1. Structure of New Management and Corporate Organization

Today (March 28) the Regular Board of Directors meeting approved the new corporate organization as of June 1 and the new management structure effective as of April 1. The reorganization is characterized by both the speed of its implementation and the far-reaching changes to the existing structure in terms of organizational functions as well as personnel.

Basic Concepts

1. clear responsibility and personal accountability in all job descriptions,
2. fast and unfiltered information flow via a reduced number of management layers,
3. delegation of decision-making power to operative management levels,
4. implementation of strict operational rules and controlling measures at all levels,
5. performance-based evaluation and promotion rules for all employees.

Specific Key Changes

• reduction of the number of Executive Officers from the current 38 to 29, reducing the average age of such executives from the current 58.5 to 54.4.
• 60% of these 29 executive officers represent new assignments;
• concentration on four managerial levels, including a drastic reduction of managerial positions;
• abolition of the Executive Advisory System within MMC by June 30, 2001;
• abolition of Executive Councilor System, Executive Advisory System and Chairman position in MMC group companies by June 30, 2001;
• strengthening the position of the Chief Financial Officer (CFO) to include a clear responsibility for controlling the financial status of the entire MMC group;
• establishment of a unified Corporate Affairs and Strategy Office, directly reporting to the Board of Directors and the CEO;
• creation of a Turnaround Office, directly reporting to the COO and overseeing all turnaround related activities.
• assignment of a strengthened Chief Information Officer (CIO) who will control investment in Information Technology.
• establishment of an integrated department for Car R&D and Marketing Strategy, to ensure a shift from engineer-driven car development to a customer and market-oriented development approach;
• establishment of an independent car design office which reports directly to the COO, to promote more innovative and customer-oriented products;
• creation of unified purchasing, combining global sourcing and implementation of the Common Supplier and MMC Operation System (COSMOS) concept to strengthen cooperation with world-class suppliers which will result in lowering procurement costs;
• introduction of unified global production operations, replacing the regionally segmented approach to create new leverage for global production capacity;
• creation of an integrated sales office combining overseas activities on a global scale;
• adding bus assembly and industrial engine sales functions to the responsibilities of Mitsubishi FUSO Truck & Bus Company;

For further details regarding changes to take effect as of June 1, also see the attachment. The entire corporate organization including department level and related personnel changes will be announced after finalization.

New managerial assignments will be effective as of April 1. Newly assigned managers will handle business procedures and receive any reports within the scope of their new responsibilities until and after June 1.

2. Turnaround Plan Progress

Implementation of the MMC Turnaround Plan will start on April 1. Despite the brief preparation period since planning began in full-scale in January, a large number of concrete measures has already been decided and a rapid progress has been made.

This speedy progress was achieved by an intensive and very constructive dialogue with labor unions and various MMC business partners, including suppliers, dealers, financial institutions and others.

Sales and financial results and major benefits of the Turnaround Plan are as follows:

The basic assumptions to achieve breakeven in FY2001 is as below:

The relationship between the FY2000 ordinary loss forecast of Yen 90 billion which was announced today and achieving breakeven in FY2001 is explained below.

The interest bearing debt target set out in the "Turnaround Plan" for FY2001 (at the end of March 2002) will be Yen 1.35 trillion (incl. Yen 370 billion from financing operations), the same as FY2000 March end forecast. Of this amount, operation related debt will be reduced and debt for financing operations will increase. The company has entered into a basic agreement with a bank syndicate led by Bank of Tokyo-Mitsubishi as the acting chairman for a commitment line totaling Yen 150 billion. MMC will strengthen its funding abilities by using this commitment line.

These savings will be achieved mainly by the introduction of COSMOS (Common Supplier MMC Operation System), a new cost reduction program and an increase in global sourcing. The new cost reduction program uses DaimlerChrysler's cost reduction procedures as a base to implement value analysis and benchmarking. Within COSMOS, MMC will work in close cooperation with suppliers to achieve cost reductions and help them to become globally competitive as system and component suppliers.

