggregate amount of legal reserveand additional paid-in capital equals 25% of the common stock.Under the Law, the total amount of additional paid-in capital and

legal reserve may be reversed without limitation. The Law alsoprovides that common stock, legal reserve, additional paid-incapital, other capital surplus and retained earnings can betransferred among the accounts under certain conditions uponresolution of the shareholders.

(iii) Treasury stock and treasury stock acquisition rights: TheLaw also provides for Japanese companies to repurchase/disposeof treasury stock by resolution of the Board of Directors. Theamount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined byspecific formula. Under the Law, stock acquisition rights, whichwere previously presented as a liability, are now presented as aseparate component of equity. The Law also provides thatcompanies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directlyfrom stock acquisition rights.

Note 10— Stock-based compensation

The stock options outstanding as of December 31, 2007 are as follows:

March 30, 2000

March 29, 2001

March 28, 2002

March 28, 2003

March 30, 2004

March 30, 2005

March 30, 2006

March 29, 2007

DirectorsSelected employees








3233

2936

862

1052

959

1058

1068

965

Date of approval atthe generalshareholders meeting Persons granted

Number of options granted

(Thousands of shares) Date of grant Exercise price Exercise period

¥ 2,358($20.66)

1,287(11.27)

1,954(17.12)

1,479(12.96)

1,864(16.33)

2,114(18.52)

2,775(24.31)

2,546(22.30)

April 3, 2000

April 2, 2001

May 1, 2002

May 1, 2003

May 6, 2004

May 2, 2005

April 28, 2006

May 1, 2007

215

208

264

262

264

258

280

260

from April 1, 2002 to March 31, 2007









The stock option activity for the year ended December 31, 2007 is as follows:

Non-vested(Thousands of shares)Outstanding at December 31, 2006GrantedExpiredVestedOutstanding at December 31, 2007

Vested(Thousands of shares)Outstanding at December 31, 2006VestedExercisedExpiredOutstanding at December 31, 2007Exercise price

Average stock price at exercise

Fair value price at grant date

The fair value price is estimated using the Black-Scholes Option Pricing Model with the following assumptions:

Volatility of stock priceEstimated remaining outstanding periodEstimated dividend per shareRisk-free interest rate

March 30,2000

—————

175—51

124—

¥ 2,358($20.66)¥ 2,495($21.86)

—

March 29,2001

—————

70—34—36

¥ 1,287($11.27)¥ 2,512($22.01)

—

March 28,2002

—————

226—33—

193¥ 1,954($17.12)¥ 2,414($21.15)

—

March 28,2003

—————

189—57—

132¥ 1,479($12.96)¥ 2,454($21.50)

—

March 30,2004

—————

251—22—

229¥ 1,864($16.33)¥ 2,411($21.12)

—

March 30,2005

—————

258—6

—252

¥ 2,114($18.52)¥ 2,402($21.04)

—

March 30,2006

—————

280———

280¥ 2,775($24.31)

—

—

March 29,2007

—260

—260

—

—260

——

260¥ 2,546($22.30)

—

¥ 447($3.92)

March 29,2007

24.819 %4.42 years

¥ 241.116 %

Note 11— Net income per share

Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended December 31, 2007, 2006and 2005 is as follows:

For the year ended December 31, 2007:Basic EPS

Net income available to common shareholdersEffect of dilutive securities

Stock optionsDiluted EPS

Net income for computation

$ 1.48

$ 1.48

¥ 168.69

¥ 168.65

780,284

216

780,500

¥ 131,630

¥ 131,630

EPSWeighted—average sharesNet income

Millions of yen Thousands of shares Yen U.S. dollars

68

Note 12— Research and development costs

Research and development costs are charged to income as incurred.Research and development costs are ¥86,748 million ($759,947 thousand), ¥86,687 million and ¥79,415 million for the years ended

December 31, 2007, 2006 and 2005, respectively.









¥ 109.10

¥ 109.07

¥ 226.92

¥ 226.86

780,178

270

780,448

793,348

226

793,574

¥ 85,121

¥ 85,121

¥ 180,026

¥ 180,026

EPSWeighted—average sharesNet income

Millions of yen Thousands of shares Yen


Gain on sales of property, plant and equipment

Gain on sales of property, plant and equipment for the yearsended December 31, 2006 and 2005 mainly consist of gain onsales of land.

Impairment loss on assets

During the year ended December 31, 2006, impairment loss onassets are recognized primarily for certain asset groups of rawmaterial business in Europe due to continuously unprofitableperformance even expected in the foreseeable future, by marketprice erosion through competition.

During the year ended December 31, 2005, the Companyand its subsidiaries reviewed their long-lived assets forimpairment. As a result, impairment loss on assets are mainlyrecognized for certain asset groups of diversified business due to worse performance caused by market price erosion, the steepincrease in raw material price and others, and for certain assetgroups of tire business due to a significant decline in its assets’market value.

Loss on provision for environmental remediation

During the year ended December 31, 2005, the Company andcertain of its domestic subsidiaries recorded ¥5,887 million forfuture environmental remediation.

