Download - * Targeted numbers in this presentation are subject to ... · * Targeted numbers in this presentation are subject to implementation of initiatives which are included in the Revitalization

* Targeted numbers in this presentation are subject to implementation of initiatives which are included in the Revitalization Plan.

Financial Results for FY2003Business Revitalization PlanFinancial Results for FY2003Business Revitalization Plan

Mitsubishi Motors Corporation

May 21, 2004


3Apology and pledge

We pay our deepest respects to the spirit of the two victims who died as result of the wheel detachment accident that occurred in January 2002, and of the propeller shaft separation that occurred in October 2002. We also apologize to their families. Apologies go out to all others who have been affected by these tragedies as well as the general public.

MMC promises to go back to the basics of placing top on customers, safety and quality priority, and to change our corporate culture and increase transparency, thereby restoring our company into an organization that everyone can trust.


4

Financial Results for FY2003Financial Results for FY2003


5FY2003 Summary

　Operating result in line with previous forecast　　　　　　　　　　　　　

　Reversal of all of US and Japan deferred tax assets led to FY03 net loss 　　far below previous forecast　　　　

　 Reversal of deferred tax assets　　　　　　　　　

　Provided certain conditions are met, deferred tax assets can be 　　booked based on projections for the next 5 years, and we had been　　　followed this practice.

　In countries where a negative taxable income is expected in FY04, 　　　following on from FY03, we judged that the valuation of deferred tax 　　assets should be conservative.

　In FY03, we reversed all of our US and Japan deferred tax asset 　　　　　(i.e. approx. 140 billion yen). (non-cash items)


6FY03 Summary of Financial Results

-2,154

-1,103

-969

25,194

ActualFY03

24,70027,362Net Sales

　　　　Exchange Rate　

　　　　　　　　　

-720439Net Income

-1,150674Ordinary Profit

-1,050840Operating Profit

Feb 19 FCActualFY03FY02

US $ Euro

1)

1)

JPY 123 /US $ JPY 117 /Euro



(JPY 100M)

1) 2) FY02 numbers exclude the iIncl. truck & bus operations　 mpact of change to account period of overseas subsidiaries.


7FY03 Unit Sales by Region

FY02 FY03

214200

(+14)

FY02 FY03

354 359

(+5)

163

191 188

171 101

11099

104

2H

1H

YoY change

Europe

FY02 FY03

273343

(-70)

166

150177

123

North America

FY02 FY03

681680

337 347

334343

(+1)

Japan Asia & RoW Total(000 units)

FY02 FY03

1,5271,577

777 772

755800


8FY03 Net Sales by Region

FY02 FY03FY02 FY03FY02 FY03FY02 FY03FY02 FY03

25,19427,362

1)2)

1)1) 1)

5,477 6,169

9,876

5,8406,212 6,620 6,008 6,354

(+735) (+185)(+780) (-3,868)

(JPY 100M)

3,1003,100

2,377 2,925

3,2873,287

2,752

3,0883,088 3,4323,432

3,188

5,1405,140

4,7362,812

3,1963,196

2,899

3,2703,270 3,2113,211

3,143

12,764

14,59813,126

12,068

Net sales Jan-December, 02FY02 excludes net sales of truck & bus operations.

2H

1H

Japan Europe North America Asia & RoW Total


9FY03 Operating Profit by Region

FY02 FY03

-668

-353

(+315)

-548

-120

-147-206

FY02 FY03

-204

235

(+439)

1)

-111-93

15283

FY02 FY03

1,016

-1,474

-1,040

(-2,490)

1)

619

397

FY02 FY03

696 623

1)

293

255

441

330

FY02 FY03

-969

840

Operating profit Jan-December, 02FY02 excludes operating profit of truck & bus operations.

1)2)

215

625

-764

-205

2H

1H

-434

(-73)

(JPY 100M)

Japan Europe North America Asia & RoW Total


10

MMC Revitalization PlanMMC Revitalization Plan


11What happed in 2004?

