[ Presentation slides ( PDF, 19 pages, 222KB ) ]

1. Fiscal 2004 first quarter results

   MMC's consolidated net sales for the first quarter declined by 49.4 billion yen to 557.6 billion yen (FY03/Q1: 607 billion yen). By region, net sales in Europe grew 19.3 billion yen compared to the same period last year on the back of new products such as the European Colt as well as brisk sales in Russia, other Eastern European countries, and the United Kingdom. Net sales in Japan, however, declined 51.8 billion yen on year as the company faced sluggish sales due to recent quality issues in its home market. North American net sales were also down on year, declining by 12.6 billion yen as the company significantly reduced fleet sales and eliminated risky consumer financing programs. In the Asia/Rest of the World region, although MMC saw an increase in retail unit sales, a large proportion was for parts used in overseas production, which carry a lower sales value per unit, and net sales declined 4.3 billion yen on year.

   Total unit sales in Japan for the quarter decreased by 30,000 units to 49,000 as both registrations and minicars saw declines compared to the same period last year. North American unit sales slipped by 23,000 units on year to 53,000. European unit sales, meanwhile, increased by 5,000 units to 58,000, while robust sales in China, Thailand, South America, the Middle East and other regions more than offset a decline in sales in Australia to boost unit sales in Asia/Rest of the World by 4,000 units to 178,000.

   Operating results for the quarter improved by 10.6 billion yen compared to the same period last year for an operating loss of 31.7 billion yen. This comes as the 24.1 billion yen loss booked last year for loan defaults in North America was eliminated. Ordinary income came to minus 39 billion yen, an improvement of 13.1 billion yen on year. The company's net loss, however, expanded by 3.6 billion yen to 54.7 billion yen due to extraordinary losses booked for restructuring costs in Australian operations and the cancellation of development of a new model.

   MMC's financial standing improved greatly during the first quarter thanks to the issuance of preferred shares. As of June 30, the company's shareholders' equity was 263.4 billion yen (compared to 30 billion yen on March 31) and the equity ratio stood at 14 percent, up from 1 percent on March 31. MMC also slashed interest-bearing debt by 328.9 billion yen during the first quarter. Interest-bearing debt now stands at 733.7 billion yen (automotive: 564.4 billion; financial services: 169.3 billion), down from 1.06 trillion yen (automotive: 869.3 billion; financial services: 193.3 billion) at the end of March.

   To shore up its financial base, MMC embarked on a capital enhancement program which saw the company issue 295 billion yen worth of No. 1 and No. 2 Class A preferred shares and No. 1 Class G preferred shares in June. This was followed in July by the issuance of common stock, No. 1 - No. 3 Class B preferred shares and No. 3 Class A preferred shares for an additional 201 billion yen. In total, the company raised 496 billion yen worth of funds, or 46 billion yen more than the originally planned target of 450 billion yen. MMC plans to put these funds to use to pare debts further, push through restructuring measures to ensure a sound profit structure, and invest in developing new cars to pave the way for future growth.

   Breakdown of capital enhancement

   	No. 1 Class A preferred shares:	130 billion yen (Mitsubishi Heavy Industries, Mitsubishi Corporation, Bank of Tokyo-Mitsubishi, Mitsubishi Trust & Banking Corporation)
   	No. 2 Class A preferred shares:	35 billion yen (China Motor Corporation, Tokio Marine and Fire Insurance Company, Meiji Yasuda Life Insurance Company, Mitsubishi Electric Corporation, Nippon Yusen K.K, Mitsubishi Materials Corporation, Mitsubishi Chemical Corporation, Mitsubishi Logistics Corporation)
   	No. 1 Class G preferred shares:	130 billion yen (Bank of Tokyo-Mitsubishi, Mitsubishi Trust & Banking Corporation)
   	No. 3 Class A preferred shares:	1 billion yen (Nippon Oil Corporation)
   	No.1 - No.3 Class B preferred shares:	126 billion yen (JP Morgan)
   	Common stock:	74 billion yen (Phoenix Capital)

2. Progress of business revitalization plan

   Fully recognizing that this is its last chance for survival as an automaker, MMC is now working to a three-year plan announced on May 21 to support the self-revitalization of the company. Following the announcement, recall problems at MMC and Mitsubishi Fuso surfaced, causing downward risks for MMC's domestic sales. To combat this, the company outlined a number of additional steps based on three main areas: All-out cost cutting, restoring customer trust, and across-the-board compliance. This put MMC in a position to quickly respond to anticipated risks without changing the framework of the revitalization plan.

