• Mitsubishi Motors has returned to profitability in FY2001, achieving an operating profit of 40.2 billion yen, a dramatic improvement after record consolidated losses of 73.9 billion yen in FY2000.
• MMC's operating net income of 11.3 billion yen clearly surpassed its target of achieving the break-even in the first year of its Turnaround Plan, contributed by both its Passenger Car Operations and Truck & Bus Operations.
• Major achievements in cost savings and other Turnaround improvements resulted in MMC surpassing its original first-year targets by 37% in Passenger Car Operations and thus greatly contributed to the overall result.

Mitsubishi Motors Corporation today on May 13, 2002 announced its consolidated results for fiscal 2001, presented its forecasts for fiscal 2002 and gave a report on the progress of the company's 3-year Turnaround Plan.

President and CEO Takashi Sonobe said, "The first year of our 3-year MMC Turnaround has resulted in a great start as we not only surpassed our promise to break-even in fiscal 2001 but also returned our operations to a profitable base."

Chief Operating Officer (Passenger Cars) Rolf Eckrodt said, "The result shows the speed of our restructuring, but it is only a first step. We will now move steadily from cost reduction and process optimization into further business consolidation and profitable growth in the years to come."

Chief Operating Officer (Truck & Bus) Takashi Usami said, "As a financially healthy unit, Truck & Bus Operations will continue to contribute positively to MMC's profits, despite the severity of the market environment."

Highlights of today's financial results announcement:

I. FY2001 Results and FY2002 Forecast

In its fiscal 2001 consolidated operations, MMC reported sales of 3,200.7 billion yen. This was a 2.3% decrease over fiscal 2000 and was due chiefly to a decline in car sales on the domestic market.

For fiscal 2001, MMC reported an operating profit of 40.2 billion yen, ordinary income of 11.9 billion yen and net income of 11.3 billion yen. This represents increases over fiscal 2000 of 114.1 billion yen, 105.9 billion yen and 289.4 billion yen respectively.

MMC posted a positive operating profit not only on a company-wide basis but also separately for both of its divisions. Truck & Bus Operations achieved an operating profit of 9.5 billion yen, while the Passenger Car Operations posted an operating profit of 30.7 billion yen in fiscal 2001.

For fiscal 2002, despite the continuing severity of the market environment, MMC forecasts that an acceleration in turnaround-driven improvements will lead to sales of 3,400 billion yen, an operating profit of 77 billion yen, an ordinary income of 48 billion yen and a net income of 38 billion yen.

II. Turnaround Progress

MMC is making steady progress in the implementation of its Turnaround, surpassing targets in cost reduction, improving its focus on core activities, and making steady progress in process optimization and product and brand development. Not content with these results however, MMC plans to accelerate its Turnaround improvement plan.

1. Passenger Car Operations

(1) Cost reduction

MMC achieved overall improvements of 136.9 billion yen in fiscal 2001, surpassing the initial target for that year by 37%. Targets for fiscal 2002 and 2003 call for further reductions of 230 billion yen and 255 billion yen respectively.

MMC's original target was to reduce material costs by 15% over 3 years.
Actual cost reduction in fiscal year 2001, however, amounted to 6.5%, eventually allowing MMC to achieve its 15% target much earlier than initially forecasted. Overall material cost savings are now expected to be 380 billion yen by the end of fiscal 2003.

(2) Streamlining of production capacity in Japan

The MMC Turnaround calls for a 20% reduction in production capacity in Japan by the end of fiscal 2003. It expects to exceed this target with the closure of the car assembly line at the Oye Plant (September 2001) and the closure of one of its four assembly lines at its Mizushima plant during fiscal 2002.

(3) Headcount adjustment

By the beginning of April 2002, MMC achieved a reduction of 9,100 compared to its original target of 9,500 persons by the end of fiscal 2003. The reductions have been achieved through the implementation of early-retirement programs and other measures.

