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The New Medium-term Management Plan of Yamaha Motor Co., Ltd. "NEXT 50," the New Three-year Plan

April 09, 2002

Yamaha Motor Co., Ltd. has initiated a new medium-term management plan - "NEXT 50" - to be implemented over three years, from April 2002 through March 2005. Next 50 is aimed at creating a stronger management foundation ahead of the 50th anniversary of the company's foundation in July 2005, and achieving further growth in the next half century.

Management issues and numerical targets of the new medium-term management plan are as follows.

Management issues

(1)

Improving the profitability of existing businesses

(2)

Solidifying the foundation of businesses in China, India and ASEAN countries

(3)

Promoting a growth strategy

(4)

Enhancing the company's financial position


Numerical targets in FY 2005
(Premised on an exchange rate of 120 yen to the U.S. dollar and 110 yen to the euro)

 

(1)

Achieving consolidated net sales of 1,050 billion yen; consolidated operating income

 

 

of 70 billion yen; and consolidated ordinary income of 65 billion yen


 

-Breakdown of net sales:

568 billion yen for the motorcycle business; 202 billion yen for the marine business; 188 billion yen for the power product business; and 92 billion yen for the "other products" business


 

-Breakdown of operating income:

34 billion yen for motorcycle business; 13 billion yen for marine business; 17 billion yen for power product business;and 6 billion yen for the "other products" business


 

(2)

Generating 70 billion yen in free cash flows, and ensuring 10% or higher ROE in three years

 

(3)

Raising the equity ratio to 30%, and holding consolidated borrowings under 200 billion yen


FY ending March 31

 

In the new medium-term management plan, Yamaha Motor will concentrate on "improving the profitability of existing businesses" and "solidifying the foundation of businesses in Asian countries," in an all-out, group-wide effort to quickly reach the plan's targets. To this end, the company will enhance its development capabilities, particularly in core businesses, enabling it to market attractive products worldwide, while realizing a 30% cost reduction in three years. Yamaha Motor will also act decisively in implementing a top-to-bottom review and restructure of unprofitable segments, including the domestic boat business and the electro-hybrid bicycle business.

In terms of its regional strategy, Yamaha Motor will give priority in allocating management resources to operations in China, India and ASEAN countries, and will take comprehensive measures - encompassing manufacture, sales, technology, procurement and finance - to regain competitiveness in Asian motorcycle markets, which are expected to grow further. Thus, the company aims to solidify the foundation of its Asian operations.
As far as the numerical targets spelled out in the plan, the company is called on to achieve consolidated net sales of 1,050 billion yen, and consolidated ordinary income of 65 billion yen in FY 2005.

The company will attain the target for "enhancing financial position" by steady implementation of the SCM (supply-chain management) reform launched in the previous medium term. It is designed to generate more free cash flow by improving asset turnover through the effective utilization of fixed assets. SCM reform also seeks to reduce borrowings, and raise the equity ratio.
"Promoting a growth strategy" entails creating a stronger management foundation to help achieve further growth in the next half century. The company will develop promising new technologies and businesses into significant profit sources, both in core and non-core areas.

Yamaha Motor will pursue a corporate brand strategy that helps promote its structural reform as well as support its growth. The company will develop and market products and services that differentiate it from the competition. It will be guided by its "Touching Your Heart" brand slogan, as well as its landmarks in the markets - the distinctive value that each of its businesses operations can offer.



Business Strategy and Corporate Strategy for the New Medium-term Management Plan

1. Motorcycle business

The numerical targets for the motorcycle business in the medium-term management plan are as follows.