   The original and additional measures are being implemented to schedule and in some cases the moves are being pushed through ahead of schedule.

   Cost cutting
   		In the area of cost cutting, MMC is making steady progress towards its target of slashing costs by 89.4 billion yen — 14 billion in fixed costs, 41 billion in variable costs, and 34.4 in additional measures — in fiscal 2004. In addition to the reductions achieved in the first quarter, the second quarter will see the effects of initiatives launched in the first quarter such as a cut to executive compensation packages, a revision of remuneration for managers and rank-and-file workers, and the speeding up of restructuring efforts in Australia. In the third and fourth quarters, the effects of further cost-cutting measures such as the elimination of yearend bonuses in Japan and the move to one shift at the US plant in Illinois will also come into play and the company expects to achieve its fiscal 2004 target.
   US production capacity adjustment
   		MMC remains fully committed to the North American market. The company is working to put its operations there back on the road to sustained profitability by reducing its dependence on fleet sales and shifting its sales approach from one aimed at a short-term expansion of sales based on incentives to a more dealer-centric, long-term one with a renewed focus on the competitiveness of its vehicles. As the company works to rebuild natural retail demand for its vehicles in North America, production capacity has to be adjusted accordingly and the Illinois plant will move to one shift from October this year.
   Sales in Japan
   		To restore customer trust and rebuild the company's brand image, MMC will embark on a program to build up its domestic sales base with a solid focus on customers. In addition to extending till the end of the year its free vehicle inspections, three-year full vehicle support program, and dealer support initiatives, MMC will launch new and special edition models in autumn to keep the downward risks to domestic sales at a minimum.
   Speeding up revitalization plan initiatives
   		MMC is seeking to speed up its production capacity adjustments in a number of areas. In addition to moving to one shift at its US plant in Illinois from October, MMC plans to bring forward the completion of vehicle production at its Okazaki plant to the end of 2005 from its original plan which called for the plant to be closed in fiscal 2006. The company is also looking to offer early retirement packages to some workers at the plant and introduce others to re-employment opportunities with local businesses such as the Toyota group. The company's Tonsley Park vehicle assembly plant in Australia is offering voluntary redundancy packages to a number of employees. In an effort to reduce the cost of materials, MMC has set up a project team charged with revamping operations related to parts procurement and logistics.
   Support from Japanese government institutions
   		The Ministry of Economy, Trade and Industry approved MMC's application under the Industrial Revitalization Law, which allows MMC to pay lower taxes in relation to its capital enhancement. This also positions the company to be eligible for low-interest loans from the Development Bank of Japan. Safety-net loans and guarantees for subcontractors and dealers have also expanded the options for MMC affiliated companies to secure stable funds at low interest rates. The Ministry of Health, Labour and Welfare has offered to support employment maintenance and re-employment for workers at MMC affiliated companies.
   Progress of Corporate Restructuring Committee
   		Since its establishment in June, the Corporate Restructuring Committee, which reports directly to MMC Chairman and Chief Executive Officer Yoichiro Okazaki, has worked on the most pressing issues facing the company: a cost cutting project to achieve further reductions and an analysis of current business circumstances to provide support for the company's domestic dealer network. In addition to this, the committee conducted interviews over two months with employees, business partners and dealers to pinpoint ten issues that need to be addressed to ensure MMC can rebuild its operations. The company has now set up cross-functional teams to map out detailed plans to address the issues from the viewpoint of what is best for the whole company. Ten team leaders (mainly managers with an average age of 38.7 years) were chosen to oversee one issue each based on their leadership skills and ability to think logically. After each team presents its plan to the committee chairman, the Corporate Restructuring Committee will formulate its final plan by mid December and announce the plan both internally and externally. Once the committee has authorized the plan, each department responsible for implementation will work under MMC Chairman Okazaki to carry out the plan and the Corporate Restructuring Committee will monitor the progress of their work.
   Cross-functional team issues
   		Reforming corporate governance Manufacturing market-oriented products Realizing synergies between product appeal and sales strengths Creating lifetime customers Defining process and commitments for volume projections Improving quality management from consumers' perspective Eliminating unprofitable models, parts & accessories, and investments Establishing an optimum manufacturing system to meet factory floor's call for change Optimizing entire supply chain Encouraging can-do corporate culture

