Mitsubishi Motors
Revitalization Plan

Mitsubishi Motors Corporation
January 28, 2005

Outline
1. Introduction
2. Current Situation
3. Corporate Culture Reform Initiatives
4. Key Points in Mitsubishi Motors Revitalization Plan
5. Commitments
6. Sales Volume Plan
7. Product Strategy
8. Business Tie-up Strategy
9. Regional Strategy
10. Cost Reductions
11. The Voice of Employees
12. Financial
13. Financing
14. Conclusion

2

3

Introduction

Takashi Nishioka
Chairman & CEO

Business Revitalization Plan

Recover
Trust

Changes in Environment

Current Situation

Past Recall Issues

Submission of past
recalls completed

Continuous
implementation of
corporate reform
Further
deterioration of
credibility

RestoreEarnings

Declining sales
volumeConcern overthe delay ofbusiness
recovery andfinancial health

Rapid shortfallof capital

Additional countermeasures

Current Situation

Ongoing4

5Corporate Culture Reform Initiatives
2004
6

7

8

9

2005
10

11

12

1

2

3

4

5

6

7

8

9

10

11

12

From 2006

Establishment of the CSR Promotion Office, responsible for corporate culture reform and business ethics
Declaration by the Chairman and the President that business ethics is a top priority
Establishment of the Business Ethics Committee, formed by external intellectuals and experts

Foster Culture

Awareness Reform

Instruction and advice to the CSR Promotion Office by the Business Ethics Committee
Thorough investigation of recall problems
Establishment of preventative measuresand disciplinary actions
Observance of corporate ethics by compliance officer
Presentation of
written pledge toobey corporate
ethics by all
employees
Problem solving through cross-functional activities
Training and promoting talented personnel to higher positions
Personnel evaluation reflecting “Customer first" practice
Personnel exchanges with sales co. and dept. rotations

Key Points in Mitsubishi Motors Revitalization Plan

１．Customer First – Recovering Trust
Put the customer first from marketing through after-sales service
Thorough improvement of product quality

２． Business Strategy
Incorporate downside risk into the sales plan
Expand business tie-ups with other automotive companies
Optimize the utilization of production capacity and sales
networks (North America, Australia, Japan)

３．Reinforcement of Capital and Financing
Strengthen financial standing and secure capital for revitalization

４． Strengthen Management’s Effectiveness
Headed by a new management team
Establish a thorough follow-up system67Commitments
Business Revitalization
Plan on May 21

FY2005
FY2005
Positive
Positive
Ordinary
OrdinaryProfit
Profit
FY2006
FY2006
Positive
PositiveNet
NetIncome
IncomeToday’s Announcement

FY2006
FY2006 –– Return
Return toto Profitability
Profitability
Net
Net Income:
Income: ¥¥ 88 billion
billion

FY2007
FY2007 –– Establish
Establish
Sustainable
Sustainable
Profitability
Profitability
Net
Net Income:
Income: ¥¥ 41
41 billion
billion8

Osamu Masuko
President & COO

9Sales Volume Plan

Realistic Sales Plan
Downward revision of sales plan for Japan and North America
Reflect the slowdown of market expansion in China (North Asia)（‘000 units）

Business Revitalization Plan

Effect of
new OEM

1,600

ActualToday’s Announcement

1,200
01

02

03

04

05

06

07

（FY）

10

Sales Volume Plan

Region-specific Sales Volume Plan
（ ‘000 units ）

2,000

1,500

1,337
220

1,000

1,437
224

1,476

1,524
New OEM

242

278

Japan

170

184

201

218

N.A.