Sales, profits and number of units sold

 

FY 2002

FY 2005

Sales/operating income

473.5 billion yen/12 billion yen

568 billion yen/34 billion yen

Number of units sold

2.18 million units

3.32 million units


Sales and number of units sold in major regions

 

FY 2002

FY 2005

Japan

54.7 billion yen(220,000 units)

60.0 billion yen(240,000 units)

North America

109.2 billion yen(180,000 units)

123.0 billion yen(210,000 units)

Europe

157.7 billion yen(440,000 units)

162.0 billion yen(470,000 units)


ASEAN countries & India

 

107.4 billion yen(1,090,000 units)

159.0 billion yen(1,700,000 units)

China

10.1 billion yen(50,000 units)

37.6 billion yen(440,000 units)

FY ending March 31


Note:

The figures for the fiscal year ended March 31, 2002 are based on forecast

 

business performance announced in November 2001.

 

(Policy for the motorcycle business)
In Yamaha Motor's core motorcycle business, growth in demand is expected, led by Asian countries. The company aims to win 20% of the world market share for motorcycles, both in terms of sales amount and number of units sold, by 2010.
To this end, the company will further enhance profitability in North American and European operations by increasing the brand power through the aggressive marketing of large, better-selling models over the next three years. In Asian nations including China, where market share is less than 10%, Yamaha Motor will embark on a vigorous, companywide course of strategic operations, during the three-year period, with the priority on winning market share equivalent to that in advanced countries.

In particular, the company will strive to enhance the business foundation in China, India and ASEAN countries, taking measures to expand the procurement of Chinese-made parts, introducing compact 4-stroke models, and restructuring the production and sales systems in these markets.
The company forecasts sales and income increases - mainly derived from Asian operations - to result over the next three years. Specifically, about 94.5 billion yen in sales amount, a 22.0 billion yen gain in operating income, and 1.14 million additional unit sales are expected in the motorcycle business overall.
To attain its numerical targets for the entire motorcycle business, the company will reduce costs by 30% by pushing manufacturing innovation.

(Major business policies by area)
Japan:
The company will focus on creating a stable, profit-generating business structure by establishing a Japan headquarters, introducing scooters made in Taiwan, increasing sales of large motorcycles, and restructuring core sales channels, among other measures.

Europe and North America:
The company aims to maintain the strong reputation of its brand name, and to further improve profitability with measures such as expediting the introduction of large motorcycles, enhancing the competitiveness of local production systems, and promoting cost reduction through the System Supplier system.

ASEAN countries:
The company will strengthen its business foundation in the region and secure appropriate market share by establishing an Asia headquarters, as well as introducing compact 4-stroke models - including new commuter vehicles - and utilizing Chinese-made parts, among other measures.

China:
The company will reform the business foundation in China to enhance market competitiveness by introducing medium to low price models, establishing a new local company to develop and supply parts, and restructuring the production and sales systems, among other measures.

Manufacturing innovation:
The company will achieve cost reduction equivalent to about 50 billion yen in FY 2005 through measures focusing on globally optimized procurement, such as promoting the System Supplier system and utilizing Chinese-made parts.



2. Marine engine business, ATV* business and IM business*

The numerical targets for the marine engine business, ATV business and IM business in the medium-term management plan are as follows.


Sales and number of units sold

 

FY 2002

FY 2005

Marine engine business

99.5 billion yen(270,000 units)

118 billion yen(300,000 units)

ATV business

104.1 billion yen(210,000 units)

122 billion yen(230,000 units)

IM business

18.8 billion yen(1,000 units)

28 billion yen(1,760 units)

FY ending March 31


ATV*: all-terrain vehicle
IM business*: Manufacture and marketing of industrial robots

Note:

The figures for the fiscal year ended March 31, 2002 are based on forecast

 

business performance announced in November 2001.

 

(Marine engine business)
The marine engine business maintained its leading position in worldwide markets in the previous medium term, mainly by expanding the line-up of large, environmentally friendly 4-stroke and 2-stroke models, and reorganizing the production system at three global plants.

In the new medium term, the company aims to establish a high profit-generating business structure by, among other things, further strengthening the development of environmentally friendly models, expanding the sales of profitable large models in North America and other worldwide markets, substantially reducing costs through manufacturing innovation programs, and implementing the SCM project.
The sales target in the new medium-term management plan is 118 billion yen, an 18% increase over the performance achieved during the previous medium term.

