MITSUBISHI MOTORS CORPORATION
Annual Report 2005
YEAR ENDED MARCH 31, 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Mitsubishi Group Philosophy—Three Corporate Principles

Corporate Responsibility
to Society “Shoki Hoko”

Integrity and Fairness“Shoji Komei”

Strive to enrich society, bothmaterially and spiritually, while
contributing towards the preservation of the global environment.

Maintain principles of transparency
and openness, conducting businesswith integrity and fairness.

International Understanding through Trade“Ritsugyo Boeki”
Expand business, based on an allencompassing global perspective.

Contents
Mitsubishi Motors Corporate Philosophy

1

Consolidated Financial Summary

2

The Mitsubishi Motors Revitalization Plan—Targets

3

To Our Shareholders and Stakeholders

4Interview with the President: Business Revitalization – Issues and Initiatives

6

The Mitsubishi Motors Revitalization Plan: Toward Revitalization

10

Business Strategies

12

Product Development

12

Quality

18

Production

20

Procurement

22

Region23

Motor Sports

33

Environmental Activities

34

Corporate Governance

36Compliance38

New Organization

40

Executives

41

Financial Section

42

Consolidated Subsidiaries and Affiliates

78

Shareholder Information

80

Corporate Information

81

Forward-looking Statements
This annual report contains forward-looking statements about Mitsubishi Motors Corporation’s plans, strategies, beliefs and performance that are not historical facts.
These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which Mitsubishi Motors
Corporation (MMC) operates, management’s beliefs and assumptions made by management. As the expectations, estimates, forecasts and projections are subject toa number of risks, uncertainties and assumptions, they may cause actual results to differ materially from those projected. Mitsubishi Motors Corporation, therefore,
wishes to caution readers not to place undue reliance on forward-looking statements. Furthermore, Mitsubishi Motors Corporation undertakes no obligation to update
any forward-looking statements as a result of new information, future events or other developments.

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Mitsubishi Motors Corporate Philosophy
Mitsubishi Motors recently drew up a new corporate philosophy that adheres to the spirit of “The
MMC’s Corporate Philosophy

Three Principles” of the Mitsubishi group of companies. It also clearly states the purpose of thecompany’s existence and its future direction. All corporate activities will be based on thiscorporate philosophy.

“We are committed to providing the utmost driving pleasureand safety for our valued customers and our community.
On these commitments we will never compromise.
This is the Mitsubishi Motors way.”

Customer-centric approach
Mitsubishi Motors will give the highest priority to earning the satisfaction of its customers, and by doingso, become a company that enjoys the trust and confidence of the community at large. To that end,
Mitsubishi Motors will strive its utmost to tackle environmental issues, to raise the level of passenger
and road safety and to address other issues of concern to car owners and the general public.

A clear direction for the development and manufacturing of Mitsubishi Motors
vehiclesThe cars that Mitsubishi Motors will manufacture will embody two major concepts: “driving pleasure”
and “safety.” Mitsubishi Motors will manufacture cars that deliver superior driving performance andsuperior levels of safety and durability, and as such, those who use them will enjoy peace of mind.

Going the extra mile
Mitsubishi Motors will pay close attention to even the smallest details in the belief that thisapproach will lead customers to discover new value in their cars, giving them a richer and more
rewarding motoring experience.

Importance of continuity
Mitsubishi Motors will continue to manufacture distinctive cars with the passion and conviction to
overcome all challenges.

Annual Report 2005

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M I T S U B I S H I M O T O R S C O R P O R AT I O NConsolidated Financial Summary
For the years ended March 31,

In millions of yen

In thousands of
U.S. dollars

2001

2002

2003

2004

2005

2005

¥3,276,716¥3,200,699¥3,884,874¥2,519,449¥2,122,626$19,765,586(73,865)

40,227

82,761(96,852)(128,544)(1,196,983)

minority interests(407,289)(31,875)

42,206(77,173)(460,906)(4,291,892)

Net income (loss)(278,139)

11,25637,361(215,424)(474,785)(4,421,136)

In yenIn U.S. dollars

For the year:
Net sales
Operating profit (loss)
Profit (loss) before income taxes andPer share data:
Net income (loss) per share: Basic¥(232.77)¥7.66¥25.35¥(145.22)¥(194.36)$(1.81)

–

7.42

23.43

–

–

–

–

–

–

–

–

–

In millions of yen

In thousands of
U.S. dollars

DilutedCash dividends

At year-end:
Total assets
Total stockholders’ equity¥2,981,668¥2,894,560¥2,425,352¥2,029,035¥1,589,286$14,799,202

256,068

270,663

280,294

29,972

324,782

3,024,328

Notes: 1. U.S. dollar amounts in the accompanying consolidated financial statements are converted, solely for convenience, at a rate of ¥107.39 = U.S.$1.00,
the exchange rate prevailing on March 31, 2005.
2. In the year 2003, due to a change of accounting period at consolidated overseas subsidiaries, from December 31 to March 31, 15-month figures foroverseas subsidiaries have been incorporated.
3. The assets and liabilities of truck and bus operations are not reflected in each account because these operations were spun off and subsequently became
an equity-method affiliate of MMC on March 14, 2003 and all remaining shares had been transferred to other parties by the end of March 2005.

Net Sales

Operating Profit (Loss)Net Income (Loss)(¥ billion)(¥ billion)(¥ billion)

4,000

90

100

3,500

60

3,000

30

2,500

0

2,000

–30

1,500

–60

1,000

–90

500

–120

0

–100

–200

–300

–400

0

01

02

03

04

05

06

Actual

07
Plan

08

–150

01

02

03
Actual

04

05

06

07
Plan

08

–500

01

02

03

04

05

06

ActualNote: Fiscal year refers to the accounting period that runs from April to March of the following year (e.g. FY 2004 = April 1, 2004 to March 31, 2005).

2

Annual Report 2005

07
Plan

08

M I T S U B I S H I M O T O R S C O R P O R AT I O N

The Mitsubishi Motors Revitalization Plan—Targets
For the years ending March 31,

Thousand units

Unit Sales Targets

2006

2007

2008

1,370.0

1,408.0

1,435.0

253.0

242.0

278.0

North America

184.0

201.0

218.0

Europe

254.0

244.0

246.0

Asia and other areas

679.0

721.0

693.0

Consolidated Financial Summary The Mitsubishi Motors Revitalization Plan—TargetsJapan¥ billion

Performance Targets
Net Sales

2,220.0

2,160.02,430.0

Japan

530.0

500.0

570.0

North America

450.0

490.0

510.0

Europe

620.0

520.0

630.0

Asia and other areas

620.0

650.0

720.0

Operating Profit (loss)(14.0)

43.0

74.0

Japan

(65.0)(40.0)(18.0)

North America(21.0)

8.0(7.0)

Europe

6.0

(8.0)

11.0

Asia and other areas

66.0

83.0

88.0

(64.0)

8.0

41.0

Net income (loss)
Balance Sheet Forecasts
Cash and cash equivalents
Total assets

175.0

168.0

150.0

1,592.0

1,601.0

1,620.0

Interest-bearing debt

497.0

500.0

432.0

Total stockholders’ equity

281.0

289.0

330.0

Operating activities

1.0

105.0

162.0

Investing activities(122.0)(115.0)(112.0)Financing activities

48.0

3.0

(68.0)

(73)

(7)

(18)

Cash Flow Forecasts

Total* MMC revised its targets for fiscal 2005 when it released its fiscal 2004 full-year financial results on May 23, 2005. Targets for fiscal 2006 onwards
are those announced in the Mitsubishi Motors Revitalization Plan on January 28, 2005.

Total Assets

Unit Sales(¥ billion)(Thousand units)

3,000

2,000

2,500
1,500
2,000

1,500

1,000

1,000
500

■ New OEM contracts■ Asia and other areas■ Europe■ North America■ Japan

500

0

01

02

03
Actual

04

05

06

07
Plan

08

0

01

02

03
Actual

04

05

06

07

08

Plan

Annual Report 2005

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M I T S U B I S H I M O T O R S C O R P O R AT I O N

TO OUR SHAREHOLDERS AND STAKEHOLDERS

We were elected by the Board of Directors on January 28, 2005 to take over the revitalization of Mitsubishi Motors
Corporation from the former management. Our first task was to formulate the new Mitsubishi Motors Revitalization Plan,
which was announced on the same day.
Our immediate predecessors steered Mitsubishi Motors through one of the most difficult periods of its history, and indoing so cast off the negative legacy of the past and drew up a roadmap for restoring confidence in the company. The
task we face now is to make a collective effort as a group to nurture Mitsubishi Motors into a success story on the ground
prepared by the former management.
We took the final steps toward resolving past recall problems on March 30, 2005, with the submission of our final
response to a warning issued by Japan’s Ministry of Land, Infrastructure and Transport and the filing of a claim for compensation for damages against certain former management in place at the time the problems occurred. We want to use thisopportunity to thank everyone for their support during these trying times. Without your understanding, Mitsubishi Motors would
have been unable to make a fresh start.
The various challenges faced by management during the past eighteen months affected our business results for the
fiscal year ended March 31, 2005. Consolidated net sales fell 15.8% from the previous fiscal year to ¥2,122.6 billion.
We reported a net loss of ¥474.8 billion, due in large part to a ¥289.8 billion extraordinary loss related to impairment of
production facilities, a move directed at lowering future cost outlays. Regarding our financial position, we made capitalenhancements of ¥496.0 billion in June and July 2004 and an additional ¥284.2 billion in March 2005. In doing so,
we shored up shareholders’ equity and restored financial soundness, and secured the funds required to finance our
future business plans.
We are now making concerted efforts to win back customer confidence, restore our corporate value, and once again
make Mitsubishi Motors a firm that is held in the highest esteem by all stakeholders. To meet the targets of the Mitsubishi
Motors Revitalization Plan, as our commitment to stakeholders, we promise to implement the measures outlined below:
1. Put the highest priority on customers to win back their confidence
A “customer first” policy now guides all operations, from development and manufacturing to sales and after-sales
service. The most urgent issue is to supply customers with vehicles of the highest quality through the unrelenting
pursuit of quality enhancement.
2. Restructure production and sales networks based on a conservative business plan
The Mitsubishi Motors Revitalization Plan includes a sales plan that incorporates downside risks. We will no longer
pursue the over-extended growth strategies of the past. By steadily reinforcing our competitive strengths while maintaining an optimal scale of operations, we aim to increase our corporate value.
3. Strengthen business execution
We will build a framework that assures steady implementation and verification of business plans. By integrating our organization into eight divisions, or “headquarters,” we have clarified responsibility for each MMC function. We will make sure that
we achieve the goals of the Mitsubishi Motors Revitalization Plan by requiring each division to deliver on its commitments.
In April 2005, we established the Business Revitalization Monitoring Committee, an advisory body to the Board of
Directors. The committee is monitoring progress toward the goals of the Mitsubishi Motors Revitalization Plan from anexternal perspective.
The first year of the Mitsubishi Motors Revitalization Plan has already seen several positive developments, including
the announcement of plans to develop a next-generation electric vehicle and launch new models in the domestic andoverseas markets. There has been a marked change in the mindset of employees, and through our achievements, one byone, we have already been able to feel an effect. Looking ahead, all employees will continue to make unified andconcerted efforts to improve corporate value, with the aim of ensuring that MMC carves out a distinctive niche for itself
in the face of global competition. Through these and other efforts, we are confident of charting a course that leads to therevitalization of Mitsubishi Motors.
September 2005

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

To Our Shareholders and Stakeholders

Takashi Nishioka

Osamu Masuko

Chairman of the Board

President

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M I T S U B I S H I M O T O R S C O R P O R AT I O NBusiness Revitalization – Issues and Initiatives
Interview with the President

Question 1:

What is your view of fiscal 2004? How did the year turn out for Mitsubishi Motors?
In April 2004, we were informed by then leading shareholder DaimlerChrysler that it would
not participate in a capital increase or provide additional financial support to MMC. Having
received this notice, in May 2004, MMC unveiled the Business Revitalization Plan, a new
medium-term business plan formulated to restore vitality to the company. Subsequently,
however, there was a dramatic change in the company’s operating environment due to suchfactors as the loss of public trust triggered by past recall-related issues and customers
shunning Mitsubishi-made vehicles. To respond to this unprecedented change in our operating environment, we announced the Mitsubishi Motors Revitalization Plan, incorporating
additional countermeasures, on January 28, 2005. In this sense, the past fiscal year was aparticularly difficult one for MMC.
Under these challenging circumstances, MMC was supported by corporations and investors
who subscribed to its massive capital increase in expectation of future growth, and theexhaustive efforts of the former management team to win back customer trust lost as a resultof past recall-related issues. It was in this context that I took the helm of the company andbegan leading revitalization efforts in January 2005. I believe that our prospects are now alittle brighter on the road to recovery.
In September 2004, we submitted a report to the Ministry of Land, Infrastructure andTransport on measures taken in regard to the problems associated with past recalls. In March
2005, we submitted our final report to the same ministry in response to its written warning. In
this report, we outlined measures to prevent any recurrence based on a fact-finding study toestablish the causes of the recall-related problems. At the same time, we announced disciplinary actions against the personnel involved, including former directors in place at the time theproblems occurred, thus drawing a line to put the issue behind us. Moving forward, MMC will
redouble its commitment to being a socially responsible automaker as it seeks to regain thetrust of customers and the public at large.

Question 2:

You were appointed president of Mitsubishi Motors just as the company announced its new
revitalization plan in January 2005. You come from a trading company, so what are your views
on management of an automaker?
At Mitsubishi Corporation, I was involved in the overseas marketing of cars for more than 30
years. I am not worried, nor do I feel that managing an automaker will put me under enormous

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NInterview with the President: Business Revitalization – Issues and Initiatives

pressure. I have the full support of an outstanding management team and workforce. I also feelthat I can draw on my trading company background to initiate management reforms from adifferent perspective. My priorities are to streamline management while keeping an eye on cash
flows and the balance sheet, and at the same time developing a new risk management framework.
Question 3:

One key priority of the revitalization plan is to adjust administration to a proper scale. In
essence, this means channeling management resources into operations that embody MMC’s
core strengths. What are Mitsubishi Motors’ core strengths and how do you plan to develop
them further?
Mitsubishi Motors is known for its technology. We made history by becoming the first team onrecord to win five consecutive Dakar Rallies and to claim ten overall victories. We haveoutstanding technologies in the areas of driving performance, both on and off-road, as well as
in terms of durability and safety, all of which have been refined by constantly taking on thechallenge of motor sports. By incorporating these technologies into our products, we will
provide automobiles that are uniquely Mitsubishi Motors.
It is just as important to use our technologies to develop environmentally friendly products.
We are channeling our technological expertise into the environmental aspects of automobiles.
These include responding to emission control regulations and other external environmental
issues, as well as improving a vehicle’s cabin environment, such as in terms of driver safety andcomfort. We will raise our profile by developing automobiles that offer superior features fromthese standpoints. In this respect, the Mitsubishi In-wheel motor Electric Vehicle (MIEV),
unveiled in May 2005, is a precursor of things to come (see page 17).
We sincerely apologize to our customers for the inconvenience caused by past recall-related
problems. Those problems also hurt our brand value. Our foremost priority is to reaffirm ouroutstanding technologies and redouble our commitment to quality, safety and the environment.
Mitsubishi Motors also has regional strengths. Sales in Asia and the ASEAN region
remained favorable despite the turmoil triggered by the recall problem in fiscal 2004. This
demonstrates the very strong brand image Mitsubishi Motors has enjoyed over the years in thisregion, underscoring the fact that we are a company overflowing with a pioneering spirit. In
fiscal 2004, sales growth was also strong in Eastern Europe and other emerging markets.
Winning recognition for the Mitsubishi brand in these emerging markets will go a long way
toward brightening our future. In fiscal 2004, Mitsubishi Motors’ vehicles were highly rated,winning more than 20 awards worldwide (see page 15).
Annual Report 2005

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M I T S U B I S H I M O T O R S C O R P O R AT I O NQuestion 4:

What were the factors behind the recent downturn in operating results? What plans do you
have for correcting the problem?
In my view, the most significant factor was over-ambitious growth policies in all areas of operations.
In product development, we introduced a number of regional vehicles targeted at specificregional markets. However, sales volumes were often not high enough to recoup investments.
Looking ahead, we will instead concentrate management resources on actively launching
global strategic models.
In the U.S., we expanded into business areas beyond our core business of car manufacturing. For instance, we entered the automobile sales financing business on our own. However,
we established a joint venture with Merrill Lynch in March 2005 to reduce risk exposure andto reduce operating expenses while offering competitive financial products.
In manufacturing, declining capacity utilization remains an issue. We have been taking
several steps to address the issue, including the pursuit of strategic alliances with otherautomakers to supply vehicles on an OEM basis. In the U.S. and Australia, we booked impairment losses, switched plants to single shifts, and reduced staff to rationalize operations. We
plan to restructure our production network while keeping a close eye on sales trends.
Through these and other measures, we will selectively concentrate resources in key
areas, as we strive to rescale business operations to an optimal level and build cars withfeatures that fully exert our strengths. The overriding goal is to transform MMC into a
company of choice for consumers.

Question 5:

The new revitalization plan is based on sales volume targets that fully reflect downside risk, and you
are committed to its achievement. What is the most important initiative for the achievement of
the revitalization plan?
The most important initiative is improving sales in Japan and North America. Sales are favorable
in other areas, particularly in the ASEAN region. The chief causes of our poor business performance were a loss of consumer confidence in Japan following the recall issue and over-ambitious
policies for growing sales in the U.S. in the past. While we also want to boost sales in otherregions, restoring sales in Japan and North America will be the key to revitalizing the company.
In Japan, we will boost sales by launching two new models: the Outlander in October 2005
and i in January 2006. In fiscal 2004, we worked to regain customer trust through a freeinspection campaign for 3.4 million MMC car owners. We will continue to work to earn the trust of8

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NOsamu Masuko
PresidentInterview with the President: Business Revitalization – Issues and Initiatives

customers through additional measures, such as the “Five Point Reassurance Program” now
under way (see p. 24).
In North America, the all-new Eclipse, launched a month ahead of schedule in May 2005,
has been well received. In October 2005, MMC will launch the Raider pickup truck, which
will be supplied by DaimlerChrysler on an OEM basis. This launch will mark our entry into the
local pickup truck market, a large market segment in the U.S. We expect these new models toboost dealer traffic and benefit sales of other products as well.
Question 6:

The new revitalization plan reflects the input of cross-functional teams (CFTs). What is yourimpression of the younger team members? What will be their role in the future?
The report of the CFTs was the product of lively discussions on the company’s future heldby around 80 younger employees. I’m pleased to say that they produced many useful,constructive ideas. I’m also convinced that their vision and enthusiasm will be a major
driving force behind our revitalization plan. Now that the plan has been announced, the CFTteam members are not only improving operations in their own units, they are also involving
themselves in the overall management of the company by working with me at the Corporate
Planning Office, and implementing the revitalization plan at the frontlines, including at ourdomestic and overseas dealerships. They are responsible for putting into practice the ideas
and plans formulated in CFT sessions.

Question 7:

When you were appointed president, you expressed your resolve in terms of the three
keywords of Decisiveness, Achievement and Speed. Could you elaborate on the concepts
behind these keywords?
These concepts are key to reforming our corporate culture. Decisiveness means a strong
commitment to face up to even the most difficult issues instead of sweeping them under
the carpet. Achievement refers to the results we must deliver through the decisions we
make. Of course, good decisions alone will not deliver positive results. Decisiveness mustbe followed by appropriate action to achieve the goals we have set. When taking action,
speed will be of essence. Instead of merely waiting for results after action is taken, employees must be encouraged to take the initiative to deliver results. Serious daily efforts by eachand every employee, along with a firm commitment to achieve goals, will be a hallmark of
the corporate culture of the new Mitsubishi Motors.

Annual Report 2005

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M I T S U B I S H I M O T O R S C O R P O R AT I O N

The Mitsubishi Motors Revitalization Plan:
Toward Revitalization
On May 21, 2004, MMC announced the Business

The main thrust of the plan is to change our over-

Revitalization Plan, a roadmap for achieving self-

stretched regional strategy, and make a clean break from ourrevitalization and restoring credibility with all stakehold-over-ambitious product line-up strategy. We are selectively

ers. Guided by this plan, the company raised capital andconcentrating resources in key areas, as we strive to properly

steadily implemented various measures to achieve thescale business operations and build cars with features thatplan’s targets. However, shortly after the plan was

fully exert our strengths. The overriding goal is to transformunveiled, the company’s handling of past recalls led to

MMC into a company of choice for consumers.

the occurrence of a loss of trust from customers andsociety. This triggered sharper-than-expected falls in sales

Targets:

volumes in Japan and overseas, raising concerns over■possible delays in the turnaround of the MMC Group’s
operations and about its financial soundness. These

Restore profitability on a net income basis in fiscal
2006■

Maintain profitability in fiscal 2007 and beyond

developments made it difficult for MMC to secure funds.
To surmount these obstacles and revitalize the MMC

1. Reinforcing Capital and Funding

Group, ongoing efforts have been made to restore trust.
■

However, additional measures were deemed necessary to
shore up the company’s financial position and procure

Reinforce financial position and obtain funds forrevitalization

funds to fuel the revitalization as well as to ensure an

Following the increase in capital of ¥496.0 billion in

improvement in earnings. After due consideration, MMC

2004, MMC raised a total of ¥284.2 billion in Marchannounced a new plan, the Mitsubishi Motors Revitaliza-

2005 through an allocation of shares mainly to threetion Plan, on January 28, 2005.

Mitsubishi group companies (Mitsubishi Heavy Indus-

In the process of formulating this plan, members oftries, Ltd., Mitsubishi Corporation, and The Bank ofcross-functional teams (CFTs), consisting mainly ofTokyo-Mitsubishi, Ltd.). As a result, shareholders’ equity

younger employees led by the Revitalization Committee,

improved to ¥324.8 billion as of March 31, 2005,

identified issues faced by the company and held lively

compared with ¥30.0 billion a year earlier. With this

discussions on how to rectify these issues as well as thestep, MMC obtained a level of capital sufficient to dispel

future of MMC in general. Furthermore, MMC enhanced

concerns over its financial soundness. By fiscal 2007,

the plan’s objectivity and trustworthiness by taking into

MMC plans to procure an additional ¥270.0 billion (inconsideration the advice of 150 outside experts.

March 2005, MMC received a loan of ¥30.0 billion fromthe Development Bank of Japan.) This will ensuresufficient funding for the R&D expenses and capital
expenditures essential to meeting the targets of the
Mitsubishi Motors Revitalization Plan.