Loss related to voluntary tire replacement

During the year ended December 31, 2007, the Company hasrecorded an amount for a legal settlement of disclosure issuesassociated with the August 2000 voluntary safety recall.

During the year ended December 31, 2005, one of theCompany’s overseas subsidiaries in the U.S. and the Ford MotorCompany (“Ford”) reached a joint settlement of all outstandingfinancial issues associated with the August 2000 voluntary safetyrecall and Ford’s May 2001 tire replacement program. Under thisagreement, the subsidiary paid Ford $240 million (¥26,503million) for the settlement.

Plant restructuring costs in the Americas

Some of the Company’s overseas subsidiaries in Americasrecord costs of some of their plant closures as a part of tiremanufacturing rationalization.

Note 13— Other income (expenses)

Note 14— Income taxes

The Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in theaggregate, resulted in normal effective statutory tax rates of

approximately 40.6% for each of the years ended December 31,2007, 2006 and 2005 respectively.


Deferred tax assets:Accrued pension and liability for retirement benefitsAccrued expensesUnrealized intercompany profitsNet operating loss carryforwards for tax purposesDepreciable assetsOtherLess valuation allowance

Total

Deferred tax liabilities:Reserve for deferred gain related fixed assets for tax purposesUnrealized gain on available-for-sale securitiesOther

Total Net deferred tax assets

2007

$ 968,121346,246246,544463,618

—384,880(116,522)

2,292,887

(100,394)(690,521)(336,584)

(1,127,499)$ 1,165,388

2006

¥ 126,165 35,936 25,887 55,820 11,004 47,432 (16,903)

285,341

(11,668) (91,416) (22,809)

(125,893) ¥ 159,448

2007

¥ 110,51139,52428,14352,922

—43,934(13,301)261,733

(11,460)(78,823)(38,421)

(128,704)¥ 133,029


U.S. dollars

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities atDecember 31, 2007 and 2006 are as follows:

Normal effective statutory tax rateExpenses not deductible for income tax purposeLower income tax rates applicable to income in certain consolidated subsidiariesLower income tax rates applicable to income in certain overseas countriesTax credit for research and development costs of domestic companiesTax adjustment of overseas companiesChange in valuation allowance for deferred tax assetsOther—net

Actual effective tax rate

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the consolidatedstatements of income for the years ended December 31, 2007, 2006 and 2005 is as follows:

2005

40.6% 2.7 —

(3.2) (2.5)

— (13.9)

0.9 24.6%

2006

40.6% 4.7 (1.9)

—(3.9) (1.8)

— (1.1)

36.6%

2007

40.6% 2.1 (2.6)

—(3.2)

— (1.7) 0.8

36.0%

Note 15— Derivatives

The Companies enter into foreign currency forward contracts,currency swap contracts and currency option contracts to hedgeforeign currency exchange risk associated with certain assets andliabilities denominated in foreign currencies. The Companies enterinto interest rate swap contracts to manage their interest rateexposure on certain liabilities. In addition, the Companies enter intocommodity future contracts to hedge the risk of fluctuation ofcommodity prices for raw materials.

All derivative transactions are entered into to hedge foreigncurrency, interest and commodity price exposures that arise in thecourse of the Companies’ business. Accordingly, the market risk inthese derivatives is basically offset by opposite movements in thevalue of hedged assets or liabilities. Because the counterparties to

these derivatives are limited to major international financialinstitutions, the Companies do not anticipate any losses arisingfrom credit risk. Derivative transactions entered into by theCompanies have been made in accordance with internal policieswhich regulate the authorization and credit limit amounts.Foreign currency forward contracts and currency swap contractswhich qualify for hedge accounting for the years ended December31, 2007 and 2006 are excluded from the disclosure of marketvalue information.

The contract or notional amounts of derivatives which areshown in the following table do not represent the amountsexchanged by the parties and do not measure the Companies’exposure to credit or market risk.

70

The outstanding balance of derivative contracts at December 31, 2007 and 2006 are as follows:

Foreign currency forward contracts:Sell:

U.S. dollarEuroAustralian dollarBritish poundOther

Buy:U.S. dollarJapanese yenOther

Currency swap contracts:Indian rupee receipt, Japanese yen paymentU.S. dollar receipt, Japanese yen paymentU.S. dollar receipt, Singapore dollar payment

Interest rate swap contracts:Floating rate receipt, fixed rate payment

¥ 35,07640,18810,207

—6,650

10,2453,619

264

—12,5525,655

14,562

Contractamount

¥ 35,41540,81610,172

—6,902

10,1123,549

270

—4

74

(165)

Fair value

¥ (339)(628)

35—

(252)

(133)(70)

6

—4

74

(165)

Unrealized gain(loss)

Contractamount Fair value


¥ 47,328 61,686 6,678

819 5,986

9,107 6,550

409

1,402 12,006 5,400

16,054

¥ 48,218 63,451 7,012

857 6,158

8,895 6,228

398

— (296)

91

(339)

¥ (890) (1,765)

(334) (38)

(172)

(212) (322) (11)

— (296)

91

(339)

2007 2006Millions of yen


Foreign currency forward contracts:Sell:

U.S. dollarEuro Australian dollarBritish poundOther

Buy:U.S. dollarJapanese yenOther

Currency swap contracts:Indian rupee receipt, Japanese yen paymentU.S. dollar receipt, Japanese yen paymentU.S. dollar receipt, Singapore dollar payment

Interest rate swap contracts:Floating rate receipt, fixed rate payment

Contractamount Fair value


$ 307,280352,06389,417

—58,257

89,75031,7042,313

—109,96149,540

127,569

$ 310,250357,56589,111

—60,464

88,58531,0912,366

—35

648

(1,445)

$ (2,970)(5,502)

306—

(2,207)

(1,165)(613)

53

—35

648

(1,445)

2007Thousands of U.S. dollars

Note 16— Contingent liabilities and commitments

(a) Contingent liabilities

At December 31, 2007 and 2006, the Companies had the following contingent liabilities:

Trade notes discountedGuarantees and similar items of bank borrowings

Total

2007

$ 66,2292,961

$ 69,190

2006

¥ 8,094 465

¥ 8,559

2007

¥ 7,560338

¥ 7,898


U.S. dollars


(b) Operating lease commitments

The Companies lease certain land, machinery, vehicles, computer equipment, office space and other assets. The minimum leasecommitments under noncancelable operating leases at December 31, 2007 and 2006 are as follows:

(c) Litigation

See Note 18 for contingent legal liabilities in relation to the voluntary tire recall.

Due within one yearDue after one year

Total

2007

$ 310,9681,609,277

$ 1,920,245

2006

¥ 32,979 177,217

¥ 210,196

2007

¥ 35,497183,699

¥ 219,196


U.S. dollars

Note 17— Segment information

Information about industry segments, geographic segments and sales to customers outside of Japan, for the years ended December 31,2007, 2006 and 2005 is as follows:

(a) Information by industry segment

Net sales:External customersInter-segment

TotalOperating expensesOperating incomeIdentifiable assetsDepreciation and amortization Capital expenditures

¥ 3,390,219 —

3,390,2193,140,257

¥ 249,962¥ 3,359,255¥ 173,585¥ 289,932

— ¥ (22,116)

(22,116)(22,335)

¥ 219¥ (3,008)¥ —¥ —

¥ 2,750,3745,618

2,755,9922,560,956

¥ 195,036¥ 2,878,953¥ 150,239¥ 257,178

¥ 639,84516,498

656,343601,636

¥ 54,707¥ 483,310¥ 23,346¥ 32,754

¥ 3,390,21922,116

3,412,3353,162,592

¥ 249,743¥ 3,362,263¥ 173,585¥ 289,932

Millions of yenYear ended December 31, 2007


TotalOperating expensesOperating incomeIdentifiable assetsDepreciation and amortization Impairment losses on assetsCapital expenditures

¥ 2,991,275 —

2,991,275 2,800,399

¥ 190,876 ¥ 3,053,440 ¥ 145,349 ¥ 5,774 ¥ 262,515

— ¥ (32,542)

(32,542) (32,596)

¥ 54 ¥ (11,573)

———

¥ 2,393,165 3,781

2,396,946 2,257,877

¥ 139,069 ¥ 2,585,497 ¥ 129,286 ¥ 5,774 ¥ 231,995

¥ 598,110 28,761

626,871 575,118

¥ 51,753 ¥ 479,516 ¥ 16,063

— ¥ 30,520

¥ 2,991,275 32,542

3,023,817 2,832,995

¥ 190,822 ¥ 3,065,013 ¥ 145,349 ¥ 5,774 ¥ 262,515


ConsolidatedElimination or

corporate Tires Diversified products Total




TotalOperating expensesOperating incomeIdentifiable assetsDepreciation and amortization Impairment losses on assetsCapital expenditures

¥ 2,691,376 —

2,691,376 2,477,525

¥ 213,851 ¥ 2,709,962 ¥ 127,609 ¥ 4,010 ¥ 208,350

— ¥ (30,180)

(30,180) (30,242)

¥ 62 ¥ (9,889)

— ——

¥ 2,152,950 3,838

2,156,788 1,988,876

¥ 167,912 ¥ 2,285,669 ¥ 109,483 ¥ 2,966 ¥ 183,121

¥ 538,426 26,342

564,768 518,891

¥ 45,877 ¥ 434,182 ¥ 18,126 ¥ 1,044 ¥ 25,229

¥ 2,691,376 30,180

2,721,556 2,507,767

¥ 213,789 ¥ 2,719,851 ¥ 127,609 ¥ 4,010 ¥ 208,350




72

The major products and business of each industry segment are as follows:Tires: Tires and tubes, wheels and accessories, retread material and services, auto maintenance, etc.Diversified products: Chemical products, industrial products, sporting goods, bicycles, etc.


