President's Message 2004

1. Management Policy for 2004

There is some sense of anticipation that the Japanese economy will recover in 2004, reflecting the bottoming out of stock prices. However, business conditions remain unpredictable for Yamaha Motor, resulting from such factors as uncertainty in the U.S. economy, due mainly to the situation in Iraq and the appreciating yen against the U.S. dollar.
In 2004, we plan to expedite the reforms spelled out in our medium-term management plan. By implementing global strategies and establishing a profitable structure, we will swiftly build a robust corporate structure capable of withstanding exchange rate fluctuations even if the yen continues to become stronger.
To this end, we will address the following three priority themes this year.

Priority Themes for 2004

(1) Final resolution of medium-term management issues

To improve profitability, we will strive to achieve a 30 percent cost reduction and to return low profitability businesses to the black. We will work harder to build a system that can withstand and overcome ever-intensifying competition with consistently superior, attractive products.

To solidify the foundation of our businesses in China, India and ASEAN countries, we will continue to be aggressive in launching new products, thus driving both sales and profits beyond planned targets. In particular, we intend to finalize and implement business strategies for our China operations in 2004.

To promote a growth strategy, we are committed to expanding our mainstay businesses, while developing original business models in new domains such as biotechnology.

To enhance our financial structure, we will maximize tangible fixed assets groupwide from a consolidated management standpoint, thus aiming to achieve a higher return on investment.

(2) Unifying the accounting term to achieve far-reaching consolidated business reform

In the next fiscal year, Yamaha Motor Co., Ltd. in Japan will change the date of its accounting term, from the current March 31 to December 31.
More than 80% of our consolidated sales are derived from overseas markets. By accurately reflecting seasonal fluctuations in business performance for our mainstay products in the financial statements, and by unifying the accounting term with other group companies, including consolidated subsidiaries, we can further promote our globalization programs.
Since this unification of the accounting term will renovate the corporate management cycle, we view the change as an aspect of our consolidated business reform program.

(3) Launching the YAMAHA CCS21 campaign groupwide

This year, Yamaha Motor will launch its CCS (Customer and Community Satisfaction) 21 campaign, which links management and employees in a tight web of shared interest and close communication. It is designed to involve each and every Yamaha Motor Group employee in the effort to achieve prosperity for both our business and our people.
In fiscal 2004, we will place special emphasis on developing human resources. We will initiate a program designed to strengthen in-house communication, clarify our view of ethics and standards of conduct, and help employees better understand the "Yamaha Value 21" action guidelines, thus instilling shared values and a unified focus for their efforts.

2. Business Plan for 2004

(Motorcycles)

In 2004, the total worldwide demand for motorcycles is expected to rise 2.9 percent from the previous year, to 31,070,000 units. Yamaha Motor plans to increase motorcycle shipments by 15.4 percent from 2003, to 3,132,000 units, in 2004.

-Japanese market-

• In 2004, we anticipate the total domestic demand to remain about the same as in 2003, at about 800,000 units.
• We plan to ship 197,000 units in 2004, up 10.1 percent from 2003. We will strive to expand shipments by promoting the BJ50, which has been selling well since its introduction in October 2003, and by releasing new models such as the XG250 Tricker, YP250 Grand Majesty, and 4-stroke Vino, which were exhibited at the Tokyo Motor Show.

-Overseas markets in general-

• We plan to export 2,940,000 units in 2004, an increase of 15.8 percent from 2003.
Of these, we expect knockdown parts for overseas production to account for 2,490,000 sets, representing an increase of 17.4 percent from 2003.

-North America-

• In 2004, we forecast total demand of about 1,000,000 units, which is roughly on a par with 2003.
• Yamaha Motor in Japan will ship 158,000 units to North America in 2004. Including the small off-road model (TTR125, approximately 19,000 units), whose production will be transferred from Yamaha Motor in Japan to its Brazilian subsidiary, total shipments will be 177,000 units, a significant increase of 12.7 percent from 2003. Now that our inventory reduction is complete, and our highly competitive 2004 cruiser, sport and competition models have been released onto the market, we can expect further growth in retail sales.

-Europe-

• We estimate about the same total demand as in 2003, amounting to 1,720,000 units, in 2004. We plan to ship 364,000 units in 2004, up 9.4 percent from 2003. The major reasons for this increase are our successes in reducing inventories and in launching competitive products, including the YZF-R1 and FZ6 sport models - which won acclaim at European motor shows - and the Majesty 400 large scooter. Furthermore, we anticipate an increase in production volume at our overseas manufacturing subsidiaries in France and Spain.

