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Entering a new stage of growth
Entering a new stage of growth
ANNUAL REPORT 2014
Year ended March 31, 2014

Table of contents

  • Page 1
    ANNUAL REPORT 2014 Year ended March 31, 2014 Entering a new stage of growth

  • Page 2
    ... enjoys the trust and confidence of the community at large. To this end, Mitsubishi Motors will strive its utmost to tackle environmental issues, to raise the level of passenger and road safety and to address other issues of concern to car owners and the general public. A clear direction for the...

  • Page 3
    ... set for the final year of New Stage 2016 two years early. ï,¢ Special Feature ...11 Our New Mid-Term Business Plan, "New Stage 2016" ï,¢ Plug-in Hybrid EV (PHEV) System ...15 ï,¢ Overview of Operations by Region ...16 ï,¢ Corporate Social Responsibility ...22 Corporate Governance ...22 Management...

  • Page 4
    ... Mitsubishi Group 2004 Mitsubishi Motors Revitalization Plan Building solid profitability: Restoring earnings and recovering trust (Billions of yen, thousands of units) Fiscal years: 2005 2006 2007 Sales Volume (Retail sales) (Previous calculation method)* (New calculation method)* Net Sales...

  • Page 5
    ...2009 2010 2011 2012 2013 Step Up 2010 Building the foundations for growth: Bolstering our strengths, securing steady profits Jump 2013 Growth and leap forward: Concentrating business resources in emerging markets and environmental initiatives, reforming the cost structure 2011 2012 2013 2008...

  • Page 6
    To Our Shareholders and Stakeholders Under a new management structure, we have put in place a new mid-term business plan, "New Stage 2016," and we will strive toward sustained growth and increases in corporate value. 4 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 7
    ...as president of the Company. Under this new management structure, we will continue making steady progress along our growth trajectory during the period covered by New Stage 2016. Osamu Masuko Chairman of the Board, CEO Tetsuro Aikawa President, COO MITSUBISHI MOTORS CORPORATION Annual Report 2014...

  • Page 8
    ... operating income target set for the nal year of New Stage 2016 two years early. Overview of the Final Year for "Jump 2013" "Growth and leap forward" was the basic policy of Jump 2013, our mid-term business plan that commenced in 2011. Under this plan, we endeavored to shore up our local production...

  • Page 9
    ... America Europe Asia Other Regions 987 134 85 181 357 230 FY2012 1,047 143 97 202 344 261 FY2013 Operating Performance FY2012 FY2013 (Billions of yen) Change Net Sales Operating Income Net Income 1,815.1 67.4 38.0 2,093.4 123.4 104.7 15% 83% 176% MITSUBISHI MOTORS CORPORATION Annual Report...

  • Page 10
    ... as our main profit center Asia Europe p Strengthen renewed European business as the second pillar Operating Income In nc ¥135.0 ¥ 3 ¥1 billion Stabilize profitability in Japan and the United States Other Regions Japan/ North America 8 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 11
    ... 2013. In fiscal 2014, we plan to conduct proactive promotional activities for the Outlander PHEV in the Netherlands and other European countries, leading to higher sales and income in the region.  In Japan, Introducing the New eK Space Minicar, a "Super-Height" (Tall) Wagon Mitsubishi Motors...

  • Page 12
    ...97 Canada & 31 Mexico Minicars 225 202 431 344 280 ASEAN 261 Middle East 81 & Africa 270 91 38 91 Russia & others 83 91 93 243 United States Registered 52 Vehicles (FY) 66 71 111 Western Europe & Others Latin 103 America 99 142 151 Australia & NZ (FY) 54 North Asia 101 77 80 2013...

  • Page 13
    ... 2016 New Stage 2016, covering the three fiscal years beginning fiscal 2014, builds on the management foundations strengthened through Jump 2013 and aims to further growth. Mitsubishi Motors believes that one of the keys to achieving this expansion is leveraging its strategic products-pickup trucks...

