Mitsubishi Motors Aims for 2 Million Sales in FY2007
through the Introduction of New Model with Platforms Common to DCX
While Mitsubishi achieved its projected streamlining,
the unsuccessful car finance business in the US hurt its financial results in FY2003

  Mitsubishi Motors (Mitsubishi) announced a new business vision in February 2001 called the Turnaround Plan, after DaimlerChrysler (DCX) acquired a 34% capital share in Mitsubishi in October 2000. The investment stake has now increased to 36.97% as of September 2003.

  Mitsubishi already achieved its streamlining goals initially set for FY2003 in the Turnaround Plan, one year earlier than anticipated, in FY2002, which included reductions in production capacity and material costs. Its truck and bus divisions separated from Mitsubishi to become an independent corporation, Mitsubishi Fuso Truck and Bus Corporation, in January 6th 2003, which allows Mitsubishi to further focus on its passenger car business. In May 2003, Mitsubishi revealed a new project; it intends to expand its sales volume worldwide from 1.55 million units for FY2002 to approximately 2 million units for FY2007 through aggressively marketing new models using the common platforms developed with DCX from 2005 onwards.

  However, the problems with the increase in delayed loan payments and loan losses have come to the surface in Mitsubishi's US car finance business since the last half of FY2002. They caused Mitsubishi to post a loan-loss reserve of ¥36 billion in FY2002 and ¥50.6 billion in the first half of FY2003. This largely affected Mitsubishi's financial results in the first half of FY2003, resulting in a net loss of ¥80.2 billion. Mitsubishi announced its expected net loss of ¥11 billion throughout FY2003. This forces Mitsubishi to postpone part of its project for expanding its capacity in the US plant.

■Achievement of the streamlining goals set for FY2003 in the Turnaround Plan one year earlier than anticipated

  The reduction goals that Mitsubishi established for FY2003 are to be incorporated in its Turnaround Plan announced in February 2001, including domestic production capacity, material costs and personnel costs. However, Mitsubishi has already achieved them one year earlier than anticipated. Total cost reductions including material, personnel and fixed costs amounted to ¥113.7 billion for FY2001 and ¥209.9 billion for FY2002. The capacity utilization in the domestic plants increased from 67% in FY2000 to 80% in FY2002.

  Mitsubishi upwardly revised its initially projected goal of material cost reduction for FY2003 from 15% to 20%, and accordingly its cost reduction forecast of ¥270 billion for FY2003, announced in May 2003, to ¥305 billion, when it released its fiscal half-year financial statement in November 2003.

  In contrast, it is stated that Mitsubishi could need at least one more year to achieve its operational profit rate goal of 4.5% set for FY2003 in the Turnaround Plan. The operational profit rate was 1.3% for FY2001 and 2.1% for FY2002, along with a 6.3% operating loss in the first half of FY2003.

■Goals set for FY2001-2003 in the Turnaround and their progression by FY2002

Japan's production capacity reduction goal: 20% by FY2003. Resulting in a total reduction of 26% in June 2002 through closing of the assembly line in the Oe Plant in FY2001 and one of the production lines in the Mizushima Plant in FY2002.

Material cost reduction goal: 15% in FY2003. Resulted in a 15% reduction in FY2002. Setting a new goal of 20% for FY2003.

Personnel cost reduction goal: 14% in FY2003. Resulted in a 16% reduction in total including a separate company, Mitsubishi Fuso, and an 18% reduction achieved by Mitsubishi alone at the end of FY2002.

Profitability goal: Operational profit rate of 4.5% for FY2003. Resulted in a 1.3% operational profit rate for FY2001 and 2.1% for FY2002 along with a 6.3% operating loss in the first half of FY2003. In May 2003, Mitsubishi revealed a delay in reaching this profitability goal by at least one year.

