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Harnessing
Emerging Market Dynamism
ANNUAL REPORT 2013
Year ended March 31, 2013

Table of contents

  • Page 1
    ANNUAL REPORT 2013 Year ended March 31, 2013 Harnessing Emerging Market Dynamism

  • Page 2
    ...Statements This annual report contains forward-looking statements about Mitsubishi Motors Corporation's plans, strategies, beliefs and performance. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which Mitsubishi Motors...

  • Page 3
    ...23 Compliance ...24 Responsibility to Society ...25 Environmental Initiatives ...26 Financial Section ...Corporate Information ... 27 60 Consolidated Subsidiaries and Affiliates ...60 Principal Production Facilities...62 Investor Information...63 MITSUBISHI MOTORS CORPORATION Annual Report 2013 1

  • Page 4
    ... core initiatives. • Concentrating business resources in emerging markets and environmental initiatives • Reforming the cost structure • Pursuing business alliance opportunities for profit increases • Reinforcing our business foundation 2 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 5
    ...we will introduce products that best meet the needs of the markets and establish a cost structure capable of withstanding exchange rate uctuations, thereby increasing profits. In particular, in fiscal 2013 we have begun selling in Japan new minicar models (the eK Wagon and the eK Custom) planned and...

  • Page 6
    ... sales volume and achieve sales and profit increases. In fiscal 2013, overseas we will successively roll out new models, including the Mirage, the Outlander and the Outlander PHEV, as well as adding models produced locally in emerging markets, such as Thailand, China and Russia. In Japan, meanwhile...

  • Page 7
    ...of "Jump 2013" In fiscal 2012, the second year for our mid-term business plan, "Jump 2013," we worked to achieve "Growth and Leap Forward" through environmental initiatives and emerging-market response projects. We worked to launch, produce and sell new models in each field. Specifically, by product...

  • Page 8
    ...mid-term business plan. One key initiative will be to increase sales volume through the global rollout of new models introduced in fiscal 2012, including the Mirage and the Outlander. We also expect to bolster sales volume through the addition of locally produced models in Thailand, China and Russia...

  • Page 9
    ... 2014. Going forward, Mitsubishi Motors plans to step up its sales volume in the minicar market. XBy raising productivity and aggressively developing new models, we intend to improve sales and profits in mature markets. At our factories in Japan, we are introducing structural reforms to increase...

  • Page 10
    ... quality reform promotion activity, named the "Customer First Program." Specifically, we set up reform teams targeting three areas: product quality, corporate culture and operational quality. We assigned the head officers of headquarters for development and production and domestic sales as...

  • Page 11
    ... rise in net income, to ¥50.0 billion. Mitsubishi Motors believes it is essential for us to push forward and demonstrate improved profitability to our shareholders. We maintain a strong and unwavering resolve to achieve this goal. Regional Sales Volume (Retail) Japan (Thousands of units) North...

  • Page 12
    ... to exchange rate uctuations. Accordingly, we plan to concentrate our management resources on expanding our production capacity and sales in emerging markets. XWe are working to increase our share in the ASEAN region, which we consider a market of foremost importance. The market represented...

  • Page 13
    ... for Mitsubishi Motors to increase its market share in the five main ASEAN countries from 6.5% in 2010 to 12.0% in 2015, and we are making steady progress toward this objective. The ASEAN region has also become a key pillar of operating income for the Company. R Russia Commence local al production...

  • Page 14
    ...Mitsubishi Motors currently has production bases in Thailand, the Philippines and Vietnam, and an assembly plant in Indonesia. In fiscal 2012, Mitsubishi Motors' sales volume in Thailand exceeded that in Japan. In addition to being our largest market in its own right, Thailand serves as an important...

  • Page 15
    ... most important markets for its vehicles, where sales of its SUV models in particular are favorable. Given this situation, Mitsubishi Motors established a factory in Russia in May 2008 together with PSA Peugeot Citroën. We began full-scale manufacturing of the brand-new Outlander in November 2012...

  • Page 16
    ... rolled out the model in various parts of the world, including Japan, Europe, North America and Asia. The second phase of this launch, in 2011, was the introduction of the MINICAB-MiEV VAN, a minicar class commercial EV. The third wave came in 2013, with the launch of the MINICAB-MiEV TRUCK in the...

  • Page 17
    ... fuel efficiency when driven in all-electric mode, called the plug-in fuel efficiency, and when driven in hybrid mode, called the hybrid fuel efficiency (measured via Japan's JC08 mode) using the plug-in mode contribution rating (utility factor). MITSUBISHI MOTORS CORPORATION Annual Report 2013 15

  • Page 18
    ... expect sales volume (retail) to exceed fiscal 2012 levels in all geographic regions. In Japan, we anticipate the rise in sales volume will center on our new minicars, the eK Wagon and the eK Custom. Overseas, we expect to boost sales of global models, including the Mirage, Outlander, Triton, Pajero...

