Mitsubishi 2006 Annual Report Download - page 8

6MITSUBISHI MOTORS CORPORATION ANNUAL REPORT 2006
Osamu Masuko
President of MMC since an-
nouncement of Mitsubishi Motors
Revitalization Plan in January
2005. Previously appointed
MMC Managing Director in
Charge of Overseas Operations
Group Headquarters in June
2004, after serving as Senior
Vice President & Division COO of
the Motor Vehicle Business Divi-
sion of Mitsubishi Corporation.
Progress in the Revitalization Plan and Restoring Trust
Hiizu Ichikawa
Managing Director in Charge of
Finance Group Headquarters
since June 2004. Previously with
The Bank of Tokyo-Mitsubishi,
Ltd. (currently The Bank of Tokyo-
Mitsubishi UFJ, Ltd.)
Overview of the First Year of the Mitsubishi Motors Revitalization Plan
Restored operating profitability one year earlier than planned
Q: What is your assessment of MMC’s financial performance
for the first fiscal year of the revitalization plan?
<President Masuko>
Since announcing the plan in January 2005, MMC has striven to implement each and every initiative under
the new management team. The two key priorities are to win back customer confidence and improve earnings.
It’s gratifying to know that we were able to restore operating profitability one year ahead of schedule in the
plan’s first fiscal year.
In Japan, we launched two new models crucial to our revitalization— Outlander and i —on schedule under
a stringent quality assurance system. These two models got off to a strong start, outperforming sales plans.
With this strong customer response to new models, I believe that MMC took a strong first step toward revital-
ization and winning back customer confidence.
Meanwhile, the issues that we must resolve have become clearer. MMC must boost performance in markets
where sales have been slow to recover, such as the U.S. and Australia, rationalize its global production
system, and respond to escalating materials costs. In fiscal year 2005, we restored operating profitability, a
key indicator of the health of a company’s core operations, and the ordinary loss was better than forecast.
However, the net loss was worse than forecast due to additional asset impairment charges taken and other
factors. Nonetheless, our target for fiscal year 2006 is to restore profitability at all levels. To this end, MMC
requires all regions and operational units to perform at their best. Fiscal year 2006 is a crucial year for
ensuring that we remain firmly on the path to revitalization.
<Managing Director Ichikawa>
In fiscal year 2005, MMC achieved positive operating income, an indicator of the earnings power of core
operations, but a larger net loss than originally planned. I’d like to highlight several points of interest with
respect to our performance.
First, while exchange rates did move in our favor, MMC was able to restore operating profitability princi-
pally due to cost reduction measures focused on fixed costs.
Second, while our net loss of ¥92.2 billion was ¥28.2 billion worse than forecast for fiscal year 2005, we
believe that the booking of additional asset impairment charges in North America and Australia along with
restructuring charges position us for improved earnings in fiscal year 2006 and beyond.
Third, MMC largely achieved its overall retail sales targets for fiscal year 2005. However, some regions
outperformed while others underperformed due to changes in market conditions such as high crude oil prices
and intensifying competition. Therefore, MMC has updated targets for fiscal years 2006 and 2007 based on
the regional sales results from the plan’s first fiscal year. This was done so as to achieve overall earnings
targets originally laid out in the revitalization plan.
Top Management Interview 1