Source: Mitsubishi Motors Publicity May 26, 2003

■Utilization of Domestic Plants   FY 2000 FY 2002 FY 2003 Plan Nagoya Plant 29% 35% 80% Pajero Mfg. 99% 129% 84% Mizushima Plant 72% 84% 82% Average 67% 80% 82%

■Material cost reduction goal and results   FY 2001 FY 2002 FY 2003 Initial goal 5.0% 10.0% 15.0% Results 6.5% 15.0%   New goal - - 20.0%

■Cost reduction goal and results in Turnaround Plan (material, personnel and fixed costs)

(Million yen)

	FY 2001		FY 2002		FY 2003
	Initial Goal	Results	Initial Goal	Results	Initial Goal	Forecast in May	Forecast in Nov.
Amount	100,000	113,700	175,000	209,900	203,000	270,000	305,000

Sources: Mitsubishi Motors Publicity Nov. 11, 2003/ May 26, 2003

■Record-breaking net income in FY2002 followed by 80.2 billion net loss in the first half of FY2003

  Passenger car sales, the business area Mitsubishi covers after Mitsubishi Fuso became independent, increased by 8.6% in FY2002. It was the first time for Mitsubishi to experience a sales increase of this magnitude in the last five years due to a record-high overseas sales volume of 1.19 million units. Its operating income resulted favorably in 84 billion, due to the robust sales in North America and Asia/other regions despite losses made in the Japanese and European operations. Mitsubishi also yielded a record-high net income of 43.9 billion. Both income results were already recalculated on a 12-month basis because part of the results provided from some of its overseas subsidiaries were originally posted on a 15-month basis.

  However, an increase in irrecoverable loans in Mitsubishi's US car finance business, Mitsubishi Motors Credit of America (MMCA), beginning in the second half of FY2002 resulted from the rate of delayed payments of 4.3% and loan losses of 3.7% in FY2002. This caused Mitsubishi to post a loan-loss reserve of US$294 million (approximately 36 billion) in the financial results for FY2002.

  After MMCA strictly revised the credit standard for car purchase loans in the first half of FY2003, the retail sales in North America decreased to 150,000 units from 177,000 units in the corresponding period of 2002. Mitsubishi substantially reduced inventories in its sales companies from 91,000 units in April 2003 to 54,000 units in September 2003. This also influenced Mitsubishi's sales in North America in the first half of FY2003, yielding a 40% decrease from 473.6 billion for FY2002 to 281.2 billion. As well as a loan-loss reserve of 36 billion for FY2002, Mitsubishi also posted a loan-loss reserve of 50.6 billion for operating costs according to the revised accounting procedure. This caused an operating loss of 104 billion in North America in the first half of FY2003 (61.9 billion operating income in the corresponding period of FY2002).

  Mitsubishi, expecting sales recovery due to a decelerating reduction in inventories in its sales companies, will allow 4 billion operating income for the North American sales in the second half of FY2003. However, Mitsubishi's total sales in North America throughout FY2003 are likely to decrease by 22% from 987.6 billion for FY2002 to 770 billion along with an expected operating loss of 100 billion. (Mitsubishi Press Release)

  A decrease in the North American sales, Mitsubishi's most profitable area, resulted in a total operating loss of 76.4 billion and a net loss of 80.2 billion in the first half of FY2003. Mitsubishi announced an expected operating loss of 45 billion and a net loss of 11 billion throughout FY2003. (Mitsubishi Press Release)

■Mitsubishi Motors Results by Region (excluding Trucks and Buses)

■Unit Sales (Retail Sales)

(1,000 units)

	FY 2001	FY 2002		2003 Forecast	Apr.-Sep. 2002	Apr.-Sep. 2003
		Actual	w/o Bridge
Japan North America	404 338	354 360	354 343	355 320	163 177	171 150
Europe Asia/Others	213 602	203 646	200 646	205 700	101 322	104 348
Total	1,557	1,563	1,543	1,580	763	773

Note: 1.	The results for FY2002 include those totaled based on a 15-month fiscal period, which were provided from some overseas subsidiaries. "W/o bridge" indicates those revised to correspond to a 12-month fiscal year basis for comparison purposes (the same as other tables below).
2.	Results from Thailand, the Philippines, Australia and New Zealand included in Asia for FY2001-2002 are based on the calendar year.

■Sales

(Million yen)

	FY 2001	FY 2002		2003 Forecast	Apr.-Sep. 2002	Apr.-Sep. 2003
		Actual	w/o Bridge
Japan North America	621,800 869,300	547,700 1,191,000	547,700 987,600	600,000 770,000	237,700 473,600	292,500 281,200
Europe Asia/Others	525,000 503,900	730,800 691,100	584,000 616,900	610,000 620,000	275,200 289,900	318,800 314,300
Total	2,520,000	3,160,600	2,736,200	2,600,000	1,276,400	1,206,800

■Operating Income

(Million yen)

