Mitsubishi 2004 Annual Report Download

Download and view the complete annual report

Please find the complete 2004 Mitsubishi annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 74

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74

MITSUBISHI MOTORS CORPORATION
ANNUAL REPORT 2004
YEAR ENDED MARCH 31, 2004

Table of contents

  • Page 1
    MITSUBISHI MOTORS CORPORATION ANNUAL REPORT 2004 YEAR ENDED MARCH 31, 2004

  • Page 2
    ...the industries in which Mitsubishi Motors Corporation (MMC) operates, management's beliefs and assumptions made by management. As the expectations, estimates, forecasts and projections are subject to a number of risks, uncertainties and assumptions, they may cause actual results to differ materially...

  • Page 3
    ...31, 2004. 2. In the year 2003, due to a change of balance date at consolidated overseas subsidiaries, from December 31 to March 31, 15-month figures for overseas subsidiaries have been incorporated. 3. The assets and liabilities of truck and bus operations are not reï¬,ected in each account because...

  • Page 4
    ... the purchase of preferred stocks by Mitsubishi Group companies, China Motor Corporation, a major business partner in Asia, and J.P. Morgan, as well as the purchase of common stocks by Phoenix Capital. These arrangements allowed Mitsubishi Motors to procure ¥496.0 billion in capital, more than the...

  • Page 5
    ...Revitalization Committee Meeting of the Board of Directors "Toward rebuilding trust" Chairman of the Board (CEO) President (COO) Executive departments *Phoenix Capital additions completed our new management team that is committed to the revitalization of Mitsubishi Motors and taking the first...

  • Page 6
    ... the Deposit Insurance Corporation of Japan. Naturally, the creation of a new auditing organization alone will not change our corporate culture. I believe that strict compliance and changes to our corporate culture are the most important points of the revitalization of Mitsubishi Motors, and I will...

  • Page 7
    ... Lancer Evolution series. Mitsubishi Motors is introducing a product executive (PX) system where product executives in charge of a car model are responsible for ensuring integrated management from basic product concepts and styling to development, ongoing improvements and post-market quality reviews...

  • Page 8
    ...-including development, purchasing and procurement, manufacturing, sales, quality assurance and management-and take pride in leading a group of dedicated employees. Guided by the Business Revitalization Plan, a three-year plan that commenced in fiscal 2004, the Company is making steady progress in...

  • Page 9
    ...has initiated a raft of changes to their management systems. Henceforward, to correct the past biased way of thinking that tried to secure vehicle numbers in North America and Japan, the global regional portfolio will be restored to health by actively injecting operational resources into key regions...

  • Page 10
    ... Corporate General Manager of CSR Promotion Office Chief Business Ethics Officer BACKGROUND Mitsubishi Motors has lost the trust and confidence of its customers and of society. This very regrettable situation can be attributed to a number of factors including frequent changes to its management...

  • Page 11
    ... from outside the Company. The Business Ethics Committee has also been called upon to support and make comment on these investigations. OUTLOOK Producing defect-free vehicles is the mandate of every automobile manufacturer. The human element, however, dictates that a 100% defect-free rate is dif...

  • Page 12
    ... on compliance, safety, and customers. Guided by these priorities, MMC is dedicated to overhauling its corporate culture, business ethics and is working toward improving product quality. Established in June 2004, the Business Ethics Committee is an advisory body to MMC's Board of Directors. From an...

  • Page 13
    ... day at MMC's research & development center and production plant in Okazaki. After observing development (design, engineering, testing), production preparations, and production processes, the committee members joined the first business ethics seminar at the plant to see firsthand the Company...

  • Page 14
    ...2004, supported by employees from each Company department and employees from Phoenix Capital, to ensure an external perspective. Crisis Response Teams were established to immediately tackle the most critical issues including quality assurance, cost reduction, management accounting, and sales support...

  • Page 15
    .... At the same time, as a consumer goods manufacturer, the Company must incorporate the voice of the market in its business processes as the launch pad for product planning and design. Through these initiatives, MMC will be well placed to establish a cycle capable of addressing management issues and...

  • Page 16
    ... trust. Furthermore, MMC is working as swiftly as possible to address repairs from the recall, and is offering free inspection services to all customers driving Mitsubishi cars. The Three-Year Full Support Program, offering free inspections and 24-hour roadside services, was launched for customers...

