The New 33-year-year Business Plan

Isuzu Motors LimitedOctober 25, 2002

Preface
In August '02, Isuzu Motors Limited announced that it wasdeveloping a "New 3-year Business Plan" - - - a new plan thatfacilitates Isuzu to accelerate and extend the reach and scope of
the V-Plan initiatives; that allows Isuzu to strengthen its
collaborative relationship with GM; that directs Isuzu toward
fundamental restructuring of North American SUV businesses.
After the announcement, Isuzu carried out specific studies byreceiving kind assistance of General Motors Corporation andMizuho Corporate Bank, and completed the compilation of theNew 3-year Business Plan. The contents of the Plan received
agreements and support from GM, Mizuho CB and other financial
institutions. And, Isuzu reached a basic agreement with Fuji
Heavy Industries Ltd.

Ⅰ. Outline of the New 3-year Business PlanGist of the New 3-year Business Plan
Wipe
Wipe out
out
uncertainties
uncertainties

Reinforce
Reinforce
management
management control
controlsystemsystem¾ Review/restructure North American businesses¾ Create new power-train engineering JV with GM¾ Reduce overall employment (VER)¾ Consolidate manufacturing infrastructures, etc.
¾ Exc. VP and Rep. Director from GM¾ Exc. VP from Mizuho CB¾ Establish full-time function to promote
3-year Plan
¾ Debt-for-equity conversion (DEC)Re-capitalization
Re-capitalization¾ Capital decrease/increase (Retire GM's
shareholding without consideration)¾ New money

Cooperation from GM and financial
institutions

Re-focus,Re-focus,andandshiftto
CVshift to CVspecialist
specialistwith
withDEas"CoreDE as "Coretechnology"
technology"

FY101-H1 Performance¾ Market conditions surrounding CV businesses continue to be extremely severe.
Against this backdrop, Isuzu has exerted corporate endeavor on structuralreform since it embarked upon the V-Plan. The Company’s operating
performance has steadily been showing year-on-year improvements.
 Market share improvement in Japan, despite significant industry sales
decline Impressive sales performance of new pick-up truck in Thailand, boosting
market share HD truck sales increase in various overseas markets
 Stronger operating cash flow Reduction of total debt, and inventory
 Earnings improvement of domestic dealers and profit turnaround inconsolidated subsidiaries

For reference: CV sales in Japan- HD Market Share -（％）
（Units）

26- JPN Industry Sales -120000

25HDV-Plan

1000002480000

23
Mar.'05

Mar.'04

Mar.'03

Mar.'02

Mar.'01

Mar.'00

Mar.'99

HD
2-3t

60000

(FY through)40000- LD Market Share 20000（％）37035

M a r .'0 5

M a r .'0 4

M a r .'0 3

M a r .'0 2

M a r .'0 1

M a r .'0 0

M a r .'9 9(FY through)

2-3t
V-Plan33

31
M a r.'0 5

M a r.'0 4

M a r.'0 3

M a r.'0 2

M a r.'0 1

M a r.'0 0

M a r.'9 9(FY through)For reference: Business Performancein Thailand
Pick-up truck sales

Profit/Loss Position(including export from Thailand)(5 local companies)

k. units
250.0（百万バーツ）
2,500

2,000

200.0

1,500

150.0

ISZ export

1,000

ISZ dom.
500

100.0

0

50.0

Actual/Estimate

CY05

CY04

▲ 1,000

CY03

CY02:4Q

CY02:3Q

CY02:2Q

CY01

CY00

CY99

0.0

CY02:1Q

▲ 500

FCST

99年

00年

01年

02年(予)

For reference: Inventory Performance(Y00 mil.)- SUP Inventory -2,000
1,800
1,6001,4001,200
1,000
800
600

