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PhTILIP'MO'RRIS U. S. A. INTER-OFFICE CORRESPONIDENCE Richmond, Virginia To:Bernie LaRoy Date: August 12, 1992 From: Zafar Munshi Subjiect:Summary of Battery Companies TOSHIBA~ CORP+(JRATIO'N~ Toshiba is the 3rd largest Japanese electronics and eliectrical equipment manufacturer (behind~ Hitachi' and MEl) and 5th in the world. Tihey are also the 6th largest industrial company in Japan and the 23rd in the world. Their major activities are in the area of semiconductors, computers, robotics, consurner eliectronics and ceramics. Some of the major shareholders of interest are Mitsui Yaiyo Kobe Bank, The Mitsubishi Trust and Banking Corporation; Mitsui Trust and!Banking Company and Mitsui Mutual Life Insurance, among others: The company employs 162,000 people and 1000 are in batteries. Battery sales are about $'169, mi1Qion. Toshiba Battery Company makes alkaline batteries, nickel-cadmium batteries and nickel-metal hydride batteries. It holds lithium battery patents on thin film card type; lithium carbon monofluoride, lithium ion, and polymer electrolyte batteries. Other patents are on fuel-cells, n2ck6-cadmium, nickel-metal hydride and alkaline batteries. Some of these patents are with Misubishi Petrochemicals. In the past, Toshiba! has bought rechargeables from Panasonic~and Sanyo. Toshiba and other Japanese companies enjoy the luxury of working in joint ventures with other companies. An advisory, ccommittee exist on superconductivity consisting of the government of Japan, Hitachi, Kyocera, Mitsubishi, NTT abd Sumitomo Electric Industries. Another joint venture exists on Fifth Generation Computer Projects where aa number of companies are involved including Mitsubishi Electric CorporaUion, Other joint ventures are with Fujitsu, Hitachi, Matsushita, NEC, Sharp, GE, Sanyo, Motorola, Rhone- Polenc and' GP Batteries Internationall of Singapore. There are reports of an aborted deat between India Tobacco Company and Toshiba Anand' Battery. In January, 1992, Toshiba Battery Company; Duracell and Varta teamed-up to condt''yct research and development, manufacturing, and standardization of nackel-metal' hydride rechargeable batteries. Prior to the emergence of this collaboration, Toshiba had begun! mass-producing Ni-MH batteries at its Takasaki factory at the rate of 3'00,000 units/month. This will be ea:panded'to 2-3' m2lTionn units/month. They have another strong joint venture with Asahi Chemical Industry Company to commercially produce lithium ioni batteries.

Toshiba has a joint venture with Japan Tobacco in developing what is claimedd to be the world's fastestequipsnent for attaching electronic components to semiconductor chips. SANYO ELECTRIC COMPANY LTD. Sanyo Energy Corporation is a wholly-owned subsidiary of Sanyo Electric. The subsidiary was incorporated in.1987 and operates out of San Diego. The company has 30-64' employees with sales of $3.8' - 9 million. The parent company is a$10 billion company and is the 8th largest electriical! company in Japan and 22nd in the world. It is the 19th largest industrial company in Japan and 123rd in the world. The company employs 40,000 people worldwide. Pretax profit (1990) ~ for Sanyo Electric is $288'millfion. Sanyo Energy is active in~ the manufacture of nickel-cadmium batteries to. OEM. The company has vast expertise in nickell-metal hydride batteries, lithium batteries, lithium ion batteries, electronically conducting polymers, solar ce11§, fuel-cells and nickel-zinc technology. Clearly, it has a very diverse technology base. There appears to be no link between Sanyo and the tobacco industry. However, they have a joint venture wiithi a, Japanese consortium consisting of Sony, Misubish2 Electric, NEC, Matsushita, Communication, NTT, Hitachi, Toshiba, and Fujitsu to develop analog television phones. Other joint ventures are with McDonnell' D.ouglas, ITT, Olivetti and Micron Technology. SONY CORPORATION' Sony Cbrporation is a $11 bill'aoni company - owner of CBS' Records and', Columbia Pictures. Cbnsumer Electronie Products is their maini line business. The company employs 60,000 people worldwide, On March 31, 1992, the company reported their first full year loss for fiscal year, 1991, and the forecast for 1992 was also poor. The subsidiary, Sony Energytec has strong,expertise in.lit'h2um and lithium, ion batteries. Ciirrently, Sony is producing 1100;000 units/month of lithium ion, cells for theircelludarphones: This technology is one of Sony's major business develbpmentprojects.

