[ Presentation Slides (PDF:1,400KB) ]

1. The current situation
   After publishing its Business Revitalization Plan on May 21, 2004, the company has devoted itself to implementing the measures set out in the plan which it designed to regain customer and public trust and improve profitability. Since the publication of the plan, the company has conducted extensive investigations into past recall problems. The findings of these investigations have allowed the company to complete filing of post-market measures with the Ministry of Land, Infrastructure and Transport on September 28 last year, as well as to make substantial progress in its efforts to reform corporate culture.
   Despite these achievements, the company's inability to respond adequately to past recall problems has delayed the hoped-for restoration of consumer and public trust and has seriously impacted sales. This in turn, has highlighted the problem of over-capacity that has lurked beneath the surface over recent years. In addition, concerns have deepened about delays in the recovery of operations and about the financial health of the company. As a result of being forced to use funds earmarked for the revitalization program in the repayment of interest-bearing debt, the company now finds itself short of funds.
   To break out of this situation and successfully revitalize itself, the company, while continuing its efforts to regain customer and public trust, finds itself in a situation that requires additional measures to improve profitability. Given these circumstances, the company has put together the new Mitsubishi Motors Revitalization Plan.
   
   
2. Corporate culture reform initiatives
   Recovering customer and public trust and reforming corporate culture are items of absolute priority in the company's bid to revitalize itself. The CSR Promotion Office has played a lead role in the implementation of a wide range of measures designed to enhance compliance. The Business Ethics Committee, made up of specialists and leaders in their fields from outside the company, has also given valuable advice and guidance from an external perspective in this regard. An internal seminar program has enabled each employee to acquire a deeper understanding of business ethics principles. Employees have now submitted written pledges to fully observe and practice compliance.
   The company will also be implementing a number of initiatives and measures designed to reform the corporate culture. These include "Problem solving through cross-functional activities", "Training and promoting talented personnel to important positions", "Personnel evaluation reflecting a 'Customer First' practice", and "Promotion of personnel exchanges with sales companies and department rotations".
   The current investigation by a panel of external lawyers into past recall problems will be completed by the end of the fiscal year. The company will be determining disciplinary action and measures to prevent any recurrence on the basis of the panel's findings.
   
   
3. Key points in the Mitsubishi Motors Revitalization Plan
   ♦ Putting customers first / Recovering trust
   
   • The new plan puts customers first in all areas, from marketing through after-sales services
   • The new plan provides measures for achieving no-compromise improvements in product quality
   ♦ Business strategy
   • Sales plans reflect downside risks
   • Promotion of operational tie-ups with other auto makers
   • Rationalization of production capacity and size of sales networks (U.S., Australia, Japan)
   ♦ Reinforcement of capital and funding
   • Strengthening of financial standing and securing capital for revitalization
   ♦ Boosting management's effectiveness
   • Lead from the top with a new management team
   • Set up a thorough follow-up system
   
   
4. Commitments
   ♦ Return to profitability in fiscal 2006 (net income of 8 billion yen)
   ♦ Establish sustainable profitability in fiscal 2007 (net income of 41 billion yen)
   
   
5. Business strategy
   

   (1)	Sales volume plans
   	Sales plans in the Mitsubishi Motors Revitalization Plan have been drawn up for each region based on current market trends to set realistic and achievable targets and eliminate all foreseeable downward risks. As a result, fiscal year volume targets in the new plan are lower than those in the Business Revitalization Plan but are set to recover to the 2003 fiscal year level of 1,500,000 vehicles in 2007.
   (2)	Product strategy
   	a.	Motorsport
   		Mitsubishi Motors places motorsport at the very heart of its car design and development activities. The technology and know-how built up through taking part in grueling and competitive events such as the Dakar rally and the World Rally Championship is being fed back and injected into production cars as the "Sporty DNA" and "SUV DNA" that defines the MMC brand. That same technology and know-how enables the company to increase safety and durability as well as on- and off-road driving performance, thereby raising product value in a lineup that fully embodies these qualities.
   	b.	Improved efficiencies in model mix
   		The new plan incorporates measures under which the company will trim back the number of low-volume models produced for individual markets and concentrate managerial resources on highly competitive global market models. This will raise development and production efficiencies.
   	c.	New model launches
   		The new plan calls for a major increase in the number of new model launches compared with the last four years. The company will expand earning opportunities by aggressively introducing new models in all regions.
   (3)	Business tie-up strategy
   	To further promote a policy of selection and concentration, the company will actively pursue strategic tie-up opportunities with other automakers. One example is the recently announced expansion to the supply of minicars on an OEM basis to Nissan Motor (36,000 units annually). The company is also in final negotiations with the Peugeot-Citroen Group (PSA) regarding the OEM supply of passenger cars and expects to sign the contract in early February. The company is also looking at other tie-ups which involve an expanded range of models supplied on an OEM basis, component supply partnering, joint distribution arrangements and joint procurement.
   (4)	Regional strategy
   	a.	Japan
   		Driving towards a group structure that returns stable profits, the company and its sales companies will continue to work hand in hand to regain the trust of customers with additional measures that follow on from the free inspection campaign covering 3.4 million owners. The company will also restructure its sales network and will drive to maximize after-sales services.
   	b.	North America
   		North America remains a vital core market for the company. To put its operations in that market on a profitable basis, the company will rebuild its brand through the introduction of a new management structure, with new model launches and by cutting back on its dependence on fleet sales. It is also introducing asset impairment accounting principles to deal with excess plant capacity and is raising capacity utilization by expanding exports of locally built cars. The company is also addressing the U.S. captive financing unit that sparked the problems in the company's North American operations. It is currently reducing its exposure to loan default risks by selling off a portion of its financing asset holding to Merrill Lynch. The company also plans to establish a new joint venture company with Merrill Lynch for the purpose of creating competitive and attractive consumer financing programs.
   	c.	Europe
   		To move its European operations forward from the achieving profitability stage to the growth stage, the company will work to promote sales around a stronger model lineup and will also push forward its efforts to strengthen its management and sales structures.
   	d.	China
   		Positioning China as a core market, the company is aggressively exploiting the Mitsubishi brand, which is strong and healthy in that country, and expanding its operating base in China. In addition to expanding the range of Mitsubishi brand models available by boosting capital tie-ups with local companies, the company is also pushing ahead with efforts to establish and expand its sales network. The company is looking at using its engine joint ventures in the country to make China a major engine production hub in Asia, and is going to establish R&D facilities in the country to reflect local market needs in its products on a timely basis.
   	e.	Other markets
   		The company is taking steps to strengthen its operational footing in ASEAN markets. These include strengthening sales in Thailand, establishing sales structures in Malaysia and reorganizing its operations in Indonesia. The company is also strengthening its production base by boosting capacity in Thailand, which serves as an export hub to global markets. As for Australia, the company is on track to close its engine plant and downsize its assembly plant. The company is also introducing asset impairment accounting principles in order to address surplus plant capacity.
   (5)	Cost reduction
   	a.	Manpower
   		As the result of changes to the organization, increased work process efficiencies, rationalization of work processes and natural attrition in personnel, the company's headcount trimming program is on track and is forecast to achieve the original targets. The company is also pushing ahead with further improvements in work process efficiencies.
   	b.	Material costs
   		In view of the deterioration in the procurement market brought about by falling sales volumes and sharp rises in raw material costs, the new plan aims to reduce material costs by 90 billion yen on a cumulative basis by fiscal 2006 over fiscal 2003 levels. While this is a downward revision of the original target in monetary terms, this figure maintains the 15% reduction called for in the Business Revitalization Plan.