TotalOperating expensesOperating incomeIdentifiable assetsDepreciation and amortization Capital expenditures

$29,699,685 —

29,699,68527,509,917

$ 2,189,768$29,428,428$ 1,520,675$ 2,539,921

— $ (193,745)

(193,745)(195,664)

$ 1,919$ (26,351)$ —$ —

$24,094,38549,216

24,143,60122,435,007

$ 1,708,594$25,220,789$ 1,316,154$ 2,252,983

$ 5,605,300144,529

5,749,8295,270,574

$ 479,255$ 4,233,990$ 204,521$ 286,938

$29,699,685193,745

29,893,43027,705,581

$ 2,187,849$29,454,779$ 1,520,675$ 2,539,921



Thousands of U.S. dollarsYear ended December 31, 2007


(b) Information by geographic segment


TotalOperating expensesOperating incomeIdentifiable assets

¥ 3,390,219 —

3,390,2193,140,257

¥ 249,962¥ 3,359,255

— ¥ (556,934)

(556,934)(553,022)

¥ (3,912)¥ (249,081)

¥ 511,7314,277

516,008498,800

¥ 17,208¥ 581,435

¥ 1,497,97712,758

1,510,7351,459,220

¥ 51,515¥ 1,081,386

¥ 941,457430,267

1,371,7241,224,210

¥ 147,514¥ 1,408,965

¥ 439,054109,632548,686511,049

¥ 37,637¥ 536,550

¥ 3,390,219556,934

3,947,1533,693,279

¥ 253,874¥ 3,608,336


corporate Japan Other Europe The Americas Total








¥ 2,991,275 —

2,991,275 2,800,399

¥ 190,876 ¥ 3,053,440

— ¥ (457,603)

(457,603) (453,716)

¥ (3,887) ¥ (225,619)

¥ 413,952 4,537

418,489 403,613

¥ 14,876 ¥ 453,362

¥ 1,324,039 9,534

1,333,573 1,291,520

¥ 42,053 ¥ 968,641

¥ 896,743 358,863

1,255,606 1,138,028

¥ 117,578 ¥ 1,366,801

¥ 356,541 84,669

441,210 420,954

¥ 20,256 ¥ 490,255

¥ 2,991,275 457,603

3,448,878 3,254,115

¥ 194,763 ¥ 3,279,059




¥ 2,691,376 —

2,691,376 2,477,525

¥ 213,851 ¥ 2,709,962

— ¥ (493,812)

(493,812) (489,676)

¥ (4,136) ¥ (185,945)

¥ 363,131 3,820

366,951 347,327

¥ 19,624 ¥ 366,252

¥ 1,151,513 6,446

1,157,959 1,118,994

¥ 38,965 ¥ 820,286

¥ 858,478 303,857

1,162,335 1,024,027

¥ 138,308 ¥ 1,338,435

¥ 318,254 179,689 497,943 476,853

¥ 21,090 ¥ 370,934

¥ 2,691,376 493,812

3,185,188 2,967,201

¥ 217,987 ¥ 2,895,907






$29,699,685 —

29,699,68527,509,917

$ 2,189,768$29,428,428

— $ (4,878,966)

(4,878,966)(4,844,695)

$ (34,271)$ (2,182,050)

$ 4,482,97037,468

4,520,4384,369,689

$ 150,749$ 5,093,605

$13,122,882111,765

13,234,64712,783,355

$ 451,292$ 9,473,377

$ 8,247,5433,769,312

12,016,85510,724,573

$ 1,292,282$12,343,101

$ 3,846,290960,421

4,806,7114,476,995

$ 329,716$ 4,700,395

$29,699,6854,878,966

34,578,65132,354,612

$ 2,224,039$31,610,478

Thousands of U.S. dollarsYear ended December 31, 2007

(i) Major countries and areas included in each geographic segment are as follows:The Americas: United States, Canada, Mexico, Venezuela, Brazil, etc. Europe: Germany, United Kingdom, France, Italy, Spain, etc. Other: Asia Pacific, Africa, etc.


(ii) There is no impact on consolidated results, although the amount of inter-segment in net sales and operating expenses declined infiscal 2007 and 2006, compared with fiscal 2005, in line with a change in the contractual relationship of certain inter-segmenttransactions with other regions.

(c) Overseas sales

Areas:The AmericasEuropeOther

Overseas salesNet sales

42.6 %13.815.972.3 %

100.0 %

44.2 %14.2 15.6 74.0 %

100.0 %

¥ 1,145,913 371,394 427,976

¥ 1,945,283 ¥ 2,691,376

¥ 1,321,111 424,381 468,388

¥ 2,213,880 ¥ 2,991,275

¥ 1,489,061531,581568,364

¥ 2,589,006¥ 3,390,219

$13,044,7744,656,8644,979,098

$22,680,736$29,699,685

43.9%15.7 16.8 76.4%

100.0%

200520062007 200720052006 2007

Amount Percentage

Overseas sales by area and percentage of overseas sales over consolidated net sales for the years ended December 31, 2007, 2006 and2005 are as follows:

Millions of yen Thousands of U.S. dollars %

Note 18— Voluntary tire recall costs and legal liabilities

Bridgestone Americas Holding, Inc. and/or certain of its subsidiaries(collectively, “BSA”) are defendants in numerous product liabilitylawsuits and claims seeking compensatory and, in some cases,punitive damages based on allegations that death, personal injury,property damage and/or other loss resulted from accidents causedby tire tread separations or other tire failures, and the Company hasbeen named as a co-defendant in some of those cases. Many ofthese cases involve certain tires that were part of the BSA’svoluntary safety recall that was announced in August 2000 (andcompleted in August 2001). Many of these cases also name theFord Motor Company (“Ford”) as a co-defendant, based on variousallegations related to the Ford Explorer (the vehicle involved in manyof the alleged accidents involving tread separations).

