Komatsu Ltd. announced that the Board of Directors has today resolved to reorganize the corporate structure of specific Komatsu subsidiaries in order to strengthen their small equipment business. The main feature of the reorganization is the merger of Komatsu Forklift Co., Ltd. and Komatsu Zenoah Co. The merger is scheduled to take place on April 1, 2007. Both Komatsu Forklift and Komatsu Zenoah are wholly-owned subsidiaries of Komatsu.

The forklift trucks made by Komatsu Forklift and the mini construction equipment produced by Komatsu Zenoah are similar in both size and weight. Both companies also manufacture similar volumes of these products.

Komatsu has been therefore seeking to obtain greater synergy in its manufacturing processes, for example, by manufacturing mini wheel loaders (mini construction equipment) at Komatsu Forklift and manufacturing transmissions for forklift trucks at Komatsu's Awazu Plant. Demand for these small equipment in "Greater Asia" and other parts of the world is expected to continue to grow due to the high demand for improved city infrastructure and more efficient methods of logistics caused by increasing urbanization.

The merger is being performed so that forklift trucks and mini construction equipment business can be conducted as a new Utility Business. Upon completion of the merger, other subsidiaries that conduct business either within Japan or abroad relating to the Utility Business will be placed under the control of the new Utility Business company so that the management resources of the Komatsu Group as a whole are used more efficiently. This should accelerate achievement of the desired synergy which in turn is expected to improve competitiveness, market share and profitability in the Utility Business.

Komatsu Zenoah currently focuses on the following three business areas: mini construction equipment, outdoor power equipment and hydraulic component manufacturing. As previously announced, negotiations to sell the outdoor power equipment business of Komatsu Zenoah to Husqvarna AB of Sweden are continuing. The hydraulic component business of Komatsu Zenoah will be transferred to Komatsu as of April 1, 2007 and integrated into the Engines & Hydraulics Business Division of Komatsu in order to further improve business efficiency.