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POWER TO CHANGE
Annual Report 2001
Year ended March 31, 2001
Adobe PageMaker 6.5J /PPC

Table of contents

  • Page 1
    POWER TO CHANGE Annual Report 2001 Year ended March 31, 2001

  • Page 2
    ...Certified Public Accountants Corporate Section Offices and Works The MMC Group of Companies Corporate Information 1 2 4 22 23 24 28 32 34 41 42 46 48 49 50 51 65 66 67 68 Forward-Looking Statements This annual report contains forward-looking statements about Mitsubishi Motors Corporation's plans...

  • Page 3
    ... Corporation and Consolidated Subsidiaries Years ended March 31 In millions of yen 2001 2000 In thousands of U.S. dollars 2001 For the year: Net sales Operating income (loss) Loss before income taxes and minority interests Net loss At year-end: Total assets Total stockholders' equity Per share...

  • Page 4
    ... for Mitsubishi Motors Corporation (MMC). A large recall badly dented our brand image and highlighted the need for deep-seated structural change. Since my appointment as CEO in November 2000, we have initiated a radical restructuring program in full cooperation with our strategic alliance partner...

  • Page 5
    ... new brand identity. These two halves of the equation add up to a comprehensive re-engineering of all the business processes involved in the entire value chain, from product portfolio planning, design and development, through production, to sales and marketing and finally after-sales service. will...

  • Page 6
    ... President & COO (Passenger Car) [U] Takashi Usami, Executive Vice President & COO (Truck & Bus) Q1. Why is there a need for the Turnaround Plan? Q2. What is the main thrust of the plan? [[4 4] ] MITSUBISHI MITSUBISHI MOTORS MOTORS CORPORATION CORPORATION Annual Annual Report Report 2001 2001

  • Page 7
    "...we need to reinvent the entire MMC culture and convince our customers that MMC has changed for the better." Takashi Sonobe President & CEOMITSUBISHI MOTORS CORPORATION Annual Report 2001 [5]

  • Page 8
    ... products. We are developing such vehicles under the leadership of our new chief designer from DC to create a stronger MMC brand in the future. In addition, to raise sales volumes of new models, we will also enter new markets like Mexico and Canada. [6] MITSUBISHI MOTORS CORPORATION Annual Report...

  • Page 9
    Q3. What measures are you taking to regain the trust of your customers in light of the recent recall? MITSUBISHI MOTORS CORPORATION Annual Report 2001 [7]

  • Page 10
    ... manufacturing base, technically excellent products as demonstrated by victories at the Paris-Dakar Rally and World Rally Championship, and a sporty image. It's the overall system that needs to be fixed. We need a proactive marketing approach, a new brand positioning strategy, correct processes, and...

  • Page 11
    Q4. What measures are you taking to restore the trust of the financial community-your shareholders and investors-in the wake of your net loss of ¥278.1 billion ($2,245 million)? MITSUBISHI MOTORS CORPORATION Annual Report 2001 [9]

  • Page 12
    ... also features a state-of-the-art production system, including final assembly, and an intelligent sales business, including after-sales services. We will be a service champion, with the product as only one part of a value chain whose object is to treat the customer well. A4.[S] The difference with...

  • Page 13
    "I'm here for our future success...There's a strong common goal for us." Rolf Eckrodt Executive Vice President & COO (Passenger Car Division) MITSUBISHI MOTORS CORPORATION Annual Report 2001 [11]

  • Page 14
    ...direction do you intend to take in terms of products and market positioning? What has MMC got in the pipeline? Q7. Are the synergies you expect from the DCMMC alliance factored into the Turnaround Plan's targets? 12] ] MITSUBISHI MITSUBISHI MOTORS MOTORS CORPORATION CORPORATION [[12 Annual Report...

  • Page 15
    ... 2002 on a consolidated basis, and to achieve a 2.5% operating income margin in the year ending March 2003 and a 4.5% operating income margin in the year after that. No alliance synergy effects or potential have been factored into these targets. MITSUBISHI MOTORS CORPORATION Annual Report 2001...

