Published on November 17th, 2013 | by Daniel Sherman Fernandez0
Mitsubishi reveals mid-term plans including redesigned pickup, SUV and new PHEVs
Mitsubishi Motors Corporation (MMC) has just announced its new mid-term business plan titled “New Stage 2016” for the period of three years from fiscal 2014 to fiscal 2016. The environment for the past three years surrounding the automobile industry was extremely challenging due to factors such as natural disasters, including the Great East Japan Earthquake as well as floods in Thailand in 2011, and an extremely strong yen.
Under that environment, the MMC Group has been steadily carrying out its current mid-term business plan titled “Jump 2013,” and steadily achieving improved profitability by dedicating its management resources to emerging markets and environmental initiatives and by pursuing cost structure reform.
Accordingly, MMC was able to achieve record-high profits in both ordinary income and net income in the past fiscal year (fiscal 2012). In this fiscal year (fiscal 2013), the final year of “Jump 2013,” MMC expects to achieve profits that exceed the previous year’s results, and believes that MMC is prepared to move to a new stage of growth.
For the three years starting from next fiscal year (fiscal 2014), MMC will aim for further growth based on the management foundation strengthened through “Jump 2013.” MMC believes that keys to achieve this are utilizing its strong-selling pickup trucks, SUVs and crossover models as strategic products while steadily meeting the globally growing need for eco-car technologies and safety technologies, and steadily taking in higher sales from the mid-to long-term growth in Asian markets into MMC.
In order to achieve the above, MMC has created five basic policies for “New Stage 2016.” They are,
(1) Revenue growth by launching strategic models
MMC regards pickup trucks, SUVs and crossover models, which represent the major part of the global sales of the MMC Group as strategic products, and plans to successively introduce new models of the Triton (L200 in some markets) and Pajero Sport, (Montero Sport or Nativa in some markets) which can be considered MMC’s key models, in fiscal 2014 and fiscal 2015.
In addition, MMC is currently working on the development of the next-generation RVR (ASX or Outlander Sport in some markets), Delica D:5, and Pajero (Montero or Shogun in some markets), and technology development for the expansion of plug-in hybrid EV models, and plans to achieve revenue growth by successively introducing those strategic products and technologies into the market starting from fiscal 2015.
The target retail sales volume of the MMC Group in fiscal 2016 is 1,430,000 units representing a growth of around 30% compared with the current sales volume forecast for fiscal 2013, by increasing the proportion of strategic products-pickup trucks, SUVs and crossover models-to 63% of sales volume (retail sales volume of MMC brand vehicles) in fiscal 2016 from 57% in fiscal 2013 and 74% of net sales in fiscal 2016 from 69% in fiscal 2013.
(2) Development of next-generation technology
MMC has adopted environmental responsibility, driving pleasure, and toughness & safety as the three pillars of the technology development in “@earth TECHNOLOGY,” and will continue developing next-generation technologies based on those concepts. Electric vehicle technology is considered to fill an important role in complying with environmental regulations which are being strengthened globally, and MMC aims to increase its production ratio of EV and PHEV vehicles to 20% in 2020 as a leading company in electric vehicle technology.
At the same time, MMC, in addition to the development of next-generation engines that achieve both driving performance and environmental performance, will further evolve MMC’s unique technology, the S-AWC four-wheel integrated vehicle dynamics control system and a group of active safety technologies that are used in the Outlander, called “e-Assist,”* while expanding the range of models in which those technologies are utilized. Moreover, MMC will aggressively pursue the integration of information technology in vehicles by adopting “connected car” technology by which vehicles are connected to the Internet using smartphones.
* “e-Assist” name used in Japan only.
(3) Strengthening of regional strategies
The MMC Group has thus far been aggressively engaged in efforts to strengthen its business in emerging markets, and has prepared a foundation for future expansion of profits in each region, by establishing new plants or commencing production at joint venture companies particularly in ASEAN countries, China and Russia. MMC expects to realize benefits from those measures, and further move forward with the expansion of sales and profits of business in emerging markets, centering on Asia.