Business Focus and DecisivenessIn our current state, we cannot hope to succeed by spreading ourselves too thin. The key toachieving the targets of our revitalization plan is to reduce costs by selectively concentrating
resources in strategic areas and focusing on domains where we are certain to be successful.
It is also essential that we change the mindset of our workforce so that each and every
employee feels that they bear part of the responsibility for making the revitalization plan
successful, as they work to reach the targets of their respective divisions. With unwavering
decisiveness, the newly established Revitalization Promotion Department will play a central
role in the pursuit of management reforms that leave no stone unturned.
Heki Kasugai
Executive Vice President
Revitalization Promotion Officer
In Charge of Corporate Planning, Corporate Affairs & Quality Affairs Group Headquarters

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M I T S U B I S H I M O T O R S C O R P O R AT I O N

2. A Highly Credible Business Strategy

3. Strengthen Business Execution and Establish
Monitoring Functions■

Business plans fully reflect downside risks■

Proactive alliances with other automakers■

Adopt a new management and organizational structure■

Removal of excess production capacity and restruc-■

Build a framework for thorough follow up

turing of sales systems (U.S., Australia, and Japan)

On April 1, 2005, MMC adopted a new management and

MMC’s sales volume targets incorporate many risk factors

organizational structure to ensure that the targets of thesuch as a larger effect from the recall issue in Japan, aMitsubishi Motors Revitalization Plan are achieved.

slow recovery in North America, and a slowdown in the

Under the new organizational structure, operations are

Chinese market. In this manner, MMC has set conserva-

concentrated in eight divisions, or “headquarters,” totive sales volume targets that are achievable.

unify chains of command and clarify accountability. The
eight headquarters are CSR; Finance; Corporate Planning,deal with overcapacity in production and sales networks. In

Corporate Affairs & Quality Affairs; Product Development

Japan, MMC has been integrating its network of vehicle& Environmental Affairs; Production; Global Procurement;

sales subsidiaries and auto-parts sales companies toDomestic Operations; and Overseas Operations.

achieve greater geographical efficiency. Overseas, substan-

The Mitsubishi Motors Revitalization Plan: Toward Revitalization

Furthermore, MMC is taking appropriate measures to

A framework for following up on progress has also been

tial headcount reductions have already been implemented

built. MMC has appointed an executive vice president

at plants in the U.S. and Australia. In parallel, theresponsible for promoting revitalization and established thecompany has reduced its shifts from two to one in these

Revitalization Promotion Department, as internal checking

countries and has booked impairment losses. Meanwhile,

functions. In addition, MMC created the Business

MMC has been pursuing opportunities to form strategic

Revitalization Monitoring Committee, an external body thatalliances with other automakers to raise plant utilization.

monitors progress toward the goals of the Mitsubishi

In addition to ramping up the OEM supply of minicars toMotors Revitalization Plan. Acting as an advisory body to

Nissan Motor Co., Ltd., MMC has officially signed an

the Board of Directors, the committee comprises outsideagreement with PSA Peugeot Citroën on supplying a newexperts as well as representatives from three Mitsubishi

SUV model on an OEM basis. MMC will continue togroup companies (Mitsubishi Heavy Industries, Mitsubishi

examine all possibilities for business alliances. These

Corp., and The Bank of Tokyo-Mitsubishi). The committee

include expanding the range of models supplied on anwill monitor progress being made toward achieving the

OEM basis, mutual supply of components, and joint

goals of the Mitsubishi Motors Revitalization Plan from anlogistics and purchasing of components.

external perspective. In addition to offering necessary
advice, it will also submit reports and proposals in
response to specific requests by the Board.

New Management and Organizational Structure

Business Ethics Committee
Board of Directors

Advice and reports

Business Revitalization Monitoring Committee
Checking from anexternal perspective

Mitsubishi Motors Revitalization Plan
Measures implemented by each headquarters
CSR Headquarters

Finance Group Headquarters

Corporate Planning, Corporate Affairs& Quality Affairs Group Headquarters

Product Development &Environmental Affairs Group Headquarters

Production Group Headquarters

Global Procurement Group Headquarters

Domestic Operations Group Headquarters

Overseas Operations Group Headquarters

Annual Report 2005

11

M I T S U B I S H I M O T O R S C O R P O R AT I O NBusiness Strategies
Product Development
Developing Attractive Products to Achieve the Goals of theTo put this plan into perspective, MMC launched only

Revitalization Plan

four new models in Japan during the three-year period

As part of the revitalization plan, the Product Developmentfrom fiscal 2001 to fiscal 2003. In contrast, the plan

& Environmental Affairs Group Headquarters is committed

calls for introducing a total of nine new models in Japanto rolling out a steady stream of products on schedule over

over the next three years from fiscal 2005 to fiscal 2007.

the three-year period through fiscal 2007. The new vehicles

In fact, we plan to actively launch new models in eachwill be designed to the highest standard of quality and be

market around the world.

cost competitive. The plan calls for launching 29 global

In May 2005, MMC launched the fully redesigned all-models and 10 regional models. The introduction of these

new Eclipse in the U.S., the first new product released

attractive new products is a key requirement for achieving

following the announcement of the revitalization plan.

the goals of the revitalization plan.

Furthermore, in the second half of fiscal 2005, MMC
plans to begin selling in Japan the new Outlander SUV
and the innovative, new-age minicar i. Eclipse is a well-

Launch Plan for New Models(Global Models and Regional Models)
FY2004

known model in the North American market and is giving

FY2005

FY2006

FY2007

traction to the Mitsubishi Motors brand. We expect thelaunch of this new model to help boost sales of otherJapan

Mitsubishi Motors models as well. The Outlander SUV,
which provides a quality, all-round driving experience, will

North America

be introduced in overseas markets and become a global
model. The new i minicar employs a new platform based

Europeon a midship layout where a lightweight, compact engine
China

is mounted toward the rear of the vehicle. This new design
overcomes the size constraints of minicars to achieve

ASEAN

exceptional crashworthiness and spaciousness.
In addition, in fiscal 2005, MMC will start local

Other regions

Global Models

production of new vehicles in various locations around theRegional Models (including
minicars)

world. These include the new Triton one-ton pickup truckin Thailand, the new 380 luxury sports sedan in Australia,
and a new multipurpose vehicle in Taiwan.

Developing Technologies That Provide the “Utmost Driving Pleasure and Safety”
In product development, a key requirement for achieving the goals of therevitalization plan is to launch attractive products, on plan in terms of quality,
cost, and timeliness. By developing products that leverage the four-wheel drive
and all-wheel control technologies cultivated by MMC, we aim to provide
automobiles that embody the “Utmost Driving Pleasure and Safety.”
Tetsuro Aikawa
Managing Director
In Charge of Product Development & Environment Affairs Group Headquarters

12

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

MMC has won many accolades for quality. In the U.S.,
the Galant and Endeavor ranked No. 2 in their respective
categories in the Initial Quality Study (IQS) conducted by
J.D. Power and Associates.
The recently developed 1.5-liter DOHC 16-valve 4cylinder aluminum engine, fitted to the Colt and Colt Plus
adopts the MIVEC (Mitsubishi Innovative Valve timing
Electronic Control) system. This next-generation engine
delivers a sporty driving performance and an environmental
performance that meets ongoing market demands for low
Eclipse (North American specification)
Fourth-generation model launched in North America in May 2005.

fuel consumption and low emissions.
While many automakers have concentrated theirenergies with regard to environmentally friendly technologies on developing hybrid vehicles, MMC has continued toand Safety”

independently develop electric vehicles. In May 2005, theTo survive in the global automotive market, where fierce

company unveiled the MIEV (Mitsubishi In-wheel motor

competition is the norm, MMC must incorporate theElectric Vehicle) concept, which involves next-generation

propriety technologies it has developed into all products.

electric vehicle technologies. The core elements are in-wheel

Through participation in motor sports such as rally events,

motors, which refer to motors fitted inside the wheels, and

MMC has developed state-of-the-art technologicallithium-ion batteries, which offer superior performance inexpertise in four-wheel drive and all-wheel control, as wellterms of energy density. Development is progressing withas in the fields of weight reduction and aerodynamics.

the aim of a market launch within the next several years.

These technologies will be embodied and commercialized

MMC hopes to contribute to society by achieving massin the safety and durability of MMC’s “SUV DNA,” asproduction of electric vehicles, which have no exhaust

represented by the Pajero, and by on and off-road driving

emissions, ahead of the competition.

Business Strategies

Technologies for Offering the “Utmost Driving Pleasureperformance of MMC’s “Sporty DNA,” as represented by
the Lancer Evolution.

2005–2006
Good Design Award
Outlander (Japanese specification)
An all-new SUV embodying the pursuit of driving performance and comfort based on “an innovative on-road SUV”
concept. Launched in October 2005, the Outlander features a newly developed engine, platform and body frame.

Annual Report 2005

13

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Triton Double Cab
Produced in Thailand, a new one-ton pickup truck which went on sale in August 2005.

Two Next-generation Platforms

The minicar platform used in i (MR platform) is a

MMC has adopted entirely new platforms for Outlander

midship layout where the engine is mounted toward theand i, scheduled for launch in fiscal 2005.

rear of the vehicle. It is an innovative platform that

The platform used in the Outlander is MMC’s new mainreconciles many trade-offs—crashworthiness vs.

platform. It will be used to produce approximately threespaciousness, a comfortable ride vs. responsive handling,million units, including other new models such as a newand large tires vs. a tight radius turning—that arise due tomono-box (van) model and a small sedan. The platform’s

the size constraints of minicars. Using this platform as adevelopment reflected the collective expertise of MMC’sbase, MMC will develop unique minicars.

entire engineering force in crashworthiness, durability,

The MR platform also has a very broad scope ofrigidity and weight reduction. With the flexibility to accom-

application, including uses in future electric vehicles.

modate 1.5- to 3-liter class engines, the platform can bebroadly applied to vehicles ranging from SUVs to sedans.

Lancer Evolution IX (Japanese specification)
The 12th model in a line of high-performance 4WD sedansthat have become strongly connected with major motor sports
events such as the FIA World Rally Championship (WRC).

14

Annual Report 2005

Grandis Sports Gear (Japanese specification)
A new-style mini-van incorporating elements of an SUV.

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Colt Plus
This new compact wagon offers excellent
utility by adding the luggage space of astation wagon to the Colt.

Colt CZ3 (European specification)
A three-door model of the Colt. Thislineup also includes the Colt CZT,
which is equipped with a turbo engine.

Colt (European specification)
This compact car has received a number of awards,
including the 2004 Golden Steering Wheel Awardin Germany.

Model

CountryAward

CategoryColt

Germany

Das Goldene Lenkrad (Golden Steering Wheel)

Compact car

Denmark

Car of the Year in Denmark 2005

All categories

The Netherlands

Compact Car of the Year 2004

Compact car

The Netherlands

The 2004-2005 Right Size Award–

Romania

Car of the Year in Romania 2005

All categories

PolandBest Cars 2005

Compact car

LancerRussiaCar of the Year in Russia 2005

C segment

Lancer Evolution

U.K.

Scottish Sports Car of the YearSports car

FranceSportive de l’annee (Sports Car of the Year)Sports car

PolandPlayboy Sports Car 2004

Sports car

GreeceBest New Production Car Under Euro 60,000

–

U.S.

Sport Compact Car of the Year 2005

Compact sports car

U.S.

2005 All-Star

Sports sedan

Australia

Bang for your Bucks

All categories

Lancer Wagon

PolandSUPERPRODUKT 2004

All categories

GrandisU.K.

Scottish MPV of the Year

MPV

ThailandBest MPV

MPV

RomaniaBest SUV in Romania 2004

SUV

Outlander

Business Strategies

Awards for Mitsubishi Motors Vehicles (Fiscal 2004)(Airtrek in Japan)
PajeroAustralia

Best Medium 4WD Diesel

SUV

StradaThailandBest Export Pick-up Truck

Pickup trucki (Japanese specification)
Developed with “an innovative, new-age mini-car”
concept, the i is the first Mitsubishi vehicle to employ arear mid-ship layout, which offers both the highest
safety and comfort for a mini-car. Scheduled to go onsale in January 2006.

Raider (North American specification)
MMC’s first model to be launched in North America’s large
pickup truck market. Rolled out in October 2005.

Annual Report 2005

15

M I T S U B I S H I M O T O R S C O R P O R AT I O N■ Basic R&D Policies
MMC is pursuing R&D activities with the view to realizing the• MMC is enhancing its lineup

aspirations of the new corporate philosophy formulated inof high-performance, low

conjunction with the announcement of the Mitsubishi Motors

fuel consumption,

Revitalization Plan in January 2005. In essence, this means

powertrain systems. Thisthat the most significant mission of R&D at MMC is tolineup includes a recently

continue to deliver without comprise the “Utmost Driving

developed MIVEC aluminum

Pleasure” and “Safety” for “Valued Customers and Our

cylinder block engine, CVT

Community.” More specifically, MMC is striving to achieve(Continuously Variable

this goal based on the following three key themes:

Transmission) and AMT

New 2.4 liter, 4-cylinder MIVEC
engine fitted on the Outlander(Automated Manual Trans“For Valued Customers and Our Community”

mission). These efforts are being made to respond to new

Develop automobiles with improved fuel efficiency andfuel economy standards that will come into force in Japan

low emissions, low-pollution vehicles, and easily recy-in 2010 as well as a new certification system for low-clable vehicles with no hazardous substances with the aim

emission vehicles. In parallel, MMC is working to meetof protecting the environment.

overseas regulatory developments such as the tighteningof CAFE standards in the U.S., the launch of the ZEV“The Utmost Driving Pleasure”
Develop high-performance powertrains and four-wheel
control technologies, as well as technologies for lowering
the center of gravity and reducing the weight of vehicles.

program in California, and voluntary targets for reducing
CO2 emissions in Europe.
• As part of initiatives to create propriety environmental
technologies, MMC is pursuing the development of nextgeneration electric vehicles. These vehicles are based on“Safety”

two core technologies: in-wheel motors, which enable theDevelop body frame structures and safety features thatdrive system to be housed compactly, and lithium-ion

protect passengers, and interior materials that achieve

batteries, which offer superior energy density. Collectively,

more comfortable cabin spaces.

these technologies and vehicles are referred to as the MIEV
(Mitsubishi In-wheel motor Electric Vehicle) concept. MMC<Concrete Initiatives>is pressing ahead with technological development with theBased on the above basic policies, approximately 4,000

view to pursuing the exciting new possibilities of electric

R&D staff members across the MMC Group are working tovehicles while also applying these technologies to hybrid

develop a variety of new technologies.

and fuel cell vehicles in the future. Through these initiatives, the company is setting its sights on manufacturingcars befitting the current Century of the Environment.
• In the field of safety, MMC is developing technologies inareas such as passenger and pedestrian protection, andcompatibility, as well as advancing R&D in the safety ofstructural frameworks during collisions. Active safetymeasures include the development of electronics designed
to anticipate and prevent accidents and driving support
technologies such as parking assistance systems, inaddition to the improvement of fundamental aspects ofdriving performance such as braking and steering.
• Technologies are also being developed to make cabin
environments more comfortable. These include low-VOC
interior materials (VOCs: volatile organic compounds
responsible for “sick-house” syndrome.), the removal ofodors, pollen and other allergens, and UV and infrared
blocking technologies.

16

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NMIEV (Mitsubishi In-wheel motor Electric Vehicle)

In May 2005, MMC announced the MIEV concept, which

2. Lithium-ion Batteries

collectively refers to the test vehicles and technologies

Lithium-ion batteries offer better energy density and life

associated with a program to develop proprietary electric

expectancy than conventional lead-acid or Ni-MH batteries.

vehicle technology.

MMC has been developing EVs using this type of battery for

MIEV incorporates two core technologies: the in-wheel

many years, including the Mitsubishi HEV (1996), the FTO-

motor, which makes the drivetrain more compact; and a

FV (1998) and the Eclipse EV (2000). Public road trials

lithium-ion battery, which boasts outstanding energy density

and other testing have demonstrated the practicality ofand other properties. Development is under way with thesuch batteries as an EV power source. One of the major

aim of commercializing the first MIEV in the next several

obstacles to the uptake of EVs in the past has been theiryears. At the same time, MMC aims to create technologies

limited range. However, with the operating range on athat can be applied in hybrid and fuel cell vehicles.

single charge now up to 150km, there are high hopes forthe commercialization of these vehicles in the years ahead.
The economics of electric vehicles are also compelling, with

1. In-wheel Motors

electricity for a single recharge costing roughly 75% less

In-wheel motors represent an innovative technology that powers

than gasoline during the day and 90% less at night.

Business Strategies<MIEV Features>

vehicles using only high-performance, compact motors that
fit inside the wheels, eliminating the need for transmis-

MIEV

In-wheel motors

sions, driveshafts and other complicated drive systems.
The Colt EV, the first MIEV test car, has two in-wheel

Electric vehicle

motors installed in its rear wheels. The Lancer Evolution

MIEV, the second test car, is equipped with new-type in-wheel

Lithium-ion batteries
Inverter

motors, which deliver even more power, in all four wheels.
(I) Free Layouts

Hybrid vehicle

Putting the drivetrain system in a compact form inside theFuel tank (gasoline)

wheels makes a dramatic difference in terms of freeing up
Engine/generator

the layout of the vehicle. This further increases thepotential of electric vehicles, including the possibility to

Fuel cell vehicle

improve passive safety and driving performance, enabling
the creation of innovative exterior designs and creating
Fuel tank (hydrogen)spacious cabin environments. At the same time, this also
Fuel cellmakes the in-wheel motor a promising technology for use
in hybrid vehicles, as well as in fuel cell vehicles whereconsiderable space is needed to accommodate the fuelElectric vehicle technologies centered on in-wheel motors and lithiumion batteries can also be applied to hybrid and fuel cell vehicles.

cell stack and hydrogen tanks.
Lithium-ion battery

In-wheel motor (providing drive)(II) Progress in All-wheel Control Technology
Installing in-wheel motors in all four wheels realizes
advanced control of driving and braking force independently for each wheel, contributing to high levels of driving
performance. These components therefore offer the
possibility of wider application and enhancement of thecompany’s all-wheel control technology currently used in

Inverterthe Lancer Evolution, Pajero and other models.
Schematic of Colt EV, the first MIEV test car. Two in-wheel motors are
installed in the rear wheels. Driving tests are currently being conducted to
identify and surmount the technical issues posed by in-wheel motors.

Annual Report 2005

17

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Quality
Regaining TrustFirst Step—Organizational Reforms

Regaining Trust. For the revitalization of Mitsubishi

In June 2004, quality-related tasks previously performed

Motors, no issue is more critical.

separately at the planning and development, purchasing,

By delivering appealing products and services that our

production, sales and other stages were concentrated in thecustomers can enjoy with confidence, the entire company

newly established Quality Affairs Office. This step unified

is firmly committed to gaining trust in Mitsubishi Motors.

all decision-making on quality issues. The office’s mission

We deeply regret that MMC’s involvement in the recall

is to assume ultimate responsibility for the quality andcover-up of 2000 caused considerable hardship for oursafety of all Mitsubishi-brand vehicles worldwide. To thiscustomers and other stakeholders. Acknowledging theend, it has devised systems to enhance productinadequacy of the investigation carried out at the time, MMC

development and manufacturing quality, and expedite

reopened the investigation of past recall issues in 2004. We

quality improvements in the marketplace, all from thecompleted the process of identifying all quality problems

customer’s perspective.

and notifying the authorities of these issues where neces-

While the Quality Affairs Office is involved in allsary. In the process, we recognized that two factors were

processes of quality assurance, the CSR Promotion Office’s

to blame—the lack of an organizational structure to ensure

Quality Audit Department conducts audits to determine thequality production at every level, and a corporate culture

appropriateness of the Quality Affairs Office’s activities.

in which a compliance mindset had yet to fully penetrate.
Following an exhaustive investigation of the facts, root

Quality Assurance Initiatives

causes and background of the series of recall issues over the

Quality assurance consists of two types of initiatives:

past 25 years, in March 2005, MMC submitted to Japan’s

producing vehicles free of problems, and preventing the

Ministry of Land, Infrastructure and Transport (MLIT) its final

recurrence of problems that have occurred. At MMC,

report in response to a written warning issued by MLIT. The

quality assurance is illustrated by the following actions:final report details the findings of the investigation andoutlines measures to prevent any future recurrence.

■

Quality Management System: ISO 9001:2000

In parallel, MMC sought to clarify management

In 2003, Mitsubishi Motors obtained ISO 9001:2000

accountability by bringing legal claims against certain

edition certification company-wide. In the following year,

former members of management in charge when these

MMC was granted approval by certification agencies inincidents took place. With this step, we made a clean

Japan (JAB) and the U.K. (UKAS) to maintain its certifica-

break with the old corporate structure that was at the roottion after passing a follow-up inspection conducted by aof the problem and reaffirmed our determination to mold athird-party examiner. ISO 9001 is an international standard

new Mitsubishi Motors trusted by our customers andthat enables third parties to objectively evaluate manufac-

society at large.

turers’ initiatives to improve customer satisfaction byimplementing continuous improvements in their quality
management systems. MMC has obtained ISO 9001
certification in the fields of design, development, purchasing, manufacturing and service.
■

Development and Production Quality Enhancements

Beginning with the eK WAGON launched in 2001, MMC
introduced MMDS (Mitsubishi Motors Development
System), a management system for assuring and
Mitsuo Hashimoto
Senior Executive
Officer
Corporate General
Manager of Quality
Affairs Officeimproving the quality of all manufacturing processes.
This system, which employs the “Quality Gate” concept,
defines standards that must be met by all products andprocesses at every stage leading up to market launch.
Using this system, MMC conducts comprehensive

18

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NMMDS (Mitsubishi Motors Development System)
Product
development flow 
Requestsfromcustomers

 Start of development  Design approval

Product
planning

Designconcept

Designspecifications

 Market launch

Prototype
testing

Completion ofdevelopment

Qualityverification

Sales andretailing

Customers

Quality gate

reviews and evaluations to ensure that these standards

accurately, MMC formed a Preliminary Assessment Teamare met. As checklist items and their requirements arecomprising technical experts in product development andreviewed and upgraded continuously to meet changing

production. The team examines initial problem-related

conditions, the thoroughness of the MMDS system isinformation received from dealers to identify high-riskbuilding up definite quality.

cases so that the company can immediately begin
Business Strategies

appropriate investigations.
■

Response to Quality Problems

Information regarding quality problems, from development■

Expediting the Recall Decision Process and Ensuring

and production through to after-sales service, encompass-

Transparency

ing not only domestic but overseas information, is now

To shorten the period from the occurrence of problems tocentrally managed. Sharing this data throughout thethe implementation of countermeasures and procedures,company will enable us to handle problems and prevent

MMC increased the frequency of quality countermea-

recurrences faster.

sures meetings and recall assessment meetings from

MMC also has a network of ten technical centers acrossonce to twice monthly. In addition, to heighten theJapan equipped with advanced repair and maintenancetransparency of these meetings, members from thetechnology under the direct authority of the Quality Affairs

customer relations department and marketing division

Office. These centers offer backup support to dealers forparticipate in these meetings.
Other participants include observers from the Businessrapid and accurate response to quality problems. Furthermore, MMC will be increasing its workforce in 2005 andEthics Committee as an additional external check.

beyond, with the aim of enhancing its customer anddealer support systems.

■

Raising Employee Awareness of Quality Issues

All employees receive training on laws and regulations
Preventing Recurrences of Quality Issues

pertaining to recalls, and career paths include an assign-

In light of the findings of investigations into past recall issues,

ment in a quality-related department.

MMC is implementing additional improvement measures,
starting with the following, to prevent the recurrence of quality■

issues. At the same time, we are taking steps to speed up ourWith a view to raising awareness of the recall process andservice systems for quality assurance.

to preventing any recurrence of past recall-related issues,

Partial Revisions to Employee Regulations

MMC revised the disciplinary provisions in its employee■

Improving the Management System for Product Quality

regulations to clarify responsibilities of individual employ-

Information

ees with regard to product quality and customer safety.

Information concerning quality problems in products
already on the market, including issues in which a recall

At Mitsubishi Motors, we are pursuing the origins of car

is deemed unnecessary, is discussed at quality meetings

engineering as we strive to regain trust by continuously

and at managing directors meetings. It is then reported to

implementing thorough measures to improve quality. In

the Board of Directors.

doing so, we hope to contribute to people’s lives and tosociety. We are committed to providing customers with theForming a Team of Technical Experts

utmost satisfaction and driving pleasure through the

To improve quality on the market faster and more

vehicles we manufacture.

■

Annual Report 2005

19

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Production
Enhance Plant Utilization

inefficiencies and mistakes at the production site. As part

MMC is making ceaseless efforts to improve productionof these efforts, MMC is working to improve the FTC (firstefficiency, a key requirement for achieving the goals of its

time capability) rate, which has been positioned as a key

revitalization plan.

benchmark. This rate is the percentage of finished vehicles

In Japan, a substantial drop in domestic sales volumeassembled without being removed from production lines

in fiscal 2004 triggered a major decline in capacity

due to defects, and improves in step with quality enhance-

utilization at the Mizushima and Okazaki plants, and at

ments. When this rate is sufficiently high, just-in-time

Pajero Manufacturing Co., Ltd. (PMC).

component procurement based on detailed production

From fiscal 2005, however, an increase in plant

plans becomes possible, making planned-sequential-

utilization is planned due to increased volumes from theproduction, which can achieve the best combination oflaunch of Outlander and i, and due to strategic businessproduction and logistics, a reality.

alliances with Nissan Motors Co., Ltd. and PSA Peugeot

Giving quality enhancements of this kind the highest

Citroën of France for OEM supply of vehicles such aspriority, MMC decided to temporarily postpone the transfer

minicars and SUVs.

of production of models from the Okazaki plant to theMizushima and PMC plants, which had been announced

Quality Improvement Is Essential for Productivity

as part of the Business Revitalization Plan in May 2004.

