Mitsubishi 2004 Annual Report Download - page 35

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1. GOING CONCERN
Mitsubishi Motors Corporation (MMC) recorded a large consolidated net loss of ¥215,424 million ($2,038,263 thousand) for
the year ended March 31, 2004.
As a result, significant doubt arises as to the MMC’s ability to continue as a going concern.
A business revitalization plan for the years 2004 to 2006 was established in May 2004 in order to rectify this situation and to
strengthen the foundation of our business. The major reforms under the revitalization plan are set out below.
(1) Restoring trust and rebuilding through the revitalization plan
The Company has set up a Business Ethics Committee, Corporate Social Responsibility (CSR) Promotion Office, and
Corporate Restructuring Committee to push through corporate reforms and to strengthen corporate ethics standards under the
supervision of members from outside the Company. Further, through fresh capital, the Company will implement bold
measures aimed at revitalizing its operations.
Plan for restoring trust
A Business Ethics Committee, consisting mainly of independent experts, was established to supervise from an independent
standpoint MMC’s efforts to comply with its pledge to place the utmost importance on customers, safety, and quality. This
committee will also directly advise the Board of Directors, thereby dramatically strengthening the monitoring of quality and
governance issues.
A new Quality Affairs Office will handle all issues related to quality assurance and management, while the Corporate Social
Responsibility (CSR) Promotion Office will be established directly under the CEO to promote quality review and compliance
throughout the Company. The CSR Promotion Office will also monitor quality management and make improvements.
Decisive actions towards revitalization:
• Implementation of tough corporate reforms, 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, these teams will make bold proposals to the Corporate Restructuring Officer that will
reach through the entire organization
• The Committee sends proposals to respective departments, which will be responsible for implementation. Those in charge of
operations in each region are responsible for achieving profit targets set out for their region
Slim organization measures:
The number of executives will be cut and the number of departments slashed.
(2) Dramatic profitability reforms
Significant reduction of fixed and variable costs
¥85 billion ($804 million) in fixed cost savings by fiscal 2006 will be achieved by:
a. Reducing production capacity by 17% by fiscal 2006 and raising the overall plant utilization rate to 97% of capacity.
To reduce total production capacity by 17%, the Company will end automobile body production by fiscal 2006 at its
Okazaki plant in Japan, thereby consolidating its three domestic plants into two. Overseas, MMC will also wind down opera-
tions at Mitsubishi Motors Australia Limited (MMAL)’s engine manufacturing plant in Australia during fiscal 2005. Further,
the Company plans to decrease the output at MMAL to 30 thousand units per year for assembly, but to continue
manufacture.
b. Reducing indirect personnel by 30% by fiscal 2006 on a consolidated basis.
c. Reducing the number of platforms in order to increase development efficiency
¥154 billion ($1,457 million) in savings of variable costs by fiscal 2006
In line with its target to slash variable costs by ¥154 billion ($1,457 million) by fiscal 2006, MMC intends to cut back mater-
Notes to Consolidated Financial Statements
Mitsubishi Motors Corporation and Consolidated Subsidiaries