Business Re-organization for a Stronger Corporate Structure (Liquidation and withdrawal from GHP operations, strengthening of CV and ATV operations and consolidation of electrical parts subsidiaries)

In order to achieve "a higher level of global competitiveness," Yamaha Motor Co., Ltd. (YMC) has devoted itself to the realization of numerous structural improvements in areas like its domestic motorcycle and marine operations, all aimed at creating a corporate structure that is good at dealing with change. As the result of comprehensive efforts to accelerate this process of structural re-organization to strengthen our corporate structure, decisions have been made to realize measures including a "liquidation and withdrawal from GHP operations and strengthening of CV and ATV operations" and a "consolidat ion of our electrical parts subsidiaries." Here is a summary of the changesthat will be made.

In September of 1987, YMC entered the heating/air-conditioning industry with the release of its first "Yamaha Gas-Heat Pump Air-conditioner." As per the conditions stated below, however, the decision has been made to liquidate our GHP operations and withdraw from the industry as of the end of March of th is year and, at the same time to shift those business resources to strengthen our operations in the fields of CVs (Commuter Vehicles) and ATVs (All Terr ain Vehicles) where future demand growth is anticipated.

(1) Background, Reasons
As an engine manufacturer, YMC joined in the "Compact Gas Cooling Technology Research Association" that was formed in 1981 as a part of the national energy policy effort aimed at reducing Japan's dependence on oil and standardizing energy resources. Applying our many years of experience in small-engine technology, we brought to the market in 1987 a 2 hp small-size air-conditioning system for commercial use. In the 12 years that followed, YMC produced with the cooperation of the regional gas companies and other partners a line of products ranging from 2 hp to 20 hp that presently bring annual sales of 2 0 billion yen and have sold over the years a grand total of some 130,000 units.

However, due to such factors as the country's prolonged recession and intensification of competition in the industry, the business environment has been a difficult one for some time now. Despite efforts to improve the efficiency of operations through measures such as development of home-use and large-scale store-use units and cost-reduction through measures like standardization of parts, the business situation remains bleak and operating losses have grown to levels in excess of 10 billion yen.
Looking to the future, we have decided that, from the standpoints of GHP market competition, investment, etc., the possibilities for a company like ours which is not a comprehensive air-conditioning system manufacturer to make our GHP operations self-sustaining in future are not good. Thus, we have decided to withdraw from the GHP industry.

(2) Measures for the future and strengthening of CV and ATV operations
Concerning measures for the future, a GHP After-Service Project will be set up in the company as of April and it will be implemented in good faith to consider and initiate measures to ensure that our customers continue to get the support they need for ongoing use of our products. Measures will also be taken to meet the needs of our business associates.
Regarding personnel and facilities, a strengthening and concentration of operational resources will be undertaken in our CV and ATV operations which are presently operating on a very busy schedule and experiencing some degree of staff shortage with further growth expected in the future. In relation to th is, personnel presently employed in GHP-related positions will be transferred to the CV and ATV operations. Plans also call for the GHP factory facility to be changed over to ATV production. This factory is presently performing the ATV frame welding and painting operations, and with the additional shift to ATV assembly operations it will become a comprehensive ATV production factory incorporating the full welding, painting and assembly operations. Regarding the specifics of the schedule and measures involved in these changes, decisions will be made following discussions with the related labor union.

(3) Effects of Business Performance
Special losses totaling about 5 billion yen are expected to be accrued in the process of liquidating and withdrawing from the GHP business, and we plan to write off these losses in our March 2000 accounts. The estimates fugures for the company's 65th fiscal period are shown at the end of this news letter.

YMC has decided that as of April 1, 2000, our electrical parts manufacturing subsidiary Moriyama Works Co., Ltd. (Headquarters:, Morimachi, Shuchi-gun, S hizuoka Pref.; Representative: Kazuhiko Nomura) will absorb and merge with IIC, Ltd. (Headquarters: Iwai, Iwata-shi, Shizuoka Pref.; Representative: Kaz uhiko Nomura), our subsidiary involved primarily in supporting the overseas manufacture of electrical parts for motorcycles.

Moriyama Works Co., Ltd. was founded in 1973 and is presently involved mainly in the development, manufacture and sales of electrical parts for Yamaha motorcycles and our other main products and also the control units of our "Yamaha PAS" electro-hybrid bicycles. As for IIC, Ltd., it was founded in 1978 and is presently involved mainly in supplying electrical parts to Yamaha's overseas production bases and promoting local manufacture/supply of these parts.

This merger is a measure to deal with a market environment characterized by intensified competition in the electrical parts industry and the increasing trend toward self-production of electrical parts by the local production bases in each country. The merger of these two companies will make it possible to promote comprehensive business operations encompassing manufacture, sales and technology, thus enabling us to strive for more efficient operations and even stronger support to the local overseas production bases, while at the same time strengthening our electronic and control technologies.

Furthermore, in conjunction with this merger, plans call for the business rights to IIC's water purifying system operations presently being conducted in Japan and Overseas (Indonesia) will be turned over to YMC and the rights to its anti-theft lock system business will be transferred to one of our parts subsidiaries.

The following is a summary of the merger specifics.

In this way, YMC has deemed this year a "year of self-renewal by re-evaluating our overall corporate strength and the speed of our responses" and throughout it we will strive to strengthen our corporate structure with eyes to the 21st century.

Profile of GHP (Gas Heat-Pump Air-conditioner) Operations

Profile of MORIYAMA WORKS CO., LTD.

Profile of IIC, Ltd.

(In millions of yen)