  • Page 17
    ... products tailored to the needs of customers in Japan. In the future, however, MMC has made increasing its presence in the domestic market one of its highest priorities. As a part of this initiative, the Company plans to launch 16 new car models in the Japanese market based on the Mitsubishi Motors...

  • Page 18
    ... Operations Group Headquarters are five offices (North America, Europe, North Asia, ASEAN, and Global Aftersales) and six departments (Australia/New Zealand; Latin America, Middle East & Africa; Export Operations; Overseas Product Marketing; Overseas Sales Promotion; and Overseas Asset Management...

  • Page 19
    ... has led to adjustments to the scope of production, and our Illinois Plant will cut back from a double- to a single-shift operation. North American operations and headquarters are working together to regain customer trust and to restore the image of the Mitsubishi Motors brand. Europe The Company is...

  • Page 20
    .... Global Aftersales Office Aftersales Marketing Dept. Distributor Business Support Dept. Service Information Management Dept. Technical Service Dept. Parts & Accessories Planning & Sales Dept. Parts & Accessories Development Dept. Parts & Accessories Logistics Dept. ASEAN Office Australia & New...

  • Page 21
    ... that are uniquely Mitsubishi Motors, as shown in the Business Revitalization Plan. This will lead to restored customer trust and allow the Company to rebuild its brand image. The second priority is to provide this value at a competitive cost and return to a profitable business structure. The third...

  • Page 22
    .... To this end, the Company reviewed its organizational structure and introduced the PX system that assigns responsibilities from product planning and development to life cycle management. Product Executives are business section managers in charge of a particular car model. They play a crucial role...

  • Page 23
    Lancer WRC 04 Pajero Pajero Evolution carry a heavy responsibility for ensuring profitability and overseeing every aspect of their car model. Reviewing the functions of its organizations, MMC also introduced a support structure at the same time as the PX system in order to enhance the ...

  • Page 24
    ... required over the next three years to ensure the Company's business revitalization. Of this amount, approximately half, ¥496.0 billion, has been raised through an increase in capital as of mid-July 2004. Beginning with the CFO, it is management's duty to ensure these funds are efficiently applied...

  • Page 25
    ... of plants. The Company will continue to undertake capital investment in the development of new models to be launched from fiscal 2005 onward that exemplify the MMC essence, work toward restoring credibility with customers, reform sales functions in North America, and renew business models in China...

  • Page 26
    ... year. Year-on-year exports also remained ï¬,at, totaling 4.77 million units, with growth in sales to Asia and Europe offset by the decline in exports to North America. Against this backdrop, MMC introduced the new concept model GRANDIS and worked to realize optimal business processes. The Company...

  • Page 27
    ... the Company's truck and bus business (¥715.3 billion) and the absence of one-off figures in fiscal 2002 attributed to the change in accounting period at consolidated overseas subsidiaries (¥422.4 billion), sales in this segment fell 8.6% year on year. AUTOMOBILES 4,000 150 FINANCIAL SERVICES...

  • Page 28
    .... North America Unit sales in North America fell substantially to 273,000 units, a year-on-year decline of 20.4%. This was attributed primarily to the tightening of credit assessment standards by the Company's financial services arm and intense competition among automobile manufacturers. Sales in...

  • Page 29
    .... MMC experienced growth in sales in Asia, primarily in China, while recording a decline in sales to Malaysia. Sales in value terms rose 3.0% to ¥635.4 billion. Operating profit fell ¥7.3 billion to ¥62.3 billion. FINANCIAL POSITION Assets Total assets as of the fiscal 2003 year-end stood at...

  • Page 30
    ... of yen In thousands of U.S. dollars (Note 5) 2004 2003 2004 Assets Current assets: Cash and cash equivalents (Note 16) Trade notes and accounts receivable (Notes 6 and 11) Finance receivables (Notes ... 186,600 2,218,818 (886,993) 3,994,748 Total assets ¥2,029,035 ¥2,425,352 $19,197,990 28

  • Page 31
    ...220,000,000 shares Issued: 1,483,438,934 shares in 2004 and 2003 Capital surplus Accumulated deficit Unrealized holding gain on securities Translation adjustments Treasury stock - 4,745 shares at March 31, 2003 11,718 shares at March 31, 2004 Total stockholders' equity Contingent liabilities (Note...