In May 2001, Ford announced a campaign to replace certainBSA tires mounted on Ford vehicles without any prior agreementbetween BSA and Ford. This campaign was completed in March2002. In October 2005, BSA and Ford reached an agreementresolving all issues between them which were related to BSA’sAugust 2000 recall or the 2001 Ford replacement program. Inaccordance with the settlement agreement, BSA paid Ford $240million in October 2005.

Various purported class action lawsuits were also filed againstBSA, generally seeking expansion of the August 2000 recall orrelief for alleged economic losses sustained because of eitherrecalled tires or other tires investigated by the National HighwayTraffic Safety Administration (“NHTSA”), or the manner of theimplementation of the August 2000 recall, and the Company has

been named as a co-defendant in some of these cases. Many alsoseek punitive damages or injunctive relief. In 2003, BSA reachedan agreement in principle with plaintiffs in certain of the class actioncases on a settlement that resolved the then-outstanding claims inthe state class action cases. The settlement was preliminarilyapproved by a state court in 2003, and final approval from thestate court was received in May 2005. BSA is implementing theterms of the settlement.

In the individual product liability lawsuits and claims, BSA’sapproach is to offer a reasonable settlement and to defend itsposition aggressively where such settlement is not possible. Therecan be no assurance that product liability lawsuits and claims willbe resolved as currently envisioned and, accordingly, the ultimateliability could be higher than the recorded liability on the BalanceSheet, which consists of reasonably estimated costs related to thevoluntary tire recall. However, in the opinion of BSA management,the ultimate disposition of these product liability lawsuits and claimscould possibly be material to the results of operations in any oneaccounting period but will not have a material adverse effect on thefinancial position or liquidity of BSA.

In September 2000, NHTSA opened an investigation intoBSA’s Steeltex tires (while it is very difficult to calculate the numberof tires remaining in service, BSA’s best estimate is thatapproximately 2 million are estimated to be in service as ofDecember 31, 2007). NHTSA closed that investigation in April 2002and found no design or manufacturing defect in these tires. Sincethen, an attorney who had filed multiple purported class action

Major countries and areas included in each geographic area are as follows:The Americas: United States, Canada, Mexico, Venezuela, Brazil, etc. Europe: Germany, United Kingdom, France, Italy, Spain, etc.Other: Asia Pacific, Middle East, Africa, etc.

74

lawsuits against BSA petitioned NHTSA to reopen its investigationof Steeltex tires. The first petition was filed in November 2002, andthat petition was denied by NHTSA in June 2003. A second petitionwas filed in May 2004, urging NHTSA to investigate Steeltex tiresgenerally, and in particular those tires used on ambulances. NHTSAdenied this petition in September 2004. A third petition was filed inMay 2006, and that petition was denied in February 2007. BSAviews likelihood of loss as remote. Accordingly, BSA has made noprovision for any related contingent liability.

This same attorney filed two purported class action lawsuitsagainst BSA relating to Steeltex tires (and generally alleging that allsuch tires are defective). The first suit, filed in a California statecourt in August 2002, was dismissed in February 2007. Thesecond suit, filed in a U.S. federal court was similar to the first, anda motion to certify a California statewide class was denied onAugust 2007, and this matter is now fully concluded.

Two securities cases filed in January 2001 against BSA and theCompany are pending in a U.S. federal court. These suits, whichhave been consolidated, allege (i) misrepresentations regarding thequality of the tires previously under investigation by NHTSA; and (ii)

violations of the U.S. Securities Exchange Act. The trial court initiallydismissed these actions in their entirety in October 2002. However,in October 2004 a federal court of appeals reversed part of thatruling and held that two statements by the Company in its 1999annual report, and BSA’s statement made in August 2000, may beactionable under applicable laws and regulations. In July 2006, theplaintiffs moved for class certification on behalf of all purchasers ofthe Company stock and American Depositary Receipts betweenMarch 30, 2000 and August 31, 2000. In November 2006, BSAand the Company filed papers in which they opposed classcertification, and in which they again urged the court to dismiss orat least limit the scope of this matter. The court had scheduled ahearing on these issues for September 2007. On September 2007,the parties reached a tentative agreement to settle these matters fora payment by the Company. The Company recorded this paymentas Loss related to voluntary tire replacement in 2007. This tentativeagreement is subject to court approval.The tentative settlementcontains no admission of wrongdoing, such as violation of anysecurities laws or any material misrepresentations regarding thequality of tires, by BSA or the Company.