	FY 2001	FY 2002		2003 Forecast	Apr.-Sep. 2002	Apr.-Sep. 2003
		Actual	w/o Bridge
Japan North America	(60,500) 94,700	(66,800) 90,200	(66,800) 101,600	(40,000) (100,000)	(54,800) 61,900	(20,600) (104,000)
Europe Asia/Others	(32,200) 28,700	(22,200) 73,000	(20,400) 69,600	25,000 70,000	(11,100) 25,500	15,200 33,000
Total	30,700	74,200	84,000	(45,000)	21,500	(76,400)

Sources: Mitsubishi Motors Publicity Nov. 11, 2003/ May 26, 2003

■Mitsubishi Motors' Consolidated Business Results

(Million yen)

	FY 1999 ended Mar. 2000	FY 2000 ended Mar. 2001	FY 2001 ended Mar. 2002	FY 2002		FY 2003 Forecast	Apr.-Sep. 2002	Apr.-Sep. 2003
				ended Mar. 2003	w/o Bridge
Sales Cars Truck/.Bus	3,334,974	3,276,716 2,558,200 718,500	3,200,699 2,520,000 680,700	3,884,874 3,160,600 724,300	3,451,500 2,736,200 715,300	2,600,000 2,600,000 0	1,618,944 1,276,400 342,544	1,206,832 1,206,832 0
Operating income Cars Truck/.Bus	22,473	(73,865) (83,300) 94,000	40,227 30,700 9,500	82,761 74,200 8,600	92,800 84,000 8,800	(45,000) (45,000) 0	23,479 21,500 2,000	(76,350) (76,350) 0
Ordinary income Net income	(3,800) (23,331)	(94,057) (278,139)	11,863 11,256	54,344 37,361	67,400 43,900	(62,000) (11,000)	18,935 6,638	(85,789) (80,215)
R & D costs Facility Investment	104,000 50,600	98,000 50,500	101,000 96,100	105,000 123,800		77,000 160,000

Sources: Mitsubishi Motors Financial results FY 2002, Interim Report Apr.-Sep., 2003
Note: 1.	Sales and operating income for passenger car indicate results from the current Mitsubishi, while those for truck and bus indicate results from Mitsubishi Fuso truck and bus Corporation. Results from Mitsubishi Fuso bus and truck Corporation for January-March 2003 are wholly included in Mitsubishi's results as its subsidiary. Those from April 2003 onwards are added to Mitsubishi's results based on the calculation according to the equity method.
2.	The results for FY2002 include those totaled based on a 15-month fiscal period, which were provided from some overseas subsidiaries. "W/o Bridge" indicates those revised to correspond to a 12-month fiscal year basis for comparison purposes.
3.	R&D costs and facility investment by FY2002 include those for trucks and buses. R&D costs indicate Mitsubishi's unconsolidated results while facility investment indicates its consolidated results.

■Strictly revised the credit standard for car purchases in the US market, reducing the MMCA usage from over 50% to around 20%

  Mitsubishi strictly revised its credit standard for car purchases in the US in the second half of FY2002. Its direct credit service changed, providing services from the associated dedicated financial institution for customers with a low credit rating. Mitsubishi has drastically reduced the rate of deferred loans, which have a moratorium period after purchase, from over 50% till 2002 to almost zero since June 2003. Also, Mitsubishi substantially reduced the rate of balloon loans from approximately 10% to almost zero. The balloon loan allows a customer to only pay for the net value that is actually used, a difference between the vehicle purchase price and its residual value established for a certain lapse of time. The fleet sales also sharply decreased in 2003 from 36% between April and June to 18% between July and September.

  The MMCA loan usage reached over 50% relative to the total sales volume between 2000 and September/October 2002. However, the more strict credit standard sharply reduced this usage to around 20% in 2003. Although, delayed payments and loan losses still occurred at 3.5-4.0% and 4.0-5.0% of the total loans per month, respectively in the first half of FY2003 due to the previously provided credits.