  • Page 19
    ... Income (Loss) (Billions of yen) 10 5.1 6.8 0 -1.2 -10 -15.0 -20 -30 2009 (FY) 2010 2011 -27.6 2012 2013 (Forecast) Sales Volume (Retail) (Thousands of units) 200 164 150 152 134 148 100 50 0 2010 (FY) 2011 2012 2013 (Target) eK Custom eK Wagon MITSUBISHI MOTORS CORPORATION Annual...

  • Page 20
    ... we are working to increase sales volume in the United States. Also, we plan to expand operations by boosting exports of the locally produced Outlander Sport (RVR in Japan). Benefiting from new-model introductions, we expect the sales volume in North America to come to around 100,000 units in fiscal...

  • Page 21
    Europe As well as by introducing the Space Star (Mirage), Outlander and Outlander PHEV, we aim to increase sales volume by adding models produced locally in Russia. Hiroshi Harunari Executive Vice President (Representative Director), Head Officer of the Headquarters, Overseas Operations Group ...

  • Page 22
    ... income to fall ¥23.0 billion, to ¥99.0 billion. 90 60 30 0 2009 (FY) 2010 2011 2012 2013 (Forecast) 42.5 Sales Volume (Retail) (Thousands of units) 750 600 450 300 150 0 2010 (FY) 2011 2012 2013 (Target) 709 587 525 511 Triton Attrage 20 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 23
    ...business activities from directors and other corporate officers. Also, key internal documents and internal audit reports from internal audit divisions, accounting auditors and affiliated companies are reviewed. In addition to the statutory auditors, within the CSR Promotion Office, Mitsubishi Motors...

  • Page 24
    ...Manager of Financial Planning Department Masao Omichi Chief Environmental Strategy Officer Corporate General Manager of CSR Promotion Office Assistant to President Hiroshi Noda Corporate General Manager of Controlling & Accounting Office Jo Tsuji Head Officer of the Headquarters Procurement Group...

  • Page 25
    ...Departments Affiliated companies Compliance with the Financial Instruments and Exchange Act (Development and evaluation of internal controls over financial reporting) Compliance with the Companies Act (Development of systems in line with basic policies) Thorough information management Mitsubishi...

  • Page 26
    ...attorneys. Promoting business ethics In fiscal 2012, Mitsubishi Motors held compliance training sessions, involving outside instructors as part of a training program for directors and code leaders. The program also featured training sessions for Mitsubishi Motors Group companies in Japan (including...

  • Page 27
    ... to enjoy learning by experiencing the "real thing." Mitsubishi Motors employees visit children at elementary schools to give hands-on lessons on environment-related topics, centering on test rides in the i-MiEV electric vehicle, and car design topics. In fiscal 2012, we conducted 26 classes for...

  • Page 28
    ... company in electric vehicles, Mitsubishi Motors will continue working on ways to create an environment that will encourage the spread of electric vehicles. These efforts should also contribute to efforts to realize a sustainable, low-carbon society. MITSUBISHI MOTORS CORPORATION Annual Report 2013...

  • Page 29
    ... Income ...34 Consolidated Statements of Comprehensive Income ...35 Consolidated Statements of Changes in Net Assets ...36 Consolidated Statements of Cash Flows ...37 Notes to Consolidated Financial Statements ...38 Independent Auditor's Report ...59 MITSUBISHI MOTORS CORPORATION Annual Report 2013...

  • Page 30
    ... of yen) Net Income (Loss) (Billions of yen) 1,973.6 1,828.5 1,445.6 40.3 1,807.3 1,815.1 63.7 67.4 38.0 23.9 15.6 13.9 3.9 4.8 -54.9 2008 (FY) 2009 2010 2011 2012 2008 (FY) 2009 2010 2011 2012 2008 (FY) 2009 2010 2011 2012 28 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 31
    ...its current model life cycle. In North America, Mitsubishi Motors posted a sales volume of 85,000 units, a 20% or 21,000-unit decrease over the previous fiscal year. Although in the United States sales of the Outlander Sport (RVR or ASX in other markets) , which went into local production, increased...

  • Page 32
    ... divided by cash flow. The interest coverage ratio is cash flow divided by interest paid. Notes: 1. Each indicator is calculated from consolidated financial figures. 2. Market capitalization is calculated based on the number of issued shares excluding treasury stock. 3. Cash flow refers to operating...

  • Page 33
    ...The MMC Group procures raw materials, parts and other inputs from a host of suppliers. To ensure high levels of product quality, technology and price competition, procurement orders tend to be focused on designated suppliers. Furthermore, specific technologies required to manufacture parts and other...

