Mitsubishi Motors Corporation announced and began implementation of the "RM2001 (Renewal Mitsubishi 2001)" mid-term management plant in fiscal 1998. The measures set out in the plan to transform into a profitable organization, have generally met their targets, and in some cases have exceeded expectations.

Since the implementation of RM2001, however, there has been a tremendous change in the environment surrounding the automotive industry - environmental issues, globalization of management, technological innovation and advance of the information age included. This has been accompanied by global changes in the paradigms governing development, procurement and production. MMC itself has formed global and strategic alliances: one with DaimlerChrysler relating to passenger cars; and one with AB Volvo relating to commercial vehicles. With partners exploiting their strengths and complementing each other, these arrangements enable the building up of Win-Win relationships that will assure survival in the 21st century.

To take it through to fiscal 2003, MMC has drawn up a new mid-term management plan - Heart-Beat 21 - that incorporates the restructuring of operations laid out in RM2001 and future growth strategy. Through a process of managerial reform and rapid transformation into a profitable and meaningful player in the 21st century, Heart-Beat 21 provides the blueprint for MMC to offer, on a timely basis, a compact strategy model that has global currency and other competitive products linked directly to their target markets.

The company is firmly committed to increasing corporate value and will do so by giving absolute priority to its customers and to its shareholders, and through the practice of cashflow-based management. To this end, the company will adopt new measures of corporate evaluation and will materialize the targets and substance of corporate reform; and through one and all employees sharing the same awareness, the company will make rational business judgments and achieve this objective.

MMC is encouraged by the strong commitment to the alliance on the part of its new partner as indicated in the following remarks by DaimlerChrysler: "The global and strategic alliance with MMC is well-balanced both in terms of regions and products and will enable us both to grow and develop into truly global companies. To succeed in this, to exploit our mutual strengths and grow bigger and become more competitive, requires the kind of cooperation that can only come from an all-encompassing partnership."

I. Managerial reform

To realize economies of scale, MMC has entered strategic alliances with DaimlerChrysler(DC) and AB Volvo, and will work to consolidate its business base to enable individual operations to overcome changes in the external environment and stand on their own feet in the 21st century.

With the capital tie-up with these two companies, the company will transform itself into a corporation able to withstand the international accounting standards (accounting system, management style) that are to be introduced into Japan in the near future. Preparations to meet international accounting standards will be completed during FY2000.

1. Management reforms

• Reforms to the board of directors; introduction of Executive Officer system; Central Committee
• Introduction of CEO and CFO posts

II. Growth strategies for passenger car business

MMC will introduce, on a timely and continuous basis, products that exploit revolutionary GDI engine and CVT and other facets of MMC compact car development technology and that accurately reflect market needs.

1. Product strategies

(1) Introduction of world strategic compact model (Z car; 1.1L to 1.5L)

1. Europe: Using MMC compact car technology and working with DC, will develop and produce at NedCar a strategic compact car that clears European fuel efficiency regulations
2. Asia & ASEAN: Will introduce a compact strategic car that incorporates the tastes of the Asia & ASEAN market.
3. Japan: In FY2002 will introduce new strategic model based on the Z car, and will create new demand through additional introduction of new types of car.

(2) Building up product strength in Japan

1. Introduce and strengthen compact class model line up
2. Product strategy directed at consolidation of domestic minicar operations
3. Augment and develop competitive potential of PAJERO series

(3) Beefing up product strategy in North America and other regions

1. North American market strategy car (Project America)
2. Beef up product lineup to push sales in North America over 300,000
3. Develop operations through cooperation with DC

(4) Development of low fuel-consumption engine, fuel cell and other environmental technology

(5) Beefing up of brand strategy

2. Restructuring of domestic production organization (stage 2)

(1) Concentrating on domestic production reorganization, promote stage 2 of restructuring program in order to lower break-even volume further

(2) Adapt highly innovative production methods to domestic production

3. Cost reduction measures

Implementation of the measures below designed to minimize fixed and variable costs to realize lowest cost and best quality in industry is expected to realize cumulative reduction in costs

Cost reduction targets - Passenger Car operations (non-consolidated): 500 b Yen in 4 years

(1)Cost reduction in minicar operations to be competitive with other auto makers

(2)Reduce worldwide procurement costs through joint purchasing with DC

(3)Adopt innovative production methods

• Greater use of modularization, use of common parts, reducing number of basic parts,

(4) Sharing of IT resources

(5) Introduction of supply chain management (reduce distribution costs and inventories)