February Preparation of new mid-term business plan with support of DC

Discussion for potential equity increase among DC and 3 Mitsubishi group companies

April DC announcement to cease further financial support

Announcement by 3 Mitsubishi group companies to continue to support MMC

Resignation of Rolf Eckrodt as President & CEO

Establishment of 40-member revitalization team, in cooperation with 3 Mitsubishi group companies, to start drawing up the Revitalization Plan

Yoichiro Okazaki to become Chairman, President & CEO

May Announcement of Business Revitalization Plan


12Confronting crisis

　Turnaround far below targeted profit level

Credibility collapsed due to inappropriate response to recalls

　This is our last chance


13MMC Commitment

Self revitalization

All employees to unite strength to revitalize MMC on our own


14Outline of MMC Revitalization Plan

1. Management transformation

– Restoration of credibility

– Complete execution of reform

2. Commitment

3. Transformation of cost structure

4. Product strategy

5. Regional strategy

6. DC Alliance

7. Financial targets


Organization to complete management transformation(two ‘external eyes’)

15

• Establish corporate ethics with external supervision• Decisive step to realize business revitalization through equity injection

from 3rd party

Chairman / CEOChairman / CEO

President / COOPresident / COO

Line function

BoDBoDBusiness Ethics

Committee　　(led by external

intellectuals)

Business Ethics Committee

　　(led by external intellectuals)

“Restore credibility

“Execution of business revitalization”

Concentrate in FY04

Corporate Restructuring

Committee　(External investors to nominate head of CRC)

Corporate Restructuring

Committee　(External investors to nominate head of CRC)

1)

1)Phoenix Capital


16Restoration of credibility• Business Ethics Committee to supervise CSR Promotion Office under

public scrutiny• Consolidate quality assurance / control function into Quality Assurance

Office• CSR Promotion Office to constantly audit Quality Assurance Office and

lead improvement 　

Board of DirectorsBoard of Directors

Chairman / CEOChairman / CEO

President / COOPresident / COO

Executive CommitteeExecutive Committee

Quality CommitteeQuality Committee

Business Ethics CommitteeLed by external intellectuals

Business Ethics CommitteeLed by external intellectuals

Advisory

CSR Promotion OfficeCSR Promotion Office

Corporate AuditCorporate Audit

Customer RelationsCustomer Relations

ComplianceCompliance

Quality Assurance OfficeQuality Assurance Office

Supervision

Audit Report

Board of AuditorsBoard of Auditors


17Complete execution of reforms

• Corporate Restructuring Officer (to be sent from Phoenix Capital) to define drastic restructuring measures from shareholders’ viewpoint

• Cross functional activities consist of younger members to break 　　　through stereotypes

• Head of each operation function to be responsible for implementation• Each operation function to be responsible for regional profit/loss

Corporate Restructuring CommitteeCorporate Restructuring Committee

Corporate Restructuring OfficerCorporate Restructuring Officer

Brand revitalization

Brand revitalization

Organi.HR

Organi.HR

CostReduction

CostReduction

CustomerRelations CustomerRelations

Cross functional activities

Project Team

IdeasIdeasProduct

Line Function

Sales

R&D

Production

Procurement

Japan NA Europe China ASEAN

RegionP/L

Respo.

RegionP/L

Respo.

RegionP/L

Respo.

RegionP/L

Respo.

RegionP/L

Respo.