Note 20— Subsequent events

On March 27, 2008, the shareholders of the Company approvedpayment of a cash dividend of ¥13.0 ($0.11) per share, or a totalof ¥10,145 million ($88,874 thousand), to shareholders of recordat December 31, 2007. A stock option plan for directors asremuneration was also approved by the shareholders of theCompany. In addition, a stock option plan for selected employeeswas approved at the Board of Directors on the same date. Thesestock option plans provide options to purchase 241 thousand

shares of the Company’s common stock, at maximum, including50 thousand shares for directors. The exercise price is equal tothe higher of either 1.05 times the monthly average closing marketprice of the Company’s common stock traded in the Tokyo StockExchange in the month preceding the date of grant, or the closingmarket price of that on the date of grant. The exercise period ofthese stock options is from April 1, 2010 to March 31, 2015.

Note 19— Antimonopoly Act Cease and Desist order and Surcharge Payment order in connection withthe sales of marine hose and Improper payments to foreign agents

Since May, 2007, the US Department of Justice, the EuropeanCommission, the Fair Trade Commission of Japan and otherauthorities have been investigating the Companies in connectionwith alleged international cartel activities regarding the sales ofmarine hoses.

In February, 2008, the Company received orders from the FairTrade Commission in Japan in connection with the sales of marinehose. The orders direct the company to cease and desist fromviolating of the Antimonopoly Act and to pay surcharges for violatingthe Act.

During the internal inquiry being conducted into facts related tocartel activity, the Companies have uncovered the fact that there havebeen incidents of improper monetary payments to foreign agents, allor a part of which may have been provided to foreign governmentalofficers, and other possible forms of improper payments.

Further, if the foreign agents made payments to foreigngovernmental officers, there is a possibility that such acts constitutebreaches of the Unfair Competition Prevention Law of Japan (lawprohibiting the bribery of foreign officials). Improper payments mayalso violate laws in other jurisdictions, including but not limited tothe US Foreign Corrupt Practices Act. The Company has reportedthe results of our investigation conducted so far to the publicprosecutors’ office of Japan and to the US Department of Justice.

We have been able to confirm that inappropriate paymentshave been identified in connection with the sales of marine hoseand other industrial products. The investigation is continuing andcould expand.

The Companies plan to withdraw from the marine hosebusiness. The Companies have made no provision for any relatedcontingent liability at December 31, 2007.



INDEPENDENT AUDITORS’ REPORT

To the Board of Directors ofBridgestone Corporation:

We have audited the accompanying consolidated balance sheets of Bridgestone Corporation and subsidiaries as of December31, 2007 and 2006, and the related consolidated statements of income, changes in equity, and cash flows for each of the threeyears in the period ended December 31, 2007, all expressed in Japanese yen. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financialstatements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidatedfinancial position of Bridgestone Corporation and subsidiaries as of December 31, 2007 and 2006, and the consolidated resultsof their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity withaccounting principles generally accepted in Japan.

As discussed in Note 19 to the consolidated financial statements, since May 2007, the US Department of Justice, the EuropeanCommission, the Fair Trade Commission of Japan and other authorities have been investigating Bridgestone Corporation andsubsidiaries in connection with alleged international cartel activities regarding the sales of marine hose. During this internalinquiry being conducted into facts related to cartel activity, Bridgestone Corporation and subsidiaries have uncovered the factthat there have been incidents of improper monetary payments to foreign agents.

Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 2. Such U.S. dollar amounts are presented solely for theconvenience of readers outside Japan.

March 27, 2008

76

Major Subsidiaries and Affiliates

ArgentinaAustralia

Belgium

Brazil

Canada

Chile

China

Costa RicaFrance

GermanyIndiaIndonesiaItaly

Japan

Bridgestone Firestone Argentina S.A.I.C.Bridgestone Australia Ltd.Bridgestone Earthmover Tyres Pty. Ltd.

Bridgestone Europe NV/SA

Bridgestone Aircraft Tire (Europe) S.A.Bridgestone Firestone do BrasilIndustria e Comercio Ltda.Bridgestone Firestone Canada Inc.

Bridgestone Off-the-Road Tire Latin America S.A.

Bridgestone (China) Investment Co., Ltd.

Bridgestone (Tianjin) Tire Co., Ltd.Bridgestone (Shenyang) Tire Co., Ltd.Bridgestone Aircraft Tire Company (China) Ltd.Bridgestone Aircraft Tire Company (Asia) Ltd.Bridgestone Firestone de Costa Rica, S.A.Bridgestone France S.A.S.

Bridgestone Deutschland G.m.b.H.Bridgestone India Private Ltd.P.T. Bridgestone Tire IndonesiaBridgestone Italia S.p.A.

Bridgestone Cycle Co., Ltd.Bridgestone Flowtech Corporation

Bridgestone Elastech Co., Ltd.