  • Page 32
    ... 0 4 a n d 2 0 0 3 In millions of yen In thousands of U.S. dollars (Note 5) 2004 2003 2004 Net sales Cost of sales (Note 6) Reversal of deferred profit on installment sales, net Gross profit Selling, general and administrative expenses (Note 14) Operating (loss) profit Interest and dividend...

  • Page 33
    ...year Unrealized holding gain on securities: Balance at beginning of year Net change Balance at end of year Translation adjustments: Balance at beginning of year Net change Balance at end of year Treasury stock: Balance at beginning of year Net change Balance at end of year Total stockholders' equity...

  • Page 34
    ... of investment in securities, net Loss on impairment of investment in securities Gain on exchange of stocks Loss on sales and disposal of property, plant and equipment, net Income from affiliates accounted for by the equity method Deferred income taxes Minority interests Changes in operating assets...

  • Page 35
    ...accountable to investors • A Corporate Restructuring Committee, headed up by a Corporate Restructuring Officer appointed by investors, has been established for one year and cross-functional teams have been created to focus on business revitalization issues • Consisting mainly of younger members...

  • Page 36
    ... with external partners. To cut headquarters staff in Japan, MMC will shift its headquarters to Kyoto in order to make maximum use of its assets. (3) Product Strategy for growth 1. The new cars will be reconstructed and steeped in "Mitsubishi Motors DNA," which is best summed up by MMC's SUVs which...

  • Page 37
    ... the meeting of the Board of Directors on May 21, 2004, MMC resolved to issue preferred shares to Mitsubishi Group companies and CMC with payment due in late June. The common stock, which is expected to be priced at ¥100 per share, will be issued below market to Phoenix Capital after being approved...

  • Page 38
    ... customers to restore trust in the Company and its products, MMC is offering a free 20-point inspection and oil change for all MMC vehicles. To give new buyers peace of mind, the Company is also offering a three-year full support program, which includes free inspections and 24-hour roadside service...

  • Page 39
    ... to future costs relating to aftersales service. (i) Retirement benefits Accrued retirement benefits for employees at March 31, 2004 and 2003 have been provided mainly at an amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as adjusted...

  • Page 40
    ...risks arising from the changes in foreign currency exchange rates and interest rates. Forward foreign exchange contracts are designated to hedge the exposure to variability in expected future cash ï¬,ows. Hedge effectiveness on interest rate swaps are evaluated by reviewing the gross changes in cash...

  • Page 41
    ... year, respectively. The effect of this change on segment information is given in Note 21. (b) Lease subvention income and expenses related to the North American subsidiaries Effective January 1, 2003, a change in the recording of lease subvention income and expenses related to the North America...

  • Page 42
    ... March 31, 2004 and 2003, respectively. Following weakness in the North American economy, a higher probability was assigned to the higher end of the range of future credit losses relating to securitized finance receivables estimated in the finance company, Mitsubishi Motors Credit of America, Inc...

  • Page 43
    ..., a new book acquisition cost is established. Losses recognized on the impairment of securities with market value totaled ¥36 million ($348 thousand) and ¥10,401 million for the years ended March 31, 2004 and 2003, respectively. Significant declines in the value of securities without market value...

  • Page 44
    ...,474 363,357 856,146 $2,887,162 Following a change in the internal rules for employee bonuses relating to the current year, MMC, on a non-consolidated basis, did not have any amounts to record as accrued bonuses at March 31, 2004. At March 31, 2003, accrued bonuses amounted to ¥20,174 million, of...

  • Page 45
    ... thousand new shares would have been issuable. The conversion price is subject to adjustment in certain cases including stock splits. The maturities of long-term debt were as follows: In millions of yen Year ending March 31, In thousands of U.S. dollars 2005 2006 2007 2008 2009 Thereafter Total...

  • Page 46
    ...($9 thousand) under a collateral agreement with The Bank of Tokyo-Mitsubishi at March 31, 2004. No debt was outstanding under the credit limit at March 31, 2004 and 2003, respectively. In millions of yen In thousands of U.S. dollars 2004 2003 2004 Buildings and structures Machinery and equipment...