250

254

244

246

Europe

200

250

267

288

N. Asia

257

227

237

180

ASEAN

217

221

217

225

Others

2004

2005

2006

2007

500

0

（FY）

11

Product Strategy

Position of Mitsubishi Motors in Motorsport

SUV DNA

Safety ・ Durability

Driving Performance
On and Off Road

SPORTY DNA

12

13

Improve Efficiency of Model Mix
No. of models in FY2007 (new models + existing models)
May 2004 Business
Revitalization Plan

Today’sAnnouncement

Global Models

9 Models

10 Models

Regional Models

17 Models

14 Models

Total

26 Models

24 Models14

New Model Launches (Global Models / Regional Models)
Today’sAnnouncement

Japan

Global models

FY04

FY05

Regional models (incl. Mini-cars)

FY06

FY07

May 2004 Business
Revitalization Plan

FY00-FY03

FY04-FY07

6

10 （5）

10 （5）

ModelsModelsModels

FY04-FY07

North
America

7

6 （3）

7 （3）

ModelsModelsModelsEurope510 （2）

10 （2）

ModelsModelsModels

5

8 （2）

11（3）

ModelsModelsModels

3

6（1）

6 （1）

ModelsModelsModels411（0）12 （0）

ModelsModelsModels

China

ASEAN
Other
regions（ ）: Regional models

15

Domestic Sales Model Development Plan
New model
-FY07

FY05
FY05

FY06～07
FY06～07

Full model changeNew Category SUV

16

New Category Minicar

17

18

Business Tie-up
Strategy

Business Tie-up Strategies
Active Promotion of Strategic Business Tie-up Opportunities
OEM supply of minicars to Nissan - 36,000 units per year
OEM supply of SUV to Peugeot Citroen Group (PSA)(contract to be signed beginning of February)

Tie-ups That Will Be Considered Going Forward
Expand OEM supply of vehicles
Component supply partnering
Joint distribution
Joint procurement

19

20

Regional Strategy

21

Regional Strategy：Japan

Establish Stable Profitability Including Local Sales Companies
Current Issues

Today’s Announcement
Continue follow-ups and measures for credibility
restoration for 3.4 million customers who visited MMC
dealers for free vehicle inspections in cooperation withsales companies

Unforeseen impact
caused by recalls
Delay in credibility
restoration

Voluntary restraintof advertisement

Restructure consolidated sales subsidiaries – geographic
coverage expansion

Sales

Slow sales
performance

Restructure of sales network[Indirect personnel Ratio 24%(’03) → 20% (’06) ]Maintain and empower local independent sales companies[Strengthen communication, special management support ]Consolidate parts sales companies – geographic coverage
expansion and strengthening of external sales

Postponing newmodel introduction

Maximize after-sales business
Optimize sales network and service structure in accordancewith the number of Mitsubishi vehicles owned by customers

Excess Capacity[ 929 stores(’03) → 800 stores～(’06) ][ Sales expense covered ratio 53%(’03) → 60% (’06)]

Sales structure

Prod.

Production facilities

Expansion of OEM supply of mini-cars to Nissan
Expansion of OEM supply of SUVs to Peugeot

22

Regional Strategy：North America

Establish a Profitable Structure
Unchanged - North America remains a vital core market

Rapid and drastic
decrease in sales volume
as a result of moving
away from fleet reliance

Excessive production
capacity
2 shifts => 1 shift(completed)

Sales

Damaged brand as aresult of inappropriate
sales measures in thepast

Renew the local management structure (including CEO)

Ongoing and annual introduction of 5 new models in 3
years starting 2005
Improve residual value of used cars by decreasing ratio offleet sales
Brand rebuilding

Prod.

Concern toward MMC
caused by the productrecall problem in Japan

FinanceSlow recovery of retailsales

Today’s Announcement
Mgmt

Current Issues

Excessive production capacity deemed impaired
Utilize excess production capacity to expand exports toother markets such as the Middle East and Eastern Europe
Collaboration with Merrill Lynch
Partial disposal of financial assets possessed (removal ofrisks)
Joint venture business tie-up ( to provide competitive financial
services products)

23

Regional Strategy：Europe

From the Establishment of Business to the Stage of Growth
Strengthen management with new structure: Operatingcompany (MME), Germany, etc
Reorganize and restructure subsidiaries: strengthening ofsales force and financial ability
Sales expansion of Colt
Review of sales/pricing policy and volume increase measures
Strengthen product line-up (3-door cars/turbo/diesel)

Sales

Expanding Sales of
the Colt core model
seriesStrengthen regional strategy
Revitalize and strengthen sales in Germany
Strengthen sales network in Southern Europe (France, Spain)
Sales expansion in Russia: Strengthening of sales with Lancer
as major productProduction

Strengthening andreorganization of sales
structure

Today’s Announcement
Management

Current Issues

Strengthen production business management (management control
and cost control)
Improve plant utilization and further reduce material costs

24

Regional Strategy：China

Active Utilization of the Strong Mitsubishi Brand
Current Issues
Tie-upsChengfeng Motors

Prod.