  • Page 34
    ... and 15) Notes and accounts receivable - trade (Notes 3 and 15) Finance receivables (Notes 7 and 15) Inventories (Note 7) Short-term loans receivable Deferred tax assets (Note 18) Other (Note 7) Allowance for doubtful accounts (Note 15) Total current assets March 31, 2012 2013 ¥ 361,167 149,555...

  • Page 35
    ... 2) 2013 Liabilities and net assets Current liabilities: Notes and accounts payable - trade (Notes 3 and 15) Short-term loans payable (Notes 7 and 15) Current portion of long-term debt (Notes 7 and 15) Lease obligations (Note 7) Accounts payable - other and accrued expenses (Notes 6 and 15) Income...

  • Page 36
    Consolidated Statements of Income Mitsubishi Motors Corporation and Consolidated Subsidiaries (In millions of yen) (In thousands of U.S. dollars) (Note 2) Net sales Cost of sales Gross profit Selling, general and administrative expenses (Note 10) Operating income Interest and dividends income ...

  • Page 37
    ... associates accounted for using equity method Total other comprehensive income (Note 12) Comprehensive income Comprehensive income attributable to: Owners of the parent Minority interests See accompanying notes to consolidated financial statements. For the years ended March 31, 2013 2012 2013 ¥41...

  • Page 38
    ...end of year Total accumulated other comprehensive income Minority interests: Balance at beginning of year Net change Balance at end of year Total net assets See accompanying notes to consolidated financial statements. MITSUBISHI MOTORS CORPORATION Annual Report 2013 March 31, 2012 2013 ¥ 218,796...

  • Page 39
    ... Minority interests in income Loss (gain) on sales and retirement of property, plant and equipment, net Loss (gain) on sales of investment securities Loss (gain) on sales of subsidiaries and affiliates' stocks Decrease (increase) in notes and accounts receivable - trade Decrease (increase) in...

  • Page 40
    ... market value are stated at cost determined by the moving average method. (f) Depreciation and amortization Property, plant and equipment (excluding leased assets): Depreciation of property, plant and equipment (excluding leased assets) is principally calculated using the declining balance method...

  • Page 41
    ...the accounting standard. mon stock is computed based on the weighted average number of shares of common stock outstanding each year after giving effect to the dilutive potential of common stock to be issued upon the conversion of preferred stock. MITSUBISHI MOTORS CORPORATION Annual Report 2013 39

  • Page 42
    ..., Assets used structures, in sales land and operations others Buildings, tools, furniture and fixture Idle assets and others Buildings, tools, furniture Production and fixture facilities and others ¥606 $6,449 180 1,916 6 ¥793 67 $8,433 40 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 43
    ... (18 sites) The Netherlands and others (6sites) Assets used in sales Buildings, land operations and others Machinery and equipment, vehicles and Idle assets others Buildings, tools, furniture Production and fixture facilities and others ¥678 Other securities: Securities with market value Total...

  • Page 44
    ... as collateral for debt of Mizushima Eco-Works Co., Ltd. at 2013 and 2012, respectively. 2014 2015 2016 2017 2018 Thereafter Total ¥143,271 35,871 29,499 21,707 19,663 383 ¥250,397 $1,523,358 381,407 313,657 230,806 209,079 4,079 $2,662,390 42 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 45
    ... issued common stock on the conversion of certain of such preferred stock. Accordingly, part of Buildings and structures Machinery and equipment Land ¥ 2,331 7,294 3,859 ¥13,486 ¥ 2,370 8,683 3,859 ¥14,914 $ 24,793 77,564 41,036 $143,394 MITSUBISHI MOTORS CORPORATION Annual Report 2013 43

  • Page 46
    ... 31, 2013 and 2012, respectively. Equity in earnings of affiliates ¥ 4,853 ¥ 5,932 Foreign exchange gains 30,395 2,418 (losses) Litigation expenses (1,538) (851) Gain (loss) on sales and retirement of property, plant and equipment, net (5,032) (1,807) Gain on sales of investment securities 11,533...

  • Page 47
    ... in the consolidated statements of cash flows for the years ended March 31, 2013 and 2012 includes payments for the acquisition of lease vehicles of ¥13,801 million ($146,744 thousand) and ¥8,626 million, respectively. Proceeds from sales of property, plant and equipment within (3,899) 368...

  • Page 48
    ... risk management structure Trade receivables, which include notes receivable and accounts receivable, are exposed to the credit risk of our customers. To manage this risk, in accordance with the Group's credit control rules, each group company monitors the financial condition of its major customers...

  • Page 49
    ... Group company manages these risks, by preparing cash flow projections and other similar tools. Cash and bank deposits Notes and accounts receivable-trade Finance receivables Allowance for doubtful accounts (*1) Investment (*2) Total assets Notes and accounts payable-trade Short-term loans payable...