18Simple organization 　　　　　　　　　　　　　　　　　　　　

51

37

0

10

20

30

40

50

60

FY03 E FY04 E(FC)

Number of executives Number of departments

230

150

0

50

100

150

200

250

FY03 E FY04 E(FC)






2. Commitment


4. Product strategy


6. DC Alliance

7. Financial target


20Commitment

Business Revitalization PlanCommitment

　FY2005 Positive ordinary profit

　FY2006 Positive net profit

　FY2005 Positive ordinary profit

　FY2006 Positive net profit


21Achievement of the goals by a V-shaped recovery

‘04 ‘05 ‘06

　 Continuous effects of cost reduction 　　　　　　 Continuous effects of cost reduction 　　　　　

Return to growth　　　　　　

Product strategy　　　　　　Product strategy　　　　　　

Regional strategyRegional strategy

Fixed cost reductionFixed cost reduction

Variable cost reductionVariable cost reduction

Disposition of unprofitable businesses

Disposition of unprofitable businesses

Positive ordinary

profit

Positive ordinary

profit

Positive net

income

Positive net

income

0

(JPY 100M)

Cost structure transformation

1,000Operating profit

‘07

-1,000

Note: The above commitment is premised on the implementation of the initiatives in the current Revitalization Plan.






2. Commitment


4. Product strategy


6. DC Alliance

7. Financial target


23Drastic transformation of cost structure

Radical reduction of fixed costs– Reduction of production capacity– Headcount reduction

Drastic reduction of material costs which covers significant portion of variable costs

Other cost reduction opportunities– Consolidation of platforms

– US sales financing Business– Relocation of HQ functions to Kyoto

Radical reduction of fixed costs– Reduction of production capacity– Headcount reduction

Drastic reduction of material costs which covers significant portion of variable costs

Other cost reduction opportunities– Consolidation of platforms

– US sales financing Business– Relocation of HQ functions to Kyoto


24Transformation of cost structure

-17%Reduction of Production capacity

15 ⇒ 6 FY10Platform consolidation

-15% FY06Material cost reduction

-30%(7,600/FTE) FY06Headcount

reduction

Targets Schedule

FY06


25Transformation of cost structure

410 oku-yen

990 oku-yen

1,540 oku-yen

140 oku-yen

540 oku-yen

850 oku-yen

Fixed cost reduction– Production capacity– Indirect headcount– Platforms

Variable cost reduction

– Material cost– Sales expenses

FY2005 FY2006FY2004（vs. FY03）


26Reduction of production capacity

　Consolidate 3 domestic plants into 2 　　　　　　　　　　

　Study production capacity adjustment of MMNA (US)　　　Close MMAL (Australia) engine plant in FY05

0

100

FY03 FY06 (Target)

Production capacity

-17%(10,000 Units)

97%78%

FY03 FY06 (Target)

Capacity utilization

+19%


27Reduction of production capacity: Japan

Excess production capacity in Japan

Annual capacity 　　　　　　　　　　　　900,000 units

FY04 production plan 　　　　　　　　　　700,000 units

Excess production capacity in Japan

Annual capacity 　　　　　　　　　　　　900,000 units

FY04 production plan 　　　　　　　　　　700,000 units

PMC

Current problemsCurrent problems Revitalization PlanRevitalization Plan

Close assembly line in Okazaki by FY06

Aging backbone facilityNo large-SUV facility

5 billion yen fixed cost saving per year

Close assembly line in Okazaki by FY06

Aging backbone facilityNo large-SUV facility

5 billion yen fixed cost saving per year

PMC

Okazaki

Mizushima

• Close assembly line (Shift to other plant)

• Pilot plant for production preparation of upcoming models

Mizushima


28Reduction of production capacity: Australia

Low utilization due to lower export and domestic sales

Excess production capacity

・Capacity 62,000 units・FY03 actual 32,000 units

Aging models (past 8 years)

Low utilization due to lower export and domestic sales

Excess production capacity

・Capacity 62,000 units・FY03 actual 32,000 units

Aging models (past 8 years)

Current problemCurrent problem Revitalization PlanRevitalization Plan

Close engine plant in FY05

Downsize assembly plant to 30,000 units

Fixed cost reduction by restructuring

Sales expansion through Magna successor in FY05

Close engine plant in FY05

Downsize assembly plant to 30,000 units

Fixed cost reduction by restructuring

Sales expansion through Magna successor in FY05

Engine plant（Lonsdale）

• Close• Import engine from Japan

Assembly plant（Tonsley）

Downsize


29Headcount reduction

0

10,000

20,000

30,000

40,000

50,000

60,000

FY04 Beg. FY04E(Forecast)