Improvement

With the Mizushima Plant poised to enter peak production

At Mitsubishi Motors, we believe that to improve quality it

as the assembly of new models begins in the second half

is absolutely essential to improve productivity. Improvedof 2005, we determined that rather than transferring

quality in each development and production process leads

production duties at this time, the best course of action isto smoother production line flow and higher production

to avoid placing an undue burden on the site.

output. Based on this belief, MMC is currently implement-

Even at production sites, the greatest emphasis is on

ing the ISQC (In Stage Quality Creation) program. Thisdelivering high-quality products to our customers, andprogram involves far-reaching quality management

enacting measures to enhance productivity.

initiatives targeting each and every process on the production line aimed at enhancing productivity by preventing

Establishing a Unique Production System
MMC is working to raise production efficiency by restructuring production facility
capacity, reviewing logistics procedures, and through OEM supply based on
business alliances. But most important by far is enhancing productivity throughenhanced quality. Improvements in the FTC rate are being made through careful
quality management beginning in the development stage. The goal is to establish aunique production system with quality and production efficiency that surpasses
that of peer companies.
Makoto Maeda
Managing Director
In Charge of the Production Group Headquarters

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Principal Plants












 


Business Strategies

Vehicle assembly plant
Powertrain plant

Country/Region

Name

Japan

 Nagoya Plant - Okazaki

Major Products
Colt, Colt Plus, and Grandis Mizushima Plant

Outlander, Lancer, eK WAGON and Minicab

 Pajero Manufacturing Co., Ltd.

Pajero Powertrain Plant - Kyoto

Engines Powertrain Plant - Shiga

Engines Powertrain Plant - Mizushima

Engines and transmissions

U.S.A.

 Mitsubishi Motors North America, Inc. (MMNA)

Eclipse, Galant, and Endeavor

Netherlands

 Netherlands Car B.V. (NedCar)

Colt (European model)

Germany

MDC Power GmbH (MDC-P)

EnginesThailandMitsubishi Motors (Thailand) Co., Ltd. (MMTh)

Triton and Strada (one-ton pickup trucks)

The

Mitsubishi Motors Philippines Corp. (MMPC)

Adventure and Delica

Philippines

Asian Transmission Corp. (ATC)Transmissions

TaiwanChina Motor Corporation (CMC)

Lancer, Savrin (Chariot Grandis)Indonesia

 P.T. Mitsubishi Krama Yudha Motors & Manufacturing (MKM)

Manufacture of automotive parts

Vietnam Vina Star Motors Corp. (VSM)

Pajero, Lancer, Joly (Asian car) and Grandis

China Shenyang Aerospace Mitsubishi Motors Engine Manufacturing, Ltd. (SAME) Engines

Australia

 Harbin Dongan Automotive Engine Manufacturing, Ltd. (HDMC)

Engines and transmissions

 Mitsubishi Motors Australia, Ltd. (MMAL)

380

Annual Report 2005

21

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Procurement
Role of the Procurement Division in the New

those that could offer the lowest price. However, taking

Administrative System

this approach meant that we sometimes ruined long-

An organizational revision made in April 2005 saw thelasting relationships with suppliers, and it also affected

procurement division, which had previously belonged tothe quality of parts. Therefore, we are shifting fromthe Product Operations Group Headquarters, become thevolume-based cost reduction to quality-based cost

independent Global Procurement Group Headquarters with

reduction, which improves the overall quality of suppliers.

a direct reporting line to the president. This change shows

Specifically, we will keep in close communication withhow significant the role of purchasing is for the revitaliza-

suppliers, starting from the product design phase and thetion of Mitsubishi Motors. Under this new organization, wedevelopment phase. We aim to continually pursue optimal

are targeting a 15% reduction of material costs for thecosts and quality by enhancing our cooperative relation-

three-year period from fiscal 2004 to fiscal 2006. MMC

ships with suppliers to improve suppliers’ overall perfor-

currently faces extremely severe procurement conditions,mance in every aspect, particularly the parts

such as rising prices of steel and other raw materials.

manufacturing processes (including line layout andHowever, we see this as an opportunity to be innovative inpersonnel positioning), material procurement methods andour approach to reducing materials costs, and to enhancecost control methods.

competitiveness by improving the performance of

In June 2005, MMC established a new Suppliers

suppliers. We are committed to achieving these goals by

Council consisting of 159 suppliers. Through mutual

undertaking whatever challenges are required.

study and practical activities directed toward the future,
we will further strengthen our cooperative relationships

Change From Volume-based Purchasing to Quality-based
Purchasing

with suppliers.
Moreover, as clarified in the MMC revitalization plan,

Volume-based purchasing has generally been the method

the enhanced relationships between MMC, Mitsubishi

for reducing material costs, and this method was the

Corporation and Mitsubishi Heavy Industries offer

normal business practice in MMC as well. For example,

significant advantages to suppliers. For example, we canreducing material costs can be achieved by promoting

establish “win-win” relationships with suppliers byvolume bundling on a global basis. But when our sales

utilizing the marketing expertise of Mitsubishi Corporation

volume suddenly declined and the expected purchasing

and the leading-edge technology of Mitsubishi Heavy

volume also decreased, negotiations with suppliers

Industries to generate and expand business opportunities.

became problematic, forcing us to change suppliers to

From Volume to Quality
The former procurement division is now playing a more vital role in therevitalization of MMC as it has became the Global Procurement Group
Headquarters with a direct reporting line to the president, from April 2005.
We are shifting from volume-based purchasing to quality-based purchasing,whereby we work closely together with suppliers to enhance cost competitiveness and parts quality. We are meeting the challenge of pursuing optimal costs
through the improvement of suppliers’ overall quality in every aspect,and see today’s tough procurement environment as a chance torenew and further reinforce our relationships of trust with suppliers.
Norio Aoki
Managing Director
In Charge of Global Procurement Group Headquarters

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Region«Domestic Operations»
Net Sales

Operating Loss

Unit Sales(¥ billion)(¥ billion)(Thousand units)

600

0

300

500

250

–20

400

200
–40

300

150
–60

200

100
–80

100
0

06

07

08

–100

05

06

Plan*

07

08

0

05

Plan*

06

07

08

Business Strategies

05

50

Plan*

* MMC revised its targets for fiscal 2005 when it released its fiscal 2004 full-year financial results on May 23, 2005. Targets
for fiscal 2006 onwards are those announced in the Mitsubishi Motors Revitalization Plan on January 28, 2005.

Under the revitalization plan, MMC’s commitment is to

Returning to the Basics of Putting the Customer First

first increase domestic sales volume to 253,000 units in

After a Sharp Fall in Sales

fiscal 2005. Next, MMC aims to expand sales volume

The past recall issue had a major impact on domestic

further and achieve a return to profitability in domestic

sales, resulting in severe falls in domestic sales volumes inoperations earlier than planned. In fiscal 2004, domestic

the first half of fiscal 2004; there were some months in

net sales represented slightly less than 20% of total net

which sales volume was less than half the previous year’s

sales after a sharp decrease in sales volume last year.

level. These declines, compounded by voluntary restraints

However, restoring confidence in the domestic market

on advertising and sales promotions due to recall-related

remains a top priority for staging a true comeback on theissues, made it difficult for MMC to implement its domes-

global stage.

tic sales strategies.

“Our Bond With the Customer” Is a Key Asset
In 2004, MMC suffered sharp falls in sales volume due to a loss of trust
caused by the past recall issue. In this climate, we returned to the basics of
putting the customer first. We offered a free inspection program for all MMC
vehicle owners. Building on the relationships with 3.4 million customers
reestablished through this inspection program, we will continue to restore
customer confidence and maximize the after-sales business. Positioning
fiscal 2005 as the inaugural year of a drive to promote after-sales services,
MMC is committed to these services. Efforts will also be made to improveearnings by actively launching long-awaited new models.
Fujio ChoManaging Director
In Charge of Domestic Operations Group Headquarters

Annual Report 2005

23

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Under these trying circumstances, in fiscal 2004,
MMC achieved sales of 227,000 units, 7,000 units
higher than the target announced on January 28, 2005.
This was due largely to the tremendous efforts of staff at
MMC dealers.
Meanwhile, MMC invited all owners of MMC vehicles tobring their cars to dealerships for free inspections throughdirect mail campaigns by dealers, newspaper advertisements and other means. In addition to ensuring vehicle
safety, the free inspection program was aimed at achieving one of MMC’s highest priorities: engaging in a
dialogue with each and every customer to help win backLancer Evolution Wagon
The first station wagon in the Lancer Evolution series,
the Lancer Evolution Wagon achieves unparalleleddriving performance for its class.

their trust and build stronger relationships. Thanks to thededication of dealers nationwide, MMC was able to carryafter-sales service drive, MMC will provide the “Five Pointout free inspections on 3.4 million vehicles.

Reassurance Program” and enhance all services forcustomers through dealers, with the view to building even

Strengthening Customer Relationships Through Highstronger relationships. MMC will continue to strive to

Quality After-sales Services

restore customer confidence through these initiatives.

MMC views the customer relationships rebuilt through theAlso, in terms of customer response, we will encourage

free inspection program as the foundation of future

our customers to personally bring in their vehicles tomarketing initiatives. With this in mind, the company will

dealerships for repairs so that advisors can directly

reinforce links between sales and services at dealers to

confirm repair details with them. These visits will also

further deepen customer relationships. Going forward,

provide opportunities for customers to view new models,

MMC will bolster the entire after-sales value chain,and for other services to be provided to them as well. In

beginning from the purchase of new cars to end-of-life

this manner, MMC aims to establish a framework where

disposal. With fiscal 2005 as the inaugural year of anafter-sales services and sales complement one another.

“Five Point Reassurance Program”

24

Program

Details

Launch Period

Mitsubishi Reassurance Support“Mitsubishi Assist 24” 24-hour roadside assistance for new vehicle purchasers

January 2005

Engine Oil Change Campaign

Discounted oil changes for customers who bring their vehicles to dealers for servicing

May 2005

Car Inspection with Extended
Warrantees

Extended 2-year warrantees offered at discounts during dealer inspections and apackage combining package combining inspections with “Mitsubishi Assist 24”

October 2005

Two-year Warranty Program for
Certified Used Mitsubishi Cars

Two-year quality guarantee for certified used Mitsubishi vehicles

September 2004

Mitsubishi Reassurance
Insurance

Customers who purchase automobile insurance from Tokio Marine & Nichido
Fire Insurance Co., Ltd. at Mitsubishi dealers receive “Mitsubishi Assist 24”

January 2005

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NiOutlander

Building an Optimal Sales and Service Structure to Put

MMC plans to launch two long-awaited new vehicles in the

Customers First

second half of fiscal 2005: Outlander and i. Outlander is

To stabilize and improve operating profitability, MMC will

an all-new SUV powered by a new 2.4-liter aluminum

reestablish an optimal sales network. As of July 1, 2005,

block engine. While Outlander offers SUV-grade durability,

the company’s sales network consisted of 164 dealer

it also presents unparalleled on-road driving performance,companies and 861 locations. Based on longstanding

sporty looks and flexible utility not found in traditional

relationships of trust, MMC seeks to maintain relation-

SUVs. This new model promises to attract not only

ships and spur on the development of successful indepen-

existing SUV drivers, but also sedan and minivan drivers

dent sales companies. Meanwhile, MMC will realign its

seeking to replace their vehicles. On the other hand, i, an

network of consolidated (company-owned) sales compa-

innovative, new-age minicar, is the first Mitsubishi Motors

nies by closing and integrating dealerships to broaden

model to employ a midship engine layout. With this new

their coverage areas, while making every effort to shedmodel, MMC is targeting not only minicar users, butcosts and expand sales. MMC is also seeking to consoli-

replacement demand from compact car owners as well. In

date and broaden the coverage of its network of domestic

addition, MMC is counting on the attractive i model toauto-parts sales companies, which currently consists of 13

play an instrumental role in appealing to female custom-companies in 63 locations.

ers, who reacted most acutely to the recent spate ofquality issues.

Business Strategies

Launch of New Vehicles

However, MMC will still require at least 800 dealerships
to provide adequate after-sales services to owners of
Mitsubishi vehicles. Decisions will be made carefully, while
keeping a close eye on future trends in sales volume.

Dealerships are being renovated and redesigned based on a corporate
identity design to create a favorable impression.

Annual Report 2005

25

M I T S U B I S H I M O T O R S C O R P O R AT I O N«Overseas Operations»
Net Sales

Operating Profit (Loss)

Unit Sales(¥ billion)(¥ billion)(Thousand units)

2,000

100

1,200

80

1,000

1,500

60

800

40
1,000

600
20
400

0

500

200

-20
0

-40
05

06

07

08

0
05

06

Plan*

07

08

05

Plan*

06

07

08

Plan*

* MMC revised its targets for fiscal 2005 when it released its fiscal 2004 full-year financial results on May 23, 2005. Targets
for fiscal 2006 onwards are those announced in the Mitsubishi Motors Revitalization Plan on January 28, 2005.

Strengths and Issues in Overseas Markets

Rebuilding Operations in Unprofitable Regions andOverseas operations will have a significant bearing on the

Building on MMC’s Strengths

outcome of the Mitsubishi Motors Revitalization Plan as

As part of the revitalization plan, MMC will rebuild opera-

this segment represents approximately 80% of consoli-tions in regions where it has fallen into the red, while

dated net sales. MMC has a long history in the ASEAN

launching attractive new models in all markets. At the same

region and other Asian markets, in particular. For

time, efforts are being made to enhance models andexample, in Indonesia, the history of Mitsubishi Motors,

operations in regions where MMC can exert its strengths.

centered on commercial vehicles, dates back some thirty

Specifically, MMC has already booked substantial impair-years. In these regions, the Mitsubishi Motors image ofment losses, reduced headcount and taken other actions indurability and reliability has thoroughly penetrated theNorth America and Australia, where overcapacity was anmarkets, enabling MMC to consistently generate highissue. With these steps, MMC has achieved a sharp

earnings, especially in the ASEAN region.

reduction in fixed costs and a lower breakeven point.

However, looking at overseas markets on the whole,The key themes in each region are as follows: establish a

MMC has struggled to generate sufficient sales volumes toprofitable operating structure in North America, achieve

recoup investments made as part of past efforts to actively

commercial viability and growth in Europe, actively leverage

expand local production.

the strong Mitsubishi brand in China, and further reinforce
sales capabilities in the ASEAN region. Looking ahead, MMC
will implement various initiatives to achieve these goals.

Keys to Revitalization: Reestablish MMC in the North American Market andAchieve Steady Growth in All Markets
In overseas operations, a key requirement for revitalizing MMC is to jump-start
operations in the North American market, where MMC has struggled due to its
previous over-ambitious sales growth strategies. On the other hand, Mitsubishi
vehicles continue to enjoy an image of durability and reliability and are firmly
trusted by customers in many regions worldwide. While preserving these assets
and further enhancing quality under an optimal global production network, wewill leverage our strengths and focus on markets where we are competitive. I
believe this will ultimately pave the way for long-term growth.
Hiroshi Harunari
Managing Director
In Charge of Overseas Operations Group Headquarters

26

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N■ North America
Net Sales

Operating Profit (Loss)

Unit Sales(¥ billion)(¥ billion)(Thousand units)

600

20

250

500

0
200
-20

400

150

-40
300
-60
200

100

-80
50

100

-100

0

-120
06

07

08

0
05

06

Plan*

07

08

Plan*

05

06

07

08

Business Strategies

05

Plan*

Putting an End to a Vicious Cycle

Rebuilding Brand Image and Shifting to a Stronger

Our previous policy of over-ambitious sales growth saw

Earnings Structure

excessive reliance on fleet sales and incentives, andNorth American operations have been realigned in asales financing products insufficiently analyzed for theirstructure which unifies production, sales and financerisk. This over-expansion had the effect of driving down

under a new management team. Rich Gilligan, former

used car prices, which hurt new car sales and damaged

head of production, has been appointed CEO of Mitsubishi

the image of the Mitsubishi Motors brand. This vicious

Motors North America, Inc. (MMNA), and new heads ofcycle was a primary reason for the downturn in Northeach major business function, including a new executive

American operations.

vice president in charge of sales and marketing, have been

However, MMC has not changed, and will not change,

appointed. In fiscal 2004, MMNA reduced fleet sales to

its stance on the importance of the North American market.

23% of total sales, from more than 30% in fiscal 2003.

In fiscal 2004, North American operations posted a

In fiscal 2005, plans call for further lowering fleet sales tolarge operating loss, although losses narrowed from thearound 10% of total sales to improve prices of usedprevious fiscal year. This mainly reflected a temporary fall

Mitsubishi vehicles. Inventory clearing is also bringing

in sales volume due to measures initiated in 2004 todown sales incentive expenses. These measures arenormalize sales activities and end the above-mentioned

helping to steadily rebuild the Mitsubishi Motors brand invicious cycle. Selling expenses associated with clearing

North America.

excess inventories of older models was also responsible.
Measures to normalize sales activities are steadily
delivering results. By actively launching new models infiscal 2005 and beyond, MMC expects North American
operations to return to operating profitability on aconsolidated basis in fiscal 2006. MMC is making every
effort to put in place a structure that will deliver profits.

EclipseAnnual Report 200527

M I T S U B I S H I M O T O R S C O R P O R AT I O N

In fiscal 2005, MMC aims to increase sales volume by
6% year on year to 184,000 units through the launch of
attractive new models. Our first new model in fiscal 2005
was Eclipse, which went on sale in May 2005 after a fullmodel change. With a design that evokes the sporty imageof Mitsubishi vehicles, Eclipse has made a strong start,
driven by growing popularity mainly among affluent young
adults. October 2005 will see the launch of Raider, a midsized pickup truck which will be supplied on an OEM
basis by DaimlerChrysler. This will spearhead a major
drive to expand sales in the mid-sized pickup truck
market, a vast segment in North America. The launch ofthese appealing models is expected to increase dealer
traffic and to help boost sales of existing models such as

GalantBoasting the largest dimensions in the North American mid-size sedan segment,
Galant features leisurely interior space and a design with presence.

Galant and Endeavor.
MMC has created a new sales-finance system throughthe establishment of a joint venture with Merrill Lynch &In production, restructuring to rationalize capacity

Co., Inc. at the end of March 2005. The new ventureand facilities has included the already completed changebegan operations in July 2005. This will enable MMC toto a single production shift, along with a headcountprovide competitive financial products to customers, while

reduction of 1,200 people. Also, MMC has booked

reducing risks associated with the sales finance business

impairment charges to lessen the burden of futureand lowering operating costs.

restructuring. From midway through 2006, MMC plans tobegin exporting vehicles from North America to theMiddle East and Russia to enhance plant utilization.

Endeavor
A cross-over SUV targeting the American mid-size SUV market.

28

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N■ Europe
Net Sales

Operating Profit (Loss)

Unit Sales(¥ billion)(¥ billion)(Thousand units)

800

12

300

8

250

700
600

200

4

500
400

150

0

300

100
-4

200

50

100

-8

0

0
06

07

08

05

06

Plan*

07

08

Plan*

05

06

07

08

Business Strategies

05

Plan*

* MMC revised its targets for fiscal 2005 when it released its fiscal 2004 full-year financial results on May 23, 2005. Targets
for fiscal 2006 onwards are those announced in the Mitsubishi Motors Revitalization Plan on January 28, 2005.

Steady Earnings and a Strong Brand Image

country have already recovered. Germany is positioned as

MMC aims to consistently generate earnings in Europe. The

a key Western European market alongside the U.K., where

performance and attractiveness of Mitsubishi vehicles has

sales are strong.

won MMC high marks in European markets. These qualities

In Eastern Europe, a fast-growing region in recent

have been refined over many years, such as in the FIA

years, MMC was No. 1 in terms of imported vehicle sales

World Rally Championships (WRC) series, where MMC has

in Russia in the first quarter of 2005 and likewise No. 1

had numerous triumphs, and in the Dakar Rally, wherein the Ukraine in 2004. In Russia, in particular, MMC

MMC was the first team to win 5 consecutive events and tostrengthened its partnership with a prominent local

claim 10 overall victories. As evidence of MMC’s support inautomobile distributor to expand sales centering on Lancer.

Europe, the Colt, launched in 2004, received the Golden

Management has been reinforced through the appoint-

Steering Wheel Award in Germany and five additional

ment of new presidents at Mitsubishi Motors Europe B.V.

awards in five other European countries. In Russia, Lancer(MME), and a sales company in Germany. In Southern

received the Car of the Year Award for 2005. Looking

Europe, MMC is working with Mitsubishi Corporation toahead, MMC will continue to enhance its brand image inbuild stronger sales networks. These actions again have

Europe, supported by this track record of excellence.

been taken with the view to achieving sales targets.

Actively Launching Attractive Products and Reinforcing

Car B.V. (NedCar) remains a key production base in Europe.

Sales Networks

As a consolidated subsidiary, NedCar will continue to

MMC is targeting sales of 254,000 units in Europe in

produce the Colt and also Smart models for DaimlerChrysler.

Regarding production, consolidated subsidiary Netherlands

fiscal 2005, an increase of 5% year on year. In addition
to contributions from a full year of sales of the Coltlaunched in May 2004, MMC launched three-door, diesel,
and turbo-engine versions on the Colt this spring. Plans
call for launching other variations, including a coupecabriolet model. The launch of a diesel version of theGrandis and a new one-ton pickup truck will also be
crucial to achieving our sales volume target.
DaimlerChrysler’s announcement of its withdrawal of
financial support for MMC in 2004 had the most significant impact on sales in Germany. However, sales in thisColt CZC (Coupe Cabriolet model)
Derived from the three-door Colt CZ3, this cabriolet model isequipped with an automatic retractable roof. Produced in Europe,
it is the third in a series of body frame variations following theColt five and three-door models. Scheduled for roll out in 2006.

Annual Report 2005

29

M I T S U B I S H I M O T O R S C O R P O R AT I O N■ Asia, ASEAN and Other Regions
Net Sales

Operating Profit

Unit Sales(¥ billion)(¥ billion)(Thousand units)

800

100

800

700

700
80

600

600

500

500

60

400

400
40

300

300

200

200
20

100

100

0

0
05

06

07

08

0
05

06

Plan*

07

08

05

Plan*

06

07

08

Plan*

* MMC revised its targets for fiscal 2005 when it released its fiscal 2004 full-year financial results on May 23, 2005. Targets
for fiscal 2006 onwards are those announced in the Mitsubishi Motors Revitalization Plan on January 28, 2005.

■

North Asia (China and Taiwan)

Building Stronger Alliances With Local Partners to

Expanding Operating Bases in Growth Markets

Promote the Mitsubishi Brand

The North Asia region, particularly China, remains an

In North Asia, MMC is targeting sales of 231,000 units in

attractive market, despite a slower pace of growth infiscal 2005, an increase of 14% year on year.

motorization. MMC conducts business in this region withlocal partners (See page 32).
In China, despite large sales of local-brand vehicles

Positioning South East (Fujian) Motor Co., Ltd. (SEM)
and Hunan Changfeng Motor Co., Ltd. (CFA) as key
production bases in China, MMC will continue to enhance

manufactured by local partners, the brand image ofrelationships with these two companies. MMC plans to

Mitsubishi vehicles is extremely favorable. This reflects

take an equity stake of up to 25% in SEM, and allow thestrong public support for the Mitsubishi Motors image ofcompany to begin production and sales of Mitsubishi-

durability and reliability, in addition to the strong local

brand vehicles. In particular, SEM will focus on expanding

presence of Mitsubishi group companies. MMC willits presence in the passenger car segment, which willleverage the strength of the Mitsubishi brand in China toaccount for a significant share of the Chinese market

further expand its operating base in the country.

going forward. In December 2004, CFA began productionof the Mitsubishi-brand Pajero model. Moreover, MMC
plans to establish a new venture with CFA to establish a
production base for SUVs centered on the Pajero, whichenjoys high market visibility. MMC will also examine thepossibility of reinforcing its two local engine-manufacturing ventures with the aim of expanding their roles as key
production facilities in Asia.
In the course of implementing the above measures, tounify the Mitsubishi brand, MMC plans to establish a local
subsidiary in mid-2006 to oversee all sales operations.
With this move, MMC will further build and expand its
sales network. Furthermore, the company will establish a

PajeroProduction and sales as a Mitsubishi brand began in China in December 2004.

local R&D center to enhance quality and build a framework for incorporating market needs in products in atimely manner.