The parent company has joint ventures with Taiyo Yuden, Nissho Iwai corp., Information Presentation Technologies, Geostar Corp., Knowledge Set, (also eight other TV- telephone consortium - see Sanyo), Texas Instruments and British Telecom. The company has considerable expertise in thin film technology. JAPAN! STORAGE BATTERY COMPANY Japan Storage is the largest producer of automotive batteries. The company also produces other power sources (industrial batteries,alkal6ne, sealed! lead-acid, nickel- cadmium, miicrobatteries, silver batteries) power systems, and lighting equipmentL For a fiscal year ending March 31, 1'992, total sales was $SOO million with pretax profit of $25 million. It controls 60% of'the market share forforkl'ift batteries (which makes Japan the world's largest prod'ucer of forklifts), and! 30% of the market share of Japan's automodve batteries. Their nickel~cadmiurn batteries are used in NTT's and Motorola's portable telephones. A new production line is planned for October 1992 for manufacturing 500;000 units/month of rectangular nickel-metal hydride cells. The company has joint ventures with numerous companies (Hino Motors, Nissan; Kansai Electric Power, Yamaha, Toyota,lVlitsubishi Motors),for electric vehicle development, is the top maker of batteries for electric vehicle holding about 90%of the market share, and expect20,(l00 EWs to be exported to California from Japan by 1998.. It also has a joint venture with Sony Corporation for rectangular Ni-Zn; with GNB' it formed Enpak for producing lead4cU batteries; with SAFT it formed. GS'-Saft for producing Ni-Cd; with Mit5ubishz Heavy Iudustries it is involved in fuel-cell systems. Recently, it acquired Chloride Indonesia (~-$3 million) and! Capital Batteries Ltd. (U.K.): JapanStoragehold's joint patents~ with NlitsubishiHeavyIndustrieson Lir/TiS , Li/MnO. It has numerous other patents on Ni-Cd, lithium batteries, Ni'-Iv1H„ Pb-acid, Na-Zn,2AgO-Zn, polymer electrolyte. YUASA BATTERY COMPANY Yuasa is the second largest battery company in Japan, next to Japan Storage, but it! leads in the combined' dormestiic and' overseas sales. Yuasa holds 65% of the Japanese market for motorcycle batteries. The company's batteries are used to power such vital facilities as electrical equipment, cars, motorcycles and back-up power system. With consolidated sales exceedfng $497.7 million, Yuasa's production scale is now the largesr on -3-

the Asian battery market~ The company has over 2700 employees. The company is devoting great energy to the development of batteries for electric vehicles and~ load leveling systems to be utilized in the "Moonlight Project", a Japanese Government sponsored alternative energy scheme. Although the mainstay of Yinasa's business is lead4cUbatteries, the company has been working,on l'ithi'um batteries for a number of years. Since 1985, the company has been involved in the development of lithium polymer electrolyte batteries. In 1991, the company announced that it ha& developed a compact lithium battery in conjunction with the Central R'esearch Institute of Electric Power Industry for a daytime power source for household appliances. Also in 199'1, Yuasa entered into a joint venture wi th H1ydfo-Quebec to develop and produce film-form lithium batteries. The company is also involved with NTT, Terumo Corporation and a brance of'the Ministry of Health and Welfare to develop cardiac pacemakers. Since 1977, Yuasai has been involved with1 the : Exide Corporation to producee motorcycle batteries. In 1991, Yuasai purchased Exide's Industrial BartteryDivision. Although the company's main line business is lead-acid batteries, Yuasa ho1ds numerous patents on lithium batteries, lithium polymer electrolyte batteries, nickel- cadmium batteries, nickel-hydrogen