■MMCA usage, delayed payment and loan loss for Mitsubishi vehicle sales in the US

	FY 1998	FY 1999	FY 2000	FY 2001	FY 2002
Usage	42.8%	41.3%	56.5%	57.5%	52.4%
Delayed payment	3.8%	2.5%	2.0%	3.4%	4.3%
Loan loss	2.3%	1.9%	1.2%	1.8%	3.7%

Source:Mitsubishi Motors Financial Results 2002

■MMCA usage, delayed payment and loan loss by month

	2002			2003
	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Apr.	May	Jun.	Jul.	Aug.	Sep.
Usage	51%	44%	23%	32%	19%	25%	18%	21%	18%	24%	19%	15%
Delayed payment Loan loss	5.2% 3.9%	5.4% 4.1%	6.9% 3.6%	5.6% 3.0%	4.5% 7.7%	3.6% 5.2%	3.5% 4.1%	3.9% 4.9%	3.8% 4.9%	4.0% 5.0%	4.1% 4.9%	4.0% 5.2%

Source: Mitsubishi Motors Interim Reports Apr.-Sep. 2003

■To market new models mainly using common platforms to DCX in accordance with projected 2 million sales in FY2007

  In May 2003, Mitsubishi announced projected sales of 2 million units worldwide in FY 2007.

  These 2 million units are broken down to 450,000 units in Japan (27% up), 300,000 units in Europe (50% up), 500,000 units in North America (44% up) and 750,000 units in Asia/other regions (16% up). The total sales worldwide will increase by 29%, 450,000 units, from 1.55 million units for FY2002.

  In order to achieve this sales goal, Mitsubishi will market 14 new models each in Japan and Europe as well as 12 models each in North America and Asia/other regions between FY2003 and 2007; although, Mitsubishi will focus on its new model introductions between FY2005 and 2007.

  The number of platforms is to decrease by one-third from 15 to 10, and 70-80% of Mitsubishi's platforms (excluding SUVs) will be commonly used with DCX. Production volume per platform will increase from the existing 100,000 units to 200,000 units, which will reduce the development and production costs. The number of models derived from the same platform will increase from 2.2 models to 2.8, providing more variations. Mitsubishi said that marketing the new models mainly using the common platforms with DCX allows its profitability to reliably improve even through a possibly slower sales increase in North America.

■Mitsubishi's platform plan

	FY 2002	FY 2007
Number of Platforms	15	10
Models per Platform	2.2	2.8
Vehicles produced per Platform	100,000 units	200,000 units

Mitsubishi Motors Publicity May 26, 2003

■Mitsubishi's introduction plan of new models and those of which use the common platforms with DCX

	FY 2003	FY 2004		FY 2005-FY 2007
		Number of new models	(Note)	Number of new models	(Note)
Japan	1	2	1	11	6
North America	3	1		8	5
Europe	3	2	1	9	7
Asia/Others		2	1	10	5

Source: Mitsubishi Motors Publicity May 26, 2003
Note: The number of new models which use common platforms with DCX (of total).

  Mitsubishi's facility investments amounted to 37 billion in FY2000, which has continuously increased since FY2001, to eventually increase to a projected 160 billion for FY2003. It is said that Mitsubishi also intends to increase the R&D costs to aggressively market the new models. However, the projected costs for FY 2003 remain at 77 billion, approximately at the same level as the past three to four years.

■Facility Investment and R & D costs

■Facility Investment (consolidated)

(Million yen)

	FY 1999	FY 2000	FY 2001	FY 2002	FY 2003 Plan
Passenger Cars	29,100	37,000	88,900	115,300	160,000
Trucks & Buses	21,500	13,500	7,200	8,500	-
Total	50,600	50,500	96,100	123,800	160,000

■R & D Costs (unconsolidated)

(Million yen)

	FY 1999	FY 2000	FY 2001	FY 2002	FY 2003 Plan
Passenger Cars	72,500	64,600	68,000	76,000	77,000
Trucks & Buses	31,500	33,400	33,000	29,000	-
Total	104,000	98,000	101,000	105,000	77,000

Sources: Mitsubishi Motors Publicity May 26, 2003/ Nov. 11, 2003

■To consolidate Japan's sales network to a single channel and reducing delivery lead-time

  Mitsubishi's domestic operation with projected sales of 450,000 units in the Japanese market in FY2007 launched the Colt, the first-ever model using the common platform jointly developed with DCX, in November 2002, followed by a minivan, the Grandis, in May 2003. However, decreased sales of other models and mini-cars cause Mitsubishi's domestic sales forecast for FY2003 to remain almost the same, compared to FY2002 with a slight increase by 1,000 units, at 355,000 units. This also results in an operating loss forecast of 40 billion. It is said that Mitsubishi is planning to return its domestic operation to profitability in FY2005 when Mitsubishi will start to market new models using jointly developed platforms with DCX on a large scale.

  In order to achieve the projected profitability, Mitsubishi will introduce 14 models between 2003 and 2007 including the Grandis released in 2003 and will launch a minivan type derived from the Colt as well as a 2000cc-class minivan. The Galant and Diamante where sales volumes are decreasing will be consolidated into a single model at the time of next model changeovers to be carried out by 2005 as targeted.