(6) Cost reduction realized through restructuring of organization

(7) Benefits stemming from reduction of interest-bearing liabilities

4. Major strategic measures for each operation

(1)Japan domestic sales

1. Restructure sales organization
2. Boost strength of direct sales organization
3. Increase productivity and management efficiency at sales companies
4. Adapt to and accommodate requirements of Internet and other facets of in-formation society
5. Improve levels of after-sales service, insurance, used-car and other value-added operations
6. Make customer satisfaction top priority in sales activities

(2) Minicar Operation

1. Introduce competitive products by establishing low-cost organization
2. Promote regional strategies that reflect market characteristics
3. Make drastic review of sales organization, giving priority to 33 successful companies
4. Win 20% share by creating new demand through introduction of new-concept minicar

(3) North America

1. Consolidate stable 300,000 sales base; build up to 400,000 sales base by 2005
2. Beef up sales and production organizations with view to expanding MMC brand
3. Implement Project America and introduce 3 core models (including new SUV) for local production
4. Share platforms, components and parts with DC; utilize DC auto finance companies and procurement network
5. Integrate management of North America operations (July 2000)

(4) Europe

1. Make every effort to realize joint production with DC at NedCar
2. Restructure NedCar production organization
3. Utilize DC auto finance companies and procurement and sales networks
4. Restructure sales company organization
5. Flexible measures to cope with weak Euro

(5) Asia & ASEAN

1. Joint production and development with DC using MMC production centers
2. Strengthen product line up (Launch of Z car, new Lancer and introduction of LCV exclusively for the market)
3. Restructure organization Strengthen operational management in each countrySet up local company for procurement and complementation of low cost partsPromote China operations
4. Strengthen R&D function in Thailand, Taiwan and Malaysia
5. Restructure Australian operations

III. Growth strategies for commercial vehicle business

Aim to grow independent commercial vehicle company by working with Volvo and introducing superior products that meet global safety and environmental requirements.

1. Spin-off Truck & Bus operations as separate entity

2. Realize profitable organization

Cost reduction target - Truck and Bus operations (non-consolidated): 150 b Yen in 4 years

(1) Restructure secondary production organization

• Review production lines of Truck & Bus group as a whole
• Promote outsourcing

(2) Reduce material costs

(3) Strengthen management at domestic sales companies

(4) Establish separate organization for bus operations

(5) Strengthen organization in core overseas markets

(6) Move into high value-added operations

• Used-vehicle, maintenance leasing, etc.

3. Market direction, customer preferences

(1) Conduct advance development of environmental and other technologies ahead of competition

(2) Invest in information technology

4. Materialize results of collaboration with Volvo

(1) Development and supply of next-generation medium-duty truck cab and engine

(2) Promote joint research into future technologies (CRT, crashworthiness, engine emissions)

(3) Expand sales of European-made Canter truck; create sales collaboration benefits in South America and New Zealand.

(4) Collaboration in sourcing on global basis

IV. Improving corporate financial health

MMC will make every effort to improve its corporate financial health to be able to meet the global standards that are shortly to be introduced into Japan (accounting standards, management style). Preparations to meet accounting standards will be completed during fiscal 2000.

1. Improvements and targets

(1) FY2000: Disposal of extraordinary losses

(2) FY2001: Restoration of dividend payments by generating sufficient profits

(3) Fiscal targets for FY2003

(4) Introduction of managerial indices giving priority to capital efficiency

a. Start evaluating operations by return on cashflow

2. Corporate structure & personnel

(1) Reforms in corporate structure and personnel

1. Achieve 12,000 level through RM2001, make further cuts in indirect personnel
   (Reduce indirect personnel to 8,900 by April 2004, from current level of 9,900)
   (1)Post personnel to core car sales companies in Japan to boost sales force strength
   (2)Priority allocation of personnel to car R&D, purchasing, accessories, IT divisions
2. Introduction of performance-based remuneration
   (1)Introduce stock option system (incentive warrants) for officers and senior management at MMC and major affiliates from FY2000
3. Start preparations for spinning off passenger car operations and introducing holding company
4. Strengthen human resources development to cope with globalization (Business skills, global business know-how)
5. Strengthen Investor Relations

(2) Strengthen consolidated group management

1. Increase subsidiary autonomy and independence
2. Review total manpower in group

(3) Improve organization to cope with Information Technology evolution

(4) Initiate drastic reform in internal and external communications

V. Volume and consolidated P/L targets

1. FY2000

(1) Planned sales volume - minimum: 2,000,000 (including PPC units)

(2) Consolidated P/L targets

2. FY2003

(1) Planned sales volume - minimum: 2,150,000 (including PPC units)

(2) Consolidated P/L targets