30

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

■

ASEAN

A Strong Presence in the ASEAN Region
Over the years, MMC has expanded business in the ASEAN
region while contributing to the region’s industrial development by actively pursuing local production in addition tofinished vehicle sales. Against this background, theMitsubishi brand enjoys a strong reputation in the region.
For instance, our Thailand plant serves as a production andexport base for the supply of one-ton pickup trucks not only
to the domestic market but also to the rest of the world.
The plant is a significant source of earnings for MMC.
Preserving MMC’s strong presence and reinforcing

Triton Mega Cab
A new one-ton pickup truck produced in Thailand (two-door model).
Business Strategies

operations in the ASEAN region are key initiatives of therevitalization plan.
The company also booked substantial impairment losses.
Efforts to Cultivate New Markets Gain Momentum

In fiscal 2005, the company will launch the 380, a new

In fiscal 2005, MMC is targeting sales of 227,000 units

local production model, with the aim of expanding sales

in the ASEAN region.

and maintaining earnings.

In Thailand, the company is working to bolster sales

MMC also views Latin America, the Middle East andunits and partnerships with local sales companies

Africa as an important source of earnings. The company isfollowing the appointment of a new local management

conducting close-knit marketing tailored to these markets

team in 2004. In light of strong operations at theutilizing leading local companies and trading companies.

Thailand plant, where cumulative exports reached

MMC’s goal is to expand sales by gaining access to strong

700,000 units in February 2005, MMC is ramping up

markets as well as new markets. It is raising its presence toproduction capacity together with the full model change ofbuild a sound base for growth in the future. In specificthe one-ton pickup truck in August. With this step, MMC

terms, MMC will promote local production of KD (knock-has put in place a framework for the plant to serve as adown) units of SUVs and other mainstay vehicle models incore production facility.

Brazil, utilize new sales companies in Pakistan and else-

To expand sales of Mitsubishi-brand vehicles in
Malaysia, MMC has established a new sales company inwhere, work to win large orders in African markets and takeother actions to expand business and achieve its goals.

collaboration with Mitsubishi Corporation. Operations at
the company have already begun.
MMC has also built a strong presence in Indonesia,
Vietnam and other countries through local production.
The company will work to retain its solid stature inthese countries.
■

Other Regions

In fiscal 2005, MMC is targeting sales of 221,000 units
in other regions.
In Australia, where overcapacity was an issue, MMC
restructured production facilities and capacity to a properscale by reducing the workforce by approximately 1,310

380
Launched in October 2005, a new luxury sports sedan produced in Australia.

employees, and closing an engine plant in fiscal 2004.

Annual Report 2005

31

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Operations in North Asia

Main Operations in ASEAN Region




















• Local production (vehicles)• Local production (engines)• Import and sales of finished vehicles(regional sales company)

Operations in North Asia
Name

MMC’s Equity Interest (%) Major Products and Models

Brand Hunan Changfeng Motor Co., Ltd. (CFA)

16.07%

 South East (Fujian) Motor Corporation, Ltd. (SEM)

0.00%

Delica, Freeca, Lioncel (Lancer), Soveran (Chariot Grandis)

Local brands

 BeijingBenz-DaimlerChrysler Automotive Ltd. (BBDC)

0.00%

Pajero Sport (Challenger), Outlander (Airtrek)

Mitsubishi brands

 Hafei Motor Co.,Ltd. (HHMC)

0.00%

Sigma (Dingo)

Local brands

 Mitsubishi Corporation (Shanghai) Co., Ltd. (SSL)

0.00%

GrandisMitsubishi brands

 Shenyang Aerospace Mitsubishi Motors Engine
Manufacturing, Ltd. (SAME)

25.00%

2.0- and 2.4-liter engines and transmissions

 Harbin Dongan Automotive Engine Manufacturing,
Ltd. (HDMC)

15.30%

1.3- and 2.0-liter engines and transmissions

 China Motor Corporation (CMC)

13.97%

Local production (vehicles)

Local production (engines)

Liebao (old Pajero), Liebao Feiteng (Pajero iO)

Local brands

Pajero (new Pajero)Mitsubishi brands

Lancer, Galant, Freeca, Savrin (Chariot Grandis)

Mitsubishi brands

VerycaLocal brands

Import and sales of finished vehicles (regional sales company)

Main Operations in ASEAN Region
Country/Region

Name

Major Products and Models

Mitsubishi Motors (Thailand) Co.,Ltd. (MMTh)99.80%

Triton, Lancer and others

The

Mitsubishi Motors Philippines Corp. (MMPC)

51.00%

Adventure and Delica

Philippines

Asian Transmission Corp. (ATC)5.00%

Transmissions

Indonesia

P.T. Krama Yudha Tiga Berlian Motors (KTB)

0.00%

Colt T120SS and Colt L300

P.T. Mitsubishi Krama Yudha Motors and Manufacturing (MKM)

32.30%Engines and transmissions

Malaysia Mitsubishi Motors Malaysia Sdn Bhd (MMM)

0.00%

Lancer and L200 (one-ton pickup truck)

Vietnam Vina Star Motors Corporation (VSM)

25.00%

Grandis, Lancer and Pajero

Singapore Cycle & Carriage Automotive Pte Ltd. (CCA)

0.00%

Lancer, L300 (Delica) and Grandis

Brunei GHK Motors Sdn Bhd (GHK)

0.00%

Pajero and Lancer

Local production (vehicles)

32

MMC’s Equity Interest (%)

ThailandAnnual Report 2005

Local production (engines)

Import and sales of finished vehicles (regional sales company)

M I T S U B I S H I M O T O R S C O R P O R AT I O N

MOTOR SPORTS
For more than 30 years, Mitsubishi Motors has consis-

Dakar 2005 featured a 17-day rally staged over atently risen to the challenge of international rally events

course stretching approximately 9,000km from Barcelona,and other motor sports events. Building on the lessons

Spain, to the traditional finish in Dakar, Senegal. The event

learned in each event, MMC has made steady progress

was a severe test, with ferocious sandstorms and marathon

every year and chalked up a sparkling list of victories.

stages forcing competitors to drop out one after another.

For MMC, motorsports is an activity that embodies thePeterhansel won the rally for the second year running. In

Mitsubishi brand image of “powerful, sporty andsecond place was Luc Alphand, another Frenchman, in a

dynamic.” Participation in events such as the FIA World

Mitsubishi Pajero Evolution. Once again, the race showed

Rally Championship (WRC) and the Dakar Rally has given

the overwhelming power of the Mitsubishi team.

MMC opportunities to push its cars to the limit. The skills
and technology developed in these activities have become

World Rally Championship (WRC)integrated into all production vehicles MMC sells.

From its inception in 1973 until 2002, Mitsubishi Motors,

Furthermore, MMC is working to produce vehicles that

achieved a total of 34 victories in WRC events. Driving aoffer not only on and off-road performance but are safe

Mitsubishi Lancer Evolution, Tommi Makkinen of Finlandand durable.

became the first to win four drivers’ titles in succession in
1996–1999, a period that also included MMC winningmotorsports, MMC is determined to display its technicalthe prestigious manufacturers’ title in 1998. MMC took a

excellence, teamwork, and unwavering passion to strive forbreak from the sport in 2003 to focus on intensive vehicle

high goals.

development, but returned in 2004 with a new three-year

Motor Sports

Going forward, through continued involvement instrategy for the WRC. In 2005, three drivers (Harri
Dakar Rally 2005: A Historic Fifth Consecutive Win andRovanperä of Finland, Gilles Panizzi of France andTenth Overall Title

Gianluigi ‘Gigi’ Galli of Italy) are competing to return to

MMC first entered the Dakar Rally in 1983. The 2005

the podium.

event marked the 23rd consecutive year of MMC’s

In the related Production World Rally Championshipparticipation. The winner was Frenchman Stéphane(PWRC), in which few vehicle modifications from standardPeterhansel, driving a Mitsubishi Pajero Evolution. Forcommercial specifications are allowed, the Lancer

Mitsubishi Motors, his win marked a historic fifth

Evolution won six out of seven stages in the 2004 event, aconsecutive win and our tenth victory overall.

feat that testifies to the fundamental capabilities of
MMC’s production vehicles.

Dakar Rally Victories (Top Ten Placements, Cars)
2001

1. Jutta Kleinschmidt 2. Hiroshi Masuoka 5. Carlos Sousa

2002

1. Hiroshi Masuoka 2. Jutta Kleinschmidt 3. Kenjiro Shinozuka 4. Jean-Pierre Fontenay
6. Saeed Al Hajri 7. Luc Alphand 8. Klever Kolberg 10. Nicolas Misslin

2003

1. Hiroshi Masuoka 2. Jean-Pierre Fontenay

2004

1. Stéphane Peterhansel 2. Hiroshi Masuoka 5. Andrea Mayer

2005

1. Stéphane Peterhansel 2. Luc Alphand

WRC 2005 (Mexico)

WRC 2005 (Monte Carlo)

6. Jean-Pierre Fontenay
5. Carlos Sousa

3. Stéphane Peterhansel 4. Carlos Sousa 10. Jose-Luis Monterde
10. Nasser-Saleh Al-Attiyah

6. Joan ‘Nani’ Roma

Dakar Rally 2005 (14th stage [Mali–Senegal])

Dakar Rally 2005 victory celebrations.

Annual Report 2005

33

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Environmental Activities

As a 21st century corporation, MMC believes that environmental activities are just as crucial a partof operations as economic and social activities. Based on this belief, MMC will use its full capabilities in environmental activities and other societal pursuits while at the same time ensuring the
success of its revitalization plan.
Environmental Policy

Environmental Sustainability Plan

MMC formulated an Environmental Policy in 1999 that

MMC formulated the Environmental Sustainability Plan as

clarifies measures for protecting the environment within

a medium-term program of action for environmental

the context of management of the company.

protection activities to ensure that the environmental
policy would not be a mere verbal philosophy. The plan

Mitsubishi Motors Corporation Environmental Policy
Mitsubishi Motors recognizes that protection of the
global environment is a priority for humanity and assuch makes the following pledges:
1. Taking a global perspective, we are committed toharnessing all our resources to achieve continuous
reductions in the environmental impact of all our
corporate activities, spanning development,
procurement, production, sales, and after-saleservicing of vehicles.
2. As a good corporate citizen, we are committed to takeactions that protect the environment at the level of
local communities and of society as a whole.

lays out goals for a five-year period that began in 2002

Behavioral Standards
1. We will endeavor to protect the environment by
forecasting and assessing the environmental impactof our products at all stages in their life cycle.
Priority is given to the following areas:• Prevention of global warming by reducing emissionsof greenhouse gases• Prevention of pollution by restricting emissions of
substances harmful to the environment• Reduction of waste and maximizing efficient use ofresources by promoting conservation of resources
and recycling
2. We will endeavor to improve our environment
management practices as part of ongoing efforts toameliorate the impact on the environment.
3. We will comply with environmental regulations andagreements, and will work to protect the environment by establishing voluntary management targets.
4. We will encourage our affiliates and suppliers, bothin Japan and abroad, to cooperate in working toprotect the environment.
5. We will actively disclose environment-related
information and will seek the understanding of local
communities and of society at large.

■

and contains a variety of measures aimed at promoting
environmental conservation. It sets specific performance
objectives in four main categories: environmental management, recycling, prevention of global warming andprevention of environmental pollution. Progress against
the plan is continuously monitored in all these areas.
The sharp deterioration in our business conditions
during fiscal 2004 necessitated major changes in productdevelopment plans, which in turn led us to extend thedeadlines for achievement of some performance targets
contained in the Environmental Sustainability Plan.
Environmental Management

MMC is promoting DfE (Design for Environment), a systemdesigned to ensure that a reduced environmental impact
is built into new products at the earliest concept stages.
This includes efforts to increase recyclability and reduceweight. The goal is to minimize the environmental impact
of products over the entire life cycle so that the MMC
development process generates eco-conscious vehicles.
MMC initiated a green procurement program as part ofits environmental protection activities in November 2000.
As part of this program, MMC requires that all its materials and parts suppliers obtain ISO 14001 certification for
their environmental management systems. As of March
31, 2005, the certification rate of suppliers was 93.3%.
MMC also stresses communication. In addition to
publishing an annual social and environmental report,
MMC communicates its environmental activities by issuinga pamphlet titled The Environment and Manufacturing

Automobiles. Other means of communication include
providing support for environmental education by dispatching teachers to schools, a web site created specifically for schoolchildren, and an automobile information
consulting service.

34

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N■

Recycling■

Prevention of Environmental Pollution

January 2005 saw the End-of-Life Vehicle Recycling Law

Japan introduced tighter regulations on exhaust emissions

come into full force in Japan. MMC has worked vigorously

in 2000. The Japanese government has also introduced ato comply with these regulations by developing a system,

low emission vehicle (LEV) certification scheme that aims

publishing recycling fees and developing a processing

to make automobiles with emissions that are lower thansystem for collected items. In Europe, MMC is promoting

the revised standards the norm.

the construction of an effective system for end-of-life

MMC began submitting vehicles for LEV certification in

automobile (ELV) collection in conformity with European

fiscal 2000. The new Colt Plus, launched in 2004, as

recycling legislation. MMC is now working to conduct awell as the Lancer Series and eK Series were given SULEV

preliminary investigation of the details and costs ofcertifications, meaning that exhaust emissions are 75%

collection and recycling methods for ELVs in Europe.

less than 2005 Japanese standards. More than 96% of all

Waste generated during the production stage isgasoline-engine vehicles sold by MMC in Japan in fiscal

reduced, reused, and recycled whenever possible. As aresult, MMC has maintained a zero-emission status at its

2004 were LEV certified.
Moreover, aiming to bring to market electric vehicles

domestic plants since fiscal 2001 with regard to the(EVs) in the next few years, MMC is working on developing

disposal of waste sent to landfills.

a high-performance motor and battery system.

Prevention of Global Warming

VOCs (volatile organic compounds) such as toluene and

MMC is increasing production of vehicles complying withxylene in the body and component painting process. MMC

2010 domestic fuel efficiency standards ahead ofhas constructed a new auto body painting plant and isschedule in 2007. MMC’s efforts are focused mainly on

promoting the introduction of low-solvent paint technolo-

the Colt, Lancer and eK series.

gies, such as water-based paints and powder paints.

In production processes, MMC is reducing emissions of■Environmental Activities

MMC is working in production and logistics to prevent
global warming, too. To restrict emissions of carbon
dioxide (CO2) generated from the consumption of energy,
MMC makes energy use more efficient through various
means. These include the introduction of co-generation
systems in production (generating electricity with gas
turbines and through other means and reusing theresulting heat as a heating source for air conditioning
and water heating), and the promotion of modal shift intransportation (optimizing transportation by combining
several modes of transportation, such as trucks, ships
and trains).

Mitsubishi Motors Corporation
Social and Environmental Report 2005
For more details, please refer to the Social andEnvironmental Report 2005.
http://www.mitsubishi-motors.com/corporate/environment/report/e/index.html

Annual Report 2005

35

M I T S U B I S H I M O T O R S C O R P O R AT I O NCorporate Governance

The new motto of the Mitsubishi Motors corporate

MMC’s Board of Directors has 12 members, three ofphilosophy states: “We are committed to providing thewhom are outside directors. The Board is responsible forutmost driving pleasure and safety for our valued custom-making decisions concerning important management

ers and our community. On these commitments we will

issues and overseeing business execution. In addition, thenever compromise. This is the Mitsubishi Motors way.”

adoption of the executive officer system clarified theBased on this philosophy, MMC aims to build better

separation of the roles and responsibilities of directors andrelationships with shareholders and other investors,

executive officers. The Board of Statutory Auditors has 4

customers, suppliers, employees and all other stakehold-members, including 2 outside auditors. Furthermore,

ers. To make this corporate philosophy a reality, MMC is

managing directors meetings, attended by 15 members,

initiating a number of measures to raise standards ofare held every two weeks to expedite decision-making

corporate governance.

within the company.

1. Corporate Governance Framework

Directors supplement the internal governance structures.

MMC employs the Corporate Auditor System laid down in

In June 2004, MMC established the Business Ethics

the Japanese Commercial Code. In addition to mandatory

Committee, which is made up of six outside experts inorganizations and governance systems, we are improving

various fields. As part of efforts to foster a more strongly

and strengthening our corporate governance in various

compliance-oriented mindset within the company, thisways. These include appointing outside directors,

committee provides MMC with directions and advice on

introducing an executive officer system and setting up

ethics-related matters from an external perspective.

Advisory committees that report to the Board ofadvisory committees.

MMC’s Corporate Governance Framework
Shareholders
Meeting
Board ofAuditors

Audit
Report and advise
Board ofDirectors

Report and advise

Business Revitalization
Monitoring Committee
Business Ethics Committee

Chairman
Guidance and advice

President
Managing
Directors
Meeting

Vice President (In chargeof revitalization promotion)

Quality Affairs Office

Each Business Unit

Quality audit

CSR Promotion OfficeInternal audit
Internal audit

Subsidiaries and Affiliates(in Japan and overseas)

36

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

The Business Revitalization Monitoring Committee is

The Internal Audit Department (15 staff members as

also an important advisor to the Board, which is chargedof March 31, 2005), conducts regular audits company-

with monitoring the progress made in achieving the aims ofwide, including subsidiaries and affiliates in Japan and

the Mitsubishi Motors Revitalization Plan. Established inoverseas to check the appropriateness of business

April 2005, this six-member committee is composed ofprocesses. These audits aim to verify the appropriatenessoutside experts and representatives of major shareholders.

and effectiveness of all internal control systems, including
compliance and risk management. The results of internal

2. Functions of Internal Audit and Statutory Auditors’ Audit

audits are reported to the top management at MMC andMembers of the Board of Statutory Auditors attend

its subsidiaries and affiliates.

meetings of the Board of Directors and other important

In addition, the Statutory Auditors, Internal Audit

meetings. They audit the operations of MMC and its

Department, Quality Audit Department and independent

subsidiaries, based on business reports received fromauditors work to strengthen cooperation by regularly

directors, reviews of key internal business documents

exchanging information.

and interviews with the internal auditing groups,
subsidiaries and independent auditors.
Separate from the Statutory Auditors’ audit, MMC

3. Outside Directors and Auditors
MMC has appointed 3 outside directors. Rudiger Grube is

has also established two departments within the CSR

a member of the management board of DaimlerChrysler

Promotion Office—the Quality Audit Department andAG, which has a master alliance agreement with MMC.

Internal Audit Department—independent from other

Mikio Sasaki is the chairman of Mitsubishi Corporation, abusiness functions, to conduct internal audits from an

principal shareholder of MMC. Hidetoshi Yajima is theobjective perspective.

chairman of Shimadzu Corporation, which has a business

The Quality Audit Department (4 staff members as ofpartner relationship with MMC.
MMC has appointed 2 outside statutory auditors.

part of general efforts to assure road safety, and reaffirm

Shigemitsu Miki is the chairman of The Bank of Tokyo-

corporate social responsibilities, monitors all processes

Mitsubishi, Ltd., a major shareholder of MMC. Hiroshi Kan

related to recalls and quality improvement programs

is a managing director of Mitsubishi Heavy Industries,

carried out within the Quality Affairs Office. As well as theLtd., also a major shareholder of MMC.

audit results, the top management receives reports fromthe Customer-relations Department within the CSR

Corporate GovernanceMarch 31, 2005), newly established in August 2004 as

No conflicts of interest exist between MMC and any of
the outside directors and statutory auditors.

Promotion Office, on issues related to customer complaints and proposals and other quality-related matters.

Annual Report 2005

37

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Compliance

MMC believes that fostering a corporate culture in

Details of the Action Program

which compliance is paramount is vital to regaining the“Corporate Ethics Compliance First” Declaration

trust of the public and achieving its revitalization as a

In June 2004, former chairman and chief executive

trustworthy company.

officer Yoichiro Okazaki and former president and chief

In addition to complying with laws and ordinances,

operating officer Hideyasu Tagaya made the “Corporate

international conventions and internal regulations, all

Ethics Compliance First” Declaration. At the time of this

employees are expected to act with due consideration to

declaration, all executives signed written pledges promis-

social norms. This is enshrined in the business ethics ofing to obey business ethics. Top management also pledged

MMC. To ensure these business ethics become ingrained intheir commitment to take the lead in instilling a compli-

the mindset of employees, MMC launched the CSR

ance mindset in the company. Osamu Masuko, who was

Promotion Office in June 2004 and also initiated an action

appointed president of MMC in January 2005, reaffirmed

program for “Compliance First”. (See diagram below)

this compliance-first declaration on March 18, 2005 upon

The status of progress with this action program is

his appointment as Chief Business Ethics Officer (CBEO).

reported to the Business Ethics Committee (established inJune 2004), an advisory body to the Board of Directors,

Reestablishing Business Ethics: Organization and Systems

which is made up of outside experts. The Board of

In August 2004, 18 compliance officers were appointed

Directors receives reports and advice from members ofwith the task of instilling the importance of observing

this committee. (See page 39)

business ethics in each operational unit under the direction

Taking the initiatives of fiscal 2004 a step further, inof the CBEO. In a related move, each department manager

fiscal 2005 our actions are being guided by the theme of

was appointed as a “code leader” under the compliance“turning awareness into action.”

officers, strengthening the organizational framework forensuring the message hit home to all employees.

Action Program for “Compliance First” (Fiscal 2004)

Business Ethics Seminars“Corporate Ethics Compliance First” Declaration by Chairman and President
June 29, 2004

Reestablished businessethics: organization,systems and regulations
July 2004

Submission of signed pledges of businessethics compliance by all executives
June 29, 2004

corporate compliance. In addition, 14 seminars on
Issued Business Ethics
Compliance Promotion
Plan for 2005
February 2005

Evaluation of state ofawareness by Business
Ethics Committee
End of January 2005
CSR Promotion Office

Held meetings in eachbusiness unit to review
ethical issues
August/September 2004

Survey of all employees
on awareness ofbusiness ethics
End of November 2004

business ethics aimed at all employees were given to
13,000 employees in 5 regions in Japan by the head of
the CSR Promotion Office.

Business Ethics Committee
Held seminars on
business ethics for all
executives and employees
July/August 2004

Seminars were held for all executives concerning CSR and

Submission of signed
pledges of businessethics complianceby all employees
End of December 2004

Meetings to Review Ethical Issues in Each Workplace
Meetings were held in each workplace to study specificexamples of ethical problems so as to deepen understanding of the Business Ethics of MMC and ensure that staff
can act on them. Led predominantly by code leaders, aThoroughness of Compliance is Key to Restoring Trust in MMC
Observing business ethics is the first step in regaining the trust of customers. Startingwith ethics education and written pledges from all employees, MMC is taking ongoingproactive steps in instilling the “Compliance First” mindset.
MMC is also committed to the thoroughness of monitoring functions andexternal and internal communications so as to create a framework that
constantly reflects the views of society, provides internal feedback, andenhances the speed and transparency of disclosure.
Yoshikazu Nakamura
Executive Officer
Corporate General Manager of CSR Promotion Office38

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

total of 800 meetings were held. These meetings were

Other Initiatives

also used to identify ethical issues at workplaces andHelp Lines to Promote Self-government

discuss solutions.

In addition to the internal Employee Counseling Officeestablished in 2000, in fiscal 2004 a system whereby

Surveys on Awareness of Business Ethics

employees can consult directly with an attorney without

Surveys were conducted to gauge employees’ level ofgoing through the company was organized. Furthermore,

understanding of the business ethics of MMC after

standards were formulated as part of company regulations

conducting the aforementioned seminars and meetings.

to protect internal whistle-blowers.

The surveys also determined whether employees wereactually following the business ethics in the course of

Measures to Safeguard Personal Information

their work. Findings pointed to the need to improve the

Recognizing the importance of personal information handled

practicality of MMC’s business ethics in order to foster

in the course of business activities, MMC has formulated agreater awareness among employees.

policy concerning the protection of personal information andBased on these findings, 50 case studies of issues

is implementing appropriate measures in this regard.

identified during the course of meetings at workplaces

In accordance with this policy, MMC has appointed awere compiled into a booklet to help employees under-

person responsible for management of personal informa-stand how to approach and solve ethical issues better.

tion and created a management system, in addition toestablishing internal regulations and rules governing theWritten Pledge From All Employees

safeguarding of personal information. Through seminars

Employees who fully understood the business ethics ofand e-learning, MMC educates staff on the subject.