Among these regional endeavors, in the ASEAN region MMC will aim to further develop business centering on Thailand and Indonesia, where MMC has a strong presence, and position the Philippines as another core market and strengthen operations there, thereby building a flexible framework in which MMC will be able to carry out production and sales including the introduction of new models in accordance with demand trends in each country.
In addition, MMC recognizes that structural reform in mature markets and growth in emerging markets as being mutually inseparable. Therefore MMC will accelerate measures to improve profits in mature markets.
In Japan, MMC will aim to further develop the minicar business through NMKV, which is a joint venture established with Nissan Motor Company engaged in the design and development of minicars, and at the same time, will work towards improving sales efficiency and profitability by narrowing the number of models and expanding the sales volume per model.
In North America, MMC will aim to improve sales volume by revitalizing sales networks through the introduction of new models and by strengthening advertising, and will at the same time work towards improving production efficiency at U.S. plants by producing vehicles to be exported to foreign countries.
In Europe where MMC achieved lower fixed costs and improved profitability through the transfer of NedCar in the Netherlands in 2012, MMC will seek recovery of sales volume and expansion of profits by maximizing the effect of the introduction of major models such as the new Triton (L200) model.
(4) Restructuring of operating structure
MMC will also take action on fundamental cost improvement by aggressively driving forward reform of its operating structure. Specifically, MMC aims to achieve an optimum balance of global production capacity by on one hand expanding production in emerging markets in which demand is expected to grow, while on the other hand maintaining adequate product capacity in mature markets and moving forward with streamlining and introducing next-generation production technology at plants in Japan. So, MMC’s overseas production ratio is expected to grow. On the other hand, MMC is proceeding with an increase in operating rate at the Mizushima Plant which is the base of minicar manufacturing through projects carried out by NMKV, and will aggressively move ahead with effective use of resources through business partnerships.
In addition, by reducing the number of previous-generation models and region-specific models, MMC plans to reorganize and integrate its number of platforms from nine as of fiscal 2013 to seven by the end of fiscal 2016, and the number of models from 18 as of fiscal 2013 to 13 by the end of fiscal 2016, and will proceed with cost reduction by the reorganization and integration of models. MMC will continue activities aimed at decreasing total costs under a committee directly controlled by the President which since its establishment has steadily been achieving results, and will aim to decrease costs for the MMC Group by the scale of 110 billion yen in fiscal 2016 as compared to fiscal 2013.
(5) Establishment of stable business foundation
In carrying out the measures described above, a further strengthened framework in emerging markets, pioneering research to enhance product competitiveness and development of advanced technologies such as eco-friendly technologies are essential. The MMC Group plans to annually invest on average 100 billion yen in capital expenditure and 80 billion yen in research and development costs during the period of “New Stage 2016.” In addition, MMC will aim to utilize its management resources while pursuing revenue/profit opportunities through partnerships with other automobile manufacturers, which are beneficial for both parties.
(6) Actions for quality improvement
When it comes to vehicles, MMC believes that quality is the most important aspect required by customers to safely travel in their vehicles. In order to continue to meet customers’ expectations, MMC aims to be at the top level in the industry for all aspects of vehicle quality, and the MMC Group as a whole will focus on efforts aimed at quality upgrades. As achievement targets, MMC will aim, for new models to be introduced in fiscal 2013 onwards, to halve each of the following compared to fiscal 2012: the number of failures which occur within three months from delivery, the ratio of defective components from suppliers, and the period from any occurrence of failures to determination of countermeasures. The MMC Group expects to further improve profitability by steadily carrying out the various measures described above, and aims to achieve 2,600 billion yen in net sales (the forecast for fiscal 2013 is 2,130 billion yen), and 135 billion yen in operating income (the forecast for fiscal 2013 is 100 billion yen) as its target results for fiscal 2016. MMC will put itself on the road to continued growth during the new mid-term business plan period, and will aim to achieve stable returns for shareholders.