  • Page 14
    ...six key measures outlined in New Stage 2016. Boost Revenue by Launching Strategic Models Mitsubishi Motors regards pickup trucks, SUVs and crossover models as strategic products, as they account for 58% of the Company's global sales volume and 68% of net sales. In fiscal 2014 and fiscal 2015, we...

  • Page 15
    ... following (Thousands of units) Thailand and Indonesia FY2013 (Actual): 240 *1: 360,000 units are to be sold in five major ASEAN countries in fiscal 2015 FY2016 (Target): 390 *2: Thailand, Indonesia, the Philippines, Malaysia and Vietnam ASEAN MITSUBISHI MOTORS CORPORATION Annual Report 2014 13

  • Page 16
    ...whole value chain to improve product quality Build an ever-improving organization in which each employee has great awareness of issues 3. Halve the period from any occurrence of failure to determination of countermeasures compared with scal 2012 14 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 17
    ... Generator Generator Battery Generator Motor Engine Battery Hybrid Vehicles These are systems on which a battery and motor have been added to a gasolinepowered automobile, and do not allow electricity to be supplied externally. Assist Battery MITSUBISHI MOTORS CORPORATION Annual Report 2014...

  • Page 18
    ... North America Europe Asia Other Regions Total 134 85 181 357 230 987 143 97 202 344 261 1,047 147 109 225 431 270 1,182 1,200 987 900 600 300 230 134 85 181 357 1,182 1,047 143 97 202 344 261 431 147 109 225 270 0 2012 2013 2014 (Target) 16 MITSUBISHI MOTORS CORPORATION Annual Report...

  • Page 19
    ... Head Officer of the Headquarters, Domestic Sales Group Headquarters Performance in scal 2013 During fiscal 2013, registered vehicle sales volume in Japan was below the level for fiscal 2012. However, sales were robust thanks to solid performance with the minicars we introduced in June 2013-the new...

  • Page 20
    Overview of Operations by Region North America We will bolster sales volume through sales promotions on the Outlander and Mirage. Morikazu Chokki Senior Executive Officer, Head Officer of the Headquarters, Overseas Operations Group Headquarters B Performance in scal 2013 Our sales volume in North ...

  • Page 21
    ...) Sales Volume (Retail) (Thousands of units) 250 Western Europe & others Russia & others 218 218 83 181 225 202 83 91 88 200 150 100 50 0 64 154 135 93 111 142 2010 (FY) 2011 2012 2013 2014 (Target) Outlander Outlander PHEV MITSUBISHI MOTORS CORPORATION Annual Report 2014 19

  • Page 22
    ... Executive Officer, Head Officer of the Headquarters, Overseas Operations Group Headquarters B, Overseas Operations Group Headquarters A Corporate General Manager of Thai Business Office Performance in scal 2013 Looking at the Asian market, during the year under review sales volume in Thailand...

  • Page 23
    ...Sales Volume (Retail) (Thousands of units) 300 Australia & NZ Latin America Middle East & Africa 247 200 261 226 230 81 66 93 71 95 103 270 91 94 85 Mirage/Space Star 100 99 68 0 2010 (FY) 67 2011 64 2012 77 2013 80 2014 (Target) ASX Pajero MITSUBISHI MOTORS CORPORATION Annual Report...

  • Page 24
    ... Report Managing Directors' Meetings Chairman President Executive Vice Presidents Quality Affairs Of ce and Departments Departments Quality Audit Internal Audit Guidance and Advice CSR Promotion Of ce Internal Audit Subsidiaries and Af liates 22 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 25
    ...Charge of Development Gayu Uesugi Executive Vice President Chairman of the Board, CEO- Mitsubishi Motors North America Inc. Shuichi Aoto Managing Director Chief Business Ethics Officer Head Officer of the Headquarters CSR, Corporate Affairs, Controlling & Accounting Group Headquarters In Charge of...

  • Page 26
    ... security trade control officer. The legality of export transactions is guaranteed by a management system centered on the committee. Internal Control Promotion Framework President Internal Control Promotion Committee Evaluation Team Evaluation Department Af liated Departments companies (Develop...