  • Page 50
    ... rates of government bonds after adding credit risk premiums based on the credit risk classes. Cash and bank deposits Notes and accounts receivable-trade Finance receivables Allowance for doubtful accounts (*1) Investment (*2) Total assets Notes and accounts payable-trade Short-term loans payable...

  • Page 51
    ... Maturity profile of the long-term loans payable subsequent to March 31, 2013 Refer to Note 7 "Short-term Loans payable, Long-term Debt and Lease Obligations". 16. Derivative Financial Instruments Summarized below are the notional amounts and the estimated fair values (based on the prices provided...

  • Page 52
    ... - ¥ 500 - (*) ¥(60) $ (*) As interest rate swaps under the special hedge provisions are accounted together with the corresponding hedged item (long-term debt), their fair values are reflected in the fair value of long-term loans payable. 50 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 53
    ...their taxable income. Income taxes of the foreign consolidated subsidiaries are generally calculated based on the tax rates applicable in their countries of incorporation. The consolidated tax payment system is applied at March 31, 2013 and 2012. MITSUBISHI MOTORS CORPORATION Annual Report 2013 51

  • Page 54
    ...as it has become clear that the expected removal costs required at the time of retirement would be less than the original estimate. Changes in the amount of asset retirement obligations for the years ended March 31, 2013 and 2012 were as follows: 52 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 55
    ... main business of the Group is automobile business, involving development, design, manufacturing and sales of automobiles and component parts. In addition, as financial service business, we engage in sales finance and leasing services for Group products. Accordingly, based on the types of products...

  • Page 56
    ... ...U.A.E., Puerto Rico (2) Property, plant and Equipment (In thousands (In millions of yen) of U.S. dollars) March 31, 2013 2012 2013 Net sales: Japan North America Europe Asia Oceania Other Total Adjustment Grand total Operating income (loss): Japan North America Europe Asia Oceania Other Total...

  • Page 57
    ...: Major shareholder Mitsubishi Corporation Chiyoda-Ku, Tokyo, Japan ¥204,447 million Wholesale trading Direct 13.99 Indirect 0.00 Sales of products; import of materials for production; mutual directorships Sales of products ¥296,523 million Accounts receivable ¥19,626 million Total non-current...

  • Page 58
    ...consolidated carrying value of Netherlands Car B.V. is recorded as Loss on sales of subsidiaries and affiliates' stocks, which is included in Other gain (loss), net of consolidated statement of income for the year ended March 31, 2013. (4) The reportable segment in which the transferred business was...

  • Page 59
    ... i. Purpose of consolidation MMC would like to make its total number of outstanding shares of common stock more appropriate relative to its market capitalization by consolidating ten shares of MMC's common stock into one share ("Consolidation of MITSUBISHI MOTORS CORPORATION Annual Report 2013 57

  • Page 60
    ...market capitalization is excessive in comparison with other corporations listed on Tokyo Stock Exchange, Inc. (First Section). Japanese Stock Exchanges are aiming, under an agenda entitled "Action Plan for Consolidating Trading Units," to unify the stock trade units of listed companies to 100 shares...

  • Page 61
    Independent Auditor's Report MITSUBISHI MOTORS CORPORATION Annual Report 2013 59

  • Page 62
    ... Heavy Industries, Ltd. Japan Japan * 1. Figures in parentheses represent indirect shares. 2. Specified subsidiaries. (Mitsubishi Motors Europe B.V. (MME), Mitsubishi Motors Australia, Ltd. (MMAL), Mitsubishi Motors (Thailand) Co., Ltd. (MMTh)) 60 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 63
    ..., sales of parts Product development, design, testing, certification Automobile importing, sales Automobile importing, sales Procurement of funds, group company financing Automobile importing, sales Automobile importing, sales Automobile importing, assembly, sales Manufacturing of automobile engines...

  • Page 64
    ..., Triton, Pajero Sport, Lancer Engines Adventure, L300 (Delica), Lancer Transmissions Pajero, Pajero Sport, ASX Lancer, Zinger Engines Engines, transmissions Colt Plus, Lancer Fortis, Outlander, Zinger, Delica Zinger, Pajero Sport Taiwan Vietnam 62 MITSUBISHI MOTORS CORPORATION Annual Report 2013

  • Page 65
    Investor Information As of March 31, 2013 Company Name Head Office MITSUBISHI MOTORS CORPORATION 5-33-8, Shiba, Minato-ku, Tokyo 108-8410, Japan Telephone: +81-3-3456-1111 Established Capital Number of Employees Stock Listing Securities Code Share Trading Unit Number of Shares Outstanding Number of ...

  • Page 66
    5-33-8, Shiba, Minato-ku, Tokyo 108-8410, Japan Public Relations Dept. Tel: +81-3-6852-4206 (IR) +81-3-6852-4274 (Corporate PR) Fax: +81-3-6852-5405 http: //www.mitsubishi-motors.com Printed in Japan