FY05E (Target) FY06E (Target)

Total：△22%

Indirect labor：△30%


30Material cost reduction

PastPast【Reduction of Direct materials】　Cross functional 　　activities 　　　　　　　focusing on 　　　　　parts

Revitalization PlanRevitalization Plan

Additional initiatives 　　　　　　focusing on models

Dedicated design teamExamination of drawingsRevision of specification and equipmentTear downReduce number of variety, Parts commonization

Global sourcingCross functional activities 　 overseas

Die cost reduction【Indirect materials】　Promotion of 　　　　　　　centralized 　　　　　　　　purchasing

Collaborative effort across organization/geography

（JPY 100M）

Financial EffectFinancial Effect

360

750

1200

0

200

400

600

800

1000

1200

1400

FY04(FC)

FY05(Target)

FY06(Target)


31Platform integration

CurrentCurrent 2010 Target2010 Target15 P/F15 P/F 6 P/F6 P/F

New generation mini P/FNew generation mini P/F

Small FF P/FSmall FF P/F

Mid-size FF P/FMid-size FF P/F

Full-size FF P/FFull-size FF P/F

FR SUV P/FFR SUV P/F

Commercial FR P/FCommercial FR P/F

Minica, eK WagonMinica, eK WagonminicabminicabPajero MiniPajero Mini

ColtColt

LancerLancer

GrandisGrandis

Pajero ioPajero ioPajeroPajero

L200 StradaL200 StradaFreecaFreeca

GalantGalant

Space GearSpace GearDelicaDelica

EclipseEclipseDiamanteDiamante

A-seg.A-seg.

B-seg.B-seg.

C-seg.C-seg.

D-seg.D-seg.

SUVSUV

ComCom


32Review of US sales financing business

Significant credit loss

Rapid growth of total assets serviced

Increased complexity in the total portfolio

Insufficient staffing

Increase in funding cost

Significant credit loss

Rapid growth of total assets serviced

Increased complexity in the total portfolio

Insufficient staffing

Increase in funding cost

Issues of US sales financing business

Issues of US sales financing business Revitalization PlanRevitalization Plan

Review of captive sales financing business

Continue framework to provide competitive sales financing products to customers and dealers

Run off existing portfolio

Potential strategic alliance with external parties

Review of captive sales financing business

Continue framework to provide competitive sales financing products to customers and dealers

Run off existing portfolio

Potential strategic alliance with external parties


33Consolidation of HQ function to production location

• Bring back functions which should be at work sites• Realize small HQ utilizing existing resources at a maximum• Potential reduction of 30% headcount, approx. 2 billion yen

annual saving of running costs 　

Shinagawa(1,400)

[Production, procurement, logistics, product planning]

[Government relations, metropolitan sales, etc.]

[Others]Kyoto(700)

Okazaki(200)

Tokyo(100)

<Present> <FY06>

HQ relocation

( ): headcount






2. Commitment


4. Product strategy


6. DC Alliance

7. Financial target


35“MMC DNA”

Return to “MMC DNA car” (SUV: Pajero, Sporty: Lancer Evolution)

Spirited Spirited GearGear

StrongStrong

SportySportyDynamicDynamic

Sharp DesignSharp Design Direct responseDirect response

4WD/Durability4WD/Durability New conceptNew concept


36Revival plan of “MMC DNA”

CY04CY04 CY05CY05 CY06CY06 CY07CY07 CY08CY08

Aluminum block+ MIVEC

Aluminum block+ MIVEC Next GDINext GDI MIVEC ⅡMIVEC ⅡHigh-efficiency

TURBOHigh-efficiency

TURBONew miniengine

New miniengine

Next agesuspensionNext age

suspensionAll wheel control（S-AWC）

All wheel control（S-AWC）

ComfortableSUV

ComfortableSUV

New minicarplatform

New minicarplatform

4WDmono-box

4WDmono-box MR SUVMR SUV

New Compact V6New Compact V6World EngineWorld Engine

1)