  The longer delivery time due to the customer free choice sales system will also shorten. Mitsubishi will change the existing build-to-order production system (not applied to mini-cars) to avoid inventories, to a new system that allows Mitsubishi to have 3,000 to 4,000 units of inventory. This reduces Mitsubishi's recent average delivery time of 29 days to 20 days, enhancing its competitiveness.

  Restructuring of the domestic sales network is also underway, consolidating the existing two sales channels, Galant and Car Plaza, into a single channel at the beginning of 2003. Mitsubishi introduced the new Corporate Identity (CI) design to refresh dealerships through an investment amounting to 35 billion over the next three years (between 2003 and 2005).

  The projected cost reductions in engine development and production have been achieved. Mitsubishi announced in October 2003 that it has decided on the domestic production site, for world engines jointly developed and produced with DCX and Hyundai Motor, as the Shiga Plant. It will start producing the 1800, 2000 and 2400 cc in-line four-cylinder engines in the spring of 2005. The scheduled total engine production worldwide in the DCX Group would be 1.5 million units per year.

  With 2005 as a target, the Colt, to be manufactured in Japan, will also use the 1300 or 1500cc engine jointly produced with DCX in Germany.

■Mitsubishi's future core models for its domestic market

	Models
Large/middle sedan	A new model consolidating Galant and Diamante (note)
Small sedan	Lancer
Compact vehicles	Colt
	A minivan-type derivative of Colt
Minivans	Grandis
	A 2000cc-class minivan
SUV	Pajero
Minicar	eK series

Sources: Nikkei Sngyo Shimbun May 20, 2003, Others
Note:	The domestic sales volumes from January to September 2003 include the Galant, 1,067 units and the Diamante, 1,191 units.

■35 billion investment to strengthen Japan's sales network as well as for the launch of production of DCX's world engines in 2005

■To consolidate the existing two distribution channels into one, and a 35 billion investment between 2003 and 2005 for strengthening the sales network

Mitsubishi consolidated the existing two distribution channels, Galant and Car Plaza, into a single channel, Mitsubishi Motors, which can deal with all passenger cars in January 2003. Mitsubishi introduces the new CI design to renew the dealerships through an investment amounting to 35 billion between 2003 and 2005. Establishing dealer standards such as a site area and installed facilities allows Mitsubishi to relocate the dealerships which do not satisfy these standards, or merge them into other shops located nearby or otherwise to terminate the sales contract.

The number of sales employees, which previously decreased from approximately 8,000 in 1995 to 6,300, has been increasing again since the summer of 2003 when Mitsubishi started recruitment, with the goal of 8,300 sales employees by 2005.

■To party reintroduce the project-based production to reduce the new vehicle delivery time from 29 days to 20

Mitsubishi does not usually have inventories, excluding mini-cars, since it introduced the customer free choice sales system for the Colt and Grandis. The previous average delivery time was 29 days due to the build-to-order production. Starting to deal with 3,000 to 4,000 units of inventory, which is equivalent to the production volume of five to seven days, in the fall of 2003 will allow a reduction in delivery time to 20 days, enhancing its competitiveness.

■Alliance with Toyota for the G-BOOK service to be released in 2005

Mitsubishi revealed an alliance with Toyota in September 2003 to introduce the G-BOOK service. It will allow Mitsubishi to start providing this service for the Mitsubishi models in 2005. Toyota is supposed to provide Mitsubishi with the infrastructure and application technology. Subsequent to that, Mitsubishi will establish and manage its individual G-BOOK membership system in conjunction with the customer management system. Daihatsu and Fuji Heavy Industries have also decided to offer the G-BOOK service.

■To use engines jointly produced in Germany for the Colt to be made in Japan in 2005

The joint engine plant between Mitsubishi and DCX, which is now under construction in Germany, Kolleda, will start producing and supplying the 1300 and 1500cc gasoline engines for the Colt for the European market, and the Smart four-seater, both to be produced at Holland's NedCar Plant. The Colt, to be produced in Japan, will also use these engines in 2005 as targeted. This intends to improve the capacity utilization of the joint engine plant to achieve cost reduction.

