Mitsubishi 1999 Annual Report Download - page 24

Operational review
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Operational review
Fiscal 1998 was make-or-break year for Mitsubishi Motors
after 1997 saw the worst set of results in the history of the
company. Total commitment to the corporate ideals has seen
a dramatic improvement in the financial and business health
of the company over the last year, as reflected in the sharp
increase in the value of its shares on the Tokyo Stock
Exchange.
The recuperation process started in earnest in March
1998 with the introduction of forward-looking structural re-
forms, followed by the announcement of a new management
team in June. The RM2001 mid-term management plan an-
nounced in November 1998 provides the main blueprint for
the company's do-or-die quest.
Details of RM2001 may be found elsewhere in this letter
but, in essence, the 3-year plan sets two major targets: (1) To
post a ¥20 billion consolidated profit in fiscal 2000, this to be
achieved through improved efficiencies in sales, production
and development, and through uncompromising cuts in labor
and other fixed costs and in material costs; (2) To reduce in-
terest-bearing liabilities from the March 1998 level of ¥2.0
trillion to ¥1.3 trillion by fiscal 2000, this to be achieved by
cutting capital expenditure and by paring the company's port-
folio of under-performing assets. The
company's deteriorating performance was
reflected on the Tokyo Stock Exchange,
where MMC stock sank from ¥700 at the
end of August 1997, to a historic low of
¥208 in October 1998. This collapse was
sparked principally by the losses recorded
in fiscal 1997 by a one-time foreign ex-
change appraisal loss in Thailand and, by
sharply lower sales in the depressed
Japanese market.
The pertinence of the measures laid
out in RM2001, the determination and
speed with which they are being imple-
mented, and management's eagerness to
conduct its business in a transparent manner and to regularly
publish details of the progress being made, have been favor-
ably assessed by the market. MMC stock had recovered to
¥400 at the end of the fiscal year, and was standing at ¥600
in May. Assisting this recovery is the general consensus that
the Japanese domestic truck market has finally bottomed out,
opening the door for recovery in what has traditionally been
a very profitable area of operation.
The company is currently engaged in a major restructur-
ing of all its operations in order to raise efficiencies through-
out the organization. The targets set out in RM2001 for fiscal
1998 have all been met on, or even ahead of, schedule. They
include: a reduction in costs of ¥107 billion and in interest-
bearing liabilities of ¥241 billion; the selling off of the
Maruko truck transmission plant; the consolidation of sales
companies in Japan; the restoration to profitability of the
company's units in North America, Europe and Thailand; a
reduction in capital expenditure and, a reduction in the indi-
rect labor payroll.
In fact, the patient is recuperating so well that other tar-
gets have been brought forward to enable the company to re-
spond more effectively to the major changes seen in the in-
dustry and the global economy over the last year.
Overview