Bridgestone Kaseihin Seizo Corporation

Bridgestone Sports Co., Ltd.Asahi Carbon Co., Ltd.Bridgestone Finance Corporation

100.0%100.0%100.0%

100.0%

100.0%100.0%

100.0%

90.0%

100.0%

94.5%98.5%

100.0%100.0%98.6%

100.0%

100.0%100.0%54.3%

100.0%

100.0%100.0%

100.0%

100.0%

100.0%99.4%

100.0%

ARS8,280A$11,016A$7,000

€724,668

€1,388R140,163

C$97,584

US$3,000

US$90,859

US$49,016US$49,980US$8,000HK$21,000¢1,452,750€74,090

€14,000RP2,753,000US$24,960€38,775

¥1,870,000¥484,000

¥450,000

¥450,000

¥3,000,000¥1,720,000¥50,000

Manufacture and sale of tiresManufacture and sale of tiresSale of off-the-road tires formining and construction vehiclesManagement of Europeanoperations and sale of tiresRetread and sale of aircraft tiresManufacture and sale of tires

Manufacture and sale of tires and sale ofautomotive componentsSale of off-the-road tires for miningand construction vehiclesManagement of Chinese tire operationsand sale of tiresManufacture and sale of tiresManufacture and sale of tiresRetread and sale of aircraft tiresRetread and sale of aircraft tiresManufacture and sale of tiresManufacture and sale of tires andsale of automotive componentsSale of tires and automotive componentsManufacture and sale of tiresManufacture and sale of tiresManufacture and sale of tires andsale of automotive componentsManufacture and sale of bicyclesManufacture and sale of industrialhydraulic hosesManufacture and sale of antivibrationcomponentsManufacture and sale of syntheticresin productsManufacture and sale of sporting goodsProduction and sale of carbon blackLending, purchasing of sales receivables,and outsourced processing of accountingand salary payments

Country Company

Ownership(includingindirectownership)

Capital(in thousands) Operations

MAJOR SUBSIDIARIES AND AFFILIATES


MexicoThe NetherlandsNew ZealandPolandRussiaSingapore

South Africa

Spain

TaiwanThailand

Turkey

United Kingdom

UAE

U.S.A.

Venezuela

Bridgestone Firestone de Mexico, S.A. de C.V.Bridgestone Finance Europe B.V.Bridgestone New Zealand Ltd.Bridgestone Poznan Sp. z o.o.Bridgestone C.I.S. LLCBridgestone Singapore Pte LtdBridgestone Asia Pacific Pte. Ltd.

Bridgestone South Africa Holdings (Pty) Ltd.

Bridgestone Hispania S.A.

Bridgestone Taiwan Co., Ltd.Thai Bridgestone Co., Ltd.Bridgestone Tire Manufacturing (Thailand) Co., Ltd.Bridgestone Natural Rubber (Thailand) Co., Ltd.Brisa Bridgestone Sabanci LastikSanayi ve Ticaret A.S.Bridgestone U.K. Ltd.Bridgestone Industrial Ltd.Bridgestone Middle East & Africa FZE.

Bridgestone Americas Holding, Inc.Bridgestone Bandag, LLC

Bridgestone Firestone North American Tire, LLCBFS Retail & Commercial Operations, LLC

BFS Diversified Products, LLC

Morgan Tire & Auto, Inc.

Bridgestone APM Company

Bridgestone Aircraft Tire (USA), Inc.Bridgestone Firestone Venezolana, C.A.

100.0%100.0%100.0%100.0%100.0%100.0%100.0%

100.0%

99.7%

80.0%69.2%

100.0%100.0%43.6%

100.0%100.0%100.0%

100.0%100.0%

100.0%100.0%

100.0%

88.0%

100.0%

100.0%100.0%

NP455,997€225NZ$32,848Zl 558,058RB68,474US$674SG$6,520

ZAR23

€56,726

NT$810,000B400,000B6,921,000B447,000TL7,441

£28,035£250Dh17,000

US$127,000US$1

US$1US$1

US$1

US$1

US$15,000

US$1Bs10,386,400

Manufacture and sale of tiresLending and purchasing of sales receivablesManufacture and sale of tiresManufacture and sale of tiresSale of tiresNatural rubber tradingManagement of Asia and Oceania tireoperations and sale of tiresHolding company for tiremanufacturing and marketing companyManufacture and sale of tires andsale of automotive componentsManufacture and sale of tiresManufacture and sale of tiresManufacture and sale of tiresProcessing of natural rubberManufacture and sale of tires

Sale of tires and automotive componentsSale of engineered productsManagement of Middle East and Africa tireoperations and sale of tiresManagement of Americas operationsManufacture and sale of retreadingmaterials, and provision of related servicesManufacture and sale of tiresSale of tires and automotive componentsand automotive maintenance and repairservicesManufacture and sale of roofingmaterials, synthetic rubber, and otherproductsSale of tires and automotive componentsand automotive maintenance and repairservicesManufacture and sale of antivibrationcomponents for automobiles and ofsynthetic resin productsRetread and sale of aircraft tiresManufacture and sale of tires

Country Company

Ownership(includingindirectownership)

Capital(in thousands) Operations

78

Board of Directors, Corporate Auditors and Corporate Officers

Board of Directors

Shoshi ArakawaChairman of the Board

Osamu Inoue

Junya Sato

Toru Tsuda

Kazuhisa Nishigai

Masaaki Tsuya

Mark A. EmkesChairman and CEO of Bridgestone AmericasHolding, Inc.

