Friday, November 17, 2000

Announces Financial Results 2000

Mazda Motor Corporation announced today its consolidated and non-consolidated financial results for the first half of fiscal 2000 (April 1, 2000 through September 30, 2000). Also announced was the company's mid-term plan to make Mazda stronger and better positioned to compete next year and in the years beyond.

Mazda Announces Financial Results
Mazda's consolidated operating loss was 4.7 billion yen (US$44 million*, 49 million euro**), about 50% better than projected at the year-end financial results announcement in May. Despite the yen being stronger than expected and lower sales volume, the consolidated net loss of mid-year fiscal 2000 was 9.5 billion yen (US$88 million, 100 million euro), 2.5 billion yen (US$23 million, 26 million euro) better than the figure announced in May 2000.

Consolidated Mazda and Mazda Anfini domestic dealers recorded significantly higher ordinary income compared to the first six months of the previous fiscal year. Forty-two of the 58 consolidated dealers were profitable.

Consolidated cash flow was a positive 15.9 billion yen (US$147 million, 168 million euro), improving 12.9 billion yen (US$119 million, 136 million euro) from the original plan.

Interest-bearing debt was reduced by 15.6 billion yen (US$144 million, 164 million euro) compared to the last fiscal year end. It improved by 14.1 billion yen (US$131 million, 148 million euro) compared to the figure announced last May.

Market Overview
Automotive industry sales in Japan, including micro-mini vehicles, totaled 2.82 million units, up 1.4% compared with the same period a year ago. The growth reflected in part the impact of new products introduced by Japan's carmakers. Vehicle exports, at 2.26 million units, increased by 6.8%, as North American and Asian markets continued to be robust.

Mazda's domestic wholesale volume for the first half of the current fiscal year reached 166,638 units, an increase of 2.0% compared with the same period of the previous year, due to the continued robust sales of the minivan "MPV." Our share of registered vehicles in the domestic market was 6.8%, down 0.2% points from a year ago. Our total share, including micro-mini vehicles, was 5.4%, also down 0.2 points.

Export wholesales totaled 246,819 units, down 3.1% from the same period of the previous fiscal term. A slowdown in exports in North America and Europe was offset partially by higher exports to the Middle East, Africa, Asia and Oceania. Combined domestic and export sales totaled 413,457 units, down 0.9% compared with the same period of the previous term.

Consolidated Financial Results
Mazda's consolidated sales revenue was 1,006.1 billion yen (US$9.3 billion, 10.6 billion euro), down 7.5 % from the same period of the previous fiscal term. Net loss was 9.5 billion yen (US$88 million, 100 million euro), down 22.7 billion yen (US$210 million, 239 million euro) from the same period of the previous fiscal term. This decline was more than explained by a stronger yen, lower volumes, and higher sales of assets and investment securities at the parent company during the first half of last year. Continued progress on cost reductions and improved subsidiary performance in Japan were partial offsets.

Cash flow
Consolidated cash flow reached 15.9 billion yen (US$147 million, 167 million euro), reflecting management's active focus on cash flow. As a result, consolidated net debt was reduced to 521.4 billion yen (US$4.8 billion, 5.5 billion euro), down 2.9% compared with the end of the previous fiscal term.

Non-consolidated financial results
Non-consolidated sales revenue totaled 662.8 billion yen (US$6.1 billion, 7 billion euro), down 9.8 % from the same period of the previous fiscal term. Net loss was 12.7 billion yen (US$118 million, 134 million euro), down 16.5 billion yen (US$153 million, 174 million euro) from the same period to the prior year, reflecting lower volume and a stronger yen, especially against the euro.

Cash flow was 13.6 billion yen (US$126 million, 143 million euro).

Mazda has decided to eliminate payment of interim dividends due to our deteriorated financial performance.

Financial Projection for the full fiscal year 2000 (April 1, 2000 to March 31, 2001)
Economic conditions globally are generally positive, although the Japanese economy remains sluggish. The yen continues to be stronger than we believe economic fundamentals dictate, particularly versus the euro and other European currencies. The competitive challenges we face are severe.

To position the company for future success, a mid-term plan has been developed that includes major streamlining actions in the current fiscal year. Those actions, combined with a stronger yen and lower volumes than projected in May 2000, are expected to impact our earnings unfavorably in FY2000, despite continued progress on subsidiary and domestic dealer reform, and improved operating efficiencies and cost reductions company-wide.

Under these conditions, our projection of financial results for the full FY2000 is as follows:

We are projecting a consolidated operating loss of 16 billion yen (US$148 million, 167 million euro). Net loss is projected at 49.5 billion yen (US$458 million, 521 million euro). Cash flow will remain positive at 30 billion yen (US$278 million, 316 million euro).