6. Corporate ideals and direction
   Through a process of exhaustive analysis and discussion between cross-functional teams composed mainly of younger employees and the departments concerned, the Corporate Revitalization Committee has looked in depth at a number of issues that the company faces. This has allowed the company to formulate a new course to steer; one that clarifies to its stakeholders the ideals that underpin the company's management as it drives forward in fulfilling its responsibilities as a corporate citizen. These ideals are crystallized in the new corporate maxim: "Mitsubishi Motors is dedicated to responsibly providing customers and society with driving pleasure and assured security."
   
   
7. Profit and loss targets
   To reflect all the measures described above, the numerical targets set out in the Business Revitalization Plan and covering the period up to fiscal 2006-consolidated net sales, operating profit, ordinary profit, net income for the term-are downwardly revised in the Mitsubishi Motors Revitalization Plan. The new plan forecasts that although it will be difficult for the company to return to profitability before the end of fiscal 2005, it will do so in fiscal 2006 and in fiscal 2007 will achieve a record net income for the term of 41 billion yen.
   
   
8. Revised full-year forecasts for fiscal 2004
   The new plan forecasts fiscal 2004 sales volume of 1,337,000 vehicles, a decrease of 190,000 on the previous year. This figure is 63,000 less than the forecast of 1,400,000 vehicles given when the company announced its half-year results in November 2004.
   The new plan revises full-year operating result forecasts made in November 2004. It forecasts consolidated net sales of 2,035 billion yen, 484.4 billion yen down on the previous year, and an operating loss of 132 billion yen, 35.1 billion yen worse than the previous year. Ordinary loss is forecast at 197 billion yen, 86.7 billion yen worse than the previous year, and net loss for the term is forecast at 472 billion yen, 256.6 billion yen worse than the previous year.
   The net loss forecast is significantly worse than the 240 billion yen given in November 2004. This stems mainly from the booking of extraordinary losses asset impairment accounting costs subsequent to revised sales volumes in the U.S. and Australia. The company is confident these forward-looking measures will underpin future improvements in business profits.
   
   
9. Support systems: Capital and funding reinforcements
   

   (1)	Capital reinforcement
   	With the full-support of three Mitsubishi group companies, during the current fiscal year the company will make a capital enhancement of 270 billion yen through the issue of new common and preferred shares [Mitsubishi Heavy Industries, 50 billion yen; Mitsubishi Corporation, 70 billion yen; The Bank of Tokyo-Mitsubishi, 150 billion yen (of which 50 billion yen in a debt-for-equity swap)]. As stated above, this fiscal year the company has adopted asset impairment accounting principles. While this will lead to an impairment of capital, the capital enhancement will make possible the restoration of shareholders' equity to an appropriate level and assist the company in putting its financial status on a healthy standing. The capital increase will bring the combined holding of the three Mitsubishi group companies in the company to 34%. Because this will also bring MHI's holding up to 15%, the company expects to become an equity method affiliate of MHI in fiscal 2005.
   (2)	Borrowing
   	The company is planning to raise a total of 270 billion yen in funding, mostly through new borrowing. New loans are expected to account for 240 billion yen of this total. The remaining 30 billion yen will be raised either from the purchase of MMC business assets or through a further capital increase by Mitsubishi Corporation.
   (3)	Capital Expenditure for Revitalization
   	The capital enhancement and funding measures will give the company access to 490 billion yen (excluding a 50 billion yen debt-for-equity swap). The company will allocate this funding with maximum effect to R&D and capital investment which will provide the platform vital to the successful achievement of the targets and goals set out in the Mitsubishi Motors Revitalization Plan.