(ATV business)

The ATV business made a significant contribution to the company's overall performance during the previous medium term, due to increased demand and favorable sales of new models in the United States.

In the new medium term, the company will strive to expand sales and profits in mature markets, focusing on enhancing the automatic model line-up and expanding the production capability of the Atlanta plant (to more than 100,0000 units) in the United States.
The sales target in the new medium-term management plan is 122 billion yen, a 17% increase over the results achieved during the previous medium term.

(IM business)

In FY 2001, the IM business attained record highs, both in sales and profits, due to a sales expansion for highly competitive surface mounters. However, year-on-year surface mounter sales decreased to half in FY 2002, reflecting the recession in information technology-related industries.

Amid this harsh business environment, the IM business has maintained a double-digit figure for the ratio of operating income to sales, thus consolidating the stable profit structure in this business sector. In the new medium-term management plan, the IM business aims to realize V-shape sales and profit growth, corresponding with the market recovery expected from FY 2003, while maintaining top share in the medium-speed surface mounter market.
The sales target in the new medium-term management plan is 28 billion yen, a 48% increase compared to results for the previous medium term.



3. Reforming low profitability businesses

(Boat business in Japan and PAS business*)
The schedule for recovery to profitability from operating losses in the boat business in Japan and PAS business on a consolidated basis is as follows.


Boat business in Japan:

 

3.5 billion yen operating loss forecast in FY 2002 -->

 
 

return to profitability in FY 2004

PAS business:

 

1.7 billion yen operating loss forecast in FY 2002 -->

 
 

return to profitability in FY 2004


FY ending March 31


PAS business*:

Manufacture and marketing of electro-hybrid bicycle and power assist

 

system units

 

(Boat business in Japan)
The company aims to return to the black on a consolidated basis in FY 2004 in this business sector by promoting profitable small boats with outboard motors, while taking measures including closing the Gamagori plant (following the closing of two plants in the previous medium term); making effective use of domestic and overseas outsourcing; and establishing a joint venture with Yanmar Diesel Engine Co., Ltd. (President, Takehito Yamaoka; Osaka, Japan)

(PAS business)

In the PAS business, the company will expand the business domain and reduce operating cost by transferring main operations to the company's electric parts manufacturing subsidiary, Moric Co., Ltd. In particular, the company will implement a significant cost reduction program integrating development and production capabilities, while promoting new businesses that use power assist units.
Thus, the company aims to return to profitability in this business sector in FY 2004.



4. Corporate strategy

(Reforming the group management system)
Based on consolidated management, Yamaha Motor aims to realize group-wide growth for the next half century by promoting the synergy of twin systems: a highly autonomous in-house company system and a regional headquarters system.

In the future, Yamaha Motor will transform itself into a more compact organization, with motorcycles at its core, and in direct control of the automobile engine and parts businesses. It will be characterized by corporate functions that integrate group companies and capabilities in new business promotion and R&D. By adopting an in-house company system for the marine engine business, patterned on the IM Company, which is responsible for industrial robot business, Yamaha Motor aims to realize an agile group management with increased autonomy for each business unit.
Yamaha Motor will also introduce a regional headquarters system, establishing headquarters in the United States, Europe, Japan and Asia. Beginning with the planned addition of the China headquarters, the company intends to develop a highly autonomous regional headquarters system covering major markets worldwide.

(Next generation growth strategy)

In its growth strategy, Yamaha Motor will principally work to make existing products more competitive, and to establish new businesses which can become an integral part of the company's profits.
To this end, the company will promote the development of high value-added technologies, and then develop them into profitable business models, with an eye toward forming alliances with other companies.
In core technology areas, Yamaha Motor has taken on the challenge of developing next-generation engines and components in an eco-conscious power source strategy, while in other areas, the company has been pioneering businesses that feature new technologies, including biotechnology and information technology.



Yamaha motor's new medium-term management plan

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