General Machinery & Special Vehicle Business Operation June 11, 2010 Akira Hishikawa Senior Vice President, General Manager, General Machinery & Special Vehicle Headquarters 1
Contents 1. General Machinery & Special Vehicle (GM & SV) Headquarters: Business Outline 2. Business Trends and Plan from FY2010 3. Reform Processes and Growth Processes 4. Strengthening Business Operating Structure of Individual Products 5. Accelerating Offshoring 6. Moving Production Operations to Emerging Markets 7. Growth Processes for Individual Products 8. Bolster Environmentally Friendly Business. 9. Power Train System Business 10. Summary 2
1. General Machinery & Special Vehicle (GM & SV) Headquarters: Business Outline The General Machinery & Special Vehicle (GM &SV) Headquarters strives to make a contribution to social infrastructure development and the environment and energy sectors through its wide range of products, from turbochargers and engines to industrial vehicles and special vehicles. Main Products Breakdown of sales for FY2009 (consolidated) Turbochargers Forklift Trucks (Material Handling Equipment) Variable capacity turbochargers for diesel vehicles Engines & Equipment Variable capacity turbochargers for gasoline vehicles FD25 forklift truck ESR15N electric reach truck Special vehicles Special Vehicles 10% Others 13% Forklift Trucks (Material Handling Equipment) 32% Net Sales 286.3 yen Turbochargers 16% Engines 29% S4S Small-sized diesel engine S6RG marine diesel engine M1203-G diesel generator set Type 90 tank 3
2. Business Trends and Plan from FY2010 1. Business environment changed dramatically from second half of FY2008 due to impact of global recession. Financial results for FY2009 reduced, with sales of 286.3 yen and an operating loss of 23.2 yen. 2. Orders and sales began upward trend in 2010 and forecast for current fiscal year is sales of 310 yen and an operating loss of 11 yen. 3. Plan to restore growth scenario in short term through establishment of agile operating structure capable of swiftly adapting to changes in business environment and through implementation of forward-looking growth strategies. Sales of 450 yen and operating income of 13 yen planned in FY2012. Net Sales (consolidated) Actual Forecast 600.0 500.0 400.0 300.0 (Billion yen) 308.3 285.2 363.0 393.2 431.1 474.4 Others Special Vehicles Forklift Trucks 432.7 286.3 Restoration of growth scenario 520.0 (2010 business plan figure) 450.0 (2010 business plan figure) 310.0 200.0 100.0 Engines & Equipment 0.0 Turbochargers 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2014 Exchange rate Dollar 122/$ Euro 120/ 113/$ 132/ 107/$ 135/ 113/$ 138/ 117/$ 149/ 115/$ 161/ 102/$ 149/ 95/$ 129/ 90/$ 130/ 90/$ 130/ 90/$ 130/ Operating income (Billion yen) 20.8-1.3-23.2-11.0 13.0 35.0 4
3. Reform Processes and Growth Processes Order environments of individual products Turbochargers Engines & Equipment Forklift Trucks Reform processes Temporary halt in production adjustments by auto manufacturers. Demand picking up since beginning of year. Orders comparable with peak (2007) expected in 2010. Orders from emerging markets for small-sized engines installed on construction machinery, etc. increasing, as inventory adjustments wind down. Slump in demand from key advanced markets of Japan, United States and. Efforts being made to speed up expansion into emerging markets. Strengthen business operating structure for individual products. Speed up offshoring. Growth processes Adapt to market polarization and diversification of demand. Expand environmental solutions business. - Increase flexibility of global operating structure to compete with specialist manufacturers. - Introduce ROIC performance indicator for individual products. - Improve cost-competitiveness through local production and procurement in low cost countries. - Increase overseas procurement to take advantage of strong yen. - Launch environmentally friendly models for advanced markets (high end models). - Launch popular models for emerging markets (mid-range models). - Promote development of models compliant with emission restrictions. - Start up power train system business. 5
