President Message

Message from the management of Yamaha Motor

Aiming to become a unique company
that continues to achieve dynamic milestones
Year 2


Happy New Year everyone!

In 2016 we began our long-term vision of "Aiming to become a unique company that continues to achieve dynamic milestones" with the start of our new Medium-Term Management Plan. Although there was some disparity between plans and reality in some regions, due to factors in the global business environment such as market stagnation, currency exchange fluctuation and geopolitical risk, we could advance a variety of initiatives. Through all your efforts, we were able to achieve a certain level of results even in the face of environmental changes affecting our business. Thank you.

Although we can expect a similar business environment to continue in 2017, we will steadily advance each of our initiatives. As well as cementing our achievements in enhancing greater corporate strength, we can look at these three years as a stage to steadily lay the groundwork for even more dynamic milestones. Corporate strength refers to overall strength through such means as brand values, sales levels, earning power, financial power, product competitiveness, growth strategies, structure, and human resources, etc. As part of these efforts, while thinking carefully about what the unique style of Yamaha is, and continuing to pursue it, we consider it important to show originality.

As we bring in the new year, I would like to share with you my thoughts looking back on 2016, and our planned initiatives for 2017. The 2016 figures below are based on the revised budget.

Enhancing Brand Value

While maintaining our ideals and passion for our major corporate management objective - "Revs your Heart - creating exceptional value and experiences that enrich the lives of everyone worldwide who connect with Yamaha" we want to reach new levels of enhancement of the Yamaha brand value. To enhance brand value is to show the unique style of Yamaha and to have this value acknowledged by all stakeholders.

In 2016, we began activities to observe, investigate and analyze brand value in the market place and use this research to inform ongoing corporate activities. Through these investigations, we discovered that there is a problem in the brand's "governance (control)" as well as issues with "differentiation" when compared to competitors. In 2017, as we work towards solving these sorts of problems, we will also initiate ways to clearly express "Hatsu", "Etsu", "Shin", "Mi", "Ketsu" in order to define the unique style of Yamaha.

Hatsu:Challenging for Innovation
Etsu:Creating Excitement
Shin:Ensuring Confidence
Mi:Captivating Emotional Feelings
Ketsu:Connecting to Customers for Life

Increasing Sales

sales in developed markets remained flat, sales increased in Vietnam, the Philippines, Thailand, Taiwan, and India, and decreased in Indonesia, Brazil, and China. This resulted in consolidated net sales of 1,520 billion yen with forecasts of a foreign exchange effect of ▲148 billion yen and sales scale effect of 52.5 billion yen. With the anticipation that similar market conditions will continue in 2017, we aim to increase sales in the ASEAN area and India, and to have higher sales than the previous year in developed countries, Brazil, China, and elsewhere. I ask each business unit to structure their sales activities towards achieving this plan.

Enhancing Earning Power

We are expecting to secure stable profits for 2016, despite being affected by an uncertain business environment. We expect to see a consolidated operating income of 105 billion yen with foreign currency impact of ▲ 49.0 billion yen, a sales scale effect of + 18.0 billion yen, profitability improvement at + 35.0 billion yen, an expense variation of ▲ 4 billion yen, and growth strategy costs of ▲ 8 billion. Improvements in profitability, in particular, were promoted by product mix, cost reductions, and price optimization, etc. In 2017, on the premise of the US dollar = 100 yen, Euro = 110 yen, we will secure a stable profit moving forward.

The backbone of our management over these three years is to increase "earning power", secure stable profit, and increase growth investment, and stock dividends. Have we reached the position of being able to continuously increase our "earning power"? Through your efforts, we are making steady progress in improving profitability, however I believe we are still facing challenges in cost efficiency. I would like each business unit to take stock of their "earning power", and operate under the premise of an appreciating yen.

Enhancing Financial Power

We have announced both internally and externally that we are aiming for ROE=15% as an indicator of our corporate value. ROE is a function of net income X total asset turnover X reciprocal equity ratio. It is expected to be 12.6% in 2016, and in 2017 we will work on improving each indicator.

In 2016 we focused our work on improving cash flow. If we exclude the financial business, the amount of money earned (cash in) =152.6 billion yen, the amount of money used (cash out) =121.4 billion yen, with an expected difference of +31.2 billion yen. Until the previous year, the difference was in deficit, and debt continued to increase, but in 2016, it will be in surplus due to such factors as inventory and investment optimization. In 2017, we will work on making further improvements.

In the financial business in 2016 we are expecting a receivables balance of 215.9 billion yen (+3.7 billion yen from previous year) with a profit ratio of 4.2%. We will further increase this in 2017 to promote and support existing business.

Creating Comprehensive Product Competitiveness

High product competitiveness comes down to the integrated power of planning, development, procurement, manufacturing, and marketing. In this Medium-Term Management Plan, we plan to develop and introduce 280 models (previously 250 models) while expanding original development method such as platform ・ global model etc. We will have introduced 80 models in 2016, with another 110 models in 2017.