batteries and nickel-zinc batteries. The latter system is commercialUy available in a prismatie configuration and is used in Sony's walkman. Some of the patents are jointly-owned by other Japanese companies, in particular, Mitsubishi Gas Chemical, Nippon Sheet Glass, Japan Atomic Energy Research, Center a:2nong, others. MATSUSHITA ELECTRIC INDUSTRIAL COMPANY. LTD. The company manufactures consumer electronics and electronic products. It is Japan's largest prodiucer of video, audio, home appliances, communications and industrial' equipment, energy and kitchen-related prodticts and electronic components. The company has sales of over $55 billion wiithi a profit of $2.92 billion. The battery products include Ni-Cd, Pb-acid,l'ithium batteries, Ni-MH, dry cells and solar cells. The company has plans to market lithium Ion cells in the near future.. In 199 1, a 5% sale increase resulted wi th a demand for compact, high, performance Ni-Cd and lithium cells. In 199'1, the company established~ a sealed lead-acid operation in Georgia. The company is gearing itself to become a, major producer of prismatic Ni~_Cd~ and, I*Ti-MH batteries. Currently, it is supplying to major customers such as Sony and NTI': Since 1988, the company has had many joint ventures, annong,them with Tandy Corporation (TX) - portable MS-DOS computers; Asea Brown Boveri (Japan) - robotir; products; -4-

Sequent Computer Systems (OR) - computers; Texas Instruments - semiconductor patent liicense; Energy Conversion Devices - patent agreement on erasable phase change disk drive system;NVPhilaps; British Telecom; Ford Motor, Mazda; Westinghouse; Siemens; Wang Laboratories; Gain Technolbgy; and IBM. In 1990,1VIatsushita Electric Industrial Company, Ltd. purchased MCA Inc. for $7.95 billion, then merged with Matsushita Acquisition Corporation into MCA. HITACHI. LTD. Hitachi is one of the worid'slargest diversified electronics and electrical equipment manufacturers, withi operations extending to computers, semiconductors, household appliances, power generating equipment and!industrial machinery. Hitachi has often been called the General Electric of Japan. In 1990, Hitachi Ltd. created a new company called Hitachi' Home Electronics (America) Inc. from Hitachi Consumer Products of America Inc. and Hitachi Sales Corp. of America in Compton, California. The company has been struggling during the last decade. Exports have fallen off to debt ridden Third World countries, the U.S, !and Europe. Consolidated sales for fiscal 1991 was $58.4 billibniwith a substantial decrease in net income over the previous year. In an effort to combat flat sales, etc. R&D expenditures have been increased to help Hitachi keep pace with the ever-changing cycles of electronic technology. Hitachi has 11511 offices in 39 countries and!4'S6 subsidiaries which manufacture 40,000 different products. These include among others; alkaline and silver oxide batteries, dty batteries and electriicall equipment, lithium bateries, electriic tools; magnetic tapes and floppy disks, medical electronic equipment, printed circuit boards, semiconductors, etc. Hitachi-Maxell Ltd., is the main battery manufacturing subsidiary. Since 1989, the company has had jpint ventures and agreements (28) with numerous companies mostly for high-tech electronics products. In the area of power sources, the joint ventures are between Ovonic Battery Company and Hitachi-Maxell for the development of Ni-MH battery technology. In~ 1990, Hiitachi-Maxell acquired Battery Engineering, Inc. which manufactures lithium thionyl chloride batteries for the U.S'. military; The company holds numerous battery related patents on chargers, molten carbonate fuel-cells, nickel'-metal hydride batteries, cell designs, and lithium batteries.