■Production launch of the DCX Group's world engine at the Shiga Plant in 2005

Mitsubishi announced in October 2003 that the Shiga Plant will launch production of world engines (1800, 2000 and 2400cc in-line four-cylinder engines) jointly developed with the DCX Group in the spring of 2005. The total investment amounts to over 10 billion. The models using these world engines will debut in the summer of 2005.

In addition, Hyundai Motor will start producing the DCX Group's world engines in Korea in 2004, followed by joint production between three manufacturers, DCX, Mitsubishi and Hyundai Motor, in the US in 2005. The scheduled total production volume worldwide will be 1.5 million units per year.

Sources: Mitsubishi Motors Publicity Oct. 3, 2003/ Sep. 3, 2003/ Aug. 24, 2003/ May 26, 2003, Nihon Keizai Shimbun Aug. 24, 2003/ Feb. 19, 2003

■Production to begin on the Colt and the Smart four-seater at Holland's Nedcar Plant in 2004

  The European operation, with projected sales of 300,000 units for FY2007, returned to profitability with an operating income of 15.2 billion Euros in the first half of FY2003. The operating income forecast throughout FY2003 is 25 billion. As a result of a further extensive alliance for the European business with DCX, Mitsubishi's organization was so restructured that the umbrella organization consistently can oversee all aspects of the organization.

  The NedCar Plant in Holland will discontinue its production of Mitsubishi's Carisma and Space Star successively, to be followed by production under commission from Volvo for its 40 series due for scheduled contract termination in June 2004. The NedCar Plant will therefore become a dedicated plant to manufacture the Colt for the European market with annual production of 100,000 units as well as DCX's Smart four-seater using the same platform as the Colt with annual production of 150,000 units.

  The joint engine plant between Mitsubishi and DCX, MDC Power GmbH, which is now under construction in Germany, will launch production of the 1300 and 1500cc gasoline engines in 2004 to be supplied for the Colt and the Smart four-seater, which will be produced in the NedCar Plant. The Colt, to be manufactured in Japan, will use some of these engines.

  The diesel engine Colt in turn will use DCX's 1500cc DE. A minivan, to be launched in Europe in 2005, the Grandis, will adopt the 2000cc DE supplied from VW.

■Restructuring the NedCar Plant in Holland to a dedicated plant to manufacture the Colt and DCX's Smart four-seater

Models produced in 2003			Models produced after 2004
Models	Unit Productionin Jan.-Sep.	Timing of discontinuing	Models	Timing to begin Production	Annual unit production
Carisma	22,988 units	End of 2003	Smart four-seater	Early 2004	150000 units
Space Star	30,289 units	End of 2005
Volvo Series	66,001 units	Jun. 2004	Colt	Spring 2004	100,000 units

Sources:	Mitsubishi Motors Annual Report 2002, Automotive News Europe Oct. 20,2003, Sankei Shimbun Sep. 30, 2003
Note: 1.	The NedCar Plant has an annual capacity of 280,000 units.
2.	The sedan Carisma uses the common platform with the old Volvo 40 series. The Space Star is a compact wagon.

■Changed the procurement source of 2000cc DEs from Renault to VW

Mitsubishi revealed in September 2003 that it signed the contract on procuring DEs for the Mitsubishi models from VW. This agreement permits Mitsubishi to procure four-cylinder 2000cc pump-injected DEs, that meet the Euro IV emission control regulations, from VW, mounting them first to a minivan, the Grandis, with a scheduled launch in 2005 in Europe. Mitsubishi, traditionally having procured the 2000cc DEs from Renault, will change the supply source, taking advantages of DCX's agreement with VW for DE procurement of 120,000 units per year.

■Merged Mitsubishi Motors Sales .B.V. (MMSE) with Mitsubishi Motors Europe B.V. (MME) in December 2002

Mitsubishi merged Mitsubishi Motors Sales Europe B.V. (MMSE) into Mitsubishi Motors Europe B.V. (MME) in December 2002. MME oversees all operations in Europe. This includes sales and distribution of the Mitsubishi vehicles, local production of its finished vehicles, carried out in the NedCar Plant and under commission to Italy's Pininfarina Plant, and joint engine production with DCX for the Colt and Smart at MDC Power GmbH to begin in 2004.