  • Page 47
    ...: In millions of yen In thousands of U.S. dollars 2004 2003 2004 Sales promotion and advertising Freight Bad debts expense Salaries and wages Pension expenses Severance payments to directors and corporate auditors Depreciation Research and development Others Total ¥167,925 30,109 2,907 80,921...

  • Page 48
    ... effect of a change in accounting for deferred lease subvention income Loss on impairment of investment securities Income from affiliated companies Foreign exchange (loss) gain Reversal/(Provision) of accrual for restructuring expense Cost of extraordinary measures Severance payments for early...

  • Page 49
    ... years ended March 31, 2004 and 2003, details of finance leases, excluding those lease agreements which stipulate the transfer of title of the assets to the lessee, were as follows: 1. Notional equivalent acquisition cost, accumulated depreciation, and related net book value of such finance lease...

  • Page 50
    ... U.S. dollars 2004 2003 2004 Future minimum lease revenues from operating lease transactions: Due within 1 year Due after 1 year Total ¥27,063 35,714 ¥62,778 ¥42,194 47,841 ¥90,036 $256,061 337,921 $593,982 48 18. DERIVATIVE FINANCIAL INSTRUMENTS (a) Nature of and policy for derivative...

  • Page 51
    ... outstanding at March 31, 2004 and 2003: In millions of yen 2004 Notional amount Fair value Unrealized gain (loss) Notional amount Fair value 2003 Unrealized gain (loss) Forward foreign exchange contracts: Sell: US $ Euro £ stg Canadian $ Japanese ¥ Buy: Japanese ¥ Total ¥ 7,042 7,897 12,478...

  • Page 52
    ... US$ call Euro call Buy: US$ put Euro put Total $437,455 (4,325) - - 437,455 (4,325) - - $5,533 - 3,595 - $(1,208) - (729) - $ 1,937 In millions of yen 2004 Notional amount Fair value Unrealized gain (loss) Notional amount Fair value 2003 Unrealized gain (loss) Cross currency swaps: Pay-JPY...

  • Page 53
    All cross currency swaps have maturities over one year. In millions of yen 2004 Notional amount Fair value Unrealized gain (loss) Notional amount Fair value 2003 Unrealized gain (loss) Interest rate swaps: Pay-fixed, receive-ï¬,oating Pay-ï¬,oating, receive-fixed Total Â¥150,608 14,241 Â¥(1,...

  • Page 54
    ... and is accounted for under the equity method. The retirement benefit obligation which MMC transferred to MFTBC at March 31, 2003 as part of the demerger is summarized as follows: In millions of yen 2003 Retirement benefit obligation Pension plan assets at fair value Unfunded status Unrecognized...

  • Page 55
    ... Allowance for doubtful accounts Allowance for product warranty Accounts payable - warranty Other Less valuation allowance Total deferred tax assets Deferred tax liabilities: Reserves under the Special Taxation Measures Law Unrealized holding gain on securities Fair value adjustment relating to land...

  • Page 56
    ... the change in the method of accounting for lease subvention income and expenses related to the North American subsidiaries as explained in Note 3, operating profit decreased by ¥237 million in the 'Intersegment' segment in the year ended March 31, 2003. Corporate assets and eliminations of total...

  • Page 57
    ... using the previous years' classifications. In millions of yen In thousands of U.S. dollars 2004 2003 2004 Net sales: Japan North America Europe Asia Other areas Total Interarea Consolidated Operating (loss) profit: Japan North America Europe Asia Other areas Total Interarea Consolidated Total...

  • Page 58
    ...As a result of a change in the method of accounting for lease subvention income and expenses related to the North American subsidiaries as explained in Note 3, operating profit decreased by ¥237 million in the 'North America' segment in the year ended March 31, 2003. Total assets also increased by...

  • Page 59
    ... company Mitsubishi Fuso Truck and Bus Corporation Tokyo, Japan ¥20,000 million Development, design, manufacture, assembly and sales of trucks and buses, and related parts and accessories 20.0 1 person Sales of engine and transmission parts % of voting stock held: Concurrent board appointment...