Reform Processes 4. Strengthening Business Operating Structure of Individual Products 1. Coordinate business operations for individual products with group companies and implement optimum global production and procurement. Sales Technology Materials Turbochargers Engines & Equipment Forklift Trucks Special Vehicles PTS *1 2. Set up Power Train System Division and launch hybrid power system and lithium-ion battery businesses. Quality Assurance Production Control Manufacturing 3. Speed up improvement in financial position by introducing ROIC performance indicator for individual products in addition to previous sales and profits management indicators. *1 Abbreviation of power train system. Group companies *2 MEE MENA MTA SMTC MEE MENA MHIES -A Engine sales company MCFA MCFE MCFS MFD Rocla MHI Special Vehicle *2 MEE: MHI Equipment, MENA: Mitsubishi Engine North America, MTA: Mitsubishi Turbocharger SMTC: Shanghai MHI Turbocharger Co., Ltd., MHIES-A: MHI Engine System, Engine sales company: MHI Engine Systems Co., Ltd. MHI Special Vehicle: MHI Special Vehicle Services, MCFA: Mitsubishi Caterpillar Forklift America, MCFE: Mitsubishi Caterpillar Forklift, MCFS: Mitsubishi Caterpillar Forklift MFD: Mitsubishi Heavy Industries Forklift (Dalian) Co., Ltd., Nichiyu MHI: Nichiyu MHI Forklift Nichiyu/ MHI FL 6
Reform Processes 5. Accelerating Offshoring Global GM&SV Operations MCFE (Mitsubishi Caterpillar Forklift ) MEE (MHI Equipment ) MEA (MHI Equipment Alsace) Rocla North America MCFA (Mitsubishi Caterpillar Forklift America) MENA (Mitsubishi Engine North America) China China MFD (Mitsubishi Heavy Industries Forklift (Dalian) Co., Ltd.) Went into production October 2009. MCFC (Mitsubishi Caterpillar Forklift (Shanghai) Co., Ltd.) SMTC (Shanghai MHI Turbocharger Co., Ltd.) MHIES-H (MHI Engine System Hong Kong) MHIES-SZ (MHI Engine System (Shen Zhen) Co., Ltd. ) India MVDE (MHI-VST Diesel Engines) Southeast & Middle East MCFS (Mitsubishi Caterpillar Forklift ) MHIES-A (MHI Engine System ) MHIES-ME (MHI Engine System Middle East) Thailand MTA (Mitsubishi Turbocharger ) Went into production July 2009. MPM (MHI-Pornchai Machinery) Central & South America MSA (MHI Sul Americana Distribuidora de Motores) MHIES-V (MHI Engine System Vietnam) MHIES-P (MHI Engine System Philippines) MHIES-I (MHI Engine System Indonesia) 7
Reform Processes 6. Moving Production Operations to Emerging Markets Ensure cost-competitiveness and guard against risk of currency fluctuation by promoting local procurement and local production. MTA (Mitsubishi Turbocharger ) MFD (Mitsubishi Heavy Industries Forklift (Dalian) Co., Ltd.) Established: January 2008 Capacity: 500,000 turbochargers per year/ 3 million cartridges per year Location: Chonburi Province, Bangkok, Thailand No. of employees: 700 Main business: Manufacture and sale of turbochargers Established: November 2008 Capacity: 7,000 units per year Location: Dalian, China No. of employees: 300 Main business: Manufacture and sale of forklift trucks 30% Local procurement rate 90% 30% Local procurement rate 80% Plan to increase local procurement rate from current level of around 30 ~ 50% to 90% in future. Plan to increase local procurement rate from current level of around 30% to 80% in future. 8
7. Growth Processes for Individual Products (1) Turbochargers Market conditions Advanced markets Emerging markets Key markets North America Japan China Market needs Diesel turbochargers Gasoline turbochargers Diesel turbochargers Gasoline turbochargers 800 600 400 200 Sales volume/share trend (10,000 units) MHI share 16% 17% 17% 17% 20% 20% 20% 25% North America 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sales by region MEE KYPC 1.2 North America 0.5 5.8 MENA Sales bases/production bases Partners FY2009 MHI sales (Actual) FY2007 MHI sales (Actual) FY2014 MHI sales (Plan) SMTC MTA 49.6 33.8 70.5 21.6 12.1 29.9 9