3. Detailed steps to restore trust

   As part of MMC's drive for self-revitalization, the company recognizes that legal compliance and corporate culture reforms must be carried out across the board. The company's new management philosophy seeks to place top priority on legal compliance, safety and customers. The Business Ethics Committee, Corporate Social Responsibility Promotion Office, Corporate Restructuring Committee and Quality Assurance Office — all of which form the core of the company's new structure to implement reforms — have taken concrete steps since June to push through reform initiatives.

   Expanded probe into past repair directives
   		To put its six million domestic users at ease, ensure road traffic safety, and rid itself of past problems, MMC embarked on an investigation into all past repair directives dating back to December 1993 and implemented the appropriate post-market measures. On July 29, the company finalized submissions to the Japanese Ministry of Land, Infrastructure and Transport for all 35 cases that required recalls (33) and improvement measures (2) out of the 92 cases of past repair directives that came to light as a result of the investigations. The company has now expanded its investigations to cover all possible documents that may contain information, including some 134,000 product information reports held by MMC and its dealers, and around 506,000 documents such as technical letters, business correspondence and minutes from meetings on technical issues. A detailed analysis is being undertaken to ensure there were no mistakes in the decision making process for implementing post-market measures. The results will be reported to the Business Ethics Committee ahead of an official public announcement on August 26.
   Initiatives aimed at ensuring legal compliance
   		MMC is making steady progress in terms of placing top priority on legal compliance in line with the schedule announced on June 16. Going forward, the Corporate Social Responsibility Promotion Office will continue to play a central role in this process and will ensure total legal compliance by putting in place concrete steps that were not possible with the company's previous organizational structure and human resources. MMC will also provide updates of its progress in this area. Work on compliance issues started with all executives signing a legal compliance pledge in late June. To date, MMC has also held business ethics seminars for company directors and each level of employees at its Okazaki plant. In the coming months, a survey aimed at all employees will be carried out to measure how far business ethic issues are penetrating through the company and each employee will be required to sign a pledge of legal compliance.
   Schedule
   		June 29:   Chairman and president declare company will place utmost priority on legal compliance; all executives sign pledge of legal compliance July:   Business ethics organization and rules and regulations revamped August - September:   Business ethics seminar for all executives and employees August - September:   Each department to hold meetings on business ethics problems September:   Survey for all employees on progress of business ethics throughout the company End of September:   All employees to submit pledge of legal compliance End of October:   Business Ethics Committee to evaluate how far compliance issues have taken root End of November:   Draw up plan on business ethics for 2005
   Business Ethics Committee
   		The Business Ethics Committee, which acts as an advisory body to MMC's board of directors, was set up on June 29 to beef up monitoring of quality and governance issues from an external perspective. In the three meetings to date (July 22, 27 and 28), MMC has received some stern advice and guidance from the committee members and intends to work on improvements to restore trust in the company. At the third meeting, held in Okazaki, the committee members observed the plant's development, production and quality control operations. The committee commented that business ethics start on the factory floor and that MMC's organization on the factory floor has not lost anything.

   Note on forward-looking statements This document 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 operates, management's beliefs, and assumptions made by management. As the expectations, estimates, forecasts and projections are subject to a 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.