  • Page 27
    .... Shuichi Aoto Managing Director, Chief Business Ethics Officer, Head Officer of the Headquarters, CSR,Corporate Affairs,Controlling & Accounting Group Headquarters, In Charge of Procurement Framework for promoting business ethics Mitsubishi Motors has strengthened the organization to ensure that...

  • Page 28
    ... Achieving the goals of the Mitsubishi Motors Group Environmental Vision 2020 MMC formulated the Mitsubishi Motors Group Environmental Vision 2020 in June 2009. MMC has encapsulated its vision for electric vehicles in its environmental policy of "Leading the EV Era, Towards a Sustainable Future." On...

  • Page 29
    ... ...36 Consolidated Statements of Comprehensive Income ...37 Consolidated Statements of Changes in Net Assets ...38 Consolidated Statements of Cash Flows ...41 Notes to Consolidated Financial Statements ...42 Independent Auditor's Report ...63 MITSUBISHI MOTORS CORPORATION Annual Report 2014 27

  • Page 30
    ... exchange rate prevailing on March 31, 2014. * On August 1, 2013, the Company conducted a 1-for-10 reverse share split on its common stock. Indicated figures for basic net income per share and diluted net income per share for fiscal 2012 and fiscal 2013 are calculated as if this reverse share split...

  • Page 31
    ... Vehicles 61 61 Western 135 Europe & others 93 111 North Asia 99 Latin America 93 103 95 52 71 101 Australia & NZ (FY) 67 64 77 2011 2012 2013 (FY) (FY) 2011 2012 2013 (FY) 2011 2012 2013 (FY) 2011 2012 2013 2011 2012 2013 MITSUBISHI MOTORS CORPORATION Annual Report 2014...

  • Page 32
    ... of yen) Net Assets (Billions of yen) 550.0 1,543.9 1,452.8 1,258.7 1,312.5 1,321.3 392.7 397.9 348.1 346.6 351.2 222.4 234.5 248.1 265.6 2009 (FY) 2010 2011 2012 2013 2009 (FY) 2010 2011 2012 2013 2009 (FY) 2010 2011 2012 2013 30 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 33
    ... laws and regulations and this may seriously impact the operating results and/or financial standing of the MMC Group. Manufacturing cost The MMC Group sources parts and raw materials from a large number of suppliers to manufacture its products. MITSUBISHI MOTORS CORPORATION Annual Report 2014 31

  • Page 34
    ... become prominent, the operating results and/or financial standing of the MMC Group may be seriously impacted. Product quality and safety MMC endeavors to improve the quality and assure the safety of MMC Group products. However, in the event 32 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 35
    ... intellectual property right requires a halt in manufacturing or sales or in the payment of compensation, the operating results and/or financial standing of the MMC Group may be seriously impacted. IT and information security Dependence on particular suppliers MMC sources raw materials and parts...

  • Page 36
    ... 208,826 (67,151) 1,880,976 Net defined benefit asset (Note 17) Deferred tax assets (Note 18) Other (Note 7) Allowance for doubtful accounts (Note 15) Total investments and other assets, net Total assets ¥1,543,890 ¥1,452,809 $15,000,876 34 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 37
    ... adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Minority interests Total net assets Contingent liabilities (Note 9) Total liabilities and net assets See accompanying notes to consolidated financial statements. 2013 2014 ¥ 355,724 121,074...

  • Page 38
    Consolidated Statements of Income Mitsubishi Motors Corporation and Consolidated Subsidiaries (In millions of yen) (In thousands of U.S. dollars) (Note 3) For the years ended March 31, 2014 Net sales Cost of sales Gross profit Selling, general and administrative expenses (Note 10) Operating ...

  • Page 39
    ... Income Mitsubishi Motors Corporation and Consolidated Subsidiaries (In millions of yen) (In thousands of U.S. dollars) (Note 2) For the years ended March 31, 2014 Income (loss) before minority interests Other comprehensive income Valuation difference on available-for-sale securities Deferred...