Product Marketability: Please try to realize our Monozukuri philosophy, based on the five ideals of "Hatsu", "Etsu, Shin", "Mi", "Ketsu". We are looking forward to the continued creation of unique and innovative products bearing the Yamaha brand from each business.

Cost: The Medium-Term Management Plan aims to reduce the total cost of procurement, manufacturing, and logistics by 60 billion yen. We expect 18.3 billion yen in reductions in 2016, and 12.8 billion yen in 2017. I ask that we further improve upon the Yamaha style cost reduction methods including PFCD, theoretical-value-based production and theoretical logistics etc. that have been worked on up until now. I also ask that we work on making a highly efficient business in each business unit by creating standard forms of production, logistics, inventory, and sales through "theoretical value".

Quality: The Medium-Term Management Plan is aiming for a customer return cost rate of 0.5%. This is expected to be 0.86% in 2016, and has been increasing significantly from 0.5% in 2014. This is the result of ongoing product recalls in the market that inconvenienced 1.45 million customers. Quality is brand value that customers feel directly. In 2017, through our 「WATASHI GA YAMAHA.」initiative, I want you to work on knowing the market environment and the actual state of product use, carry out appropriate development, evaluation, and production preparation, and improve our capacity to sense change and abnormality in our everyday work.

Marketing: A means for strengthening ties with customers through clearly conveying the "Hatsu", "Etsu, Shin", "Mi", "Ketsu" ideals of our products. We are standardizing the seven processes that customers experience in their contact with Yamaha. These are: becoming aware, having an interest, searching for information, visiting a store or event, purchasing, experiencing, and sharing with other customers. I would like you to repeatedly devise ways to introduce new product in 2017 by using each process.
By using case studies, we can draw on our past experience while researching new methods such as digital technology, to build cases that are even more consistent with the unique style of Yamaha.

Promoting Growth Strategies

In this Medium-Term Management Plan, we are promoting systematic activities by framing a new growth strategy with 60 billion yen for investment and 70 billion yen for research and development. 2016 was "a year of sowing the seeds", through exploring new business opportunities, developing fundamental technologies, and managing new business development.

In exploring new business opportunities, we are promoting mobility and agri-related market and business research by relevant departments and internal tasks, venture investment activities in the US, and the examination of specific M&A and alliance deals. In developing foundational technology, we are promoting the research and development of robotics, Hu - MAX, automated travel, ultra-low fuel consumption engines, batteries and more. In 2017 we will work towards the development of new business.

Creating Organizations/Human Resources

In 2016, we started various programs with the aim of creating organizations and human resources full of thoughts and passion that embody the Yamaha brand, and to create a climate where individuals respect each other.

Activating Organizations: "Coaching" is a method of increasing the autonomy of departmental members by establishing a habit of high-quality communication between management and staff. It is aimed to improve the consensus, and disseminating policy within divisions by carefully communicating management intentions, and allowing the opinions of subordinates to be conveyed freely. We introduced this method in seven divisions in 2016. "Be-Up" is a method of increasing teamwork and motivation, as well as raising the innovative power of the workplace. The goal is for members to talk about customers, and hone their sense of responsibility, along with challenging their thought process with regards to thinking about new ideas for Monozukuri and story creation. We introduced this method to eight workplaces in 2016. In 2017, we will expand two programs.

Human Resource Development: We evaluated the work of GGS 437 positions, which are the core of global management, and clarified the roles and responsibilities of those positions while promoting the creation of a successor training plan. The cumulative number of GEP/REP positions was 132, along with 72 new graduate recruitments globally. In addition, we completed the position specific training program at headquarters.

Promotion of Roles for Women: We are currently still only showing low numbers in this area with 7 GGS positions, 22 key staff, and 5 overseas representatives (including trainees). We will work on creating a more comfortable environment where women can work more effectively around the world.

Harmonizing with Stakeholders, Communities, Society, and the Global Environment

We want to be a company that grows while fulfilling responsibilities in harmony with customers, shareholders/investors, employees, business partners, stakeholders, local communities, society, and the global environment. In 2016, we worked on the creation and publication of a corporate governance policy, and the full-scale operation of Yamaha Motor MIRAI, etc. 2017 will be a year of fulfilling harmony and responsibility while creating a means to grow, and working towards more constructive dialogue with stakeholders.

With these thoughts, I have tried to take stock of the various aspects of "corporate strength". And I hope that within that "space", everyone makes their voice heard, communicates, considers all possibilities, and that they plan and implement ideas, challenges, and carry out their jobs to produce greater results. Let's make this year one of significant growth for all of us as individuals and as an organization, as well as for the Yamaha brand.




Hiroyuki Yanagi

Notes
ROE (Return On Equity):Net return on equity
PFCD (Platform Cost down):Reducing costs for platform development
GGS (Global Grading System):Evaluation of core positions globally
GEP (Global Executive Program):Global management development program
REP (Regional Executive Program):Management development program conducted in the six global regions