MMC and their importance, having gone through thisAnother initiative is to promote security measures such as

action program, submitted written pledges. As of April 30,

encrypting laptop computers. Starting in fiscal 2005,

2005, 98% of all employees had signed such documents.

MMC will be conducting internal audits as a voluntary
Compliancecheck on the status of its various measures.
Organizational Framework for Promoting Business Ethics

Report and Advise

Board ofDirectors

Guidance
and Advice

ChairmanPresident

Direction andSupervision

Business Ethics Committee(Made Up of Outside Experts)

Chief Business Ethics Officer (CBEO)

Report andConsult

Corporate General
Manager

CSR Promotion OfficeThorough ComplianceWith Business Ethics

ReportCompliance Department

Compliance Officer
Consult
and Report

Thorough ComplianceWith Business Ethics

Help Line/EmployeeCounseling Office

Deparment Manager=Code Leader
Consult on
Ethical Issues

Help Line
External Attorneys

Thorough ComplianceWith Business Ethics

Consult on
Ethical Issues

Employees with MMC Employment Agreements

Various
Consultations

Various Consultations
Employees of Subsidiaries and Dealers,
Temporary Employees, Former Employees

Annual Report 2005

39

M I T S U B I S H I M O T O R S C O R P O R AT I O N

New Organization

MMC announced a new organizational structure on March 31, 2005 to ensure the success of the Mitsubishi Motors
Revitalization Plan. The reporting lines of chairman, president and each function were unified in the new organizational
structure to expedite decision-making and to enhance internal communication. In addition, organizational units wereconsolidated and streamlined into eight divisions, or headquarters, in a move to clarify areas of accountability.
In addition, a new post of executive vice president was created to maintain and strengthen the follow-up structureneeded to execute the revitalization plan. The executive vice president plays the key strategic role of ensuring that theplan is successfully accomplished. A new Revitalization Promotion Department was also created within the Corporate
Planning Office, which is led by the executive vice president, to function as a control tower for all aspects of corporate
strategy related to the plan. Its core role is to promote cross-functional cooperation in achieving the plan’s targets.
Furthermore, to reinforce systems for implementing the revitalization plan, various functions and work processes under
the previous organization were restructured and transferred to the units best qualified to execute and carry them out. The
aim of this move was to expedite decision-making and to raise the efficiency of organizational management and work
processes. More specifically, marketing functions in different parts of the organization were consolidated and transferred to
the Corporate Planning Office. Moreover, to ensure efficiency in model development and strengthen cross-functionality intechnology development, a new design matrix structure, by model and function, was placed under the Product Development
Group Headquarters. Also to increase accountability and transparency, Production Engineering, Production Control,
Controlling & Accounting, and Finance offices were created.

New Organization(As of August 15, 2005)

Business Ethics
Committee

CSR Headquarters
Finance Group
Headquarters
Corporate Planning,
Corporate Affairs &Quality Affairs Group
Headquarters

Business
Revitalization
Monitoring Committee

CSR Promotion OfficeControlling & Accounting OfficeFinance Office
Corporate Planning Office
Corporate Affairs Office
Quality Affairs Office
Product Executives (PX);
Product Development ProjectVice President

Product Development &Environment Affairs
Group Headquarters

Development Engineering Office
Design Office

Stockholders
Meeting

Board ofDirectors

Chairman

Production Engineering Office

President

Production Control Office
Production Group
Headquarters

Board ofAuditors

Nagoya Plant
Mizushima Plant
Powertrain Plant

Managing Directors
MeetingGlobal Procurement
Group Headquarters
Domestic Operations
Group Headquarters

Global Procurement Office
Domestic Operations Office
Domestic Sales Office
North America Office
Europe Office

Overseas Operations
Group Headquarters

North Asia Office
ASEAN Office
Global Aftersales Office40

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Executives(As of August 15, 2005)

MEMBERS OF THE BOARD

Takashi Nishioka*

Osamu Masuko*

Heki Kasugai*

Chairman of the Board

President
Chief Business Ethics Officer

Executive Vice President
Revitalization Promotion Officer
In Charge of Corporate Planning, Corporate Affairs& Quality Affairs Group Headquarters

Hiizu Ichikawa*Fujio Cho

Makoto Maeda

Norio Aoki

Managing Director
In Charge of Finance Group
Headquarters

Managing Director
In Charge of Domestic Operations
Group Headquarters

Managing Director
In Charge of the Production
Group Headquarters

Managing Director
In Charge of Global Procurement
Group Headquarters
Corporate General Manager of
Global Procurement Office

New Organization Executives

Rudiger Grube
Member of the Board(Outside Director)

Mikio Sasaki
Hiroshi Harunari

Tetsuro Aikawa

Managing Director
In Charge of Overseas Operations
Group Headquarters

Managing Director
In Charge of Product Development &Environment Affairs Group
Headquarters

Member of the Board(Outside Director)

Hidetoshi Yajima
Member of the Board(Outside Director)*Representative Director

STATUTORY AUDITORSEXECUTIVE OFFICERS

Norihide Ujita

Shuichi Aoto

Yoichi Yokozawa

Osamu Matsumoto

Kenichi Miki

Statutory Auditor

Executive Officer
Corporate General Manager ofDomestic Operations Office

Mitsuo Hashimoto

Michio Mori

Makoto Ochi

Shigemitsu Miki

Executive Officer
Vice Corporate General Manager
of Corporate Planning Office andVice Corporate General Manager
of Controlling & Accounting
OfficeExecutive Officer
Plant General Manager ofMizushima Plant

Statutory Auditor

Senior Executive Officer
Corporate General Manager ofControlling & Accounting
OfficeExecutive Officer
Corporate General Manager ofDomestic Sales Office

Executive Officer
Chairman and CEO,
Netherlands Car B.V.

Kenji Egawa

Statutory Auditor (Outside)

Hiroshi Kan
Statutory Auditor (Outside)

Senior Executive Officer
Corporate General Manager of
Quality Affairs Office

Yoshikazu Nakamura
Executive Officer
Corporate General Manager of
CSR Promotion Office

Akira Kameo
Executive Officer
Corporate General Manager ofFinance Office

Shuma Uchino
Executive Officer
Corporate General Manager ofCorporate Planning Office

Keizo Fuchita
Executive Officer
Corporate General Manager ofCorporate Affairs Office
Chief Information Security Officer

Jiro Imura

Seiichi Ota

Kazuyuki Kikuchi

Executive Officer
Corporate General Manager ofDevelopment Engineering Office

Masaru Masuda
Executive Officer
Plant General Manager of Nagoya
Plant

Executive Officer
Assistant Managing Director

Executive Officer
Corporate General Manager ofNorth America Office

Toshifumi Sudo
Executive Officer
Corporate General Manager ofEurope Office

Annual Report 2005

41

M I T S U B I S H I M O T O R S C O R P O R AT I O N

FINANCIAL SECTION

Message from the Head of the Finance Group . . . . . . . . . . . . . . . . . . . 43
Financial Results and Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . 48
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . 49
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 50
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . 51
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

42

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NMESSAGE FROM THE HEAD OF THE FINANCE GROUP

On January 28, 2005, we announced the Mitsubishi Motors Revitalization Plan. This plan aims to restore profitability infiscal 2006 and maintain profitability in fiscal 2007 and beyond. To achieve these targets, the plan outlines productstrategies, alliance strategies, regional strategies, and cost reductions. We have been steadily implementing the initiatives laid out in the plan since the start of fiscal 2005. In this context, the Finance Group Headquarters has two majorroles to play.
First, it is our job to steer the company along the straightest road toward complete recovery. This involves carefully
monitoring quantitative financial data on MMC’s performance to analyze progress with various initiatives, and results
being achieved in all aspects of the plan. By ascertaining quickly the financial status of MMC’s entire operations andkeeping a close eye on current and future earnings prospects, we aim to prevent the company from straying off the path
to restoring profitability that is set out in the revitalization plan. Also, we submit regular reports on financial progress to
the Business Revitalization Monitoring Committee (BRMC). The BRMC provides strict external checks and also gives us
valuable advice to steer management in the right direction.
Second, we are focused on the vital task of securing the funds required for the revitalization process, principally thecapital needed to develop the new models that promise to be the main driver of restored profitability. The revitalization
plan calls for ¥490 billion in additional funding. In fiscal 2004, we raised ¥250 billion, just over half this sum, throughthird-party share allocations and long-term borrowings. For the remaining ¥240 billion, in addition to keeping a close eye
on capital spending and R&D budgets, we continue to seek the ideal timing and methods to raise capital through closer
communication with various investors and financial institutions.
Progress on Fund Procurement Plan Announced on January 28, 2005 (¥490 billion)
Funds procured in fiscal 2004

Funds to be procured in fiscal 2005 and beyond• Capital increases• Capital increases or¥220 billion

commercial asset divestitures:¥ 30 billion• Long-term borrowings:(excluding debt-equity swaps):¥ 30 billion• Borrowings and other sources:¥210 billion

Total:¥250 billion

Total:¥240 billion
Financial Section

The three-year period covered by the revitalization plan is a vital period for MMC to recover its strength, restore
profitability and prepare for the next stage of growth. We are approaching this difficult task in small stages, one step at atime, with the emphasis firmly on staying the course. I remain confident that our efforts will result in steady growth inshareholder value, and that we will succeed in meeting the expectations of all stakeholders.

Hiizu Ichikawa
Managing Director
In Charge of Finance Group Headquarters

Annual Report 2005

43

M I T S U B I S H I M O T O R S C O R P O R AT I O N

FINANCIAL RESULTS AND DISCUSSION

Operational Overview

Results of Operations

In fiscal 2004, the years ended March 31, 2005, the global

In the fiscal year under review, consolidated net sales were

economy faced rising prices for crude oil and key raw materials,¥2,122.6 billion, a 15.8% decline from the previous fiscal

and concerns over supply shortages, against the backdrop ofyear. MMC recorded an operating loss of ¥128.5 billion, apersistent geopolitical risks, including continued instability indeterioration of ¥31.7 billion from the previous fiscal year.

the Middle East. However, U.S. interest rate hikes and China’s

The decline in operating profit was mainly due to a ¥129.0

policies to restrain capital investment had only a negligible

billion negative impact from lower unit sales and an increase of

impact on the global economy. In this climate, global economic¥18.4 billion in warranty claim expenses. On the positive side,

conditions remained generally favorable, despite slower

cutbacks in promotion expenses via lower sales incentives in

economic growth. Meanwhile, the Japanese economy saw aNorth America and curbs on advertising through voluntary

correction but did not fall into recession. This mainly reflected

restraints in Japan contributed ¥53.4 billion. Another positivea continuation of inventory rundowns in IT-related sectors, infactor was a ¥31.3 billion contribution related to financeaddition to a slowdown in overseas demand, particularly fromreceivables in the U.S. sales finance business.

the U.S. and China.
Overall vehicle demand in the Japanese automotive industry

Regarding other income (loss), the company recorded a lossof ¥84.4 billion for asset impairment and a loss of ¥16.2

in fiscal 2004 remained largely on par with the previous year atbillion on the sale and disposal of fixed assets, in addition to

5.82 million units, a decline of 1% year on year. Vehicle

normal levels of net interest expenses. In addition, MMC

demand was largely unchanged in North America but rose inbooked a charge of ¥74.7 billion for loss compensation based

Asia, Europe and the rest of the world.

on a stock transfer contract related to Mitsubishi Fuso Truck &In this market environment, on May 21, 2004, the MMC

Bus Corp. shares; a provision of ¥29.5 billion for losses onGroup announced the Business Revitalization Plan, a roadmap

restructuring; severance payments of ¥16.3 billion for early

for achieving self-revitalization and restoring credibility with all

retirement; expenses of ¥25.2 billion for extraordinary mea-

stakeholders. Guided by this plan, the company raised capitalsures (free vehicle inspection campaign in Japan); and stockand steadily implemented various measures to achieve the plan’s

issue costs of ¥12.9 billion for a capital increase. The company

targets. The plan was prompted by the loss of reputation caused

also recorded ¥13.0 billion in losses for equity-methodby the failure to cope properly with recall-related problems

qualifying affiliates.

involving products at Mitsubishi Fuso Truck & Bus Corp. and the

As a result of the above, MMC recorded a net loss of ¥474.8

resulting loss of trust, as well as setbacks in the North Americanbillion, a deterioration of ¥259.4 billion from the previous fiscal year.

sales finance business. However, shortly after the Business
Revitalization Plan was unveiled, the company’s handling of past

Segment Analysis

recalls led to the occurrence of a loss of trust from customers< Business Segment Information >MMC and its consolidated subsidiaries divide operations into
two business segments: Automobiles and Financial Services.

and society occurring. This triggered sharper-than-expected falls
in sales volumes in Japan and overseas. In North America, sales
were significantly affected by damage to the Mitsubishi Motors
brand caused by the company’s previously over-aggressive use of■ Automobiles

financial products to push volume on a short-term basis. Concerns

In the fiscal year under review, sales in the automobile businessover the viability of North American operations also weighed

declined 14.6% year on year to ¥2,086.1 billion. MMC recorded

heavily on North American sales. In response, the company

an operating loss on automobile operations of ¥104.3 billion, a

initiated several measures to normalize operations, including

deterioration of ¥53.4 billion. Retail sales declined by 214,000

initiatives to rebuild the brand. However, sales volume in theunits from the previous fiscal year to 1,313,000 units, reflecting

North American market fell sharply as fleet sales were reduced.

a sharp decline in sales in Japan and North America.

These developments led to concerns over possible delays in theturnaround of the MMC Group’s operations and about its financial■ Financial services

soundness, making it difficult for MMC to procure funds.

Revenues from financial services fell 44.7% year on year to

To surmount these obstacles and revitalize the MMC Group,¥40.2 billion. In financial services operations, MMC reported ancontinued efforts were made to restore trust. However, additional

operating loss of ¥21.1 billion, an improvement of ¥28.8 billion

measures were deemed necessary to shore up the company’sfrom the previous fiscal year. This improvement was mainly due

financial position and procure funds to fuel the revitalization as

to the non-recurrence of a one-time charge for credit losses.

well as to ensure an improvement in earnings. After due
consideration, MMC announced a new plan, the Mitsubishi
Motors Revitalization Plan, on January 28, 2005.

44

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N< Geographical Segment Information >The geographical segment analysis provided in this section isbased on results aggregated by the region of the end user.
Accordingly, figures differ from the ‘Geographic Segment
Information’ section provided in the Note 19-(b) to Consolidated Financial Statements, which is aggregated by the regionof the MMC-related company chiefly involved in the transaction.
Figures in this section correspond to the sales figures reported
in the ‘Overseas Sales’ section in the Note 19-(c) to theConsolidated Financial Statements.

decrease in finance receivables associated with the restructuring of U.S. sales finance operations and sale of certain financereceivables. These declines were partly offset by an increase in
cash and cash equivalents of ¥113.0 billion due mainly tocapital increases.
Tangible fixed assets decreased ¥176.8 billion to ¥530.9
billion as of the fiscal year-end, due mainly to impairment
losses on production facilities.
Investments and other assets declined ¥217.9 billion from theprevious fiscal year-end to ¥204.3 billion. In addition to a ¥103.5
billion decline in long-term finance receivables, the company■ Japanrecorded a decrease of ¥66.1 billion in investment securities.

In Japan, sales decreased by ¥208.4 billion, or 33.5%, to¥412.9 billon compared with the previous fiscal year due to a
decline in sales centered on registered vehicles. The operating
loss widened to ¥97.0 billion, reflecting a deterioration of¥61.7 billion. In Japan, retail sales decreased 132,000 units
year on year to 227,000 units.
■ North America

Sales in North America declined ¥159.3 billion, or 26.5% year
on year, to ¥441.4 billion. This was primarily due to lower fleet< Liabilities >Total liabilities as of March 31, 2005 stood at ¥1,254.3 billion,a decrease of ¥729.0 billion from the previous fiscal year-end.
Current liabilities declined ¥709.8 billion to ¥857.3 billion,
reflecting a ¥51.4 billion decrease in trade notes and accounts
payable in line with lower sales, in addition to a decrease of¥424.3 billion in short-term borrowings.
Long-term debt as of the fiscal year-end had declined ¥40.8
billion to ¥198.0 billion.

sales. The operating loss significantly narrowed to ¥103.8
billion, an improvement of ¥43.6 billion from the previous year,
reflecting sharply lower losses in the financial services unit.
Retail sales fell substantially to 174,000 units, a decline of
99,000 units compared with the previous fiscal year.

Sales in Europe increased ¥5.8 billion, or 0.9% year on year, to¥667.8 billion. This was largely due to the launch of the newColt, and brisk sales particularly in the U.K., Russia and the
Ukraine. Operating profit totaled ¥7.2 billion, a decline of¥16.3 billion year on year. In Europe, retail sales climbed
27,000 units over the previous year’s total to 241,000 units.

Cash FlowsNet cash provided by operating activities totaled ¥13.7 billion,■ Asia, ASEAN and Other Regionsa ¥15.1 billion increase in net cash flow from the previous

Overall sales in Asia, ASEAN, and other regions declined ¥34.9

fiscal year. This cash was mainly provided by proceeds from thebillion, or 5.5% year on year, to ¥600.5 billion. Although unit

sale of finance receivables.

sales were largely unchanged, the high ratio of relatively low-

Net cash used in investing activities amounted to ¥34.2

priced production parts and components in total sales drove

billion, ¥81.0 billion more than in the previous fiscal year, as

down sales. Operating profit increased ¥2.8 billion to ¥65.1

payments for purchases of tangible fixed assets exceededbillion. Overall retail sales in Asia and the rest of the worldproceeds from sales of these assets.

declined 10,000 units year on year to 671,000 units.

Net cash provided by financing activities totaled ¥133.6
billion, ¥76.9 billion more than in the previous fiscal year. This

Financial Position

was mainly due to proceeds from common and preferred stock< Assets >Total assets as of the end of fiscal 2004 stood at ¥1,589.3 billion,
down ¥439.7 billion from the end of the previous fiscal year.
Current assets fell ¥47.5 billion to ¥821.9 billion. This was
mainly due to declines in trade notes and accounts receivable,
and in inventories in line with lower sales, in addition to aissued and the issuance of long-term debt. These proceeds werepartly used to repay commercial paper as well as short-termborrowings and long-term debt.
As a result, the year-end balance of cash and cash equivalents amounted to ¥294.9 billion, an increase of ¥113.0 billion
from the beginning of the fiscal year.
Annual Report 2005

45

Financial Section■ Europe< Stockholders’ Equity >At the end of the fiscal year, total stockholders’ equity
amounted to ¥324.8 billion, an increase of ¥294.8 billion.
Despite a ¥474.8 billion net loss, stockholders’ equity increased due to a ¥780.2 billion increase in common stock andcapital surplus through capital increases in June and July 2004
and March 2005.
As a result, the equity ratio rose to 20.4%, a substantial
increase from the 1.5% recorded at the end of the previous
fiscal year.

M I T S U B I S H I M O T O R S C O R P O R AT I O N

CONSOLIDATED BALANCE SHEETS
Mitsubishi Motors Corporation and Consolidated Subsidiaries
As of March 31, 2005 and 2004

In millions of yen

In thousands of
U.S. dollars(Note 3)

2005

2004

2005

¥ 294,903¥ 181,911$ 2,746,094

Trade notes and accounts receivable (Notes 4 and 9)

150,951

187,093

1,405,636

Finance receivables (Notes 4 and 9)

24,47644,451

227,917

Inventories (Notes 5 and 9)

233,353

275,460

2,172,951

Short-term loans receivable

2,386

4,719

22,222

AssetsCurrent assets:
Cash and cash equivalents (Note 14)

Deferred tax assets (Note 18)

1,799

4,979

16,761

Prepaid expenses and other current assets (Note 9)

128,244

175,045

1,194,192

Allowance for doubtful accounts(14,176)(4,268)(132,013)

Total current assets

821,937

869,393

7,653,763

Property, plant and equipment, net (Notes 6 and 9)

530,903707,717

4,943,692

Intangible assets

32,107

29,719298,983

80,115

146,165

746,021

Investments and other assets:
Investments (Notes 7 and 9)
Long-term finance receivables (Notes 4 and 9)

2,072

105,612

19,297Long-term loans receivable

11,747

9,944

109,389

Deferred tax assets (Note 18)

6,730

19,721

62,676

Residual interest in securitized assets and other

178,615

234,506

1,663,243

Allowance for doubtful accounts(74,943)(93,746)(697,866)

Investments and other assets, net

204,337

422,205

1,902,762¥1,589,286¥2,029,035$14,799,202

Total assets

46

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Liabilities, minority interests and stockholders’ equity
Current liabilities:

Trade notes and accounts payable

In millions of yen

In thousands of
U.S. dollars(Note 3)

2005

2004

2005

¥ 293,853¥ 345,212$ 2,736,318

Short-term borrowings (Note 9)

236,151

660,430

2,199,011

Current portion of long-term debt (Note 9)41,800187,889389,242

253,893

305,1442,364,221

Accrued expenses, Accounts payables and deferredincome (Note 8)
Accrued income taxes (Note 18)

3,157

1,771

29,403

Other current liabilities (Note 18)

28,48166,648265,218

Total current liabilities

857,338

1,567,096

7,983,413

Long-term debt (Note 9)

198,020

238,862

1,843,936

Deferred tax liabilities (Note 18)

17,35724,751

161,633

Accrued retirement benefits (Note 17)

99,295111,121924,624

Other non-current liabilities

82,262

41,459766,0121,254,274

1,983,291

11,679,619

10,22915,771

95,254

263,096—

2,449,916

379,204

252,201

3,531,096

Capital surplus

417,61227,513

3,888,749

Accumulated deficit(656,068)(183,410)(6,109,217)

9,208

19,91785,750(88,262)(86,245)(821,885)

(8)

(3)

(79)

324,782

29,972

3,024,328¥1,589,286¥2,029,035$14,799,202

Total liabilities
Minority interests
Stockholders’ equity (Notes 10 and 21):
Preferred stock:
Issued — 526,193 shares in 2005
Common stock:
Authorized: 9,958,285,000 shares
Issued — 1,483,438,934 shares in 2004
4,253,995,212 shares in 2005

Unrealized holding gain on securities
Translation adjustments
Treasury stock — 11,718 shares at March 31, 2004
54,250 shares at March 31, 2005
Total stockholders’ equity
Contingent liabilities (Note 11)
Total liabilities, minority interests and stockholders’ equity
See accompanying notes to consolidated financial statements.

Annual Report 2005

47

Financial Section

Authorized: 3,425,000 shares

M I T S U B I S H I M O T O R S C O R P O R AT I O N

CONSOLIDATED STATEMENTS OF OPERATIONS
Mitsubishi Motors Corporation and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004

In millions of yen

In thousands of
U.S. dollars(Note 3)

2005

2004

2005

Net sales¥2,122,626¥2,519,449$19,765,586

Cost of sales (Note 4)

1,808,110

2,160,612

16,836,859

16

50

149

314,532

358,887

2,928,876

443,076455,739

4,125,859(128,544)(96,852)(1,196,983)

Interest and dividend income

7,920

13,02173,752

Interest expense

25,601

29,335

238,401

Loss (income) from affiliated companies(13,002)

9,573(121,076)

Other loss (income), net (Notes 7 and 13)(301,678)

26,419(2,809,184)(460,906)(77,173)(4,291,892)

Current

4,016

4,272

37,402

Deferred

15,745133,573

146,616(19,761)(137,846)(184,018)(5,882)403(54,775)¥ (474,785)¥ (215,424)$ (4,421,136)

Reversal of deferred profit on installment sales, net
Gross profit
Selling, general and administrative expenses (Note 12)
Operating loss

Loss before income taxes and minority interests

Income taxes (Note 18):

Minority interests
Net loss (Note 21)
See accompanying notes to consolidated financial statements.