Maximum utilization of two engine JVs(Consider making JVs a base for Asian production)

Sales

Direct investment in South East Motors (Strengthening
alliance with Taiwanese partner)

Develop and expand the sales network of Mitsubishi, withthe possibility of establishing a sales operating company
by the end of 2006

Devl.

Ensure sales volume
and sales expansionof Mitsubishi brandvehicles

Today’s Announcement

Establish R&D base to timely reflect market needs

Launched Pajero under the Mitsubishi brand in December
Considering JV for SUV production

Utilization of engine
plantsDevelopment of sales
structure25

Regional Strategy：Others

Further Reinforce Sales Force
Current Issues

Strengthen sales in Thailand
Strengthening of sales department/Improve communication
with dealers etc

Sales

Strengthening thestructure of Thailand, as
an export andmanufacturing base of
pickup trucks and othermodels to other markets

Today’s Announcement

Take action in the
Vietnamese market where
expansion is expected

Strengthening of sales force by utilizing the marketing
capability of Mitsubishi Corporation
Malaysia/Indonesia/Vietnam

Consider restructuring Indonesian business via capital
reinforcement with MFTBC and Mitsubishi Corporation

Restructuring of businessin Indonesia

Enhancement of production system
Production

Australia: excess
capacity

Malaysia: Sales expansion by establishing new sales
company

Thailand as an export base: enhance the capability ofmatching locally produced successor

Australia: Implement impairment for excess capacity

26

Cost Reductions

27

Labor Planning

Promoting Original Plan
（headcount）

60,000：Direct
50,000：Indirect

40,00030,00020,00010,0000
FY2004Beg

FY2004End

FY2005End

FY2006End

FY2007
End

28

Reduction of Material Costs
Downward Revision of Total Target Amount,but Overall Reduction Ratio of 15% Sustained
Unit: ¥100m

Achievabletargets

Revitalization
Plan target

1,200

880
450

Influence from rising
price of materials,
reduction of volume,
etc.

750

70

Current
FY

190

Current
FY

270
750 Carry-over

290

from
FY04/05

360 Carry-over 290
from FY04

FY2004

320

560
390

360

320

FY2005

FY2006560

Improvement inindirect material
cost（Distribution
costs, etc.)

29

The Voiceof Employees

30Strategic Direction of Mitsubishi Motors
Corporate
Philosophy

Stakeholders

Direction
Optimization of lifetime customer
satisfaction

Customers

Brand establishment in driving
performance, handling, safety anddurability

Stockholders
andCreditors

Effective globalization
Sustain continuous development
Ensure stable revenue and profitability

Employees

Recovery of enthusiasm and pride

Procurement partners
Sales companies /dealers

Building firm partnership

Society

Continuous consideration ofenvironment

MMC is dedicatedto responsibly
providing customers
and society withdriving pleasure
and assured
security

31

Financial

Hiizu Ichikawa
CFO

32

Financial Outlook (P/L)
Consolidated(unit: ¥100m)

FY04

FY05

FY06

FY07

Forecast

Plan

Plan

Plan

Net Sales

20,350(21,000)

20,280(21,800)

21,590(24,900)

24,270Operating
Profit-1,320(-1,200)

-140
(200)

430
(1,200)740

Ordinary
Profit-1,970(-1,800)

-400
(30)

210
(1,000)530

Net Profit-4,720(-2,400)

-640
(100)

80
(700)

410

Exchange Rate

108 / 132
（105/125）

105 / 125
（105/125）

105 / 125
（105/125）

105 / 125
（105/125）

US $ /Euro
Note: ( ) numbers from Revitalization Plan on May 21,2004. Numbers for FY04 from 1st half financial result announced on Nov 8, 2004