IP MITSUI GR'OU Following the end of World War II, t e Japanese holding companies (pre-War zaibatsu) were abolished by the Allied Forces. In an effort to combat takeovers from foreiign-finns, the Japanese created cross-holdings of shares in what is termed the keiretsu (posr-War keiretsu). By forming the latter, Japanese corporations associate with each other to foster cooperation and harmony in working toward a common goal. Production keiretsu vertically integrate manufacturers with their suppliers, and tend to be somewhat smaller than t;he horizontally-oriented financial keiretsu. The major horizontal keiretsu are collections of large manufacturing firms structured around'a core of a main bank, a trust banking company; a trading company, and an insurance company. Mitsui and Co., Ltd, is one of the central! comp aniesof the Mitsui Group, one of the six major Japanese : horizontal keiretsu (Mitsubishi, Mitsui, Sumitomo, Fuji, Sanwa and Dai-lChi Kangyo). The present strong ranking of Mitsui arises from its April 1990 merger with Taiyo Kobe Bank. The four core elements of the financial keiretsu are The Mitsui Taiyo: Kobe Bank, Ltd.;, The Mitsuil Trust and Banking Co., Ltd.; Mitsui & Co:, Ltd.; and Mitsui Mutual Life Insurance Company. The company's principal business activity is providittg a wide range of services to facil'2tate: trade and promote the development of commerce and industry around the world. Main services include assistance in basic trading activities, arranging,forg transportationi and documentation procedures, distribution in Japan and overseas, provisioni of finance for trade transactions, and supplying information on market conditions, prices, and business opportunities worldwide. The company's activities include the following areas, non-ferrous metals; machinery; chemicals; foodstuffs; textiles; energy;, general! merchandise; and property and service business. In 1'9g7, Mitsui and Moli' jointly formed Nippon Molacell to market Moli's lithium batt,eries in, Japan. Advanced Energy Technologies was later formed between NTT (45%), Moli Energy (45%), thecha'rman of Moli Energy (6%), and Mitsui' &Co:, Ltd. (4%). However, following the defective battery incident in, NT'T's cel'1lular telephone, Moli went into receivership. Subsequently, Mitsui & Co. purchased! Moli's assets for $5 million. Mo1i is now owned by a consortium of Mitsui, Yuasa and NEC. In 1,984, Mitsui & Co: and Japan Metals and Chemicals "jointly developed a hydride materiali capable of powering a hydrogen combustion car 200 km on one charge". IVbore recently, they formed a joint venture withi E'rgeniies Inc: and Japan Metals & Chemicals called Japan Getters, Inc. to produce metal hydrides for batteries as one of theu-products_ Mitsua. Mining & Smelting Company has teamed up with Zinc Corp, of America to produce "technologically advanced zinc dust" for batteries: Although it seems that. Mitsui, is not heavily involved in the production of batteries, it is interesting to note that both Yuasa.