  • Page 16
    ...AB Volvo alliance, do you still plan to spin off the Truck & Bus Division? Q9. The Turnaround will depend to a large extent on your leadership. How is your working relationship developing? 14] ] MITSUBISHI MITSUBISHI MOTORS MOTORS CORPORATION CORPORATION [[14 Annual Report Report 2001 2001 Annual

  • Page 17
    ... he's come over to MMC and we're working well together as a team, with a clear mutual understanding of our roles and capabilities. When others in MMC see that we're working together for the same goal, this boosts our effectiveness as leaders. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [15]

  • Page 18
    Q10. What role do Mitsubishi Group Companies have to play in The Turnaround? Q11. What are the key factors for the success of The Turnaround? [[16 16] ] MITSUBISHI MITSUBISHI MOTORS MOTORS CORPORATION CORPORATION Annual Annual Report Report 2001 2001

  • Page 19
    ... our business, but we are under no obligation to order from them if their tenders are not competitive. In equity terms, DC is the leading shareholder with over 37% and the Mitsubishi Group ... it's the people that count. A11.[S] It's our people. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [17]

  • Page 20
    Q12. The Truck & Bus Division moved back into the black in fiscal 2000. Can it be assumed from this result that your division's turnaround is complete? [[18 18] ] MITSUBISHI MITSUBISHI MOTORS MOTORS CORPORATION CORPORATION Annual Annual Report Report 2001 2001

  • Page 21
    ... is exploring all possible avenues under its new alliance with DC, such as how we can harness winning synergies and in which areas we can work together most effectively." Takashi Usami Executive Vice President & COO (Truck & Bus Division) MITSUBISHI MOTORS CORPORATION Annual Report 2001 [19]

  • Page 22
    ...(including overseas PPC*). We have also integrated sales companies, reducing the number from 45 to 30 as a means of promoting efficiency throughout our sales channels. Measures such as these enabled us to return to profitability in fiscal 2000. [20] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 23
    ... Bus operations as we discuss collaborative projects. * PPC (Production Parts and Components) Of the KD (knocked down) assemblies exported overseas, those valued at less than 60% of their corresponding fully assembled vehicles are classified as PPC. MITSUBISHI MOTORS CORPORATION Annual Report 2001...

  • Page 24
    ... business activities FY 2001 140 billion yen (277% of FY 2000) FY 2001 Break even on consolidated basis (net income) FY 2002 Operating income margin of 2.5% FY 2003 Operating income margin of 4.5% [[22 22] ] MITSUBISHI MITSUBISHI MOTORS MOTORS CORPORATION CORPORATION Annual Annual Report Report...

  • Page 25
    ... Senior Vice President Chief Financial Officer Hiroshi Yajima Senior Vice President Executive GM of Corporate Affairs & Strategy Office Masanori Tani Senior Vice President Executive GM of Car Production Headquarters (As of June 26, 2001) MITSUBISHI MOTORS CORPORATION Annual Report 2001 [23]

  • Page 26
    ...this technology by switching from indirect injection to direct injection. This promises to improve fuel consumption and reduce exhaust emissions. MMC is steadily improving the fuel consumption efficiency of its passenger cars. GDI + Turbo engine In July 2000, MMC launched the PAJERO io 5-door Turbo...

  • Page 27
    ... of using lighter, high-tensile steel and steel plates of variable thickness. The incorporation of SWS (smart wiring system) and structural modifications to parts also helped keep weight down. In the range of truck models that went on sale in MITSUBISHI MOTORS CORPORATION Annual Report 2001 [25]

  • Page 28
    ...fuel tanks, and harness and hose parts. In fiscal 2000, MMC introduced new models fitted with leadfree valve sheets. In trucks, MMC has successfully developed heater cores made out of aluminum to further reduce the use of lead. In addition, all [26] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 29
    ... parts recycling. reaction is water, FCEVs generate very low levels of pollution. They are widely expected to be a popular type of cleanenergy vehicle in the future. In fiscal 2000, MMC created and tested a prototype FCEV, which is the product of joint MITSUBISHI MOTORS CORPORATION Annual Report...

  • Page 30
    ... assistance to the driver. (4) Mitsubishi ASV-2 Truck In view of the size of the impact caused by large vehicles in accidents, this vehicle is fitted with a variety of active safety technologies, as well as intelligent cruise control. Hybrid no-step large bus Modern urban transport systems face two...