-Asia-

• In 2004, we forecast total demand to rise 3 percent from 2003, to 25,330,000 units.
• We plan to ship 2,158,000 units in 2004, an increase of 17.6 percent from 2003, in an effort to recover our lost share in the Asian market. The breakdown of shipments by market is as follows: 740,000 units, up 30 percent from 2003, to Indonesia; 160,000 units, up 36 percent, to Vietnam; 220,000 units, up 13 percent, to Thailand; and 320,000 units, up 18 percent, to India, where shipments dropped in 2003.
• In 2004, we project demand in China will grow 5 percent from 2003, to 12,100,000 units. We plan to ship a total of 337,000 units, a rise of 15 percent from 2003, including variations of the popular YBR125 model and all-new scooters such as the Force and the JOG.

-Other markets-

• Other markets include Latin America, the Middle East and Africa. To these markets, we plan to ship a total of 255,000 units in 2004, up 22 percent from 2003. In Latin America, one of our main markets in this segment, we anticipate shipments will rise 27 percent from 2003, to 206,000 units. The factors contributing to this significant increase are the continued popularity of the 4-stroke YBR125 and XTZ125 models in Brazil, and the transfer of production of the TTR125 small off-road model for North America from Yamaha Motor in Japan to its Brazilian subsidiary.

(Marine Products)

-Boats-

• The demand for boats remains on a declining trend entering 2004. However, we plan to ship 1,810 boats in 2004, about the same number as in 2003, by introducing new products. We aim to return to profitability in this business - one of our medium-term targets - in the next fiscal year. To this end, we will focus on aggressively promoting profitable small boats with outboard motors, establishing a low-cost production system, and moving into new businesses.

-Outboard motors and personal watercraft-

• In 2004, we predict almost the same total demand for outboard motors as in 2003, at 800,000 units.
• We plan to ship 354,000 outboard motors in 2004, an increase of 5.9 percent from 2003, thus solidifying our leading position in the world outboard motor market. In response to the shift in demand - due to environmental concerns - from 2-stroke engines to 4-stroke models, mainly in advanced countries, Yamaha Motor has expanded its line of eco-conscious large outboard motors. We have introduced the F225, F200, F150 and F115 4-stroke engine series, along with Z300, Z250 and Z200 series high-pressure direct-injection 2-stroke engines. The company has also strengthened its business with boat builders to develop fleet customers. We will continue aggressively promoting these activities to achieve sales increases in all markets.
• Regarding personal watercraft, we plan to ship 32,000 units in 2004, down 4.8 percent from 2003, with a series of new products to be released at 2004 year-end.

(Power Products)

-ATVs-

• In 2004, we forecast the total demand for ATVs (all-terrain vehicles) to increase 2 percent from 2003, to 980,000 units.
• We plan to ship 259,000 units in 2004, up 13.8 percent from 2003. This increase is mainly attributable to the fact that the four new models released in the later part of 2003 will be in full-scale production, which will increase retail sales. Meanwhile, our inventory adjustment efforts during 2003 will provide a synergetic effect.
• The Side by Side, a new-genre off-road vehicle introduced to the market in October 2003, is highly rated by dealers. Orders received already total 7,800 units, exceeding the 5,500 units originally scheduled for production in the period to March 2005. We expect substantial performance from the Side by Side, given its great sales potential.

-Golf cars and snowmobiles-

• In 2004, we plan to ship 37,000 golf cars, up 11.8 percent from 2003, and 25,000 snowmobiles, up 47.9 percent, due to the introduction of new models in both product categories.

(PAS Business and IM Business)

-PAS-

• In 2004, we estimate the total demand for PAS electro-hybrid bicycles will increase 2.8 percent from 2003, to 220,000 units.
• We plan to ship 127,000 units in 2004, realizing an increase of 13.5 percent from 2003 by disseminating the New PAS brand name and introducing new models.

-IM (Intelligent Machinery) Business-

• We project total demand for surface mounters will climb 5 percent in 2004 from the 2003 level, to 13,300 units.
• In 2004, we plan to ship 2,400 surface mounters, an increase of 13.2 percent from 2003. There are several major reasons for this increase. We anticipate that our product shipments will rise steadily, centering on car-mounted applications, for which Yamaha Motor boasts a superior position in the domestic market. In addition, we expect the demand in Asia to remain brisk, particularly in China. To prepare for future demand growth, we will boost production capacity by 20 percent in the second half of this fiscal year.