48

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Mitsubishi Motors Corporation and Consolidated Subsidiaries
As of March 31, 2005 and 2004

In millions of yen

In thousands of
U.S. dollars(Note 3)

2004

2005

2005

Preferred stock:
Balance at beginning of year
Preferred stock issued
Balance at end of year¥—
263,096

¥

—
—

$

—
2,449,916—

2,449,916

252,201
127,003252,201—

2,348,460
1,182,636

379,204

252,201

3,531,096

27,513—390,099—

224,481(197,179)—
210

256,197—
3,632,551—

417,61227,513

3,888,749(183,410)(474,785)
2,127(155,847)(215,424)—(1,707,893)(4,421,136)
19,812

—
—
—
—

127
197,179(3,396)(6,049)————(656,068)(183,410)(6,109,217)

19,917(10,709)33,854(13,936)

185,472(99,722)

9,208

19,91785,750(86,245)(2,016)(74,394)(11,851)(803,106)(18,779)(88,262)(86,245)(821,885)

(3)
(5)

(1)
(1)

(29)
(50)

Balance at end of year

(8)

(3)

(79)

Total stockholders’ equity¥ 324,782¥ 29,972$ 3,024,328

Common stock:
Balance at beginning of year
Common stock issued
Balance at end of year
Capital surplus:
Balance at beginning of year
Transferred to accumulated deficit
Issuance of common and preferred stocks
Change due to exclusion from consolidation
Balance at end of year
Accumulated deficit:
Balance at beginning of year
Net loss
Effect of affiliates to which equity method newly applied
Change due to merger of non-consolidated subsidiaries
with consolidated subsidiaries
Transferred from capital surplus (Note 10)
Change due to inclusion in consolidation
Change due to exclusion from consolidation
Balance at end of year
Unrealized holding gain on securities:
Balance at beginning of year
Net change
Balance at end of year
Translation adjustments:
Balance at beginning of year
Net change
Balance at end of year
Treasury stock:
Balance at beginning of year
Net change

See accompanying notes to consolidated financial statements.

Annual Report 2005

49

Financial Section

263,096

M I T S U B I S H I M O T O R S C O R P O R AT I O N

CONSOLIDATED STATEMENTS OF CASH FLOWS
Mitsubishi Motors Corporation and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004

In millions of yen

In thousands of
U.S. dollars(Note 3)

2005

2004

2005

¥(474,785)¥(215,424)$(4,421,136)

96,043(9,125)(11,722)
13,002
15,745(5,882)
16,18984,376(1,331)446
74,736
12,854
39,59753,402
126,116
49,660(57,396)(8,274)
13,654

137,91134,043(6,878)(9,573)
133,573
403
4,022—(40,010)527——
19,162
3,330(46,164)
33,529(61,669)
11,768(1,449)894,339(84,972)(109,156)
121,076
146,616(54,775)
150,755785,699(12,401)
4,161
695,935
119,703368,724
497,279
1,174,381
462,432(534,464)(77,054)
127,145

Investing activities:
Increase in investments in term deposits
Purchase of property, plant and equipment (Note 14)
Proceeds from sales of property, plant and equipment (Note 14)
Decrease in investment in securities
Decrease in short-term loans receivable
Loans madeCollection of loans receivable
Other
Net cash used in (provided by) investing activities(18,920)(140,760)
111,788
7,301
5,009
(444)
1,616
203
(34,206)(1,248)(134,785)
83,080102,059—(6,674)
7,106(1,087)
46,828(176,189)(1,310,736)
1,040,960
67,99046,644(4,135)
15,0501,892(318,522)

Financing activities:
Increase in short-term borrowings
Proceeds from issuance of long-term debt
Repayment or redemption of long-term debt
Common and preferred stock issued
Dividend paid to minority — common stock
Other
Net cash provided by financing activities(425,649)
119,974(328,067)
767,344(40)(5)
133,556

55,151
274,489(272,834)
—
(130)
(1)
56,674(3,963,585)
1,117,187(3,054,917)
7,145,399
(378)
(50)
1,243,655(12)
113,004
181,911(2,242)99,80984,544(114)
1,052,278
1,693,930—¥ 294,903(2,443)¥ 181,911—$ 2,746,094

Operating activities:
Net loss
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization
Allowance for doubtful receivables, net of reversal
Accrued retirement benefits, net of reversal
Income from affiliates accounted for by the equity method
Deferred income taxes
Minority interests
Loss on sales and disposal of property, plant and equipment, net
Impairment of assets
Gain on sales of investment in securities, net
Loss on impairment of investment in securities
Loss compensation based on stocks transfer contract
Stock issue costs
Change in trade notes and accounts receivable
Change in inventories
Change in finance receivables (Note 14)
Change in retained interests in transferred receivables
Change in trade notes and accounts payable
Other
Net cash provided by (used in) operating activities

Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Change in cash and cash equivalents due to inclusionand exclusion of subsidiaries in consolidation
Cash and cash equivalents at end of year (Note 14)
See accompanying notes to consolidated financial statements.

50

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mitsubishi Motors Corporation and Consolidated Subsidiaries

1. GOING CONCERN
In the previous fiscal year, Mitsubishi Motors Corporation (MMC) group had recorded a net loss of ¥215,424 million.
In the current fiscal year, MMC group has also recorded a net loss of ¥474,785 million ($4,421,136 thousand).
As a result of these recurring losses, significant doubt arises as to the Company’s ability to continue as a going concern.
To address this situation as well as strengthen our operating base, MMC group formulated the “Business Revitalization Plan” (from FY2004 to FY2006) in May 2004.
In June 2004, MMC group outlined additional measures to its Business Revitalization Plan announced on May
21, 2004, that focuses on three areas: all-out cost cutting, restoring customer trust, and across-the-board compliance. The new measures are in response to a potential marked slump in domestic sales that has surfaced following
the recall problems at MMC and Mitsubishi Fuso Track & Bus Corporation.
After announcing its Business Revitalization Plan in May 2004, MMC group has devoted itself to implement themeasures set out in the plan, designed to regain customer and public trust and improve profitability. Since theannouncement of the plan, MMC has conducted extensive investigations into past recall problems. The findings ofthese investigations have allowed MMC to complete filings of post-market measures with the Ministry of Land,
Infrastructure and Transport in September 2004, as well as to make substantial progress in its efforts to reform
corporate culture.
Despite these achievements, MMC’s inability to respond adequately to past recall problems has delayed thehoped-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, the concerns have
deepened about delays in the recovery of operations and about the financial health of MMC group. As a result of
being forced to use funds allocated for the revitalization program in the repayment of interest-bearing debt, MMC
group now finds itself short of funds.
To break out of this situation and successfully revitalize itself, MMC group, while continuing its efforts to regain
customer and public trust, finds itself in a situation that requires additional measures to improve profitability. Given(1) Corporate culture reform initiatives
Recovering customer and public trust and reforming corporate culture are absolute priority in MMC group’s bid torevitalize itself. The Corporate Social Responsibility (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 MMC group, has also given valuable advice and guidance from anexternal 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 andpractice compliance.
MMC group 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 had been completed by the endof the fiscal year of 2004. MMC group had determined disciplinary action and measures to prevent any recurrence
on the basis of the panel’s findings.

Annual Report 2005

51

Financial Section

these circumstances, MMC group has put together the new Mitsubishi Motors Revitalization Plan in January 2005.

M I T S U B I S H I M O T O R S C O R P O R AT I O N(2) 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 automakers• 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(3) Targets• Recognition of profit in fiscal 2006 (net income of ¥8 billion ($74 million))• Establish sustainable profitability in fiscal 2007 (net income of ¥41 billion ($381 million))(4) Business strategy(i) 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 tothe fiscal 2003 level of 1,500,000 vehicles in fiscal 2007.
(ii) Product strategy
A . M OTORSPORT

MMC group places motorsport at the very heart of its car design and development activities. The technology andknow-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 define
the MMC brand. That same technology and know-how enable MMC group to increase safety and durability as well as
on and off-road driving performance, thereby raise product value in a lineup that fully embodies these qualities.
B . IMPROVING EFFICIENCIES IN MODEL MIX

The new plan incorporates measures under which MMC group 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 . N EW MODEL LAUNCHES

The new plan calls for a major increase in the number of new model launches compared with the last four years.
MMC group will expand earning opportunities by aggressively introducing new models in all regions.

52

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N(iii) Business tie-up strategy
To further promote a policy of selection and concentration, MMC group will actively pursue strategic tie-up opportunities with other automakers. One example is the announcement made in January 2005 relating to the expansion of
the supply of minicars on an OEM basis to Nissan Motor (36,000 units annually). In February 2005 MMC and
Peugeot-Citroen Group (PSA) reached to the agreement where MMC group supply passenger cars to PSA on an OEM
basis. (MMC is expected to sign the final contract in the first half of fiscal 2005.)
MMC group is looking for other tie-ups such as an expanded range of models supplying on an OEM basis,component supply partnering, joint distribution arrangements and joint procurement.
(iv) Regional strategy
A . J APAN

Driving towards a group structure that returns stable profits, MMC 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. MMC group will also restructure its sales network and will drive to maximize
after-sales services.
B . N ORTH AMERICA

North America remains a vital core market for MMC group. To put its operations in that market on a profitable basis,
MMC group will rebuild its brand through the introduction of a new management structure, with new model launches andby cutting back on its dependence on fleet sales. It is also going to raise capacity utilization by expanding exports oflocally built cars. Further, impairment loss is recognized for the excess of plant capacity in 2004.
MMC group is currently addressing the U.S. captive financing unit that sparked the problems in MMC group’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. MMC group also plans to establish a new joint venture company with

C . E UROPE

To move its European operations forward from the stage of achieving profitability to the growth stage, MMC group will
work to promote sales around a stronger model lineup and will push forward its efforts to strengthen its management
and sales structures.
D . C HINA

Positioning China as a core market, MMC group is aggressively exploiting the Mitsubishi brand, which is currently strong
and healthy in China, and expanding its operating base. In addition to expanding the range of Mitsubishi brand models
available by boosting capital tie-ups with local companies, MMC group is also pushing forward with efforts to establish
and to expand its sales network. MMC group is looking for using its engine joint ventures in the country to make China amajor engine production hub in Asia, and is going to establish R&D facilities in the country to meet local market needs
in its products on a timely basis.
E . O THER MARKETS

MMC group is taking steps to strengthen its operational footing in ASEAN markets. These include strengthening salesin Thailand, establishing sales structures in Malaysia and reorganizing its operations in Indonesia. MMC group is also
strengthening its production base by boosting capacity in Thailand, which serves as an export hub to global markets.
As for Australia, MMC group is on track to close its engine plant and downsize its assembly plant. MMC group
has also recognized impairment loss for the excess of plant capacity.
Annual Report 2005

53

Financial Section

Merrill Lynch for the purpose of creating competitive and attractive consumer financing programs.

M I T S U B I S H I M O T O R S C O R P O R AT I O N(v) Cost reduction
A . M ANPOWER

As the result of changes to the organization, increased work process efficiencies, rationalization of work processes andnatural attrition in personnel, MMC group’s headcount trimming program is on track and is forecast to achieve theoriginal targets. MMC group is also moving forward with further improvements in work process efficiencies.
B . M ATERIAL COSTS

In views 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 ($838 million) on a cumulative basis
by fiscal 2006 over fiscal 2003 levels. While this is a downward revision of the original target in the Business
Revitalization Plan, this figure maintains the 15% reduction called for in the plan.
(5) Corporate ideals and direction
Through a process of exhaustive analysis and discussion between cross-functional teams composed mainly ofyounger employees and the departments concerned, the Corporate Revitalization Committee has looked in depth ata number of issues that MMC group faces. This has allowed MMC group to formulate a new course of action; onethat clarifies to its stakeholders the ideals that underpin MMC group’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.”(6) Profit and loss targets
To reflect all the measures described above, the numerical targets set out in the Business Revitalization Plan andcovering the period up to fiscal 2006-consolidated net sales, operating profit, ordinary profit, net income for theterm are revised downwardly in the Mitsubishi Motors Revitalization Plan. The new plan forecasts notes that
although it will be difficult for MMC group to result in profit 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 ($381 million).
(7) Support systems: Capital and funding reinforcements(i) Capital reinforcement
With the full-support of four Mitsubishi group companies, during the fiscal year of 2004 MMC group made a capitalenhancement of ¥284.2 billion ($2,646 million) through the issue of new common and preferred stocks [Mitsubishi
Heavy Industries (MHI), ¥50 billion ($465 million); Mitsubishi Corporation, ¥70 billion ($651 million); The Bank ofTokyo-Mitsubishi, ¥154 billion ($1,434 million) (of which ¥54 billion ($502 million) in a debt-for equity swap);
The Mitsubishi Trust and Banking Corporation, ¥10.2 billion ($94 million) (all yen in a debt-for-equity swap)].
As stated above, in the fiscal year of 2004 MMC group has adopted asset impairment accounting principles.
While this will lead to a deficiency in capital, the capital enhancement will enable the restoration of stockholders’equity to an appropriate level and assist MMC group in establishing a healthy financial status. The capital increase
brought the combined holding of MHI, Mitsubishi Corporation, The Bank of Tokyo-Mitsubishi and The Mitsubishi
Trust and Banking Corporation in MMC to 34% as of March 10, 2005. Because this will also bring MHI’s holding
up to 15%, MMC plans to become an equity method affiliate of MHI in fiscal 2005.

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N(ii) Borrowing
MMC group is planning to raise a total of ¥270 billion ($2,514 million) in funding, mostly through new borrowingof ¥240 billion ($2,234 million). (¥30 billion ($279 million) had been already done in the fiscal 2004.) The
remaining ¥30 billion ($279 million) will be raised either from the purchase of MMC group business assets or
through a further capital increase by Mitsubishi Corporation.
(iii) Capital expenditure for Revitalization
The capital enhancement and funding measures will give MMC group access to ¥490 billion ($4,562 million)(excluding a ¥64.2 billion ($597 million) debt-for-equity swap). MMC will allocate this funding with maximum
effect to R&D and capital investment which will provide the platform vital to the successful achievement of thetargets and goals set out in the Mitsubishi Motors Revitalization Plan.
MMC group is to set up a new Business Revitalization Monitoring Committee, an external body that will monitor
the progress made in the implementation of the Mitsubishi Motors Revitalization Plan.
For the last year, MMC group had been shaken by a number of problems, however it has made a system that isable to change the profits structure more strongly and is sure to achieve its profit target. Now there is hope forfunds. MMC group will start the new Mitsubishi Motors Revitalization Plan based on these measures. MMC groupwill devote itself to implementing the new measures from a different base from which the Revitalization Plan in May
2004 was formulated.
MMC group intends to materialize the new Mitsubishi Motors Revitalization Plan at any cost with the full-supportof three Mitsubishi group companies.
As a result, these financial statements have been prepared based on the premise of going concern, and do notreflect the effect of any significant doubt as to going concern.
2. SIGNIFICANT ACCOUNTING POLICIESFinancial Section(a) Basis of preparation
MMC and its domestic consolidated subsidiaries maintain their books of account in conformity with the financial
accounting standards of Japan, and its foreign subsidiaries, in conformity with those of their countries of domicile.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Japan which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Company filed with the Financial Services Agency as required by the Securities andExchange Law of Japan.
In addition, the notes to the consolidated financial statements include information which is not required underaccounting principles generally accepted in Japan but is presented herein as additional information.
Certain reclassifications have been made to the prior year’s financial statements to conform to the current
year’s presentation.
As permitted, amounts of less than ¥1 million have been omitted. Consequently, the totals shown in the accompanying
financial statements (both in yen and U.S. dollars) do not necessarily agree with the sum of the individual amounts.
(b) Principles of consolidation
All significant companies for which MMC has effective control are consolidated. Significant companies over which
MMC has the ability to exercise significant influence have been accounted for by the equity method.
All significant intercompany transactions have been eliminated in consolidation.
The difference at the date of acquisition between the acquisition cost and the fair value of the net assets
acquired are expensed when incurred or amortized over periods that do not exceed 3 years.
Annual Report 2005

55

M I T S U B I S H I M O T O R S C O R P O R AT I O N(c) Cash and cash equivalents
All highly liquid and low-risk investments with maturities of three months or less when purchased are considered cash
equivalents.
(d) Inventories
Inventories of MMC and its domestic consolidated subsidiaries are principally stated at cost determined by the firstin first-out or specific identification method. Inventories of the foreign consolidated subsidiaries are principallystated at the lower of cost or market value. Cost is determined by the specific-identification method.
(e) Investments in securities
Investments in securities that are expected to be held-to-maturity are not held in current year.
Other securities with a readily determinable market value are stated at fair value. The difference between theacquisition cost and the carrying value of other securities, including unrealized gain and loss, is recognized in“Unrealized holding gain on securities” in the accompanying consolidated balance sheets. The cost of other securities sold is computed based on the moving average method.
Other securities without a readily determinable market value are stated at cost determined by the moving
average method.
(f ) Depreciation
Depreciation of property, plant and equipment is principally calculated by the declining-balance method or thestraight-line method over the estimated useful life of the respective assets. The estimated useful life of the assets at
MMC and its domestic consolidated subsidiaries are as provided for in the corporate tax law.
Software intended for use by MMC and its consolidated subsidiaries are amortized by the straight-line method
over the software’s estimated useful life.
(g) Allowance for doubtful accounts
The allowance for doubtful accounts has been provided based on MMC and its consolidated subsidiaries’ historicalexperience with respect to write-offs and an estimate of the amount of specific uncollectible accounts.
(h) Allowance for product warranty
The allowance for product warranty has been calculated based on MMC and its consolidated subsidiaries’ historicalexperience and estimations with respect to future costs relating to after sales service.
(i) Retirement benefits
Accrued retirement benefits for employees at March 31, 2005 and 2004 have been provided mainly at an amountcalculated based on the retirement benefit obligation and the fair value of the pension plan assets, adjusted for
unrecognized actuarial gains or losses and unrecognized prior service cost. The retirement benefit obligation isallocated to future years on a straight-line basis.
Prior service cost is being amortized by the straight-line method over periods of 10 to 21 years and 10 to 17
years for the years ended March 31, 2005 and 2004, respectively. These periods are within the estimatedaverage remaining service years of the employees.
Actuarial gains and losses are amortized from the fiscal year following the year in which they are incurred using
the straight-line method within 10 to 21. These periods are within the estimated average remaining service years of
the employees.

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N( j) Accrual for retirement benefits for directors and corporate auditors
Certain directors and corporate auditors of MMC and its domestic consolidated subsidiaries are customarily entitledto lump-sum payments under their respective unfunded severance benefit plans subject to the stockholders’approval. Provision for severance benefits for those directors and corporate auditors has been made at the estimatedamount which would be paid if all directors and corporate auditors resigned as of the balance sheet dates.
(k) Revenue recognition
Revenue is generally recognized on sales of products at the time of shipment.
Certain domestic and foreign subsidiaries recognize revenues by the installment sales method whereby grossprofit on such sales is deferred and credited to income in proportion to the amount of the installment receivables
which become due.
(l) Translation of foreign currency accounts
The accounts of the consolidated foreign subsidiaries are translated into Yen as follows:a. Asset and liability items are translated at the rate of exchange in effect on March 31;
b. Components of stockholders’ equity are translated at their historical rates at acquisition or upon occurrence; andc. Revenues, expenses and cash flow items are translated at the average rate for the financial period. Translation
adjustments are included in “Stockholders’ equity”.
(m) Amounts per share of common stock
The computation of basic net (loss) income per share of common stock is based on the weighted average number ofshares of common stock outstanding during each year. Diluted net income per share of common stock is computed
based on the weighted average number of shares of common stock outstanding each year after giving effect to thedilutive potential of common stock to be issued upon the conversion of preferred stock and stock subscription rights.
Financial Section(n) Appropriations (dispositions) of retained earnings (accumulated deficit)
Cash dividends, bonuses to directors and corporate auditors and other appropriations or dispositions of retained
earnings (accumulated deficit) are recorded in the financial year in which the appropriations (dispositions) areapproved at a general meeting of the stockholders.
(o) Leases
Non-cancelable lease transactions at MMC and its domestic consolidated subsidiaries are accounted for as operatingleases regardless of whether such leases are classified as operating or finance leases, except that lease agreements
which stipulate the transfer of ownership of the leased property to the lessee are accounted for as finance leases.
Non-cancelable lease transactions at the foreign subsidiaries except for operating leases are capitalized.
(p) Derivative financial instruments
MMC and its consolidated subsidiaries are exposed to risks arising from fluctuations in foreign currency exchange
rates and interest rates. In order to manage those risks, MMC and its consolidated subsidiaries enter into various
derivative agreements including forward foreign exchange contracts and interest rate swaps. Forward foreignexchange contracts are utilized to manage risks arising from forecasted export of finished goods and related
foreign currency receivables. Interest rate swaps are utilized to manage interest rate risk for debts. MMC and its
consolidated subsidiaries do not utilize derivatives for speculation or trading purposes.
Derivative financial instruments are recorded at fair value, excluding certain instruments described below which
are recorded in accordance with the special hedge provisions of the accounting standard.
Annual Report 2005

57

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Forward foreign exchange contracts related to forecasted export of finished goods are accounted for using deferral
hedge accounting. Deferral hedge accounting requires unrealized gains or losses to be deferred as liabilities or assets.
MMC and its consolidated subsidiaries have also developed a hedging policy to control various aspects of thederivative transactions including authorization levels and transaction volumes. Based on this policy, MMC and its
consolidated subsidiaries hedge, within certain limits, the risks arising from the changes in foreign currency
exchange rates and interest rates. Forward foreign exchange contracts are designated to hedge the exposure tovariability in expected future cash flows.
Hedge effectiveness on interest rate swaps are evaluated by reviewing the gross changes in cash flows of hedging
instruments and hedged items for the hedged period. Interest rate swaps which meet the criteria for special hedge
accounting are evaluated by reviewing whether the conditions are met for applying the special hedge accounting
instead of evaluating effectiveness, as permitted by the accounting standard.
3. U.S. DOLLAR AMOUNTSThe U.S. dollar amounts in the accompanying consolidated financial statements are included, solely for convenience, at ¥107.39 = U.S.$1.00, the exchange rate prevailing on March 31, 2005. The translation should not be
construed as a representation that the Yen amounts represent or have been, or could be, converted into U.S. dollars
at that or any other rate.
4. TRADE NOTES, ACCOUNTS RECEIVABLE AND FINANCE RECEIVABLES SOLDThe outstanding balances of trade notes and accounts receivable sold to others which have been deducted from therespective accounts amounted to ¥7,913 million ($73,687 thousand) and ¥30,091 million as of March 31, 2005
and 2004, respectively. Such amounts deducted from finance receivables were ¥240,317 million ($2,237,800
thousand) and ¥464,253 million as of March 31, 2005 and 2004, respectively.
Following weakness in the North American economy, a higher probability was assigned to the higher end of therange of future credit losses relating to securitized finance receivables estimated in the finance company, Mitsubishi Motors Credit of America, Inc. An allowance for doubtful accounts of ¥39,956 million, including an one time
unusual amount to bring the valuation to a more conservative estimate of value as compared to prior estimates, wasrecorded in cost of sales during the period ended March 31, 2004.
5. INVENTORIESInventories at March 31, 2005 and 2004 consisted of the following:

Finished products
Raw materials
Work in process

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Annual Report 2005

In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥163,187¥171,528$1,519,582

25,46819,980237,162

44,696

83,952416,206¥233,353¥275,460$2,172,951

M I T S U B I S H I M O T O R S C O R P O R AT I O N

6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 2005 and 2004 consisted of the following:
In millions of yen

In thousands of
U.S. dollars

2004

2005

178,611$ 1,186,793

2005

Land

¥

127,449¥

Buildings and structures

332,613334,049

3,097,249

Machinery and equipment

1,350,483

1,426,772

12,575,502

Construction in progress
Accumulated depreciation
Property, plant and equipment, net¥

34,96438,919325,585

1,845,511

1,978,354

17,185,131(1,314,608)(1,270,636)(12,241,439)