These projections reflect a yen exchange rate versus the U.S. dollar of 107.6 yen and 96.6 yen versus the euro. Given our projected net loss for the full year, we do not plan to declare a final dividend for the current full fiscal year.

Mid-Term Plan
Mazda has been undergoing reform actions for the past four-and-a-half years. We have made tremendous progress by developing brand and product strategies, reforming our domestic dealers and subsidiaries, achieving substantial cost reductions, reducing net debt materially and other related actions. But now we face a new set of challenges that require further actions.

To that end, a comprehensive mid-term plan has been developed to address the issues and challenges facing Mazda.

-Specific Measures -
A) Center of Excellence Designation, Production in Europe and Synergy with Ford
To enhance competitive strength and to provide a hedge against swings in currency exchange rates, Mazda has determined that a European production base is essential for our long-term profitability. We have agreed with Ford Motor Company to produce our next generation B Car (Mazda Demio) at a Ford of Europe facility. European production of the B Car is scheduled to begin in fiscal 2002. We are also planning to produce the next generation C Car 5-door hatchback (Mazda 323/Protege) in Europe in fiscal 2003. We also will continue to produce our next-generation sedan for Europe in Japan. Next generation B and C cars for all other markets will continue at Mazda facilities in Japan. Production volume of Mazda cars in Europe will be approximately 100,000 units a year. The production site will be announced at a later date.

Mazda has been designated the global center of excellence for engineering large I4 engines and for the development of front-wheel-drive mid-sized vehicles for the Ford group. In regard to our relationship with Ford, we will continue to strengthen our overall partnership.

B) U2 Plant Closure in Hiroshima
To rationalize plant operations and increase overall operational efficiency, Mazda has decided to close our U2 (Ujina Plant Number 2) assembly plant in Hiroshima by the end of September 2001. This action will reduce our straight-time capacity by 266,000 units, or 25%. With this action, Mazda's vehicle assembly operational ratio will increase to over 100% during the plan period. The U2 plant currently produces the Demio and the Familia/323/Protege.

We will shift production of these models from U2 to U1 (Ujina Plant Number 1) or H1 (Hofu Plant Number 1), and all affected employees will be relocated to other facilities. The impact of this plant closure will be recognized as an extraordinary loss of 3 billion yen (US$28 million, 32 million euro) in the full fiscal year 2000 ending March 2001.

C) Early Retirement Special Program
We are also taking actions to align our cost structure with the competitive realities of our industry. With the expanded use of information technologies, efficiency improvements and the competitive environment, we face an excess of indirect employees.

Although this issue has been one of our toughest to address, we must reduce and optimize our workforce level.

Mazda has developed a plan to offer 1,800 early retirements during February next year.
Eligible employees are those 40 years or older with more than 10 years experience in indirect positions and certain indirect employees who are 30 years or older with more than five years of experience. The retirements will be effective March 30, 2001.

Employees who accept will be offered outplacement assistance. After our public announcement of this program, Mazda will formally begin discussions with our union to obtain their agreement to the plan. The impact of this early retirement special program will be about 24 billion yen (US$222 million, 252 million euro), which we plan to recognize as an extraordinary loss in the full fiscal year 2000.

"Mazda has not taken this type of measure before, but our company cannot be viable with our current cost structure," said Mark Fields, president of Mazda Motor Corporation. "This is not an easy decision, but it is necessary to ensure the future success of the company.

"The rationalization actions will have an adverse impact on profits in the present fiscal year, but they will leave the company better positioned to compete next year and the years beyond," he added.

"There have been concerns expressed that, as we pursue European production, we will 'hollow out' domestic production or substantially weaken our local supply base. We do not expect this to happen. In the future, we are projecting reasonable growth, resulting in higher production volumes at our facilities in Japan. This reflects higher domestic industry volume in Japan as the expansion continues, introduction of 16 new models or major changes, 11 in North America, and 9 in Europe over the next four years. This includes four new platforms and derivative vehicle lines that will be totally new to the market.

"With our mid-term business plan, we are targeting to achieve consolidated breakeven in the next fiscal year, with a 3% return on sales and 6% return on assets in FY2004. This is supported by cumulative cost reductions of at least 15%, excluding new models, through FY2004.

"I believe we're now armed with a clear picture of where we are, a clear vision of where we want to go and a clear plan on how we are going to get there. It is now up to us to master the execution and deliver through on our commitments."

* Dollar equivalents compiled at 108 yen to the dollar (Exchange rate prevailing on September 30, 2000).
** Euro equivalents compiled at 95.08 yen to the euro (Exchange rate prevailing on September 30, 2000).

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