Sources: Mitsubishi Motors Publicity Dec. 19, 2002/ Sep. 10, 2003

■To market the new Galant, exclusive to North America, in the fall of 2003, and expand the annual production capacity of the US plant to 300,000 units

  Mitsubishi's North American operation with projected sales of 500,000 units for FY2007 introduced a new SUV, the Endeavor, in the fall of 2002. Mitsubishi entered into the Canadian market in September 2002, followed by the Mexican market in January 2003. Mitsubishi has scheduled to increase the number of dealerships in North America by approximately 50% to 1,000 by 2007. Actively opening dealerships in the southern US and Canada, where an insufficient number of dealerships formerly existed, Mitsubishi will establish a region-wide control system for North America. The new Galant, which was developed in the US, is exclusive to the North American market and is produced locally, debuted in November 2003 with scheduled annual sales of 100,000 units.

  In March 2003, Mitsubishi announced an increase in production capacity in the Illinois Plant from 240,000 units to 300,000 units in autumn of 2004. The joint engine production with DCX and Hyundai Motor will launch in the Michigan Plant in 2005. In July 2003, however, the decrease in sales in the US forced Mitsubishi to postpone the projected time period to complete the plant capacity increase in the fall of 2004 to June 2005, as well as postponing the decision making on the tentative new plant construction.

■To increase the annual production capacity in the US plant to 300,000 units due to a newly developed model exclusive to the US

■To increase the annual production capacity in the US Illinois Plant from 240,000 units to 300,000 units

In March 2003, Mitsubishi announced that it would expand the production capacity in the US Illinois Plant from 240,000 units to 300,000 units through the total investment of approximately US$200 million. This is because Mitsubishi projects increased production of new future models including a new SUV, the Endeavor, and the next-generation Galant, both developed for the North American market. The construction began in April 2003 and will is due to be completed in autumn of 2004. The production results in the Illinois Plant including the Chrysler models were 198,300 units in 2001 and 204,300 units in 2002.

The announcement also stated that Mitsubishi would make a decision on the possible further expansion of local production capacity to over 300,000 units including those to be produced in a newly constructed plant until the summer of 2003. In July 2003, however, the decrease in sales in North America forced Mitsubishi to postpone the completion of the increased production capacity to 300,000 units to June 2005, as well as postponing the decision on a further production expansion plan to over 300,000 units.

■To introduce exclusive models to the US market locally designed and developed in the US, the Endeavor and Galant

Mitsubishi carried out the entire process for design and development of the new Endeavor and Galant in the US to introduce them as exclusive models to the US market. The Endeavor debuted in the US market in the fall of 2002. Production of the Galant launched in the fall of 2003 with a projected annual production of 100,000 units.

■To increase the number of dealerships in North America from 637 in 2002 to 1,000 in 2007

Mitsubishi will increase the number of the dealerships in North America from 637 in 2002 to 1,000 in 2007.Actively opening dealerships in the south of the US and Canada, where an insufficient number of dealerships formerly existed, Mitsubishi will establish a region-wide control system for North America.

■To start operations in the joint engine plant between Mitsubishi, DCX and Hyundai Motor in the US in 2005

In February 2003, Mitsubishi stated that a joint venture between Mitsubishi, DCX and Hyundai Motor, Global Engine Alliance, would establish a new engine plant in Dundee, Michigan State. It will produce 2000cc-class four-cylinder gasoline engines in 2005. Mitsubishi stated that production of these engines would launch in Korea in 2004 as well as in Japan in 2005, reaching over 1.5 million units worldwide per year.

Sources: Mitsubishi Motors Publicity Mar. 17, 2003/ Apr. 16, 2003, Nihon Keizai Shimbun Apr. 18, 2003

■To start to produce the Mitsubishi brand models in China while investing 57 billion for production of the next-generation Strada in Thailand

  Mitsubishi considers China, Taiwan, Thailand and Australia as the core markets in Asia/other regions with projected sales of 750,000 units for FY2007.

  Most of the over 70,000 vehicles sold in China in 2002 were launched under the brand names of Mitsubishi's partners. (Mitsubishi Press Release) In March 2003, Beijing Jeep, with DCX holding capital shares, started producing the first-ever locally-manufactured vehicle, the Pajero Sport (named the Challenger in Japan), which could be released under the Mitsubishi brand. Mitsubishi will increase the number of models to be locally manufactured in China in the future, up to 90%, of all sales volumes, such as in Beijing Jeep and other production sites according to its policy.

  Its sales network includes 20 exclusive dealerships of the Mitsubishi vehicles and 50 joint dealerships with DCX at present. There are plans to increase the number of the joint dealerships with DCX to 120. The announcement made in March 2003 stated that the annual sales goal in China would increase to 300,000 units by 2007 while doubling the annual engine production capacity to 300,000 units. The sales goal in China for FY2003 is 150,000 units, however, the mid-term sales goal, based on Mitsubishi's projected sales of 2 million units worldwide for FY2007 incorporated in the announcement in May 2003, has not yet been clarified.