  • Page 60
    ... thousand) Payment date: June 24, 2004 (Thursday) Placement method: Allocation to the following parties: Mitsubishi Heavy Industries, Ltd. 40,000 shares Mitsubishi Corporation 40,000 shares The Bank of Tokyo-Mitsubishi, Ltd. 40,000 shares The Mitsubishi Trust and Banking Corporation 10,000 shares 58

  • Page 61
    ...) Proposed payment date: July 15, 2004 (Thursday) Placement method: Allocation of shares to Nippon Oil Corporation d. Mitsubishi Motors Corporation's No. 1 Class-G preferred stock Number of stocks issued: 130,000 shares Issue price: ¥1 million per share Amount to record as share capital: ¥65...

  • Page 62
    ... Proposed payment date: July 15, 2004 (Thursday) Placement method: Allocation of shares to an investment fund, special purpose companies (Phoenix Capital Funds) or similar formed by Phoenix Capital Inc. Note: The differences between share proceeds and the amount recorded as share capital is recorded...

  • Page 63
    .... of cases 1 2 No. of units 168,002 684 These recalls may impact future operations, however, the effect of these recalls on future business operations is currently uncertain. 5. Agreement between DaimlerChrysler AG and Mitsubishi Motors Corporation related to shares of Mitsubishi Fuso Truck and Bus...

  • Page 64
    62

  • Page 65
    63

  • Page 66
    ... and publication of recycling fees (published on our Web site on July 23, 2004) • Design and manufacture of vehicles that give due consideration to recycling and the environment • Provision of information on the construction, parts and materials of vehicles In Europe, MMC is promoting the...

  • Page 67
    .... All new passenger car models (COLT, LANCER CARGO, and GRANDIS) introduced in Japan in 2002-2003 are designated as Ultra Low Emission Vehicles (ULEVs). More than 95% of all the gasoline-engine vehicles that MMC sold in Japan in fiscal 2003 were LEVs. Fuel-cell vehicles (FCVs) MMC is working on FCV...

  • Page 68
    ... sales Automobile parts sales Automobile parts sales Automobile parts sales Automobile parts sales Automobile parts sales Automobile and parts manufacture, sales Sales of automobile accessories, air conditioners Automobile servicing Vehicle transportation contractor Design and testing of automobiles...

  • Page 69
    ....8 43.3 MAJOR EQUITY METHOD AFFILIATES OUTSIDE JAPAN Company Incorporated in Capitalization (In millions) Business Lines MMC Share of Voting Rights (%)* Mitsubishi Motors do Portugal S.A. P.T. Mitsubishi Krama Yudha Motors & Manufacturing Vina Star Motors Corp. Kuala Lumpa (Malaysia) Sendrian Bhd...

  • Page 70
    ... Business Ethics Committee Product Operations Group Headquarters Product Development Office Corporate Affairs Office Group Corporate Strategy Office Design Center Chairman of the Board (CEO) Development Engineering Center Revitalization Committee Global Procurement Office Production & Logistics...

  • Page 71
    ...General Manager of CSR Promotion Office RUDIGER GRUBE Member of the Board (Non-executive) KENICHI HORINOUCHI Executive Officer Vice Corporate General Manager of Group Corporate Strategy Office MAKOTO OCHI Executive Officer Plant General Manager of Powertrain Plant, Production and Logistics Of...

  • Page 72
    ... AG Mitsubishi Heavy Industries, Ltd. Mitsubishi Corporation Capital Guardian Trust Company DaimlerChrysler MMC Beteiligungsgesellschaft mbH The Mitsubishi Trust & Banking Corporation The Bank of Tokyo-Mitsubishi, Ltd. Japan Trustee Service Bank, Ltd. (Trust Account) The Master Trust Bank of Japan...

  • Page 73
    ... (Engines) 2-1, Kosunacho, Kosei-cho, Koka-gun, Shiga 520-3212, Japan Telephone: +81-748-75-3131 WORKS NUMBER OF EMPLOYEES SECURITIES TRADED TRANSFER AGENT AND REGISTER ACCOUNTING AUDITOR 43,624 (Consolidated Basis) Tokyo Stock Exchange and Osaka Securities Exchange The Mitsubishi Trust & Banking...

  • Page 74
    M I T S U B I S H I M O T O R S CO R P O R A T I O N 2-16-4, Konan, Minato-ku, Tokyo 108-8410, Japan Public Relations and Investor Relations Department Tel: +81-3-6719-4206 (IR) +81-3-6719-4274 (Corporate PR) Fax: +81-3-6719-0059 http://www.mitsubishi-motors.com Printed in Japan on recycled paper