707,717$ 4,943,692

530,903¥

Impairment of assets is recorded by Australian subsidiaries and U.S. subsidiaries on basis of each Australianand U.S. accounting principle, respectively. Included in the above as at March 31, 2005 are impairment loss ofmachinery and equipment, construction in progress and other assets with book values of ¥41,196 million($383,611 thousand), ¥22,911 million ($213,343 thousand) and ¥20,268 million ($188,732 thousand), respectively. Included in the above as at March 31, 2005 are idle assets of land, and buildings and structures with bookvalues of ¥2,049 million ($19,088 thousand) and ¥439 million ($4,095 thousand), respectively.
7. INVESTMENTS
Other securities at March 31, 2005 and 2004 were as follows:
In millions of yen
2005
Carrying
amountUnrealized
gains¥ 9,890¥25,622¥15,759

market value

23,17823,178—

Total other securities¥33,068¥48,800¥15,759

Unrealized(losses)2004
Acquisition
cost

Carrying
amountUnrealized
gains

Unrealized(losses)¥(27) ¥17,744 ¥49,989 ¥32,245¥(109)

Other securities:
Securities withmarket value
Securities without—

29,722

29,722——¥(27) ¥47,466 ¥79,712 ¥32,245¥(109)In thousands of U.S. dollars
2005
Acquisition
cost

Carrying
amountUnrealized
gains

Unrealized(losses)$ 92,096 $238,589 $146,751$(257)

Other securities:
Securities withmarket value
Securities withoutmarket value
Total other securities

215,831

215,831——$307,927 $454,421 $146,751$(257)

Annual Report 2005

59

Financial Section

Acquisitioncost

M I T S U B I S H I M O T O R S C O R P O R AT I O NProceeds from sales of other securities and the corresponding gross gains and losses, which are included in otherincome (loss), net in the accompanying consolidated statements of operations for the years ended March 31, 2005
and 2004 were as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Proceeds¥9,477¥58,655$88,255

Gross gains

1,609

39,48814,988Gross losses

277

56

2,587

Significant declines in the value of securities with market value are recognized as impairment losses if thedecline is not considered to be recoverable. After the write-down of the impaired amount, a new book acquisition
cost is established. Losses recognized on the impairment of securities with market value totaled ¥2 million ($25
thousand) and ¥36 million for the years ended March 31, 2005 and 2004, respectively.
Significant declines in the value of securities without market value are recognized as impairment losses. Losses
recognized on the impairment of securities without market value totaled ¥38 million ($356 thousand) and ¥65
million for the years ended March 31, 2005 and 2004, respectively.
Investment in unconsolidated subsidiaries and affiliated companies, and investment in securities at March 31,
2005 and 2004 were as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

affiliated companies¥35,535¥ 77,010$330,897

Investment in securities

44,58069,154415,124¥80,115¥146,165$746,021

Investment in unconsolidated subsidiaries and8. ACCRUED EXPENSES, OTHER PAYABLES AND DEFERRED INCOME
Accrued expenses, accounts payables and deferred income at March 31, 2005 and 2004 were as follows:
In millions of yen

Accrued expenses and accounts payables

In thousands of
U.S. dollars

2005

2004

2005

¥175,734¥148,755$1,636,409

Allowance for product warranty

49,85938,403

464,285

Deferred income

22,783110,390

212,156

Accrued bonuses

5,516

7,594

51,370¥253,893¥305,144$2,364,221

In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥236,151¥553,616$2,199,011—

106,813—¥236,151¥660,430$2,199,011

9. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2005 and 2004 consisted of the following:

Loans, principally from banks
Commercial paper

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NLong-term debt at March 31, 2005 and 2004 consisted of the following:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Secured¥173,270¥ 94,855$1,613,470

Unsecured

24,007220,104

223,553—

20,000—Loans, principally from banks and insurance companies,
due through 2023 at rates averaged 4.0% in 2005
and 3.2% in 2004:

2.7% bonds due 2004
3.1% bonds due 2007

8,700

8,700

81,013

3.3% bonds due 2009

25,60025,600238,383—

15,375—from 4.1% to 4.7%

4,243

7,660

39,511Euro medium-term notes due through 2008 at rates 2.5%

4,000

9,900

37,247—24,555—

239,821426,751

2,233,179(41,800)(187,889)(389,242)¥198,020¥ 238,862$1,843,936

In millions of yen

In thousands of
U.S. dollars

2006¥ 41,800$ 389,242

2007

44,981

418,860

2008

61,501

572,6902009

43,048400,859

2010

45,262

421,477

Thereafter

3,226

30,047¥239,821$2,233,179

Euro medium-term notes due through 2005 at rates ranging
from 0.8% to 1.7%
Euro medium-term notes due through 2006 at rates ranging

Non-interest bearing long-term debt
Less current portion

The maturities of long-term debt were as follows:

Total

Assets pledged as collateral for short-term borrowings, long-term debt and guarantees at March 31, 2005 and 2004
were as follows:
In millions of yen

In thousands of
U.S. dollars

2004

2005

2005

1,618

$ 146,299

Inventories

Trade notes and accounts receivable

52,712

14,465490,849

Finance receivables

21,01885,586

195,720

500

274

4,664

Property, plant and equipment, net

211,908

174,591

1,973,262

Other79,840702

743,458¥381,691¥277,238$3,554,255

Investments¥ 15,711¥

Annual Report 2005

61

Financial Section

Year ending March 31,

M I T S U B I S H I M O T O R S C O R P O R AT I O N

The following groups of assets of the Okazaki plant were pledged as collateral for unused credit limits of ¥1
million under a collateral agreement with The Bank of Tokyo-Mitsubishi at March 31, 2004. No debt was outstanding under the credit limit at March 31, 2005 and 2004, respectively.
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Buildings and structures¥11,871¥12,805$110,541

Machinery and equipment

8,884

10,67482,731

Land

985

985

9,180

¥21,741¥24,465$202,453

The following groups of assets of the Mizushima plant were pledged as collateral for the debt from The Japan
Bank for International Cooperation to EQUUS Leasing B.V., a counterparty of Netherland Car B.V., a consolidated
subsidiary, at March 31, 2005 and 2004, respectively. The debt amount that EQUUS was guaranteed was ¥14,353
million ($133,662 thousand) and ¥15,600 million at March 31, 2005 and 2004, respectively.
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Buildings and structures¥ 5,003¥ 4,958$ 46,588

Machinery and equipment

22,06623,962

205,480

Land

2,008

2,008

18,705¥29,078¥30,929$270,775

The following groups of assets of the Kyoto plant were pledged as collateral at March 31, 2005.
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Buildings and structures¥ 7,250—$ 67,511

Machinery and equipment

15,222—

141,752

Land

2,137

—

19,905¥24,610—$229,168

The following groups of assets at the Shiga plant were pledged as collateral at March 31, 2005.
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Buildings and structures¥ 3,426—$ 31,908

Machinery and equipment

11,940—111,186

Land

3,859

—

35,939¥19,226—$179,033

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Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

The following groups of assets at the Pajero plant were pledged as collateral for the debt from The Development
Bank of Japan and others to Pajero Manufacturing Corporation, a consolidated subsidiary, at March 31, 2005 and2004, respectively.
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Buildings and structures¥3,424¥3,038$31,884

Machinery and equipment

2,585

2,478

24,073

Land

1,540

1,542

14,340¥7,549¥7,060$70,298

The following groups of assets at the Suiryo Plastics plant were pledged as collateral for the debt from The
Hyakujushi Bank, Ltd. and others to Suiryo Plastics Co., Ltd., a consolidated subsidiary, at March 31, 2005 and2004, respectively.
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥1,123¥1,199$10,457

Machinery and equipment

944

1,189

8,793

Land

194

194

1,811

¥2,261¥2,583$21,062

Buildings and structures

The obligations secured by such collateral at March 31, 2005 and 2004 were as follows:
In thousands of
U.S. dollars

2005

2004

2005

¥383,281¥231,613$3,569,062

10. STOCKHOLDERS’ EQUITYThe Commercial Code of Japan (the “Code”) provides that an amount equal to at least 10% of the amount to be
disbursed as a distribution of earnings should be appropriated to the legal reserve until the sum of the legal reserveand capital surplus equals at least 25% of the common stock account. The Code also stipulates that, to the extent
that the sum of capital surplus account and the legal reserve exceed 25% of the common stock account, theamount of any such excess is available for appropriation by resolution of the stockholders. MMC and its domestic
subsidiaries have provided these amounts in accordance with the Code.
Unrealized holding gain on securities and derivative financial instruments is not available for dividends.
At the stockholders’ meeting held on June 25, 2003, the disposition of the non-consolidated accumulated
deficit of MMC of ¥197,179 million ($1,865,637 thousand) by offset against capital surplus was approved, as
permitted by the Code. As a result, the capital surplus decreased by the same amount.
MMC is authorized to issue 3,425,000 shares of convertible preferred stock that are classified as Series A, B andG (3 times in each series), and has originally issued 682,000 shares (526,193 shares are issued at March 31, 2005).
The holders of each series convertible preferred stock are not entitled voting right, but the holders of Series A
and G (except for Series B) are entitled to the dividend of preferred stock will be paid 50,000 yen per share to theholders each year after 2009.
MMC also distributes residual claims to the holders of each series convertible preferred stock by solely payment
of one million yen per share of preferred stock in order of payment.
Annual Report 2005

63

Financial Section

Short-term borrowings and long-term debt

In millions of yen

M I T S U B I S H I M O T O R S C O R P O R AT I O N

MMC has the rights to retain parts or entire of preferred stocks and retire parts or entire of them.
11. CONTINGENT LIABILITIES
Trade notes endorsed in the ordinary course of business amounted to ¥12 million at March 31, 2004.
Loans guaranteed given in the ordinary course of business amounted to ¥6,008 million ($55,947 thousand) and¥6,721 million at March 31, 2005 and 2004, respectively. Agreements similar to guarantees given in the ordinary course ofbusiness amounted to ¥3,449 million ($32,125 thousand) and ¥4,518 million at March 31, 2005 and 2004, respectively.
12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2005 and 2004 were as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥132,727¥167,925$1,235,937

Freight

19,75730,109183,975

Bad debts expense

4,602

2,907

42,860

Salaries and wages

86,90680,921

809,259

Pension expenses

4,348

9,864

40,488

Sales promotion and advertising

Severance payments to directors and corporate auditors
Depreciation

796

738

7,420

14,15012,148

131,765

Research and development

68,77568,874640,429

Others111,01182,2491,033,721

Total¥443,076¥455,739$4,125,859

13. OTHER INCOME (LOSS), NET
Other income (loss), net for the years ended March 31, 2005 and 2004 consisted of the following:

Gain on sales of investments in securities¥

In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

1,331

¥39,431(16,189)(4,022)$

12,401

Loss on sales and disposal of property, plant and equipment
and intangible assets(150,755)

Loss on impairment of fixed assets(84,376)(527)(785,699)

Severance payments for early retirement(16,283)(3,190)(151,629)

Amortization of consolidation goodwill

1,441

1,560

13,421

Provision for loss on restructuring(29,530)—(274,983)

Inventory valuation loss

(28,043)—

Extraordinary measure expenses(25,247)

Stock issue costs(12,854)—(119,703)

Loss compensation based on stocks transfer contract(74,736)—(695,935)

Other(17,188)(6,832)(160,060)¥(301,678)¥26,419$(2,809,184)

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Annual Report 2005

(261,136)(235,103)

M I T S U B I S H I M O T O R S C O R P O R AT I O N

14. CASH FLOW INFORMATIONCash and cash equivalents at March 31, 2005 and 2004 consisted of the following:

Cash and bank deposits

In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥307,474¥173,514$2,863,160(16,791)(2,161)(156,363)

Time deposits with maturities of three months or more
Short-term investments maturing within three months
from the acquisition dates

4,220

10,55839,297

Cash and cash equivalents¥294,903¥181,911$2,746,094

Interest paid less interest received and dividends received for the years ended March 31, 2005 and 2004 amounted toa net expense of ¥15,927 million ($148,314 thousand) and ¥15,232 million, respectively. Income taxes paid for the years
ended March 31, 2005 and 2004 amounted to ¥4,675 million ($43,535 thousand) and ¥5,260 million, respectively.
Purchase of property, plant and equipment within investing activities in the consolidated statements of cash
flows for the years ended March 31, 2005 and 2004 includes payments for the acquisition of lease vehicles of¥16,061 million ($149,558 thousand) and ¥45,059 million, respectively.
Proceeds from sales of property, plant and equipment within investing activities in the consolidated statementsof cash flows for the years ended March 31, 2005 and 2004 includes proceeds from sales of lease vehicles of¥36,276 million ($337,797 thousand) and ¥64,998 million, respectively.
Changes in finance receivables within operating activities in the consolidated statements of cash flows forthe years ended March 31, 2005 and 2004 is the net of payments amounting to ¥95,011 million ($884,730
thousand) and ¥257,773 million, respectively, and proceeds from collections amounting to ¥223,580 million($2,081,953 thousand) and ¥211,608 million, respectively.

As lessee
The following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value ofthe leased assets as of March 31, 2005, which would have been reflected in the consolidated balances sheet if
finance lease accounting had been applied to the finance leases transactions excluding lease arrangements which
stipulate the transfer of title of the assets to the lessee, which are accounted for as operating leases:(a) Notional equivalent acquisition cost, accumulated depreciation, and related net book value of suchfinance lease assets:
In millions of yen
2005
Notional
Notional
equivalentequivalent accumulatedacquisition cost depreciation

Tools and equipment
OthersTotal¥31,275 ¥23,033
5,372

2,432

Notional
equivalent
net book
value

2004
Notional
Notional
equivalentequivalentacquisition accumulated
cost depreciation

Notional
equivalent
net bookvalue¥ 8,242 ¥40,392 ¥26,322 ¥14,070
2,940

5,256

2,693

2,563

¥36,648 ¥25,466 ¥11,182 ¥45,649 ¥29,015 ¥16,634

Annual Report 2005

65

Financial Section

15. LEASESM I T S U B I S H I M O T O R S C O R P O R AT I O N

In thousand of U.S. dollars
2005
Notional
Notional
equivalentequivalent accumulatedacquisition cost depreciation

Tools and equipment
Others$291,235 $214,483 $ 76,751
50,030Total

Notional
equivalent
net book
value

22,652

27,378$341,266 $237,136 $104,129(b) Future minimum lease payments of such finance leases:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Due within 1 year

¥ 7,350¥ 9,542$ 68,447

Due after 1 year

9,933

14,121

92,498¥17,283¥23,663$160,945

Total(c) Lease payment expense, notional depreciation expense and notional interest expense of such finance leases:

Lease payment expense

In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥10,156¥12,861$94,578

8,483

13,07578,994

522

608

4,868

Notional depreciation expense
Notional interest expense(d) Notional finance lease depreciation method

Notional depreciation of such finance leases is principally calculated and depreciated with no residual value by the
declining-balance method over the lease term.
(e) Calculation of notional interest expense of finance leases
The notional interest expense of such finance leases is principally regarded as the difference between total minimum lease payments and acquisition cost, and is allocated to each period using the interest method.
Future minimum lease payments required under operating lease transactions entered into by MMC and its
consolidated subsidiaries at March 31, 2005 and 2004 were as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Due within 1 year

¥15,456¥11,260$143,924

Due after 1 year

46,69736,964434,839

Total¥62,153¥48,224$578,763

66

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

As lessor
Future minimum lease revenues from operating lease transactions entered into by MMC and its consolidated
subsidiaries as lessor at March 31, 2005 and 2004 were as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Due within 1 year

¥20,741¥27,063$193,137

Due after 1 year

22,21535,714

206,866

Total¥42,956¥62,778$400,003

16. DERIVATIVE FINANCIAL INSTRUMENTS(a) Nature of and policy for derivative transactions
MMC and consolidated subsidiaries utilize derivative financial instruments, including forward foreign exchange
contracts, currency options, currency swaps, interest rate swaps and cross currency swaps to manage their exposure tofluctuations in foreign currencies and interest rates. MMC and consolidated subsidiaries do not utilize derivatives for
speculation or trading purposes.
(b) Risk
MMC and consolidated subsidiaries are exposed to the risk of credit loss in the event of nonperformance by thecounterparties to the derivatives, but any such loss would not be expected to be material because MMC enters into
derivative transactions only with financial institutions with high credit ratings. The notional amounts of the derivative financial instruments do not necessarily represent the amounts exchanged by the parties and, therefore, are nota direct measure of MMC’s risk exposure in connection with derivatives.
All the transactions related to derivative financial instruments are for the purpose of hedging, however, certain
Financial Section

interest rate swaps which are receive-fixed/pay-floating are exposed to risk of future interest rate fluctuations.
MMC and consolidated subsidiaries do not enter into derivative contracts for which significant volatility would
have any significant influence on its operations.
(c) Control
MMC does not enter into derivative contracts for trading purposes or on the anticipation of gains from short-term
market movements. Derivative transactions are appropriately pre-approved by Managing Directors in charge ofFinance Group Head Quarters. MMC approves derivative transactions of consolidated subsidiaries as appropriate, and inaccordance with policies established for each subsidiary which require the appropriate approval of Managing Directors incharge of Finance Group Head Quarters.

Annual Report 2005

67

M I T S U B I S H I M O T O R S C O R P O R AT I O N

Summarized below are the notional amounts and the estimated fair values of the derivative positions, except for
those accounted for under the special hedge provision, outstanding at March 31, 2005 and 2004:[Forward foreign exchange contracts]
In millions of yen
2005
Notional
amountForward foreign exchange contracts:
Sell:
U.S. $Euro£ stg
Canadian $Australian $Japanese ¥Buy:Japanese ¥Fair value¥14,033 ¥13,867
18,32818,690
2,284
2,351
967
1,034
2,920
3,172
13,444
13,19910,95010,900

Total

Unrealized
gain (loss)

2004
Notional
amountFair value

Unrealized
gain (loss)¥ 166 ¥ 7,042
(362)
7,897
(66) 12,478
(66)
5,705
(251)
—
245
10,105¥ 6,825
7,721
12,604
5,677—
10,104

¥ 216
175
(126)
28
—
0

2,491

17

(49)

2,474

¥(385)¥ 311

In thousands of U.S. dollars
2005
Notional
amountForward foreign exchange contracts:
Sell:
U.S. $Euro£ stg
Canadian $Australian $Japanese ¥Buy:Japanese ¥Fair value$130,677 $129,129
170,670
174,044
21,273
21,895
9,009
9,633
27,19729,537125,195
122,912
101,966

101,504

Total

Unrealized
gain (loss)$ 1,547(3,373)(621)(623)(2,339)2,283(462)$(3,590)[Currency options]
In millions of yen
2005
Notional
amountCurrency options:
Sell:
U.S. $ call
Buy:
U.S. $ put
Total

68

—
—
—
—

Fair value

Unrealized
gain (loss)—¥46,234
—
(457)

¥584

¥(127)—

46,234
(457)

380

—
—

Annual Report 2005

2004
Notional
amountFair value

Unrealized
gain (loss)(77)¥(204)

M I T S U B I S H I M O T O R S C O R P O R AT I O N

In thousands of U.S. dollars
2005
Notional
amountFair value

Unrealized
gain (loss)

—

—

—

—

Currency options:
Sell:
U.S. $ call

—
—

Buy:
U.S. $ put

—
—
—

Total

—

[Cross currency swaps]
In millions of yen
2005
Notional
amountPay-JPY receive — U.S. $Pay-THB receive — U.S. $2004

Fair value

Unrealized
gain (loss)

Notional
amountFair value

Unrealized
gain (loss)¥2,166

¥(16)

¥(16)

¥3,595¥(387)¥(387)

3,157

1

1

5,547

(128)

(128)

Cross currency swaps:

Total

¥(15)

¥(516)In thousands of U.S. dollars
2005
Fair value

Unrealized
gain (loss)

Pay-JPY receive — U.S. $$20,177$(151)$(151)

Pay-THB receive — U.S. $29,40411

Financial Section

Notional
amountCross currency swaps:

Total

11
$(140)All cross currency swaps have maturities over one year.
[Interest rate swaps]
In millions of yen
2005
Unrealized
gain (loss)

2004

Notional
amountNotional
amountFair value

Pay-fixed, receive-floating¥129,869¥113¥113 ¥150,608

Pay-floating, receive-fixed

61,428139

139

Fair value

Unrealized
gain (loss)

Interest rate swaps:

Total

¥252

14,241¥(1,215) ¥(1,215)
531

531¥ (683)

Annual Report 2005

69

M I T S U B I S H I M O T O R S C O R P O R AT I O N

In thousands of U.S. dollars
2005
Notional
amountFair value

Unrealized
gain (loss)

Pay-fixed, receive-floating$1,209,325$1,053$1,053Pay-floating, receive-fixed

572,0121,295Interest rate swaps:

Total

1,295
$2,348

Included in interest rate swaps above, are contracts with maturities over one year with notional amounts of¥103,008 million ($959,202 thousand) and ¥45,446 million as at March 31, 2005 and 2004, respectively.
17. RETIREMENT BENEFITS
MMC and its consolidated subsidiaries have defined benefit pension plans for their employees. The plans include
contributory plans in accordance with the Welfare Pension Institute Law of Japan, tax-qualified plans and noncontributory severance plans. Additional early retirement benefits are paid in certain cases upon employee’s retirement. Certain foreign consolidated subsidiaries have defined contribution pension plans. At March 31, 2005, MMC
and its consolidated subsidiaries have 4 funds for contributory plans in accordance with the Welfare Pension
Insurance Law, and 46 funds for tax-qualified plans. MMC and 43 of its consolidated subsidiaries have noncontributory severance plans.
The discount rate used to determine the retirement benefit obligation was 1.5%–2.5% for MMC and its domestic consolidated subsidiaries, 6.0%–6.3% for its foreign consolidated subsidiaries, and 2.0%–2.5% for MMC and
its domestic consolidated subsidiaries, 6.25%–7.0% for its foreign consolidated subsidiaries at March 31, 2005
and 2004, respectively. The rate of return on plan assets assumed was 0.8%–4.0% for MMC and its domestic
consolidated subsidiaries, 8.0%–8.5% for its foreign consolidated subsidiaries, and 1.5%–4.0% for MMC and its
domestic consolidated subsidiaries, 8.0%–8.5% for its foreign consolidated subsidiaries for the year ended March
31, 2005 and 2004, respectively.
The retirement benefit obligation for MMC’s and its consolidated subsidiaries’ employees’ defined benefit plans
at March 31, 2005 and 2004 is summarized as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Retirement benefit obligation¥(173,805)¥(186,990)$(1,618,451)

Pension plan assets at fair value

45,62854,460424,882(128,177)(132,529)(1,193,569)

Unrecognized actuarial losses

Unfunded status

20,362

19,668

189,610

Unrecognized prior service cost

11,4496,605

106,618

Net recognized retirement benefit obligation(96,365)(106,255)(897,340)

Prepaid pension premiums

2,929

4,866

27,283

Accrued retirement benefits¥ (99,295)¥(111,121)$ (924,624)

Plan assets relating to multi-employer pension plans are not included in the above pension plan assets, as theamount of such assets representing the consolidated subsidiaries’ share can not be reasonably established. The
amount of such assets calculated mainly on the basis of contribution ratio was ¥3,708 million ($34,536 thousand)and ¥3,627 million at March 31, 2005 and 2004, respectively.