■Production launch of the Mitsubishi brand vehicles in China's Beijing Jeep with targeted annual sales of 300,000 units (Mitsubishi Press Release in March 2003)

Mitsubishi sold over 70,000 vehicles in China in 2002. They included three locally-produced models such as the Pajero, produced by Hunan Changfeng Motor with Mitsubishi taking a 21.3% share, as well as exported vehicles from Japan.   Beijing Jeep, with DCX taking a 42.4% share, begun production of the Pajero Sport, named the Challenger in Japan, in March 2003 under commission from Mitsubishi. This is the first-ever locally-produced vehicle to be released under the Mitsubishi brand name in China.   Beijing Jeep will also start producing the Outlander, named the Airtrek in Japan, in the early 2004, to be followed by several other locally-made models by 2007.

Mitsubishi also enhances local production of engines. The annual engine production capacity in the total of two manufacturers, Liaoyang, Shenyang Aerospace Mitsubishi Motors Manufacturing and Heilongjiang, Harbin Dongan Automotive Engine Manufacturing with Mitsubishi taking a 25% share and 15% share, respectively, will increase to 300,000 units through introducing two working shifts.

The existing sales network in China includes about 20 exclusive dealerships of the Mitsubishi vehicles and 50 joint dealerships with DCX. Mitsubishi will increase the number of the joint dealerships with DCX to 120 as well as of the exclusive dealerships of the Mitsubishi vehicles.

Sources: Mitsubishi.Motors Publicity Jun. 4, 2002/ Nov. 5, 2002/Mar. 14, 2003, Nihon Keizai Shimbun Jun. 5,2003, Nikkei Sangyo Shimbun Sep. 1, 2003

  Mitsubishi secured the No.1 position for the production volume consecutively between 1996 and 2002 in Taiwan, and will make further effort to maintain it in the future according to its policy.

  Thailand is a centralized production base for the 1-ton pick-up truck, the Strada, to be exported to 140 countries worldwide since 1996. The announcement in January 2003 stated that Mitsubishi would invest 21 billion bahts (approximately 57 billion) for developing and producing the next-generation Strada. This will allow Mitsubishi to shift the development site for this new model from Japan to Thailand within 2003, enlarging the existing production capacity in the Thailand Plant of 120,000 units to 180,000 units over the next 2 to 3 years. The results in Thailand for 2002 mainly regarding the Strada were approximately comprised of production of 105,800 units, sales of 32,800 units and export of 90,000 units.

  In July 2003, Mitsubishi also revealed the establishment of a new research and development site in Australia, through the investment of A$230 million (approximately 17.9 billion) for expanding the facilities, including a test course. It also intends to improve the IT environment so that the development sites in Japan, the US and Europe can connect to each other. Meanwhile, Mitsubishi develops the next-generation Magna Verada (named the Diamante in Japan) to be produced from 2005, as well as a new high end vehicle.

■Establishing research and development sites in Thailand and Australia

■To invest 57 billion for developing and producing the next-generation Strada, to be manufactured in Thailand, while shifting the development site to Thailand   Mitsubishi announced in January 2003 that it would invest approximately 21 billion bahts (approx. 57 billion) for developing and producing a 1-ton pick-up, the next-generation Strada, to be produced in Thailand. The current annual production capacity of 120,000 units would increase to 180,000 units by the time of the introduction of the new-generation Strada, for further growth as a supply base worldwide. The development site for the Strada in Okazaki, Aichi will be shifted to Thailand within 2003.

■To establish a research and development site in Australia   The announcement made in July 2003 stated the establishment of a research and development site at Mitsubishi's wholly owned subsidiary, Mitsubishi Motors Australia Limited. Mitsubishi will make an investment of A$230 million to expand its facilities, including the test course and improve the IT environment so that the development sites in Japan, the US and Europe can connect to each other. The number of dedicated staff for development will increase from 230 to approximately 300.   This investment is part of the total investments of A$ 900 million (approximately 70.2 billion) in its Australian subsidiary, which was revealed in 2002.

Sources: Mitsubishi Motors Publicity Jan. 15, 2003/ May 26, 2003, Nihon Keizai Shimbun Jan. 12, 2003

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