NA400

Dom.DLR

200-Parent

97‐Ⅰ 97-Ⅱ 98-Ⅰ 98-Ⅱ

99-Ⅰ 99-Ⅱ 100-Ⅰ 100-Ⅱ 101-Ⅰ

Ⅱ. Review of Business Structure

SUV Businesses in North America -1¾¾ Commensurate
Commensurate withwith decreased
decreased SUV
SUV sales
sales volume,volume, review
review andand right-sizeright-size thethe scalescale ofof businessbusiness
operations.
operations.
1.
1. Adjust
Adjust manufacturing
manufacturing capacity
capacity (incl.
(incl. review
review ofof productproduct sourcing,sourcing, ie
ie OEM,OEM, etc.)
etc.)
2.
Reviewsales
costandorganization
tomatchsales
volume*Areas
2. Review sales cost and organization to match sales volume* Areas inin red.
red.
Alleviate
AlleviateM&E
M&E
depreciation
depreciation
cost
costburden
burdenRight-size
Right-size
sales
salescost
cost

SIA
SIA

(KD)

ISZ
ISZ
GM
GM
Other
Other

SUV
-RODEO-AXIOM

CV
SUV

SUV

AIMI
AIMI

Dealers
Dealers

CV

GMICT
GMICT

Dealers
Dealers

ISZA
ISZA

SUV(LCV)< Sourcing >< Distribution >SUV Businesses in North America -2¾ Dissolve SIA JV, and subcontract assembly

ISZISZManufacturing
Manufacturing
operations
operations
(SIA)
(SIA)

Sell Isuzu's shares in SIA(49%)

Subcontract

FHIFHI

(51%)

SIA
SIA

100% subsidiary※ Isuzu to recognize valuation losses on M&E upon dissolving JVSales
Sales
operations
operations(ISZA/AIMI)(ISZA/AIMI)¾ Reduce SUV sales cost
1. Reduce sales cost: Cut back SUV workforce to less than half
2. Reduce inventory: Target at 90-day supply
3. Review ad&promo, incentive
4. Consolidate functions: Review number of offices and workforce
assignment¾ On top of Ascender, Isuzu will receive another OEM vehicles based on
TrailBlazer from GM.

GM-Isuzu Power-train Engineering JV -1¾ Create a new power-train engineering JV with GM to engage in engineeringand manufacturing of DE for GM vehicle application
Engine Design, Engineering, and Development

Electronicscontrol
controlsystems
systems
Electronics<Key technologies>

Injection
Injection

Turbo/
Turbo/
SuperSupercharger
charger

AfterAftertreatment
treatment<Base design>

EngineManufacturing<Vehicle applicationengineering>

Vehicledevelopment/
manufacturing

CVCVHDHDCVCVMD/LDMD/LDUnique
Uniqueareas
areasforvehicle
for vehicle
applicationapplication

LCV
LCV

OEM-specificOEM-specific
areas
areas

Circle-L/
Circle-L/
V6/V8
V6/V8

GM-specificGM-specific
areas
areas

Scope of JV's activities

Isuzu
Isuzuvehicles
vehicles

ISZ
ISZ
Other
Otherbrand,brand,
construction
construction
machinerymachinery

DMAX
DMAX
ISPOL
ISPOL

GM
GMvehicles
vehiclesPassenger
Passengercars
cars
LDtrucks
LD trucks

GM-Isuzu Power-train Engineering JV -2-

60%

GM
GM

Engineering
Engineering JV
JV
(new)
(new)

Subcontract
40%

60%

DMAX
DMAX
60%

40%

Parts/compo
supplyEuropean
European Holding
HoldingCompany
Company

ISUZU
ISUZU

40%

Parts/compo supplyIMG
IMG

ISPOL
ISPOL

* IMG to provide services to Engineering JV on consignment basis

Right-sizing Overall Employment¾ Voluntary Early Retirement program was implemented earlier than original plan toensure achievement of the V-Plan target (ie 8,700-person organization in March '04: onIsuzu payroll)
14,365
11,934
VER
9,193

ISZ
ISZ

484

On-loanOn-loan
2,509
Mar.‘01

2,025
End of Oct.’02(Current)

Attrition/reduction
Attrition/reduction
ininnew
newrecruit
recruit

2,725 ps
8,700

Transfer to affiliates
1,000 psTarget8,700 ps450VER 541 ps
Nov.‘02(After VER)