70

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NPension expenses for MMC’s and its consolidated subsidiaries’ employees’ retirement defined benefit plans forthe years ended March 31, 2005 and 2004 were as follows:

Service cost

In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥ 9,086¥11,718$ 84,613

Interest cost

4,803

5,175

44,731

Expected return on plan assets(2,158)(2,549)(20,101)

Amortization of actuarial loss

781

2,673

7,281

Amortization of prior service cost

708

347

6,599

Other
Pension expenses

428

5,363

3,987

¥13,650¥22,729$127,113

In addition to the above pension expenses, additional early retirement benefits of ¥16,283 million ($151,629
thousand) and ¥3,190 million were paid and recorded as other income (loss) during the year ended March 31, 2005
and 2004, respectively.
18. INCOME TAXES
MMC and its domestic consolidated subsidiaries are subject to corporation, resident’s and enterprise taxes based on
taxable income, which, in the aggregate, resulted in a statutory tax rate of approximately 40.3% and 41.6% for theyears ended March 31, 2005 and 2004, respectively. Income taxes of the foreign consolidated subsidiaries arecalculated based generally on the tax rates applicable in their countries of incorporation. Consolidated tax payment
is applied at March 3, 2005 and 2004.
The effective tax rates reflected in the accompanying consolidated statements of operations for the years ended
%
2005

2004

Statutory income tax rate for MMC

40.3

41.6

Increase in valuation allowance, effect of use of loss carry forwards and similar(42.4)(211.3)

Income from affiliates accounted for by the equity method

1.1

8.9

Amortization of consolidation goodwill

(0.1)

0.8

Increase (decrease) by tax effect of subsidiaries in North America

1.1

(8.3)

Expenses not deductible for income taxes purposes

(0.1)

(2.1)

Income (loss) on sales of affiliates

0.1

(2.1)

Other

4.3

(6.1)

4.3

(178.6)

Income taxes as a percentage of (loss) gain before income taxes
and minority interests

Annual Report 2005

71

Financial Section

March 31, 2005 and 2004 differ from the statutory tax rate for the following reasons:M I T S U B I S H I M O T O R S C O R P O R AT I O N

The significant components of deferred tax assets and liabilities as of March 31, 2005 and 2004 were as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥ 308,079¥ 162,820$ 2,868,790

Deferred tax assets:
Net operating loss carry forward
Accrued retirement benefits

41,411

41,663385,622

Allowance for doubtful accounts

31,27032,635291,182

Allowance for product warranty

19,46817,865

181,283

Accounts payable — warranty

13,33915,279124,213

Other

116,985

95,251

1,089,352

Less valuation allowance(483,085)(285,943)(4,498,421)

47,46879,573442,023

Reserves under the Special Taxation Measures Law(1,486)(12,693)(13,843)

Unrealized holding gain on securities(6,145)(3,291)(57,228)(5,921)(6,338)(55,142)

Total deferred tax assets
Deferred tax liabilities:

Fair value adjustment relating to land inconsolidated subsidiaries
Accelerated depreciation of overseas consolidated subsidiaries(30,448)(42,029)(283,535)

Other(12,393)(15,543)(115,406)(56,396)(79,896)(525,156)

Total deferred tax liabilities
Net deferred tax assets¥(8,927)

¥

(323)

$

(83,132)

Deferred tax assets and liabilities at March 31, 2005 and 2004 are included in the accompanying consolidatedbalance sheets as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥ 1,799¥ 4,979$ 16,761

Investments and other assets

6,730

19,721

62,676

Other current liabilities

(100)

(273)

(936)

Non-current liabilities(17,357)(24,751)(161,633)

Net deferred tax assets¥ (8,927)¥$ (83,132)

Current assets

72

Annual Report 2005

(323)

M I T S U B I S H I M O T O R S C O R P O R AT I O N

19. SEGMENT INFORMATION(a) Business segments
The business segment information for MMC and its consolidated subsidiaries for the years ended March 31, 2005
and 2004 is summarized as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥2,086,053¥2,443,342$19,425,023

40,19372,626374,271

2,126,246

2,515,968

19,799,294(3,619)3,481(33,708)¥2,122,626¥2,519,449$19,765,586¥ (104,305)¥$

Net sales:
Automobiles
Financial services
Total
Intersegment
Consolidated
Operating loss:
Automobiles
Financial services
Total
Intersegment
Consolidated(50,864)(971,278)(21,066)(49,880)(196,165)(125,371)(100,745)(1,167,444)

3,892(29,539)¥ (128,544)(3,172)¥(96,852)$ (1,196,983)¥1,601,183¥1,784,453$14,909,985

273,412

485,540

2,545,973

1,874,595

2,269,994

17,455,958

Total assets:
Automobiles
Financial services
Total
Corporate and eliminations(285,309)(240,958)(2,656,756)¥1,589,286¥2,029,035$14,799,202¥$

Depreciation:
Automobiles

75,258¥ 108,051

22,226

31,41997,484¥ 139,471$¥ 128,592¥ 113,907$ 1,197,430

16,06137,015

149,558¥ 144,653¥ 150,923$ 1,346,988

Financial services
Consolidated¥

700,792
206,967
907,760

Capital expenditures:
Automobiles
Financial services
Consolidated

Annual Report 2005

73

Financial Section

Consolidated

M I T S U B I S H I M O T O R S C O R P O R AT I O N(b) Geographical segments
The geographical segment information for MMC and its consolidated subsidiaries for the years ended March 31,
2005 and 2004 is summarized as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥1,258,275¥1,564,860$11,716,876

Net sales:
Japan
North America

435,311599,675

4,053,559

Europe670,218

656,241

6,240,976

Asia

198,554

183,767

1,848,909

Other areas

160,677

181,958

1,496,204

Total

2,723,037

3,186,503

25,356,526

Interarea(600,411)(667,054)(5,590,939)¥2,122,626¥2,519,449$19,765,586

¥

¥

$

Consolidated
Operating (loss) profit:
Japan
North America
Europe(73,561)(74,256)

19,933(125,970)(684,996)(691,465)(192)

14,105(1,794)

Asia

21,602

12,415201,157

Other areas(11,448)(16,732)(106,611)

Total(137,857)(96,248)(1,283,709)

Interarea

9,313

(604)

86,726

Consolidated¥ (128,544)¥(96,852)$ (1,196,983)¥1,188,913¥1,197,472$11,070,991

Total assets:
Japan
North America

309,933

676,349

2,886,053

Europe194,170

257,556

1,808,089

Asia

101,681

86,514

946,847

Other areas

74,89882,830697,446

1,869,598

2,300,723

17,409,428

TotalInterarea
Consolidated

74

Annual Report 2005

(280,312)(271,687)(2,610,226)¥1,589,286¥2,029,035$14,799,202

M I T S U B I S H I M O T O R S C O R P O R AT I O N(c) Overseas sales
Overseas sales, which include export sales of MMC and its domestic consolidated subsidiaries and sales (other thanexports to Japan) of the foreign consolidated subsidiaries for the years ended March 31, 2005 and 2004 aresummarized as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

Overseas sales:¥ 441,441¥ 600,770$ 4,110,641

EuropeNorth America

667,778

661,967

6,218,257

Asia

258,331304,429

2,405,549

Other areas

342,184

330,974

3,186,371

Total

1,709,736

1,898,141

15,920,818¥2,122,626¥2,519,449$19,765,586

Consolidated sales
Overseas sales as a percentage of consolidated sales:
North America

20.8%

23.8%

Europe

31.4

26.3

Asia

12.2

12.1

Other areas

16.1

13.1

Total

80.5

75.3

20. RELATED PARTY TRANSACTIONS
MMC entered into the following transactions with related parties during the years ended March 31, 2005 and 2004:
Financial Section

2005

Party type:

Main stockholder

Party name:DaimlerChrysler AG

Address:

Stuttgart, Germany

Capital:Business:

Euro 2,633 million
Manufacturing and sales of passenger
cars and other transportation equipment% of voting stock held:
Concurrent board appointment:

Direct 12.9
1 personBusiness relationship:

International alliances for research,development, production, sales
and similar for passenger cars

Detail of transaction:

Loss supplementation based on
Mitsubishi Fuso stock transfer contract

Transaction amount:¥64,212 million

Account title:

Accounts payable and accrued expense

Balance at year end:

¥23, 249 million(see (i) below)

Annual Report 2005

75

M I T S U B I S H I M O T O R S C O R P O R AT I O N

2004Party type:(a)
Other related company(b)Affiliated company

Party name:DaimlerChrysler AG

Mitsubishi Fuso Truck
and Bus Corporation

Address:

Stuttgart, Germany

Tokyo, Japan

Capital:Euro 2,633 million¥20,000 million

Business:

Manufacturing and sales of passenger
cars and other transportation equipment

Development, design, manufacture,assembly and sales of trucks and buses,
and related parts and accessories% of voting stock held:

Direct 33.7, Indirect 3.2

20.0

Concurrent board appointment:

1 person1 personBusiness relationship:

International alliances for research,development, production, sales andsimilar for passenger cars
Sale of shares in MFTBC

Sales of engine and transmission parts

Account title:

Sale amount ¥52,360 million
Gain on sale ¥499 million—

Deposit amount ¥275,000 million
Interest expenses ¥125 million
Other current liabilities

Balance at year end:——(see (i) below)(see (ii) below)

Detail of transaction:
Transaction amount:

Deposit held(i) The terms and conditions of the above transactions were decided by negotiation based on Mitsubishi Fuso
subject to the transaction’s net assets.
(ii) The highest amount of the deposit held during the year was ¥60,000 million.
21. LOSS AND EQUITY PER SHARE
Net loss and equity per share of common stock for the years ended March 31, 2005 and 2004 are summarized as follows:In yenIn U.S. dollars

2005

2004

2005

¥(194.36)¥(145.22)$(1.81)

Net loss per share of common stock
Basic
DilutedStockholders’ equity per share of common stock

—

—

—

(47.34)20.20(0.44)

Diluted amounts per share of common stock are not included for the years ended March 31, 2005 and 2004
due to the net loss recorded.
The computations of net loss per share of common stock for the years ended March 31, 2005 and 2004 are as follows:
In millions of yen

In thousands of
U.S. dollars

2005

2004

2005

¥(474,785)¥(215,424)$(4,421,136)

—

—

—

¥(474,785)¥(215,424)$(4,421,136)

2,442,864

1,483,429

2,442,864

Numerator for basic net income per share of common stock:
Net loss
Income not available to common stockholders
Income available to common stockholders
Denominator for net income per share of common stock:
Weighted average number of shares (in thousands)

76

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O NREPORT OF INDEPENDENT AUDITORS

Financial Section

Annual Report 2005

77

M I T S U B I S H I M O T O R S C O R P O R AT I O N

CONSOLIDATED SUBSIDIARIES AND AFFILIATES(AS OF MARCH 31, 2005)

CONSOLIDATED SUBSIDIARIES IN JAPANCompany

Capitalization(In millions of yen)

Business Lines

MMC Share of
Voting Rights (%)*

Hokkaido Mitsubishi Motors Sales Co., Ltd.

1,750

Automobile sales

100.0

Sapporo Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0
100.0

Iwamizawa Mitsubishi Motors Sales Co., Ltd.

60

Automobile sales

Sorachi Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Asahikawa Mitsubishi Motors Sales Co., Ltd.

90

Automobile sales

100.0

Iwate Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Sendai Mitsubishi Motors Sales Co., Ltd.

120

Automobile sales

100.0

Fukushima Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Koriyama Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Gunma Chuo Mitsubishi Motors Sales Co., Ltd.

80

Automobile sales

100.0

Tochigi Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Minami Ibaraki Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Saitama Mitsubishi Motors Sales Co., Ltd.

500

Automobile sales

100.0

Saitama Chuo Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0Tokyo Mitsubishi Motors Sales Co., Ltd.

3,263

Automobile sales

100.0

Kanagawa Mitsubishi Motors Sales Co., Ltd.

1,025

Automobile sales

100.0

Kawasaki Mitsubishi Motors Sales Co., Ltd.

882

Automobile sales

100.0

Yamanashi Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Matsumoto Mitsubishi Motors Sales Co., Ltd.

160

Automobile sales

100.0

Aichi Chuo Mitsubishi Motors Sales Co., Ltd.

50

Automobile sales

99.1

Gifu Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

82.5
100.0

Ishikawa Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

Kinki Mitsubishi Motors Sales Co., Ltd.

1,083

Automobile sales

100.0

Konan Mitsubishi Motors Sales Co., Ltd.

180

Automobile sales

100.0
100.0 (15.4)

Nishi Tottori Mitsubishi Motors Sales Co., Ltd.

40

Automobile sales

Okayama Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

65.0

Hiroshima Chuo Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

97.8

Shimane Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

97.2

Shin Yamaguchi Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Matsuyama Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Oita Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Miyazaki Chuo Mitsubishi Motors Sales Co., Ltd.

40

Automobile sales

90.7

Nagasaki Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

100.0

Kagoshima Chuo Mitsubishi Motors Sales Co., Ltd.

90

Automobile sales

Hokkaido Mitsubishi Motors Parts Sales Co., Ltd.

150

Automobile parts sales

99.3
90.0 (45.0)

Tohoku Mitsubishi Motors Parts Sales Co., Ltd.

200

Automobile parts sales

62.0 (15.0)

Michinoku Mitsubishi Motors Parts Sales Co., Ltd.

100

Automobile parts sales

71.0 (21.0)

Kita Kanto Mitsubishi Motors Parts Sales Co., Ltd.

100

Automobile parts sales

75.0 (25.0)

Saitama Mitsubishi Motors Parts Sales Co., Ltd.

60

Automobile parts sales

90.4 (32.7)

Tokyo Mitsubishi Motors Parts Sales Co., Ltd.

100

Automobile parts sales

100.0 (30.0)

Higashi Kanto Mitsubishi Motors Parts Sales Co., Ltd.

100

Automobile parts sales

56.0 (10.0)

Kanagawa Mitsubishi Motors Parts Sales Co., Ltd.

100

Automobile parts sales

100.0 (44.4)

Shinetsu Mitsubishi Motors Parts Sales Co., Ltd.**200

Automobile parts sales

50.0 (15.0)

Hokuriku Mitsubishi Motors Parts Sales Co., Ltd.

150

Automobile parts sales

65.8 (21.5)

Higashi Chugoku Mitsubishi Motors Parts Sales Co., Ltd.

150

Automobile parts sales

83.0 (43.0)

Nishi Chugoku Mitsubishi Motors Parts Sales Co., Ltd.

150

Automobile parts sales

55.0 (5.0)

Shikoku Mitsubishi Motors Parts Sales Co., Ltd.**100

Automobile parts sales

50.0

Pajero Manufacturing Co., Ltd.

610

Automobile and parts manufacture, sales

100.0

Ryoji Yohin Sales Co., Ltd.

20

Sales of automobile accessories, air conditioners

100.0

Mitsubishi Automotive Techno-Service Co., Ltd.

400

Automobile servicing

100.0

Mitsubishi Automotive Logistics Co., Ltd.

300

Vehicle transportation contractor

75.0

Mitsubishi Automotive Engineering Co., Ltd.

350

Design and testing of automobiles and parts

100.0

Suiryo Plastics Co., Ltd.

100

Manufacture, sales of automobile parts

100.0

78

Annual Report 2005

M I T S U B I S H I M O T O R S C O R P O R AT I O N

MAJOR CONSOLIDATED SUBSIDIARIES OUTSIDE JAPANCompany

Incorporated in

Capitalization(In millions)

Netherlands Car B.V. (NedCar)

Netherlands

EUR

Mitsubishi Motors Europe B.V. (MME)

Netherlands

EUR 1,282.9

Mitsubishi Motor R&D of Europe GmbH (MRDE)

Germany

EUR

0.8

Product development, design, testing, certification

100.0 (100.0)

Mitsubishi Motor Sales Netherlands B.V.

Netherlands

EUR

6.8

Automobile importing, sales

100.0 (100.0)

Mitsubishi Motors Deutschland GmbHGermany

EUR

30.0

Automobile importing, sales

100.0 (100.0)

Mitsubishi Motor Sales Sweden AB (MMSS)

SwedenEUR

5.5

Automobile importing, sales

100.0 (100.0)

Mitsubishi Motor Sales Denmark AS (MMSD)

Denmark

EUR

33.1

Automobile importing, sales

100.0 (100.0)

MMC Automoviles Espana S.A.

Spain

EUR

1.2

Automobile importing, sales

75.0 (75.0)

Mitsubishi Motors France S.A.S

FranceEUR

22.7

Automobile importing, sales

100.0 (100.0)

250.0

MMC Share of
Voting Rights (%)*

Business Lines
Manufacture, sales of automobiles and parts

100.0 (15.0)

Holding company
Imports, sales of automobiles and parts

100.0

Mitsubishi Motors Belgium nv

Belgium

EUR

3.0

Automobile importing, sales

100.0 (100.0)

Mitsubishi Motors R&D of America, Inc. (MRDA)

U.S.A.

USD

2.0

Product development, design, testing, certification

100.0 (100.0)

Mitsubishi Motors North America, Inc. (MMNA)

U.S.A.

USD

398.8

Mitsubishi Motors Credit of America, Inc. (MMCA)

U.S.A.

USD 1,220.0

Automobile importing, manufacture, sales

100.0

Automobile financing, leasing

100.0 (100.0)

Mitsubishi Motor Sales of Canada, Inc. (MMSCAN)

CanadaUSD

1.3

Automobile importing, sales

100.0 (100.0)

Mitsubishi Motor Sales of Caribbean, Inc. (MMSC)

Puerto Rico

USD

47.5

Automobile importing, sales

100.0

MMC Holding New Zealand Ltd.

New Zealand

NZD

48.0

Holding company

Mitsubishi Motors New Zealand Ltd. (MMNZ)New Zealand

NZD

38.2

Automobile importing, sales

Mitsubishi Motors Australia, Ltd. (MMAL)

Australia

AUD 1,039.9

Automobile importing, assembly, sales

100.0

MMC International Finance (Netherlands) B.V.

Netherlands

EUR

Procurement of funds, group company financing

100.0

Mitsubishi Motors Philippines Corp. (MMPC)

Philippines

PHP 1,640.0

Automobile importing, assembly, sales

Asian Transmission Corp. (ATC)Philippines

PHP

Manufacture of automobile transmissions

Mitsubishi Motors (Thailand) Co., Ltd. (MMTh)ThailandTHB 7,000.0

Automobile importing, assembly, sales

MSC Engine Co., Ltd. (MEC)

Thailand

THB

20.0

Manufacture of automobile engines

Mitsubishi Motor Parts Sales of Gulf FZE

UAE

UAD

10.0

Importing, sales of automobile panels

0.1
350.0

100.0
100.0 (100.0)

51.0
84.7 (79.4)
99.8
100.0 (100.0)
100.0

Note: MMC has 34 other subsidiaries outside Japan in addition to the above.

EQUITY METHOD AFFILIATES IN JAPANMMC Share of
Voting Rights (%)*

Business Lines

Hakodate Mitsubishi Motors Sales Co., Ltd.***480

Automobile sales

16.9

Muroran Mitsubishi Motors Sales Co., Ltd.

100

Automobile sales

29.0 (29.0)

Tokachi Mitsubishi Motors Sales Co., Ltd.

60

Automobile sales

35.0

Morioka Mitsubishi Motors Sales Co., Ltd.

48

Automobile sales

21.5

Ibaraki Mitsubishi Motors Sales Co., Ltd.

30

Automobile sales

40.0

Meihoku Mitsubishi Motors Sales Co., Ltd.

70

Automobile sales

28.6

Mie Mitsubishi Motors Sales Co., Ltd.

58

Automobile sales

24.8

Kagawa Mitsubishi Motors Sales Co., Ltd.

50

Automobile sales

23.0

Iyo Mitsubishi Motors Sales Co., Ltd.

30

Automobile sales

22.2

Uwajima Mitsubishi Motors Sales Co., Ltd.

30

Automobile sales

26.7

Miyazaki Mitsubishi Motors Sales Co., Ltd.

60

Automobile sales

38.8

Mitsubishi Automobile Credit-Lease Corporation

960

Auto sales financing, leasing, rentals

43.3

MAJOR EQUITY METHOD AFFILIATES OUTSIDE JAPANCompany

Incorporated in

Capitalization(In millions)

Business Lines

MMC Share of
Voting Rights (%)*

MDC Power GmbHGermany

EUR

0.5

Manufacture of automobile engines

Mitsubishi Motors do Portugal S.A.

Portugal

EUR

16.5

Importing, sales of automobiles

50.0

P.T. Mitsubishi Krama Yudha Motors & Manufacturing

Indonesia

IDR

11.5

Manufacture, sales of automobile parts

32.3

Vina Star Motors Corp.

Vietnam

USD

16.0

Manufacture and marketing of automobiles and parts

25.0

Kuala Lumpa (Malaysia) Sendrian Bhd

Malaysia

MYR

2.0

Holding company

Nation Wide Distribution Service (Thailand) Co., Ltd.

Thailand

THB

20.0

Transporting of automobiles in Thailand

50.0 (50.0)

25.0
49.0 (49.0)

Note: MMC has 9 other equity method affiliates outside Japan in addition to the above.
* Figures in parentheses represent indirect shares.
** Although MMC’s equity holding is less than 50%, this affiliate is listed as a subsidiary because MMC exercises effective control over the company.
*** Although MMC’s equity holding is less than 20%, this company is listed as an affiliate because MMC exercises effective control over the company.

Annual Report 2005

79

Consolidated Subsidiaries and Affiliates

Capitalization(In millions of yen)CompanyM I T S U B I S H I M O T O R S C O R P O R AT I O NSHAREHOLDER INFORMATION(As of March 31, 2005)

STOCK INFORMATION
PAID-IN CAPITAL¥642,300 million

NUMBER OF SHARES

4,254,521,405 shares (including preferred shares)

NUMBER OF SHAREHOLDERS

215,332

Type

Number of issued shares

Number of stockholders

4,253,995,212

215,310First Series Class A

130,000

4

Second Series Class A

35,0008

Third Series Class A

1,000

1

Second Series Class B

11,0001

Third Series Class B

40,6002First Series Class G

130,000

2

Second Series Class G

168,393

3

Third Series Class G

10,200

1

COMMON SHARESPREFERRED SHARESMAJOR SHAREHOLDERS
Name

Mitsubishi Heavy Industries, Ltd.

Number of shares held (thousands)% of total

580,683

13.65

Mitsubishi Corporation

571,065

13.42

DaimlerChrysler AG

548,372

12.89

Phoenix Capital Partners One, Inc.

300,000

7.05

Phoenix Capital Partners Four, Inc.

240,000

5.64

The Bank of Tokyo-Mitsubishi, Ltd.

203,949

4.79

Phoenix Capital Partners Two, Inc.

150,000

3.52

JP Morgan Securities Limited

59,995

1.40

Phoenix Capital Partners Three, Inc.

50,000

1.17

The Master Trust Bank of Japan, Ltd. (Trust account)
Total

80

Annual Report 2005

43,966

1.03

2,747,985

64.59

M I T S U B I S H I M O T O R S C O R P O R AT I O NCORPORATE INFORMATION(AS OF MARCH 31, 2005)

COMPANY NAMEMITSUBISHI MOTORS CORPORATIONDATE OF ESTABLISHMENT April 22, 1970
HEAD OFFICE

2-16-4, Konan, Minato-ku, Tokyo 108-8410, Japan
Telephone: +81-3-6719-2111 Fax: +81-3-6719-0014

ENGINEERING CENTERS

Research & Development Center—Okazaki
1, Aza-Nakashinkiri, Hashime-cho, Okazaki, Aichi 444-8501, Japan
Telephone: +81-564-31-3100
Research & Development Center—Kyoto
1, Uzumasa Tatsumi-cho, Ukyo-ku, Kyoto 616-8501, Japan
Telephone: +81-75-864-8000
Research & Development Center—Tokachi Proving Ground22-1, Aza-Osarushi, Otofuke-cho, Kato-gun, Hokkaido 080-0271, Japan
Telephone: +81-155-32-7111

DESIGN CENTER

Tokyo Design Center (From May 2005)
2-16-4, Konan, Minato-ku, Tokyo 108-8410, Japan
Telephone: +81-3-6719-2996

PLANTS

Nagoya Plant—Okazaki (Assembly)
1, Aza-Nakashinkiri, Hashime-cho, Okazaki, Aichi 444-8501, Japan
Telephone: +81-564-31-3100
Mizushima Plant (Assembly)
1-1, Mizushima Kaigandori, Kurashiki, Okayama 712-8501, Japan
Telephone: +81-86-444-4114
Powertrain Plant—Kyoto (Engines & Transmissions)1, Uzumasa Tatsumi-cho, Ukyo-ku, Kyoto 616-8501, Japan
Telephone: +81-75-864-8000

NUMBER OF EMPLOYEES

36,970 (Consolidated Basis) 12,094 (Non-consolidated Basis)

LISTED SECURITIESTokyo Stock Exchange and Osaka Securities Exchange

TRANSFER AGENT
AND REGISTER

The Mitsubishi Trust & Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, JapanACCOUNTING AUDITOR

Shin Nihon & Co.

Annual Report 2005

Shareholder Information Corporate Information

Powertrain Plant—Shiga (Engines)
2-1, Kosunacho, Kosei-cho, Koka-gun, Shiga 520-3212, Japan
Telephone: +81-748-75-3131

81ANNUAL REPORT 2005

MITSUBISHI MOTORS CORPORATION
2-16-4, Konan, Minato-ku, Tokyo 108-8410, Japan
Public Relations and Investor Relations Department
Tel: +81-3-6719-4206 (IR)+81-3-6719-4274 (Corporate PR)
Fax: +81-3-6719-0059
http://www.mitsubishi-motors.com

Printed in Japan