7. Growth Processes for Individual Products (2) Large and Midsize Engines Market conditions Advanced markets Emerging markets Key markets North America Japan China Central & South America Middle East Africa Marine Models compliant with emissions regulations Popular models Market needs Power generation Stand-By Continuous 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 (Units) 0 Sales volume/share trend 6% 7% 7% 7% 6% MHI share 9% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 9% 10% Middle East & Africa Central & South America North America 12.8 Sales by region 11.8 13.0 MEE MEA Middle East & Africa 42.2 40.5 MHIES-ME 50.9 MHIES-A North America 6.2 3.4 6.1 MENA Central & South America Sales bases/production bases FY2007 MHI sales (Actual) FY2009 MHI sales (Actual) FY2014 MHI sales (Plan) MSA 4.5 5.0 15.2 0.4 0.4 5.5 10
7. Growth Processes for Individual Products (3) Forklift Trucks Market conditions Key markets Advanced markets Emerging markets North America Japan China Central & South America Middle East Africa Internal combustion CB forklift trucks Models compliant with emissions regulations Popular models Market needs Electric CB forklift trucks Warehouse equipment 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 (Units) 0 Sales volume/share trend 7% 7% 7% 7% MHI share 6% 7% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 7% 10% Middle East & Africa Central & South America North America Sales by region Rocla MCFE North America Sales bases/production bases Partner FY2007 MHI sales (Actual) FY2009 MHI sales (Actual) FY2014 MHI sales (Plan) 50.8 25.8 49.9 30.6 Middle East & Africa 18.2 40.2 MFD MCFC MCFS Nichiyu 81.7 38.0 65.6 MCFA Central & South America 10.5 0.8 12.8 14.0 3.7 17.1 11
Growth Processes 8. Bolster Environmentally Friendly Business. Promote development of small-sized engines compliant with emission regulations. Increase sales of hybrid forklift trucks. Develop models compliant with stricter regulations in advanced markets and elsewhere. Launched world s first hybrid forklift truck with on-board lithium ion battery in October 2009. [Schedule] Fuel efficient 39% greater fuel efficiency than previous models 19~37kW 37~75kW 75~130kW 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 Tier1 Tier1 Tier2 Tier2 Tier1 Tier2 Interim Tier4 Tier4 Interim Tier4 Tier4 Tier3 Interim Tier4 Tier3 Interim Tier4 Tier4 Tier4 19~56kW 56~130kW CO 2 emissions reduction Noise reduction More than 14.5 tons of CO 2 emissions eliminated per year compared with previous models. Noise reduction from downsized engine Step up proactive marketing activities to increase sales amid intensifying trend towards greater fuel efficiency and CO 2 emission trading, especially in advanced countries. Tier 4-compliant engine GRENDiA EX Hybrid hybrid forklift truck 12
Growth Processes 9. Power Train System Business (1) Manufacture and sell fully assembled power train systems including engine, electric motor, transmission, controller and lithium-ion battery. Combine power train system manufactured completely in-house and industrial vehicle technology accumulated over many years to offer customers optimum solutions. Power system (engine/motor) Power Train System Transmission Controller Industrial vehicle technology Lithium-ion battery 13
運行時間 (h) 走行距離 (km) Growth Processes 9. Power Train System Business (2) Proposed solution Tried and tested industrial vehicle technology Business size 18.0 9.0 2010 2012 Plan to double business size by 2012. Propose optimum power system significantly reduces CO 2 emissions and running costs. 5 月運行時間 走行距離 14 50 12 45 40 10 35 8 30 25 6 20 4 15 2 10 5 0 5-7( 金 ) 5-8( 土 ) 5-10( 月 ) 5-11( 火 ) 5-12( 水 ) 5-14( 金 ) 5-15( 土 ) 5-17( 月 ) 5-18( 火 ) 5-19( 水 ) 5-20( 木 ) 5-21( 金 ) 5-22( 土 ) 5-23( 日 ) 5-24( 月 ) 5-25( 火 ) 5-26( 水 ) 5-27( 木 ) 5-28( 金 ) 5-29( 土 ) 5-31( 月 ) 0 System control optimizes vehicle operation Industrial lithium-ion battery 14
10. Summary Reform Processes Growth Processes Strengthen business operating structure for individual products. Accelerate offshoring. Adapt to market polarization and diversification of demand. Bolster environmentally friendly business. Restore growth scenario in short-term by implementing reform processes and growth processes. 15