  • Page 31
    ... sufficiently high. During braking, the motor is run in reverse to provide top-up power for the battery. This regenerative braking mechanism helps to raise the energy efficiency of the system substantially, allowing for a much smaller size of MITSUBISHI MOTORS CORPORATION Annual Report 2001 [29]

  • Page 32
    ...mechanical LSD (limited slip differential), a combination that frequently failed to deal with the constantly changing peculiarities of rallying terrain. This fact left much room for improvement to boost the competitiveness of rallying vehicles. [30] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 33
    ...single, fully integrated, computer-controlled 4WD system that promises to deliver improved cornering performance, higher acceleration around bends and greater operating stability than has been possible with either system employed in isolation. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [31]

  • Page 34
    ... motoring pleasure on- and off-road; • Innovative styling that visually projects the flexible space and allround performance of the new model. This concept has created a newgeneration crossover RV that sports levels of all-round performance [32] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 35
    ... which realizes an ultra-low floor and a wide and flat floor surface. This bus also offers excellent passenger control, seating comfort and other passenger-friendly measures such as a wheelchair area and slope panel for easy wheelchair access. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [33]

  • Page 36
    ... small car. In April 2001, MMC further agreed to a change in the alliance's strategic partner in Truck & Bus operations from AB Volvo to DC, which raised its equity interest in MMC from 34% to 37.3%. Currently, MMC is working to expand its business in the passenger car and truck and bus markets...

  • Page 37
    ... on the LANCER CEDIA , which underwent a full model change in May 2000, the LANCER EVOLUTION VII features a proven high-performance 2-liter intercooler-turbocharged engine, MMC's proprietary advanced 4WD system and a brake cooling system. The end result is a true sports-car driving experience. The...

  • Page 38
    ...brand's growing sales were the new ECLIPSE SPYDER and the redesigned MONTERO, launched in the spring of 2000. Mitsubishi Motor Manufacturing of America, Inc. (MMMA), thanks to stronger sales by MMSA, produced 222,000 units during 2000, a jump of 37.3% from [36] MITSUBISHI MOTORS CORPORATION Annual...

  • Page 39
    ...: Total market sales in China grew 14% over the previous year, reaching 1,882,000 units in 2000. Reflecting the immense popularity of the PAJERO brand in China, 70% of the 5,000 completed cars exported from Japan were the new PAJERO models. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [37...

  • Page 40
    ... straight year. However, MMC's share of Taiwan's automobile market dropped slightly from the previous year's 22% to 21%. INDIA: Overall sales in India during 2000 rose 21% to 697,000 units. In that country, MMC-brand cars are produced and marketed by Hindustan Motors and Mahindra & Mahindra, Ltd...

  • Page 41
    ...in Japan's truck and bus market. However, the recall-related issues in 2000 have hurt the brand's image since last July, forcing MMC's total domestic shipments down 10% to 61,000 units. On the other hand, domestic production was up 5% to 103,000 units. New Products MMC added a new model to its SUPER...

  • Page 42
    ... driver's championship. (Victories in heated competitive environments such as these serve to demonstrate the superiority of MMC's technology.) PRODUCTION UNITS OF PASSENGER CARS, TRUCKS AND BUSES BY REGION (PPC basis) 1999 calendar year 2000 calendar year North America South America Europe Africa...

  • Page 43
    ...yen, for convenience only, at the rate of ¥123.90=U.S.$1, the exchange rate prevailing on March 31, 2001. 2. Fully diluted net income per share for the years ended March 31, 1998, 2000 and 2001 is not available due to the loss for the periods. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [41]

  • Page 44
    ...NET SALES (Â¥ billion) OPERATING INCOME (Â¥ billion) 2,000 4,000 50 1,500 3,000 0 1,000 2,000 -50 500 1,000 0 (FY) 99 00 0 (FY) 99 00 -100 99 (FY) 00 Truck & Bus Passenger Car Truck & Bus Passenger Car Truck & Bus Passenger Car [42] MITSUBISHI MOTORS CORPORATION Annual Report...