A large meeting with about 600 representatives of most suppliers was held on this topic in Tokyo on March 23. After explaining COSMOS and the new cost reduction program to its suppliers, MMC received positive response and understanding for the implementation of this system. By utilizing COSMOS, MMC will achieve a reduction of 60 billion yen in material costs in FY 2001.

Cost optimization effects will lead to a substantial reduction in fixed costs over the next three years. In FY2001 alone, the total will be more than 40 billion yen. One important measure is the reduction of headcount by 14% by the end of FY 2003.

Of the total headcount reduction of 9,500 to be achieved by the end of FY 2003, more than 4,000 will be reduced at MMC and more than 5,000 will be reduced at MMC subsidiaries (incl. overseas). For FY 2001, a reduction of the headcount by 2,400 is expected.

• a simplified organization structure
• more efficient business procedures
• changes in operational functions, including synergy effects realized through the alliance with DaimlerChrysler.

To reduce the headcount, MMC will implement measures such as not supplementing attrition, temporarily halting or reducing the number of new hires, implementing early-retirement programs, and outsourcing.

Implementation of the new Quality Check Gate System, based on DaimlerChrysler's quality system, is making rapid progress. It has already been applied to all models to be launched this year. The system places a total of 15 check gates at each stage from product development through production start, ensuring that no car can move on to the next stage within the product development chain without passing the prior quality check.

Staff will be increased in quality related departments to speed up work procedures and improve the quality level of the countermeasures to be implemented. A new automatic information registering system also will be implemented to monitor defect-related information from the marketplace. This new system will help quantify collected information and build a database for collected information.

Internal auditing functions have been significantly strengthened by establishment of a Quality Audit Council reporting directly to the President, as well as establishing a Safety Quality Audit Project Manager responsible for confirming that all safety quality procedures are being followed. Quality Audit Meetings will be held every three months, including members of the Legal and Public Relations departments. Already, seven meetings of the Quality Matters Advisory Committee have been held, resulting in valuable advice from outside members which have led to additional measures to secure high quality being implemented.

Other actions to support sales activities include an increase in MMC field managers and dealer employee training functions, coordinated by our Technical Center, to improve problem-solving abilities and improve the technical abilities of dealers.

As a first step towards a production capacity reduction of at least 20%, MMC will close the body assembly line of the Oye plant permanently by the end of Sept., 2001. The Z-Car is to be produced at the Okazaki plant.

A detailed definition of the MMC's core business is currently under evaluation. This includes the definition of core competencies and the study of opportunities for outsourcing parts and components.

The number of platforms will be halved; the number of models will be reduced. A better balance between engineer capacity and actual workload will be achieved by relocating engineering resources to segments of special MMC competitiveness.

These developments will be further accelerated by strengthened cooperation between MMC and DaimlerChrysler and will result in wide scale merits through common platforms in the compact and middle class segment.

Production of the Proudia and Dignity models will be discontinued at the end of May. After-sales services for existing customers will be continued.

In the domestic market, MMC will launch a new generation all-round recreational vehicle in June, 2001. This cross-over model taps a new market segment for MMC and will attract new customer groups.

As the second product novelty of 2001, a new minicar will be launched by this fall. The attractiveness of the product line-up will be further increased by refreshment and product measures on six additional models.

In North America, the new Lancer sedan will be launched in June, setting an example for the new world-wide integrated sales of domestically successful models.

The future-oriented character of the MMC Turnaround Plan is underlined by the massive investment in such areas as IT (information technology), training for human resources, and research and development. The budget for investment in IT only has been raised by over 10 billion yen in FY 2001.

Reflecting the speedy progress of the MMC Turnaround Plan, the expected business results remain unchanged. In FY 2001 MMC will break even and return to an operating profit margin of 2.5% by FY 2002. For FY 2003 MMC foresees an operating profit margin of 4.5%.

Within this process, MMC will continue to follow the path of transparency and an open exchange of information with its shareholders, business partners and the mass media.

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