Mar.‘04(Target)4,266 persons applied and accepted for voluntary early retirement (incl 1,000 transfer).
<Plan: 3,700 persons, incl. 700 transfer>Restructuring Charges and Improvements¾ In current fiscal year through March '03, Isuzu will take approximately Y140.0
billion charges. However, effects of restructuring will largely contribute toearnings in ensuing years.
Positive effects(as compared to actual results through March '02)
Initiatives
Review/restructure North AmericaCharges

Mar.'03

Mar.'04

Mar.'05(91.0)

+6.0

+38.0

+38.0

- Revaluation of investments in subsidiaries(34.0)- Revaluation of under-performing facilities in SIA(47.0)- Restructuring at Isuzu-America(10.0)

Headcount reduction(22.0)

+8.0

+21.0

+21.0

Exit domestic RV business

(3.0)

+1.0

+1.0

+1.0

Recognition of latent losses, etc.

(25.0)

+15.0

+60.0

+60.0

Total

(141.0)

Ⅲ. Reinforcement of Management Control

Reinforce Management Control/Activity Promotion Organization¾ Exc. VP & Rep Director from GM¾ Exc. VP from Mizuho CB¾ Promote New 3-year Business Plan
1. Full-time organization to monitor progress
2. Profit-control by product/business line (VLE)
3. Centralize management over consolidated subsidiaries

Ⅳ．Re-capitalization

Improve Financial Fundamentals‐ Cooperation from GM, Shareholders and Financial Institutions‐

GMGM

1. Retirement of shares- Cancellation without consideration (619 million shares)
2. Total injection of approx. Y60.0 billion for:
- JV with Isuzu, capital increase in Isuzu PT units- Intellectual property- Subscription to new shares of Isuzu (for 10.0 billion: 12% equity)
3. Consolidation of PT companies and assumption of approx. Y40.0 billion debt
(est. a/o Dec '02)

GeneralGeneralshareholders
shareholders

1. Reduction of capital stock: Y89.8 billion, including cancellation of GM's
shareholding without consideration.
* Note: Number of issued shares to general shareholders remain unchanged.

Financial
Financialinstitutionsinstitutions

1. Debt-for-equity conversion: Y100.0 billion of debt with major banks(to be converted to new issues of preferred stock)→ To restore Isuzu net worth
2. New money- Bond redemption funds: financing request, to cover redemptions during
the period- Headcount reduction funds: financing request to 5 major banks
3. Financial support from other banks- Roll-over of existing credits: Based on request to major banks to step up
cooperation, other financial institutions are also requested to accept roll-over(excluding(excluding GM)
GM)

Ⅴ. Future Vision, Business Strategy

Strategic Direction
Direction

CVCV

LCV
LCVPTPT

MarketBusiness Focus

JPNJPN•• Reform
Reformofof sales
sales
structure/Expandstructure/Expandsales
salestotomajorcargofleetmajor cargo fleet

 Concentrate
Concentrateresources
resources
ononCVCVas
ascorecorebusinessbusiness•• Introduce
Introducenew
newengineengine(10-liter,(10-liter,L6)
L6)

 Maximize
Maximize
revenue/volume
revenue/volume•• Full
Full model
modelchangechangeofof 22-to
to 4-ton
4-ton

China
China
ASEAN
ASEAN
NANA

•• Aggressive
Aggressivesales
sales
expansion,leveraging
expansion, leveraging
brand
brandequity
equity•• Enrich
Enrichproductproductline-up
line-up•• 3rd-party
alliance
3rd-party alliance Pursue
Pursuemaximum
maximum
efficiency
efficiencyin
inreturn
returnonon
investment
investment•• Introduce
IntroduceP-up
P-up
derivative
derivative

ThailandThailand•• Maintain
MaintainNo.1
No.1market
marketshare
share•• Reinforce
alliance
withReinforce alliance with MCMC-- Centralize
Centralizeproduction
productioninin•• Increase
Increasevol
volwithwithderivative
derivative
vehiclevehicle•• Aggressive
Aggressivesales
salesin
inGM
GMterritories
territories•• Introduce
Introducenew
new L4L4DE
DE

ASEAN,ASEAN,
etc.
etc.