Board of Corporate Auditors

Executive Members

Yukimitsu Ushio

Takashi Yasukouchi

Non-Executive Members

Hiroshi Ishibashi

Toshiaki Hasegawa

Yo Takeuchi

Masayuki Takase

Corporate Officers

Members of the Board ServingConcurrently as Corporate Officers

Shoshi ArakawaCEO and President

Osamu InoueSenior Vice PresidentResponsible for GLC and Quality Management; Concurrently Responsible for Quality Management;Concurrently Responsible for GLC

Junya SatoSenior Vice PresidentResponsible for Japan Tire Sales; ConcurrentlyResponsible for Replacement Tire Sales;Concurrently Responsible for Original EquipmentTire Sales

Toru TsudaVice President and Senior OfficerResponsible for Products DevelopmentTire Products Development

Kazuhisa NishigaiVice President and Senior OfficerResponsible for Production TechnologyTire Production Technology Development

Masaaki TsuyaVice President and Senior OfficerChief Risk-Management Officer, Responsible forHuman Resources, General Affairs, Legal Affairsand Corporate Communications;Chief Compliance Officer, Office of Group CEO,Internal Auditing

Vice President and Senior Officers

Yasumi KawasakiProduction and Distribution, Mold Technology andManufacturing

Kazuo KakehiResponsible for Diversified ProductsIndustrial Products and Construction Materials

Yukio KanaiResponsible for Diversified Products, Sports andCycle Business Administration

Takashi UranoSeconded to Bridgestone Europe NV/SAChairman, CEO and President of BridgestoneEurope NV/SA

Vice President and Officers

Akira NozawaChief Financial Officer, Finance and IT & Network;Concurrently Director, Internal Control Division

Hideo HaraOriginal Equipment Tire Sales

Shuichi IshibashiQuality

Hiroshi YamaguchiSafety, Environment and Intellectual Property,Motorsport

Hideki YokoyamaCentral Research; Concurrently Vice Director,Human Resources Division

Yoshiyuki MorimotoTire Research and Material Development

Osamu MoriElectro-Materials, Chemical Products and O. E.Component

Satoshi TagomoriChemical and Industrial Products Production &Technology, Chemical and Industrial ProductsProduction Technology Development

Akira YamashitaCommercial Tires Business

Kiyoshi NomuraInternational Tire Business Operations

Yoshiharu InoueJapan Tire Production

Mikio MasunagaProcurement

Asahiko NishiyamaSeconded to Bridgestone Americas Holding, Inc.Vice Chairman and President of BridgestoneAmericas Holding, Inc.

Narumi ZaitsuSeconded to Bridgestone Americas Holding, Inc.Vice Chairman of Bridgestone Americas Holding, Inc.

Sugio FukuokaSeconded to Bridgestone South Africa Holdings(Pty) Ltd.Chairman and CEO of Bridgestone South AfricaHoldings (Pty) Ltd.

(as of April 1, 2008)

BOARD OF DIRECTORS, CORPORATE AUDITORS AND CORPORATE OFFICERS


Common Stock Price Range(Tokyo Stock Exchange)

Common Stock Price Index(relative to Nikkei Stock Average)

Note: Relative value is based on 100 at the end of December 1988.

HighLow

(¥)

2008: 1st Quarter

20021,9751,305

20031,7431,230

20042,1901,449

20052,6251,935

20062,9451,903

20072,7151,941

20081,9461,493

Common Stock Price Index

Nikkei Stock Average

2030405060708090

100110120130140150160170180190200210220230240250260270

12/8912/88 6/89 6/90 12/90 6/91 12/91 6/92 12/92 6/93 12/93 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99 6/00 12/00 6/01 12/01 6/02 12/02 6/03 12/03 6/04 12/04 6/05 12/05 6/06 12/06 6/07 12/07 3/08

Shareholder Information

Head Office

10-1, Kyobashi 1-chome, Chuo-ku, Tokyo 104-8340, JapanPhone: +81-3-3563-6811 Fax: +81-3-3567-4615Web site: www.bridgestone.co.jp

Established

1931

Employees

133,752

Independent Auditors

Deloitte Touche Tohmatsu

Technical Centers

Bridgestone Corporation: Tokyo and Yokohama, JapanBridgestone Americas: Akron, Ohio, U.S.A.Bridgestone Europe: Rome, Italy

Consolidated Subsidiaries

449 companies

Paid-in-Capital

¥126,354 million

Shares

Authorized: 1,450,000,000Issued: 813,102,321

Transfer Agent

The Chuo Mitsui Trust and Banking Company, Limited33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Common Stock Traded

Tokyo, Nagoya, Osaka, Fukuoka

(as of December 31, 2007)

SHAREHOLDER INFORMATION

May 2008Printed in Japan with soy-based ink using waterless printing

on paper made from trees from a sustainable forest.

10-1, Kyobashi 1-chome, Chuo-ku, Tokyo 104-8340, Japanwww.bridgestone.co.jp

COMPANY IN BOTH NAME AND SUBSTANCE, THE · PDF file · 2014-12-01• Hydraulic...

Documents

Transcript of COMPANY IN BOTH NAME AND SUBSTANCE, THE · PDF file · 2014-12-01• Hydraulic...