Mitsubishi 2000 Annual Report Download - page 40

Financial review
Financial review
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Mid and long-term management strategy
The automotive industry is undergoing substantive change today:
Environmental issues, globalization of management and advances
in information technology being accompanied by global changes
in the paradigms governing development, procurement and pro-
duction. To enable it to take maximum advantage of these
changes, MMC has recently formed two significant global and
strategic alliances: With DaimlerChrysler relating to passenger
cars, and with AB Volvo relating to commercial vehicles.
Enabling partners to utilize and exploit each other's strengths,
these arrangements open the way to Win-Win relationships that
will assure survival in the 21st century.
In fiscal 1998, MMC embarked on a restructuring of its oper-
ations charted by the RM 2001 (Renewal Mitsubishi) mid-term
management plan in order to make the Company more profitable.
Bolstered by the abovementioned alliances and incorporating the
restructuring and future growth strategy laid out in RM2001, in
April 2000 the Company drew up a new "Heart-Beat 21" mid-
term management plan to take it through to fiscal 2003.
Through a process of managerial reform and rapid transfor-
mation into a profitable and meaningful player in the 21st century,
Heart-Beat 21 provides the blueprint for MMC to establish and
consolidate management foundations that will enable its passen-
ger car and commercial vehicle operations to prosper as separate
and self-supporting entities. At the same time, and taking the op-
portunities presented by the alliances with DaimlerChrysler and
AB Volvo, Heart-Beat 21 maps out policy that will enable the
Company to switch to a truly internationl management style, and
to offer, in a timely manner, a compact strategy pasenger car that
has global currency as well as other highly competitive products
effectively tailored to their target markets.
MMC is firmly committed to increasing corporate value and
will do so by giving absolute priority to its customers and to its
shareholders interests, and through the practice of cashflow-based
management. To achieve this objective, the Company is moving
to make business judgments in a more rational manner. Towards
this end, the Company is working to materialize the targets and
substance of its reform plans by adopting and implementing new
corporate preformance evaluation tools, and by promoting a com-
mon awareness among one and all employees.
Management structure
MMC has implemented some major changes to its management
structure recently. These include the introduction of an internal-
Company system with the setting up to the Truck & Bus
Company on 1 April this year, with a view to spinning it off as a
separate Company by the end of 2001; and the formation of al-
liances with Daimler Chrysler and AB Volvo. In order to speed up
the management process further and to make the alliances effec-
tive and meaningful, the Company implemented a radical reorga-
nization of the Board of Directors on 27 June this year.
In a step designed to revitalize directors and the board, the
number of directors on the board has been reduced to 10, while
giving greater weight to external directors. The Company also in-
troduced a system of executive officers.
The board of directors will retain responsibility for formula-
tion of management strategy, for key management decisions, and
for supervision of execution of operations. Executive officers will
be responsible for the execution of business. This will help clarify
responsibilities and authority in individual areas of operation.
MMC has established two new executive positions: Chief
Executive Officer (CEO), and Chief Financial Officer (CFO), the
director with ultimate responsibility for the financial affairs of the
Company.
These reforms to the management structure will speed up the
decision-making process and bring greater clarity to issues of ac-
countability. They will bring about an organization that encour-
ages the active implementation of the measures called for in
Heart-Beat 21, and one that is able to deliver results faster.
Issues to be addressed
MMC has recently entered two major alliances, with
DaimlerChrysler for passenger cars and with AB Volvo for trucks.
The challenge now is to get these global alliances up to speed as
rapidly as possible and to maximize the synergies they are expect-
ed to bring.
With DaimlerChrysler the challenge will be to see how to or-
chestrate, and make successful, the many areas of collaboration
that project teams at the two companies are studying. Included are
the Z-Car world strategy passenger model to be jointly developed
by the partners, as well as other development, production and
sales activities in which they will collaborate around the world.
In its alliance with AB Volvo, the challenge for MMC is to
spin off its commercial vehicle operations at an early date, and to
start benefiting from the various synergies that will stem from the
joint development of a medium truck, as well as from collabora-
tion in worldwide production and sales activities.
In this rapidly changing business environment, MMC is pur-
posefully applying its resources to swiftly establish a corporate
brand-oriented management, to internal reforms, and to the glob-
alization of its management.
Today, the Internet is bringing substantial changes to tradi-
tional business models. MMC is working to introduce global de-
sign and procurement activities using the latest Information
Technology; to develop new ways of marketing in Japan using in-
formation equipment, and to introduce supply chain management
and other ways of boosting management efficiencies.
Net sales
Mitsubishi Motors Corporation's consolidated sales in fiscal 1999
were ¥3,335 billion, a decrease of 5.1% on the previous year.
Japanese domestic market sales were ¥1,441 billion, a decrease of
2.8% on the previous year. The decrease was primarily due to a
major decline in total vehicle demand, and in truck sales in partic-
ular.
Sales outside Japan totaled ¥1,893.9 billion, a decrease of