and T'oshiba, are members of the Mitsui keiretsu. Furthermore, Mitsui Mining has a, battery material research laboratory in Japan for the purpose of "experimenting with raw materials including zinc, zinc powder, silver oxide, lithium, etc.". The Mitsui Group does not make a very large direct contribution to advanced battery research. However, Mitsui Mining and Smelting is often mentioned when discussing batteries, but usually not as a manufacturer of' novel! batteries. For instance, its latest newsworthy venture is a recycling facility for Ni- Cd batteries. Nonetheless, the company holds numerous patents and publication in various types of power sources including, lithium batteries, dry cells, redox flow batteries, lead- acid batteries, primary alkaline batteries, polymer electrode batteries, niiekel-cadmium batteries, silver oxide batteries, fuel cells and photovoltaic devices. Mitsui & Co., Ltd, is one of the firms that Philip Morris USA uses to~ distribute and market its cigarettes in Japan: At the time that the importation regulations wereliberalizedin 1985, Mitsui handled approximately 55% of PM's business in Japan; thee remaining 45% was executed by Nissho Iwai' Corporatiion. M01:,1: ENERGY 1'990 Little information is currently, available on ~ Molfi Energy 1'990! Since going, into receivership and a subsequent takeover by Mitsui, Yuasa and NEC, there has been no new news about Moli or Mitsui. Before the defective battery incident, Moli was the only source for rechargeable lithium batteries. The company was also planning, to bring its version of the lithium ion cell before long. Since the incident, the workforce has been severely cut- back from over 200 to much~lbss than 100. THE'GATE'S CORPORATION Gates Energy Products was started' in 1971 by officers of the Gates Rubber. Company. Transfer of ownership to The Gates Corporatiion resulted frorni internal reorganization in 1981. The parent company has about 18,000 employees wi th $1.3' billion in sales: Gates Energy has 3,561 employees with $182.5 million in.sales: This subsidiary manufactures rechargeabIie Ni-Cd (65%) and sealed lead! acid (35%) batteries. The company has just introduced its version of the Ni-MH battery (l'ieensed'fforn Ovonics) calli the Hydlritech. It is also aiming its product for the prismatic cell application. Gates is -7-

considered! to be one of the top three manufacturers of sealed rechargeablle batteries in the world. The company has numerous patents on NR~-Cd and lead-acid batteries, but none on Ni-MH batteries. There i!s no visible resear&on tihe lithium battery system, or any papers on lithium or nickel-metal hydride batteries.. VARTA AG Varta is Europe's largest manufacturer of all types of batteries. It is the 11 th largest ellectrical industry in~ Germany and 40 th in Europe. It is a~ public company, but 60% is owned by the Quandt family (owners of'6d°Io of BMIJ): The company has about20,CJ40, employees. Its connections to the Quandt and Linde group helps stabilize the sale of'starter andl traction batteries. Varta holds 20% of the European and 43% of'Germany's market share for starter and traction batteries. The company's prodluct lines include, industrial batteries, stationary batteries, starter batteries, solar batteries, portable batteries, C'-Zn, alkaline, Ni~-Cd, Ni-1VIH, Li-Ion; and Ii,i-Polymer electrode. It also markets alkaline, Zn-HgO. Zn-AgO, lithium, and'Ni-Cd button, cells. Recently; Varta formed the Portable Rechargeablc Battery Association with Sanyo, Matsushita, Gates and SAFT to investigate recovery and treatment of Ni'.Cds, Pb- acid, and Ni~-11!IH batteries. In 1992, Varta along with Duracell andd Toshibe agreed to cooperate on R & D, manufacturing, and standardization of Ni.-MH batteriies. The company has joint ventures with Pacific Dunlop and Johnson Controls on lead-acid batteries and licensing agreements with S anyo and! Ovoniic battery Company on~ Li- MnO and Ni-NIH batteries, respectively. It's Canadian starter battery operation was sold in 1'9R9 i Johnson Controls. It's export strategy is.gearedtowards the EEC'countries. In 1991, it acquiredl Zwickauer Batteries GmbH (Robert Bosch) and in 1992, Czechoslbvakia's Akucel, which is a commercial vehicle battery producer. SAFT SAFT is a, subsidiary of the huge French conglomerate Alcatel-Alsthom, formerly CGE. Alcatel employs 219,000 people. Alcateii also owned CEAC'wHiich manufactured lead-acid, batteries. The salie of CEAC'to Fiarhas left SAFT'as the sole battery unit of Alicatel. Of the four business groups that Alcatel is involved in (Telecommunications; Blisiness Communications and Cables; Energy and Transportation; Electrical Engineering; and Batteries), the battery operation is the smallest of the conglomerate. The battery operation