33

FY2004 Earnings Estimates Revision（11/8 1H announcement revision variance）

Decreased operating profit
Unit sales revised - Mainly North America, China and Australia- ¥ 12 billion

Deterioration of ordinary profit
Issuance of new shares- ¥ 5 billion

Review of extraordinary gains and losses
To alleviate future liabilities, recognized special loss, etc. as follows:
NA and Australia fixed assets impairment booking*- ¥113 billion

Losses from the sale of fixed assets- ¥ 17 billion

Other- ¥ 85 billion- ¥215 billion*: Including ¥19.7B booked in the 1H FY2004 financial result (announced on Dec 24, 2004)

34

Regional Performance for FY04-FY07

Consolidated(unit: ¥100m)

FY04

FY05

FY06

FY07

Forecast

Plan

Plan

Plan

Net Sales

20,35020,30021,60024,300

Japan

4,200

4,700

5,000

5,700

N.A.

4,300

4,500

4,900

5,100

Europe

5,850

4,800

5,200

6,300

Other regions

6,000

6,300

6,500

7,200

Operating profit-1,320

-140

430

740

Japan

-960

-680

-400

-180

N.A.

-1,110

-210

80

-70

Europe

20

30

-80

110

Other regions

730

720

830

880

35

Financing36

Support Backing：Capital Reinforcement Outline

Full support from 3 Mitsubishi Group Companies
Increase in percent of stock held by 3 Mitsubishi Group Companies:
Investment Ratio

34%

Over 1/3 of shares secured

Mitsubishi Heavy Industries, Ltd：
Investment Ratio

15%

MMC to become equity method
affiliate of MHI from FY2005【Support from the 3 Shareholder Companies】
New Investment (incl. DES*)
Mitsubishi Heavy Industries, Ltd.
Mitsubishi Corporation, Ltd.
Bank of Tokyo-Mitsubishi
Total*: Includes Debt Equity Swap of ¥50 billion¥50 billion¥70 billion¥150 billion (¥50 billion*)¥270 billion (¥50 billion*)

Planned Share Ratio
15%
14%
5%

34%

37

Support Structure: Equity Enhancement Measures
Capital increase¥270 bln (‘04)

【Capital】
Mitsubishi Heavy Industries, Ltd
Mitsubishi Corporation, Ltd
Bank of Tokyo-Mitsubishi（incl. D/E swap of ¥50 bln）

Bus. invest. & Capital Increase
Mitsubishi Corporation, Ltd¥ 50 bln¥ 70 bln¥150 bln¥ 30 bln（‘05）¥ 30 bln

Loan¥240 bln

Total¥540 bln（Not incl. D/E swap

Restore capital written-off for
asset impairment【Financing】
Ensure capital for revitalization（FY05～FY07 cum. total）
R&D Capital ¥270 billion
Capital investment ¥310 billion¥490 bln）

Committed to achieving plan by securing the necessary funds and restoring our financial position

38

Balance Sheet & Cash Flow
'FY04～FY07 B/S forecast(unit: ¥100m)

FY04(3E)

FY05(3E)

FY06(3E)

FY07(3E)

Cash and Cash in banks

2,480

1,750

1,680

1,500

Trade notes & accounts receivable

3,200

3,000

2,860

2,990

Inventories

2,670

2,520

2,500

2,420

Tangible/Intangible fixed assets

5,680

5,680

5,940

6,120

Investments

1,530

1,800

1,930

2,060

Other assets

870

1,170

1,100

1,110

T o t al Asse t s

16,43015,92016,01016,200Trade notes & accounts payable

3,180

2,980

2,990

3,360

Interest-bearing debt

4,790

4,970

5,000

4,320

Other liabilities

5,130

5,000

4,970

5,060

T o t al Li abi l i t i e s

13,10012,95012,96012,740Minority Interests

160

160

160

160

Common stock & capital surplus

10,46010,76010,76010,760Retained earnings-7,290-7,950-7,870-7,460T o t al st o c kh o l de r ' s e qu i t y

