Mitsubishi 2006 Annual Report Download - page 62

60 MITSUBISHI MOTORS CORPORATION ANNUAL REPORT 2006
(v) Cost reductions
a. Manpower
As a result of changes to the organization, increased work process efficiencies, rationalization of work processes and
natural attrition of personnel, the MMC group’s staff reduction program is on track and is forecast to achieve
targets. MMC group is also moving forward with further improvements in work process efficiencies.
b. Materials costs
In view of the deterioration in procurement brought about by falling sales volumes and sharp rises in raw materials
costs, the new plan aims to reduce materials costs by approximately ¥90 billion ($766 million) on a cumulative
basis by FY2006 over the FY2003 level. While this is a downward revision of the “Business Revitalization Plan,”
the MMC group still maintains a 15% cost reduction rate as stated in the “Business Revitalization Plan.”
(5) Corporate ideals and direction
Through a process of exhaustive analysis and discussion between cross-functional teams composed mainly of younger
employees and affected departments, the Corporate Revitalization Committee has looked in depth at a number of
issues that the MMC group faces. This has allowed the MMC group to formulate a new course of action; one that
clarifies to its stakeholders the ideals that underpin the MMC group’s management as it drives forward in fulfilling its
responsibilities as a corporate citizen. These ideals are crystallized in the new corporate maxim: “We are committed
to providing the utmost driving pleasure and safety for our valued customers and our community. On these commit-
ments we will never compromise. This is the Mitsubishi Motors way.” In addition, in September 2005, the MMC group
also adopted a new slogan in Japan, which was chosen by staff: “Kuruma zukuri no genten e” (English translation:
“Pursuing the Origins of Car Engineering.”)
(6) Profit and loss targets
To reflect all the measures described above, the targets for consolidated sales and earnings for the periods through
FY2006 in the “Business Revitalization Plan” were revised downward in the “Mitsubishi Motors Revitalization Plan.”
Also, in FY2005, the MMC group did not achieve profitability except for on the operating profit level. Overall
profitability however, has been improving since FY2004 as MMC looks forward to bringing net income back to the
black in FY2006 and expects to generate record net income of ¥41 billion ($349 million) in FY2007.
(7) Support systems: capital and funding reinforcements
(i) Capital reinforcement
With the full support of four Mitsubishi companies, during FY2004, the MMC group received a capital enhancement
of ¥284.2 billion ($2,419 million) through the issuance of common and preferred stock [Mitsubishi Heavy Industries,
Ltd. (MHI) ¥50 billion ($425 million); Mitsubishi Corporation, ¥70 billion ($595 million); The Bank of Tokyo-
Mitsubishi UFJ, Ltd. ¥154 billion ($1,310 million) (of which ¥54 billion ($459 million) was a debt-equity swap);
The Mitsubishi UFJ Trust and Banking Corporation, ¥10.2 billion ($86 million) (the entire amount being a debt-
equity swap)].
In January 2006, with Mitsubishi Corporation as underwriter, MMC group issued ¥30 billion of preferred stock
by third party allocation.
The combined interests in the MMC group by MHI, Mitsubishi Corporation and The Bank of Tokyo-Mitsubishi UFJ,
Ltd. was approximately 34% at March 31, 2006. Following MHI’s conversion of its preferred stock, which made its
holdings in MMC more than 15%, MMC became an equity method affiliate of MHI in the second half of FY2005.