“SUV”DNA

“Sporty”DNA

Technology DN

A

MMCengine

MMCchassis

MMCpackaging

1)to be mounted in CY06


37Introduction of Product Executive (PX)

Model-specific Product Executive (PX) takes charge of end-to-end product lifecycle from product planning, styling, development, improvement down through quality follow-up

CurrentCurrent Product ManagerPre-development design staff

Sales & marketing staff

Product planning/styling Sales CustomersDevelopment & production

PXPX

DesignTechnology

CostQuality

DesignTechnology

CostQuality

ProductSales

ProductSales

DesignDesign

Product planningProduct planning

DevelopmentDevelopment

PurchasingPurchasing

ProductionProduction

QualityQuality

Sales planningSales planning

AdvertisingAdvertising

Sales structureSales structure

Model

“Produce”

“Sell”


Aggressive introduction of “MMC DNA” Models (Including derivatives)

38

FY04 FY05 FY06 FY07 FY08FY00-FY03 FY04 FY05 FY06 FY07 FY04-FY07

8Models

16 Models

Japan

Europe

China

North America

10Models

5Models

7Models

7Models

11Models

5Models


Aggressive introduction of “MMC DNA” Models(New models/Full model changes)

38’

FY04 FY05 FY06 FY07 FY08FY00-FY03 FY04 FY05 FY06 FY07 FY04-FY07

6Models

10 Models

Japan

Europe

China

North America

10Models

5Models

7Models

7Models

11Models

5Models

New Products Full model change






2. Commitment


4. Product strategy


6. DC Alliance

7. Financial target


Japan: Product offensive based on “MMC DNA”,close communication to 3.6 million users

40

“OEM with no attractive car”Unfocused / follower model

“Rapid fire” of customer focused, MMC DNA vehicles

FY04：4 , FY05：5 models

Accelerate CRMThorough contact to MMC customersCall Center

Free inspection / 24H call support

Loss of consumer confidence caused by lack of appropriate actions at product recalls

Model

Customer

Relation

Revitalization PlanCurrent problem

Customer follow-up utilizing IT infrastructureAccelerate outlet renewalSharing dealer best practiceShift sub-dealer to satellite shops

Loss of strength at dealers

Sales

Return to customer centric sales cycle

Negative spiral toward low revenue


41US: Size adjustment for profitability

Revitalization PlanCurrent Problems

Lower fleet businessMaintain residual valueLower incentives

Introduction of special action modelsNew products：FY05:3 models

Volume⇒Adverse effect due to increase fleet

Lower residual valueHigher incentivesModel

High cost structure due to excess capacityMfg. Production capacity adjustment

Volume⇒High dependency on sales finance

Inadequate risk control, huge loss mainly due to risky products

Appropriate risk controlDownsize managed portfolioKeep service level by leveraging outside partner

Finance

Return to demand-supply balanced business

Negative spiral toward low revenue


42China：Pursuit of profit at high growth market• Conversion of JV’s production and sales channel into MMC brand through

increased equity • Enlarged profit and stable operation through tighter control of JV

• Reinforcement of product line-up by introduction of new cars / Asian cars• Transformation of Engine / Transmission JV into the Hub of parts supply for Asia

3.88.0

12.918.9 21.3

18.717.3

16.3

12.4 9.7

0

5

10

15

20

25

30

35

FY04 (FC) FY05(Target)

FY06(Target)

FY07(Target)

FY08(Target)

Sales volume（000 units）

22.525.3

29.231.3 31.0

MMC Brand

110

266

380

470500

0

100

200

300

400

500

600

FY04 (FC) FY05(Target)

FY06(Target)

FY07(Target)