 Minimize
Minimizebusinessbusinessrisks
risks•• AddAddOEM
OEM models
models•• V6gas
engineV6 gas engine

NANA•• Review
Review operational
operational
structure
structureto
tosuitsuitsales
salesvol.
vol.

 Secure
Securebusinessbusinessstability
stabilitythroughthroughcreationcreation ofof JV
JVwithwithGM
GM

Improve
Improveproduct:
product:V6,
V6,
V8,
L4
V8, L4

NANA•• Capacity
Capacityincrease
increaseat
atDMAXDMAXEurope
Europe•• Max.
Max.vol
voloperation
operation(300k)(300k)•• Expand
Expand other
otherOEM
OEMsalessales

ThailandThailand--Tie-up
Tie-upsales
salesoperation
operationwith
withMCMCSUV
SUV

Product/Technology

CV Business: Product/MarketProductGroup/Engine

MarketNew
New
14-liter
14-liter
HDHDMDMD

LD/LD/LCVLCV‐High output‐High torqueJapanJapan

Overseas
Overseas Adopt on CVs for heavy cargo
carrier/construction use

 Ally with third-party for manf./sales
operations

Secure stable growth as Isuzu's
stronghold

Capture CV market opportunity in
China whose construction/public
works are booming

NewNew
10-liter
10-liter Enrich cargo CV offering with newengine (meeting the need for greatercargo-load efficiency and higher fuelefficiency)‐ Energy efficient‐ Light weight

Boost market share of cargo types,
with the 1st in class output and fuelefficiency

Pursue volume merit throughregional complementation in manf.,
and consolidation of smaller-scalemarkets

 Enrich LCV line-up by adopting newengines on ELF

 Expand new engine adoption
covering pick-up derivative and LCV

Ensure absolute advantage overcompetition by meeting market
needs thoroughly

Leverage the strengths as the world
No1 light-weight, biggest volumeLCVNew
New 3-liter
3-liter
NewNew 2.5
2.5 liter
liter‐ High output- Light weight Introduce as "Asian Truck"Material Cost Reduction

CVCV¾ Commonize next generation MD and LD cab ( -30%)¾ Volume merit from HD and MD truck ( -15%)− In short-term, reduce domestic supplier prices by leveraging
China/ASEAN volume (eg. extensive use of dies)− In mid-term, expand procurement from China/ASEAN toachieve further cost reduction¾ Drastic de-proliferation : vehicle variations, engine series− HD: 500 --> 200− MD, LD: 5,000 --> 2,000− Engine: 9 --> 7 series

LCVLCV¾ Combine purchase volume with US-produced GM volume (WWPprogram)¾ Review manf. footprint plans for new engine (Japan, China, Thailand)¾ Secure re-quotation and/or re-source based on increase volume
including derivative models (10%)

Generate
Generate cost
costsavingthroughsaving throughvolumevolume merit,
merit, ononpart-by-partpart-by-partbasis
basis

Unconventional
Unconventional
Approach
Approach (esp.
(esp.
leveragealliance)
leverage alliance)¾ Joint purchasing with GM Alliance Partners (FHI, SZK, GM): 13 commodities + α¾ Collaboration with keiretsu body-builders: Integrate chassis & body engineering(body: 10%)¾ Supply component to 3rd parties (GM, domestic competitors, etc)
− Suspension, T/M, Transfer¾ Reinforce complementary relationship with non-keiretsu suppliers

For reference: HD Sales(units)
16000
14000
12000
10000

O/S
Dom.