3,170

2,810

2,890

3,300

T o t . Li a, , M i n . In t . & S H e qu i t y

16,43015,92016,01016,200'FY04～FY07 Cash flow forecast
FY0 4
Ca sh flows from oper a ting a ct.
Ca sh flows from inv esting a ct.
Ca sh flows from fina ncing a ct.
Ca sh flow tota l

FY0 5

FY0 6

FY0 7

-450

10

1,050

1,620

-640

-1,220-1,150-1,120

1,830

480

30

-680

740

-730

-70

-180

39

Conclusion
Takashi Nishioka
Chairman & CEO

40All statements herein, other than historical facts, contain forward-looking statements and are basedon our forecasts, expectations, target, assumptions, plans and evaluation as of the date hereof. Any
expected number is calculated or obtained based on certain assumption. Forward-looking
statements involve inherent risks and uncertainties. A number of significant factors could therefore
cause actual results to differ from those contained in any forward-looking statement. Such significant
factors include, but not limited to:• feasibility of each target and initiatives as contemplated by the Mitsubishi Motors RevitalizationPlan;• any material adverse affects by any product quality problems in the past and future of our groupand of Mitsubishi Fuso Truck & Bus Co., Ltd. (“MFTBC”) that was spun off from us and by any civil
proceedings, recalls, administrative or criminal sanctions that may be brought or executed relating
thereto;• possible fluctuations in interest rates, exchange rates and oil prices;• possible changes in laws, regulations and government policies; and• general economic conditions in Japan and overseas
It should be noted that potential risks and uncertainties are not limited to the above and that weundertake no obligation to update the information in these statements to reflect any development or
event in the future.

41

Appendix42

Revitalization Plan Development Process

July

AugustInterview
Phase【Questionnaire
Survey 】(over14,000 employees)
・MMC
・PMC

CFT#2 Product appeal
and sales strength
CFT#3 Customer relation
CFT#4 Volume projection
process
CFT#5 Quality
management
CFT#6 Development,
Design, Procurement
CFT#7 Production
CFT#8 Logistics
CFT#9 Corporate culture
reformPolicy Review
Meetings

Business Revitalization Follow-up Team

Execution and Monitoring of
Revitalization Plan・Customer
surveys, etc.

CFT#1 Brand/products
deployment

January Press Release

CFT#0
Governance reformIndividual tasks
Creation of Business
Revitalization Action Plan

Establishment of Execution Structure【In-house data】

January

Cross Functional Team (CFT) Activities

Dec. 3 final Recommendation

・Procurement
Partners

DecemberDevelopment of
Revitalization Plan

・Dealers

November

Oct. 6 Interim Report・Employees

OctoberDevelopment of measures in response to environmental changes in/outside Japan【Domestic/
Overseas
Interviews】(over 350 interviewees)

September

Drafting / Verification of Hypothesis

June

2005

Extraction of Issues

Corporate Restructuring Committee established

2004

43

Strategic Direction of Mitsubishi Motors (overview)
Stakeholders

Customers
MMC isdedicated toresponsibly
providingcustomers

pleasure
and assured
security

Measures

Optimization of
lifetime customer
satisfaction• Strengthen linkages with customers• Ensure sense of security (new maintenanceJapanpackage, introduction of new maintenanceservice with extended warranty)• Quality improvement by utilizing CSI in customers’
perspective (exceeding quality)• Development and deployment of motorsporttechnologies to all models

Brand establishment indriving performance,
handling, safetyand durability

Effective globalization
Sustain continuous
development
Ensure stable revenue
and profitability

•
•
•
•

Employees

Recovery ofenthusiasm and pride• A structure which solves problems in a crossfunctional style

Procurement
Partners
Sales Co. /Dealers

Building firm
partnership

Society

Continuous
consideration ofenvironment

Stockholders
andCreditors

and society
with driving

Direction

Strengthen global models
Emphasis on growing markets, such as ASEAN
Continuous development through tie-ups
Ensure the thoroughness and responsibilities ofbusiness management• Focus on cost reduction• Equity enhancement