  • Page 45
    ..., compared with the ¥28.7 billion operating income it recorded in fiscal 1999. NET LOSS (¥ billion) INTEREST-BEARING DEBT (¥ billion) 0 1,500 -100 1,000 -200 500 -300 (FY) 99 00 0 (FY) 99 00 Automobiles Financial Services MITSUBISHI MOTORS CORPORATION Annual Report 2001 [43]

  • Page 46
    ... also expanded by ¥211.5 billion mainly due to the adoption of new accounting standards for financial instruments, resulting in a ¥96.2 billion increase in investment in securities and a ¥92.9 billion increase in investment and other assets. [44] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 47
    ... to the previous year, due to increased North American sales. The Automobiles segment accounted for ¥968.3 billion, a decrease of ¥253.1 billion. The year-end balance of interest-bearing debt has been dropping steadily since fiscal 1998. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [45]

  • Page 48
    ...Mitsubishi Motors Corporation and Consolidated Subsidiaries March 31, 2001 and 2000 In millions of yen In thousands of U.S. dollars (Note 4) Assets 2001 2000 2001 Current assets: Cash and cash equivalents Trade notes and accounts receivable (Notes 5 and 9) Marketable securities...893 Property, ...

  • Page 49
    ...stockholders' equity 2001 2000 2001 Current liabilities: Trade notes and accounts payable Short-term borrowings (Note 9) Current portion of long-term debt (Note 9) Accrued income taxes Other ...153,850 1,637,926 162,720 22,053,010 (54,625) MITSUBISHI MOTORS CORPORATION Annual Report 2001 [47]

  • Page 50
    ...) (876,699) 165,674 $ (2,244,867) In U.S. dollars (Note 4) In yen Per share of common stock: Net loss: Basic Diluted Cash dividends See accompanying notes to consolidated financial statements. ¥ (232.77) - - ¥ (24.87) - - $ (1.88) - - [48] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 51
    ... STATEMENTS OF STOCKHOLDERS' EQUITY Mitsubishi Motors Corporation and Consolidated Subsidiaries Years ended March 31, 2001 and 2000 In millions of yen In thousands of U.S. dollars (Note 4) 2001 2000 2001 Common stock: Balance at beginning of year Issuance of common stock Balance at end of...

  • Page 52
    ...marketable securities Loss (gain) on sales and disposal of property, plant and equipment, net Equity in income of affiliates Deferred income taxes Minority interests Changes in operating assets and liabilities: Trade notes and accounts...,133 $ [50] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 53
    ... the foreign subsidiaries is principally calculated by the straight-line method over the estimated useful lives of the respective assets. Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income. MITSUBISHI MOTORS CORPORATION Annual Report 2001 [51]

  • Page 54
    ... that lease agreements which stipulate the transfer of ownership of the leased property to the lessee are accounted for as capital leases. Noncancelable lease transactions at the foreign subsidiaries except for operating leases are capitalized. [52] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 55
    ... value with changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in stockholders' equity. Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving average method. As of April 1, 2000...

  • Page 56
    ...,855 280,549 22,774,738 (12,523,083) $ 10,251,646 2,821,790 (1,551,610) ¥ 1,270,179 2,609,154 (1,389,868) ¥ 1,219,286 [54] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 57
    ... 31, 2001 and 2000 consisted of the following: In millions of yen 2001 2000 In thousands of U.S. dollars 2001 Loans, principally from banks Commercial paper ¥531,718 22,950 ¥554,668 ¥624,184 24,637 ¥648,821 $4,291,509 185,230 $4,476,739 MITSUBISHI MOTORS CORPORATION Annual Report 2001 [55...

  • Page 58
    ... dollars 2001 Notes receivable Marketable securities Investments Property, plant and equipment, net Other ¥ 53,357 - 45,542 141,020 4,059 ¥243,979 ¥ 49,318 20,698 - 139,934 4,202 ¥214,154 $ 430,646 - 367,571 1,138,176 32,760 $1,969,161 [56] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 59
    ... allowance Equity in affiliates Amortization of consolidation adjustments Other Income taxes as a percentage of loss before income taxes and minority interests 41.8% (11.3) 0.2 0.2 (2.5) (1.7) 26.7% 41.8 % (92.5) (83.9) 30.2 (19.5) (5.0) (128.9)% MITSUBISHI MOTORS CORPORATION Annual Report 2001...