8000
6000
4000
2000
0Mar.'99

Mar.'00

Mar.'01

Mar.'02

Actual/Estimate

Mar.'03

Mar.'04

Mar.'05

FCST(FY through)For reference: P’up
Export Forecast-Excl. Sales in Thailand(units)

200,000
180,000

Derivative

160,000
140,000
120,000
100,000

GM

80,00060,00040,000ISZ
20,000
0

CY02

CY03

CY04

CY05

CY06

CY07

Ⅵ．Quantitative Targets

1. Volume Assumption‐ Shipment Volume from Isuzu‐(k. units)

Mar.'02

Mar.'03

Mar.'04

Mar.'05

SUPJPN
NA
Other
Total

64
25137
226

57
20143
22066
1490
170

68
1777
162

KD set/Compo.

NA
Thailand
Other
Total

6957
77
203

33
100
105
238

35
143
100
278

34
199
82
315

HD

78
23.8

74
25.0

82
25.2

87
25.2

93
31.8

86
33.7

97
33.7

104
33.7

125

120

120

120

JPN
Industry
Sales(Mkt. share%)LD(Mkt. share%)

FX(Y/$)

2. Revenue/Earnings(Ybil.)

Mar. '02

Mar. '03

Mar. '04

Mar. '05
over 1,270.0

Sales
RevenueCons.

1,597.7

1,270.0

1,220.0

Incl. CV

594.7

710.0

730.0

Operating
ProfitCons.

15.1

5.0

50.0

over 60.0

Incl. CV

18.1

18.0

42.0

over 50.0

Cons.

(42.9)(170.0)35.0

Net Income

overover760.0

50.0

2- (1) Parent Company
Mar. '02

Mar. '03

Mar. '04

Mar. '05

Sales volume

HD

33.6

32.0

38.7

41.9

(k. units)

LD

94.7

97.4

101.3

110.4

761.9

740.0

700.0

700.0

8.1

11.0

40.0

50.0

(56.2)(181.0)

30.0

40.0

(23.0)(11.0)(9.0)

Material cost reduction

5.0

15.0

22.0

FX

(2.0)

(2.0)

(2.0)

Labor cost

22.0

27.0

28.0

Expense0.9

2.92.9Sales revenue (Ybil.)
Operating profit
Net income<Variance analysis (Operating Profit) >* as compared to actual results through March '02

Vol/Mix2-(2) Domestic Consolidated Dealers
Mar. '02

Mar. '03

Mar. '04

Mar. '05

Sales volume

HD

11.9

11.5

12.0

12.4

(k. units)

LD

30.0

28.5

29.3

29.7

Sales revenue

357.0

340.0

350.0

360.0

Operating profit

(5.0)

3.0

5.0

6.0

Net income(17.0)(7.0)---Gross profit improvement, etc.

2.0

2.5

3.5

-Fixed cost reduction

6.0

7.5

7.5

(incl. labor cost)

4.5

6.06.0

7,031
48.8

6,811
51.4

6,811
52.3

<Variance analysis (Operating Profit) >* as compared to actual results through March '02-Number of employees (aver.) ps-Revenue per head (Ymil.)2-(3) North American Subsidiaries
CY01

CY02

CY03

CY04

Sales volumeCV

21.4

21.8

22.8

22.8

(k. units)

SUV

82.9

40.3

39.4

40.3

Sales revenue (mil.$)

6,810

3,700

3,700

3,700

Operating profit

(150)

(200)

-20

Net income

(190)

(250)

(40)

4

Gross profit improvement

8075(Included: effects of OEM)

5070

Sales cost reduction

120145(incl. labor cost)

3030(incl. ad.promo exp.)

4060<Variance analysis (Operating Profit) >* as compared to actual results through March '02

3. Consolidated Cashflow(Ybil.)

Mar. '02

Mar. '03

Mar. '04

Mar. '05

Operating CF

59.0

13.0

50.0

64.0

Severance allowance(14.0)(42.0)

Investing CF

6.0

13.0

(15.0)-Free CF

65.0

26.0

35.0

64.0

Financing CF(123.0)(34.0)(43.0)(65.0)

Total(58.0)

(8.0)

(8.0)

(1.0)

Debt

738.7

560.0

510.0

450.0

Total equity

61.0

2.0

39.0

91.0Capex
D&A

67.6
73.6

29.0
34.0

28.0
32.0

26.0
31.0

CF

Main
Items