  • Page 40
    ... of Changes in Net Assets Mitsubishi Motors Corporation and Consolidated Subsidiaries (In millions of yen) For the year ended March 31, 2014 Shareholders' equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders' equity Balance at beginning of year Changes of items...

  • Page 41
    ... the year ended March 31, 2014 Shareholders' equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders' equity Balance at beginning of year Changes of items during the period Issuance of new shares Deficit disposition Transfer to capital surplus from capital stock Net...

  • Page 42
    ... of yen) For the year ended March 31, 2013 Shareholders' equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders' equity Balance at beginning of year Changes of items during the period Issuance of new shares Deficit disposition Transfer to capital surplus from...

  • Page 43
    ... 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 Share issuance cost Decrease (increase) in notes and accounts receivable - trade Decrease (increase) in inventories Changes in finance...

  • Page 44
    ... financial statements filed with the Financial Services Agency as required by the Financial Instruments & Exchange Act of Japan. In addition, the notes to the consolidated financial statements include information, which is not required under generally accepted accounting principles in Japan...

  • Page 45
    ...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 2014 43

  • Page 46
    ... used in sales Buildings, land operations and others ¥ 539 $ 5,243 Idle assets Production facilities Buildings, land and others Machinery and equipment, tools, furniture and fixture and others 2,032 19,749 4,330 ¥6,902 42,076 $67,069 44 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 47
    ... 31, 2014. Loss on impairment of fixed assets amounted to ¥793 million and consisted of ¥82 million from buildings and structures, ¥155 million from tools, furniture and fixtures, ¥525 million from land and ¥29 million from other assets for the year ended March 31, 2013. $180,450 $180,450 $88...

  • Page 48
    ...) March 31, 2014 2013 2014 Years ending March 31, Loans, principally from banks and insurance companies, due through 2023 at weighted average interest rates averaging 3.0% in 2014 and 3.2% in 2013: Secured Unsecured Less current portion 2015 2016 2017 2018 2019 Thereafter Total ¥3,818 3,005...

  • Page 49
    ... groups of assets of a consolidated subsidiary, Pajero Manufacturing Corporation, were pledged as collateral at March 31, 2014 and 2013, respectively. (In thousands (In millions of yen) of U.S. dollars) March 31, 2013 2014 2014 Buildings and structures Machinery and equipment Tools, furniture...

  • Page 50
    ... Loss on sales of subsidiaries (185) (30,188) and affiliates' stocks Impairment loss (6,902) (793) Other (3,508) (1,483) Total ¥ (3,251) ¥ 7,747 $ 71,639 162,013 (122,804) (10,026) (39,238) 1,994 7,796 (1,804) (67,069) (34,091) $ (31,591) 48 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 51
    ... activities in the consolidated statements of cash flows for the years ended March 31, 2014 and 2013 include payments for the acquisition of lease vehicles of ¥26,124 million ($253,828 thousand) and ¥13,801 million, respectively. Proceeds from sales of property, plant and equipment within 7,441 34...

  • Page 52
    ...Floating rate bank borrowings are exposed to interest rate risk. For some of our long-term bank borrowings, derivative transactions $ 16,612 96,299 $112,911 Due within 1 year Due after 1 year Total ¥ 1,709 9,911 ¥11,620 ¥1,357 8,201 ¥9,559 50 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 53
    ... with highly rated financial institutions. Trade payables and bank borrowings are exposed to liquidity risk. Each 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...

  • Page 54
    ...flows discounted using appropriate rates, such as the rates of government bonds after adding credit risk 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...

  • Page 55
    ...,661 4,368,541 $1,686,124 $281,068 58,502 89,643 86,019 88,105 72,717 $676,056 4. Maturity profile of the long-term loans payable subsequent to March 31, 2014 Refer to Note 7 "Short-term Loans payable, Long-term Debt and Lease Obligations". MITSUBISHI MOTORS CORPORATION Annual Report 2014 53

  • Page 56
    ...2014 Unrealized Notional Due more Fair value than 1 year gain (loss) amount Interest rate options: Buy: Total Hedged item (In millions of yen) March 31, 2013 Due more Notional Fair value than 1 year amount $25,068 $ - $25,068 $ - $526 $526 $526 $526 No items to be reported for the year ended...