  • Page 60
    ... prepaid expenses and other Other current liabilities Deferred tax liabilities Net deferred tax assets (liabilities) ¥ 97,102 11,261 (25) (19,062) ¥ 89,275 ¥ 19,637 1,483 (30) (24,651) ¥ (3,561) $ 783,713 90,888 (202) (153,850) $ 720,541 [58] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 61
    ... of yen 2001 2000 In thousands of U.S. dollars 2001 Sales Automobiles Financial services Total Intersegment Consolidated Operating income (loss) Automobiles Financial services Total Intersegment Consolidated Total assets Automobiles Financial services Total Corporate and eliminations Consolidated...

  • Page 62
    ... accounting for of derivatives related to the consolidated finance subsidiaries as explained in Note 3, operating expenses and operating loss in "Japan" segment increased by ¥6,138 million ($49,540 thousand) for the year ended March 31, 2001. [60] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 63
    ... U.S. dollars Notional amount Fair value Unrealized gain (loss) Forward foreign exchange contracts: Sell: US $ £ stg Total ¥10,422 - ¥10,422 ¥10,740 - ¥10,740 ¥(317) - ¥(317) $84,116 - $84,116 $86,683 - $86,683 $(2,559) - $(2,559) MITSUBISHI MOTORS CORPORATION Annual Report 2001 [61]

  • Page 64
    ... to ¥29,434 million ($237,563 thousand). The equivalent of the related depreciation and interest expense for the year ended March 31, 2001 amounted to ¥25,999 million ($209,839 thousand) and ¥2,786 million ($22,486 thousand), respectively. [62] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 65
    ...gain Unrecognized prior service cost Net recognized retirement benefit obligation Allowance for retirement benefits ¥(258,825) 53,585 (205,239) 6,038 6 (199,195) ¥(199,195) $(2,088,983) 432,486 (1,656,489) 48,733 48 (1,607,708) $(1,607,708) MITSUBISHI MOTORS CORPORATION Annual Report 2001 [63]

  • Page 66
    ... 2001 amounted to ¥23,037 million ($185,932 thousand) and ¥6,896 million ($55,658 thousand), respectively. [18. Subsequent Event] In the three months subsequent to March 31, 2001, no significant events occurred which would require disclosure. [64] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 67
    ... PUBLIC ACCOUNTANTS Report of Independent Certified Public Accountants The Board of Directors Mitsubishi Motors Corporation We have audited the consolidated balance sheets of Mitsubishi Motors Corporation and consolidated subsidiaries as of March 31, 2001 and 2000, and the related consolidated...

  • Page 68
    ...cho, Nakahara-ku, Kawasaki, Kanagawa 211-8522, Japan Telephone: +81-44-587-2000 b Tokyo Plant-Nakatsu (Transmissions, Cogwheel-related parts) 4001, Nakatsu Aza Sakuradai, Aikawa-cho, Aiko-gun, Kanagawa 243-0303, Japan Telephone: +81-462-86-8111 [66] MITSUBISHI MOTORS CORPORATION Annual Report 2001

  • Page 69
    ... Techno-Service Co., Ltd. Mitsubishi Automotive Engineering Co., Ltd. Mitsubishi Automotive Logistics Co., Ltd. Mitsubishi Auto Credit-Lease Corporation MMC IT Solutions Co., Ltd. Ralliart Inc. Tokyo Chuo Mitsubishi Motor Sales Co. Kinki Mitsubishi Motor Sales Co. Tokyo Mitsubishi Fuso Sales Co...

  • Page 70
    ...The Chase Manhattan Bank, NA London SL Omnibus Account Meiji Life Insurance Company MMC Employees Shareholding Association Boston Safe Deposit BSDT Treaty Clients Omnibus SECURITIES TRADED All stock exchanges in Japan: Tokyo, Osaka, Nagoya, Kyoto, Fukuoka and Sapporo TRANSFER AGENT AND REGISTER The...

  • Page 71

  • Page 72
    5-33-8, Shiba, Minato-ku, Tokyo 108-8410, Japan Corporate Communications Department Tel: +81-3-5232-7176 (Investor Relations) +81-3-5232-7165 (Media Relations) Fax: +81-3-5232-7747 http://www.mitsubishi-motors.co.jp Printed in Japan