Collaboration

Corporate
Philosophy• Procurement partners’ early participation todevelopment process• Strengthening of cooperation with dealers• Continuous development of electricpowered vehicles, etc• Promotion of environmentally conscious
activities throughout the product life cycle,
from development to disposal

Corporate Philosophy and Three Management Principles

Mitsubishi Groupz “Shoki hoko”・・・・・Corporate Responsibility to Society“Sankoryo” ・・・ The Three Principles

z “Shoji komei”・・・・・Integrity and Fairness
z “Ritsugyo boeki” ・・・・・Global Perspective

Corporate Philosophy
MMC is dedicated toresponsibly providing customers
and society with driving pleasure
and assured security
Management
Commitmentsz MMC’s basic policy is to cherish our customers,
pursue safety, and implement compliancez Ensure transparency by disclosing information fully toall our stakeholders
z Clarify the responsibilities of management and achieve
our management objectives

44

45

Mitsubishi Motors Car-making“Simplicity and Fortitude”(Driving Performance, Handling, Safety, Durability)

Sporty DNA

SUV DNA

46

Improve Customer Satisfaction

Build theFoundationz Strengthen the service quality
z Increase the dealer service productivity
z Strengthen the foundation of CRM(Customer RelationshipManagement)z Strengthen the used-car businessz Improve the mix of parts and accessories available

Strengthen
customer
relationships

Offer attractive
high-value added

Measures to improvecustomer satisfaction

Voice ofCustomersz Execute programs to better link with customers over theinternetz Promote continuous communication with customers
z Offer new extension warranty services with conditions suchas vehicle check-in for inspection
z Introduce Mitsubishi Assist 24-hour roadside and reminder
service*

MMC will unite andwork on the measuresestablished in theregular meetings heldby board members

service* Vehicle checkup services during customer visits, vehicle checkup notification indicator light on the instrumental panel

47

Quality Improvement Measures (New MMC Standard)

New MMC Standard
Customers’
Perspective

Service
ServiceCommunication
Inspection/repair cost
Repair technology
DesignProduct

Price
Performance, functions
Safety, Environment

×Complaints/
TroublesSatisfying
Quality

Base Quality

Appealing
Quality

Exceeding Quality

Measures to ensure new MMC standard

Product

Service

Ensure Sincere Correspondence

Enhanced customer support
at dealers

Assure Sense of Security to Customers

Extended warranty service

Improve Product Reliability

Pursue MMC’s styleThorough inspection of

Sharing quality target withinsecurity standard

the company and monitoring

Base Quality

Exceeding Quality

48

Introduction of Management and Managerial Accounting to Clarify Authorities and Responsibilities:
3-D Management by Market-axis, Functional-axis, Model-axis

Domestic
Operations
Group HQ
Japan
Japan

Market Axis

Overseas Operations Group HQ
N.A.
N.A.

（機能）

EuropeEuropeN.
N. Asia
Asia

ASEAN
ASEAN

Sales

Responsible for functional optimization
Responsible for final P/L

Quality Control

Model Axis

Product Operations

Procurement

Logistics（Product Executive）

Australia
Australia SS .America.America
NZ
NZ
M.
M. EastEast

Development

Production

PX

Generate a positive
confrontation and workwith mutual supervision

Group HQ

Production &Distribution Office

Quality Affairs Office

Functional Axis Line functions

Regional Operations Group HQ

49Radical Reformation of Subsidiaries:
Strengthening of Matrix Management in Headquarters
Primary
Primary Management
Management
Dept.
Dept.

CEO・COO

Subsidiaries
Compliance（Function）

Compliance

Financial Group HQ/Line functions

Group Corporate Office

Regional Operations
Group HQ
Product Operations
Group HQ
Production &Logistics Office
Quality Affairs Office

Profit--andand--loss responsibility andProfitbusiness management responsibility

CSR Promotion Office

Aware of compliance situation.
Manage, advice, plan and implement
measures in a cross-functional style

FinanceFinancial Health

Sales

Cross-management ofsubsidiaries

Understand and manage the P/L andfinancial health (including
consolidation) across the company

Development/
Procurement
Production /Distribution

Quality
Control

Functional operation
Plan and implement measures toachieve global optimization, support
primary management department