  • Page 57
    ... (recorded as fair value): Pay-fixed, receivefloating (special hedge provisions): Total Debt $286,598 $286,598 Debt $ 73,989 - $ 2,671 - (*) $(183) $(183) bution plan. Defined benefit plan The changes in the retirement benefit obligations during the year ended March 31, 2014 is as follows...

  • Page 58
    ... costs Interest costs Expected return on plan assets Amortization of actuarial losses Amortization of prior service costs Retirement benefit expenses ¥ 7,628 4,734 (4,490) 2,667 (688) ¥ 9,850 $ 74,116 46,000 (43,629) 25,918 (6,693) $ 95,711 56 MITSUBISHI MOTORS CORPORATION Annual Report 2014

  • Page 59
    ... Institute Law of Japan, defined benefit corporate pension plans and lump-sum payment plans, and defined contribution pension plans. Additional retirement benefits are paid in certain cases upon an employee's retirement and similar. Information of multi-employer pension plans included in the above...

  • Page 60
    ...generally calculated based on the tax rates applicable in their countries of incorporation. The consolidated tax payment system is applied in Japan for the years ended March 31, 2014 and 2013. The effective tax rates reflected in the accompanying consolidated statements of income for the years ended...

  • Page 61
    ... discount rates ranging from 0.1% to 4.4%. The 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...

  • Page 62
    ... Japan are grouped as follows: (1) North America ...The United States (2) Europe ...Russia, France, The Netherlands, Germany, (3) Asia ...Thailand, The Philippines, China, Indonesia, (4) Oceania ...Australia, New Zealand (5) Other ...Brazil, U.A.E., Puerto Rico (2) Property, plant and equipment...

  • Page 63
    ...Thailand, The Philippines (4) Oceania ...Australia, New Zealand (5) Other ...U.A.E., Puerto Rico Information on major customers For the year ended March 31, 2014 2013 Major shareholder Mitsubishi Corporation Chiyoda-Ku, Tokyo, Japan ¥204,447 million ($1,986,465 thousand) Wholesale trading Direct...

  • Page 64
    ... per share of common stock for the years ended March 31, 2014 and 2013 are summarized as follows: (In yen) March 31, 2013 2014 (In U.S. dollars) 2014 Major affiliates Summarized financial information of the major affiliates MMC Diamond Finance Corp. is the major affiliate of reporting company (MMC...

  • Page 65
    Independent Auditor's Report MITSUBISHI MOTORS CORPORATION Annual Report 2014 63

  • Page 66
    ...Australia New Zealand Thailand Thailand Philippines Philippines U.A.E. Japan Japan Japan Japan Japan Japan Japan Japan Japan Germany Portugal Vietnam Mitsubishi Heavy Industries, Ltd. Japan Japan * 1 Figures in parentheses represent indirect shares. * 2 Specified subsidiaries. (Mitsubishi Motors...

  • Page 67
    ... (In millions) Business Lines Share of Voting Rights in MMC (%)*1 JPY 265,608 Energy & environment, commercial aviation & transportation systems, integrated defense & space systems, machinery, equipment & infrastructure and others 20.3 (7.7) MITSUBISHI MOTORS CORPORATION Annual Report 2014 65

  • Page 68
    ...) Mirage, Attrage, Triton, Pajero Sport, Lancer 10. MMTh Engine Co., Ltd. (MEC) Engines 11. Mitsubishi Motors Philippines Corporation (MMPC) Adventure, L300 (Delica), Lancer 12. Asian Transmission Corporation (ATC) Transmissions 13. GAC Mitsubishi Motors Co., Ltd. (GMMC) Pajero, Pajero Sport, ASX 14...

  • Page 69
    ...March 31, 2014 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 Major Shareholders April 22, 1970...

  • Page 70
    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