January 13, 2000 | NewsRelease | Subaru Corporation

Fuji Heavy Industries Ltd.
-New TQF21-

Strategic Five-year Medium-term Business Plan

Fuji Heavy Industries Ltd. (FHI), announced a strategic five-year medium-term business plan-the New TQF 21 (Total Quality Fuji 21). The plan covers the current fiscal year that started April 1, 2000 to the fiscal 2005 ending March 31, 2005. The New TQF21's objectives encompass all the aspects of the company operations, including basic management policy, product strategies, alliances and management indices.

The New TQF21 maintains the mission statement of "to grow to a distinctive and attractive corporation in the 21st century" of the previous medium-term plan. It outlines measures to accomplish FHI's objective of becoming a "global player with premium-brand" in accordance with the alliance with GM and Suzuki.

Our specific goals are described in our "Challenge 30" initiative, a crucial component of the New TQF21 plan. We believe the key to achieving these goals is the early realization of synergies with GM. Through this alliance, we will benefit from exchange of products, expansion of sales network, joint development of a new concept sports utility wagon (SUW), increased production capacity and worldwide purchasing power.

- Outline of FHI Strategic Five-year Medium-term Business Plan -

Key Strategies

"Challenge 30,"an integral part of New TQF 21, designates boosting sales, improving quality, cutting cost and raising productivity, all by 30% over a five-year period. The figures below illustrate goals for fiscal 2005, in comparison with fiscal 1999 results.

(Billion yen)

(Thousand units)

Management Targets

Sales Targets

Net sales

Operating income

Ordinary income

Net income

Interest-bearing debt

�1,788	(+34.4%)
123	(+34.6%)
118	(+35.6%)
60	(+91.7%)

350	(-22.0%)

Domestic Minicars *1

Domestic Small cars*2

Domestic Total

184	(+ 3.4%)
164	(+37.0%)
348	(+16.9%)

North America

Europe

Other regions

Overseas Total

294	(+62.6%)
87	(+51.9%)
71	(+67.0%)
452	(+61.1%)

Global Total

800

(+38.3%)

*1. Minicars: Engine displacement of 660cc or below
*2. Small cars: Engine displacement exceeding 660cc

Management target indices

Return on equity (ROE) of 10%, and return on net assets (RONA) of 5%.

Specific measures for achieving goals

1. Automobile sales expansion

(1)

Japan

Strengthen four mainstay models (full model changes, new horizontally opposed six-cylinder engine, etc.

Product exchange with GM

Strengthen sales network: improve quality of sales and services, improve CS, raise efficiency of administrative work and management of distributorship division

Reconstruct communications networks to dealers and utilize information technology (IT)

(2)

North America

Strengthen three mainstay models (full model changes, horizontally opposed six-cylinder engine, introduction of turbo models, etc.)

Launch a 4-door pick-up based on Legacy (Starting 2002)

Product exchange with GM

Subaru dealer development supported by GM

Utilization of GM expertise, systems and infrastructures (automobile loans: GMAC, internet: e-GM)

(3)

Europe

Product exchange with GM

Clustering of distributors and rationalization of total logistics for European Union

(4)

Other regions

Develop dealer network directly managed by a distributor in Oceania (build a 30,000 unit p.a. sales network)

Product exchange with GM and Subaru dealer development supported by GM in Asia, Middle East, and South America

2. Automobile product development

Jointly develop a new-concept SUW with GM (launch by fiscal 2005 or 2006)

Develop a compact car for Europe and a minicar in cooperation with GM and Suzuki

Strengthen engineering development capabilities (increase engineers by 200; more computer aided development process)

3. Increase automobile production capacity
Establish capability of 800,000 units (facility and equipment investment of �60 billion)

Improve supply in North America by boosting Subaru-Isuzu Automotive Inc.'s output and implement local engine production

Boost domestic production capacity at Gunma plants

Improve production capacity of CVT transmissions to expand component business

4. Reduce costs (Promotion of SCI-TC30)

Decrease parts cost by utilizing GM global purchasing process and minicar manufacturing cost by sharing parts with Suzuki

Curtail expense by centralizing purchasing function

5. Strengthen financial position

Reduce interest-bearing debt (�449 billion as of March 31, 2001 from �350 billion as of March 31, 2005)

Write off pension and severance liabilities (�44 billion on a consolidated basis as of April 2000) over the next five years

One-time write off of losses at domestic distributorships (�19.5 billion as of March 31, 2000)

6. Development at other core businesses

Aerospace Division: Expand sales in the aerospace segment to �100 billion by increasing international commercial business and aim for lean management

Industrial Products Division: Aim to become the world's third-largest industrial engine manufacturer with sales of �50 billion and 1.5 million units annually

Transportation & Ecology Systems Division: Focus on ecology systems business, a high-growth area, and prioritize profit in railway car business

Bus Manufacturing and House Prefabricating Division: Develop unit housing business and improve feasibility of bus business

- End -