(4) Focus on core business

Major spin-off and outsourcing measures announced to date include:

• Integration of automatic and continuously variable transmission operations into JATCO Technology Ltd.
• Outsourcing of component production formerly manufactured at the Oye Plant
• Outsourcing of information technology systems to a strategic alliance with IBM
• Outsourcing of property management and catering operations.

MMC is also studying further outsourcing possibilities to improve management resources focus on its core business.

(5) Product strategy

At the 2001 Tokyo Motor Show, MMC unveiled four concept cars that revealed a new direction for Mitsubishi cars, embodying a new Mitsubishi Motors design identity.

In Japan, MMC introduced new models such as the eK Wagon, launched in October 2001, which immediately established itself as a hit product. Orders topped 95,000 at the end of April 2002 helping MMC to recover market share in the important mini-car segment.

(6) Fiscal 2002 worldwide sales and profit forecasts

MMC forecasts total sales volume will increase mainly due to the increase in North American operations. Other markets, Japan, Europe, Asia and other regions will remain flat. In fiscal 2002 total car sales revenue are forecasted to be 2,700 billion yen, an increase of 180 billion yen over fiscal 2001.

MMC forecasts that operating profit will more than double from the 30.7 billion yen in fiscal 2001 to 67 billion yen in fiscal 2002, representing an operating profit margin of 2.5%.

a. Japan

MMC expects sales to recover in the second half of fiscal 2002, driven by the launch of a new compact model in November, supported by a steady recovery of the brand image, strong sales of the eK Wagon, and an accelerating restructuring of the domestic sales network.

b. North America

In the U.S. market, MMC posted an all-time record in sales and profits in 2001, marking a record year in 3 consecutive years. Supported by clear-cut brand positioning and the most youthful and ethnically diverse customer base in that market, MMC is aiming for a 2.2% market share in 2002.

By entering Canada and Mexico during the current year, the strong momentum of the U.S. market will be carried over into two other important North American markets.

c. Europe

The European turnaround is firmly on track and making steady progress. In fiscal 2001 MMC halved losses compared to fiscal 2000. The take-over of the German distribution marked a first major step in the overhaul of MMC's European distribution system, and MMC will continue to make steady progress in its Turnaround Plan.

MMC also is upgrading its local manufacturing capabilities by building a new engine plant in Germany jointly with DaimlerChrysler and by improving efficiency at its existing NedCar plant in the Netherlands.

d. Asia / Rest of World

The Australian operation returned to profitability in fiscal 2001. Foreseeing overall stable sales in Asia and the rest of world in fiscal 2002, MMC plans to further expand its already profitable business in China and strengthen its position in the Asian region.

2. Truck & Bus Operations

MMC implemented various restructuring and improvement activities in its Truck & Bus operations starting in fiscal 1998 and by fiscal 2000 succeeded in posting an operating profit. Under the Fuso Turnaround 2^nd Phase, MMC has continued to implement the following measures to strengthen and consolidate its profitable foundation:

• Strengthening the profitability of commercial vehicle sales in Japan
• Expanding and strengthening sales in overseas markets
• Raising quality levels
• Reducing costs further
• Improving R&D efficiencies to enable Mitsubishi commercial vehicles to meet environment, safety, economy and other market needs more precisely

MMC is also studying collaboration with DaimlerChrysler in a number of areas in its truck and bus operations. These include:

• Reducing material costs
• Improving parts and component efficiencies
• Co-sharing next-generation models
• Strengthening quality control organization; exhaust gas emission and safety R&D
• Expansion of sales channels in Europe and Africa.

In fiscal 2001 this division posted sales of 680.7 billion yen. While this was down from the 718.5 billion yen in fiscal 2000, operating profit increased to 9.5 billion yen despite the continuing low level of demand for commercial vehicles in Japan and other Asian markets.

For fiscal 2002, the launch of a Japan's first non-step small bus in April and a new light-duty truck in June is expected to help drive sales up to 700 billion yen with an operating profit forecast of 10 billion yen.