is only about 2.4% of the total group sales. SAFT is the world's leading supplier of alkaline batteries. In the U.S., SAFT and SAB Nife holds 30% market share! ini Ni-Cd behind Gates. SAFT America is a, subsidiary of SAFT and employs 1,300 personnel.. The major products include, industrial and commercial batteries, thermal batteries, lithium batteries, Ni-Cd batteries and the! company is developing their version of the lithium-ion!celh The company holds numerous patents on Ni~-Cd; lithium primary and secondary batteries, magnesium batteries, dry batteries, thermal batteries, Ni-H2 and Ni-MH batteries. SAFT is also a member of the Portable Rechargeable Battery Association (see Varta) L Since 1984, they have been involved in numerous joint venoures, among them, with, Peugeot (1984) for develbping Ni~-Fe and Ni-Cd batteries for electric vehicles; Japan Storage (1986) on Ni-Cd; agreement in 1986 wiRhi a French subsidiary of Mitsubishi to make Ni-Cd; agreement in 1987' with Fuji Electrochemical for the development of cylindrical Li-MnO2 batteries. In 1991, SAFT America received $30 million from Ui.S, government, contracts. EV'E'READY BATTERY COMPANY Prior to 1'986, Eveready was owned by Un2on Carbide: It was sold to Ralston. Purina for $1.42 billion. Eveready is the worldwide leader of dry-cell batteries. Their reported employment worldwide is approximately 17,000. In 1991, the company had sales of over ~~$1.5 ~ billion. During ~ 1989, - 1990; Eveready had 45% market share~ of U.S', primary ~ battery market. ~ Eveready is not in the rechargeable battery business. It has numerous patents oni all types of primary cells, including dry cells, glassy electrolyte cel2s and lithium cells. In 1989, Eveready appointed Fuji' Photo Film Co., Ltdl as the exclusive distributor of its dry cell battery products in Japan. Fuji formed Fuj~Film Battery Co.,Ltd. to market Eveready batteries. In 1991, it formed a joint venture with Konami, a manufacturer of hand-held games to promote Eveready's Energizer batteries, In 1991, it formed a $26 million joint venture agreement with. Czech company Bateri& Slany to provide Bateri'a wiRh a technology for improving,the quality of their current production. In 1992, Ralston Purina acquired~ from Hanson PLC, for $233 million, U.K.'s Ever Ready Ltd. Hanson's U.K. holdings include Imperial Tobacco:

N, V. PHILIPS Philips is a multinational Dutch company with a broad range of interests in the fields of electronic and electrical equipment and systems, lightnng, and consumer products, medical components, and recorded music and!videos. The company had 1991 sales of $30 bill'ROns of which 47% were derived from Consumer Products, 22% from Professional Products & Systems, 14% from Components & Semiconductors, and~ 13% from Lighting. Philips is the world's largest lighting company, wi th a commanding lead in the European market, and strong positions in the U.S.A. and! in Asia/Pacific. In 1990, the firm survived a profit collapse and began a major restructuring operation, under the direction of newly appointed Chairman Jan; Timmer. The firm's workforce was reduced by more than 30,000 worldwide and over 100 businesses were sold. The company discontinued its white goods and minicomputer businesses as well as the manufacture of defense systems. Philips' 1988 merger wi th Whirlpool was dfssollved in1 1991. During,a brief economic recovery in 1'991', the company showed net profits of $648 million: However, in June of 1992; Philips reported a, 56% plunge ini second' quarter net profits and possible declines for the rest of the year. The company is credited wi th the invention of the audio~cassette, the first video dzsc player, d'igital audio compact disc (CD) technology, and the first personal computer with an internaI CD RbM drive. For the future, Philips hopes to capitalize on some new consumer productsth~atthe company is marketing ahead ofJapanese rivals. . The 1991 launch in the U& of compact disc-interactive (CD-I) made Philips a strong,competitor in multimedia computers. Includedl intheILightingDivision is, P'hilips'battery business,, which received a boost from the 1991 decision~to produce rechargeable Ni-Cd batteries in a joint venture with Matsushita. The company pioneered the development of metal hydride alloys for Ni-MH! batteries. The company has joint ventures with numerous organazations,