Mitsubishi 2007 Annual Report Download - page 55

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Notes to Consolidated Financial Statements
Mitsubishi Motors Corporation and Consolidated Subsidiaries
1. Going Concern
Although the Mitsubishi Motors Corporation (MMC) group recorded consolidated net income of ¥8,745 million ($74,081
thousand) in fiscal year (“FY”) 2006, the MMC group recorded consolidated net losses of ¥474,785 million and
¥92,166 million in FY 2004 and FY 2005. As a result, significant doubt arises as to the Company’s ability to continue
as a going concern.
To address this situation as well as strengthen its operating base, the MMC group formulated the “Business
Revitalization Plan” (from FY 2004 to FY 2006) in May 2004 and outlined additional measures in June 2004 that
focus on three areas: all out cost cutting; restoring customer trust; and across the board compliance.
Despite these measures, the MMC group’s inability to respond adequately to past recall problems delayed the
hoped for restoration of consumer and public trust and seriously impacted sales. This, in turn, highlighted the problem
of over capacity that lurked beneath the surface over recent years. In addition, concerns deepened about delays in the
recovery of operations and about the financial health of the MMC group. As a result, the MMC group was forced to use
funds allocated for the revitalization program in the repayment of interest bearing debt.
To break out of this situation and successfully revitalize itself, the MMC group, while continuing its efforts to regain
customer and public trust, found itself in a situation that required additional measures to improve profitability. Given
these circumstances, the MMC group put together the new “Mitsubishi Motors Revitalization Plan” in January 2005.
Highlights of the plan as well as the progress in FY 2006 are summarized as follows.
(1) Corporate culture reform initiatives
Recovering customer and public trust and reforming corporate culture are absolute priorities in the MMC group’s bid to
revitalize itself. The Corporate Social Responsibility (CSR) Promotion Office has been playing a lead role in the imple-
mentation of a wide range of measures designed to enhance compliance. The Business Ethics Committee, made up of
specialists and leaders in their fields from outside the MMC group, has also given valuable advice and guidance from
an external perspective in this regard. The MMC group continues to carry out the counter measures that were announced
in March 2005 to prevent recurrence of the recall problem.
(2) Key points of the “Mitsubishi Motors Revitalization Plan” and additional commitments for FY 2006 and FY 2007
• Recover trust by assigning first priorities to customers
• Assigning first priorities to customers in all areas, from marketing through after sales services
• Regaining customer’s trust by superior product quality
• Business strategy
• Setting sales plans that reflect downside risks
• Promoting of operational tie-ups with other automakers
• Rationalizing production capacity and sales network
• Capital enhancement
• Strengthening financial standing and securing capital for revitalization
• Effective management
• Taking lead with a new management team
• Setting up a thorough follow-up system
• Implement and extend across the board compliance
[Additional commitments for FY 2006]
• Strengthening sales operations around the world beginning with Japan and North America in order to achieve
sales targets
• Implementing cost reduction policies in all functional areas including sales, production and development
• Optimizing the global production system
• Enhancing corporate governance through effective internal control
Consolidated Statements of Cash Flows / Notes to Consolidated Financial Statements