FY08(Target9

Number of MMC Brand DealersLocations


43Volume by Region

0

400

800

1,200

1,600

2,000

Others 467 467 443 354 346 373N. Asia 113 179 238 306 340 424NA 357 343 273 233 258 292Europe 207 200 214 260 223 254Japan 405 354 359 300 336 363

FY01 FY02 FY03 FY04 (FC) FY05(Target)

FY06(Target)

1,527 1,453 1,5031,706

1,549 1,543

1) Unit decrease in Other area after 04 is mainly caused by elimination of vehicle for Malaysia Proton T/M






2. Commitment


4. Product strategy


6. DC Alliance

7. Financial target


45Ongoing main DC Alliance will continue

Each issue of future alliances will be gone

through on economical rationality

Ongoing main DC allianceFuture

direction of alliance

A direction of alliances on future issues

Joint development & production of a platform of B seg. (Colt class) (EU)

Continue

Joint development & production of world engines (North America) Continue

Continue

Continue

Joint development of platforms of C seg. (Lancer class) (North America)

OEM of pick-up trucks from Chrysler (North America)






2. Commitment


4. Product strategy


6. DC Alliance

7. Financial targets


47Transformation of cost structure by the Revitalization Plan

-1,500

-1,000

-500

0

500

1,000

1,500

2,000（億円）

FY03-969 oku-yen

Vol.M

ix

Material

Cost, etc.

Advertisem

ent

Fixed costs

Vol / M

ix

Material

Cost, etc.

Advertisem

ent

Fixed costs

Vol. M

ix

Material

Cost, etc.

Advertis

ement

Fixed costs

FY04(FC)-1,200 oku-yen

FY05(Target)200 oku-yen

FY06(Target)1,200 oku-yen

Forex

-254+311 +48 -83 -253

+152

+422

+187

+639

+730

+344+108 -182

Deviation analysis of operating result (FY03 to FY06)

（＋） Headcount reduction, adjustment production, expenditure cut, contraction of sales finance business etc.

（＋） Headcount reduction, adjustment production, platform integration etc.

（－） R&D investment etc.

（＋） Headcount reduction, adjustment production, expenditure cut etc.

（－） R&D investment etc.


48Financial target (P/L)

700100-2,300-2,154Net Income

1,00030-1,500-1,103Ordinary profit

(4.8%)(0.9%)(-5.3%)(-3.8%)(Operating profit margin)

-1,200

22,500

FY04

Forecast

1,200

24,900

FY06target

21,80025,194Net Sales

200-969Operating profit

FY05

target

FY03

actual(¥00M)


49Financial target (B/S)

Target Deadline

Interest bearing debt (Gross)

Debt equity ratio

-40% or more (vs. FY03) FY06

Less than 2.5 FY06


50Support：Equity enhancement measures

Equity increase 4,500 oku-yen

Mitsubishi Gr. 2,700 oku-yen　　　[Preferred stock (w/ compulsory conversion

right):

1,400 oku-yen]Mitsubishi Heavy IndustryMitsubishi CorporationBank of Tokyo MitsubishiOther Mitsubishi companies

[Preferred stock (debt equity swap) :

1,300 oku-yen]Bank of Tokyo MitsubishiMitsubishi Trust Bank

China Motors (CMC) 　100 oku-yenPrivate placement 1,700 oku-yen[Common stock: 700 oky-yen]

Phoenix Capital[Preferred stock： 1,000 oku-yen]

JP Morgan

Equity increase 4,500 oku-yenOperating C/F 4,800 oku-yenCash 700 oku-yen　

For restructuring 10,000 oku-yen (FY04-06: accumulated)

Use of proceed

Revitalization 7,200 oku-yenCapex 3,600 oku-yenR&D 2,900 oku-yenRestructuring 700 oku-yen

Debt repayment 2,800 oku-yen

(Note 1)

Note 1: Maximum 1,000 oku-yenNote 2：Amounts of subscription are subject to the market condition.