NISSAN REVIVAL PLAN

TOKYO October 18, 1999

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

CALENDAR OF EVENTS 1999

March 27: May 28: June 25: June 25: July 1: Sept 1: Oct 18: Alliance Signed with Renault Transaction Closes AGM Elects new Board of Directors Board Appoints CEO, COO, EVP, SVP New Executive Management Team 17 Expatriate Renault Managers Assigned to Nissan Announcement of Revival Plan

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

GLOBAL MARKET SHARE 1988/1998

7.0% 6.5%
(% market share)

6.4 6.2 5.8

6.6 6.2 6.1 5.8 5.7 5.5 5.2 4.9

6.0% 5.5% 5.0% 4.5% 4.0% 88

89

90

91

92

93

94

95

96

97

98

(calendar year Jan-Dec)

GLOBAL PRODUCTION 1988/1998

3.2 3.02 3.0
(million units)

3.06

3.08 2.96

615,000 vehicle decrease

2.74 2.68 2.73 2.74 2.75

2.8 2.6 2.4 2.2

2.81

2.46

88

89

90

91

92

93

94

95

96

97

98

(fiscal year April - Mar)

DOMESTIC MARKET SHARE 1988/1999

26% 23.6 24%
(% market share)

23.7

23.4

23.2 22.4 22.2 21.4 21.8 20.0 20.4 20.4 19.7

22% 20% 18% 16% 14% 12% 88 89 90 91 92 93 17.4 Total Market 18.6

17.7

17.8

17.2

16.7

16.1

16.3 15.5 15.4 14.7 13.3

Ex. M ini's

94

95

96

97

98

99*

(fiscal year april-march -- 99 first half results)

EARNINGS PERFORMANCE NET INCOME 1988 - 1999

3.0 2.0 1.0 0.0 % -1.0 -2.0 -3.0 -4.0 88 89 90 91 92 93 94 95 96 97 98 99e (fiscal year)
N E G A T I V E

NET INDEBTEDNESS EXCLUDING SALES FINANCE

3 2.5 2 1.5 1 0.5 0 89 90 91 92 93 94 95 96 97 98 (trillion yen)

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

NISSAN REVIVAL PLAN

REASONS EXPLAINING PAST PERFORMANCE
1) Lack of profit orientation 2) Not enough focus on customers 3) Lack of cross-functional, cross-border, intra-hierarchical lines work 4) Lack of a sense of urgency 5) No shared vision or common long-term plan

CLEAR OPPORTUNITIES FOR PROGRESS

NISSAN REVIVAL PLAN

NISSANS STRONG BASE FOR RECOVERY

International presence and global reach World leading manufacturing system Leading edge in selected technological fields Alliance with Renault Nissans people

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

NISSAN REVIVAL PLAN

Elaboration: 9 Cross Functional Teams Decided by Executive Committee on July 5

Business Development Marketing & Sales Purchasing SG & A Manufacturing Financial Management R & D Product Phasing Out Organization & Decision Making Process

NISSAN REVIVAL PLAN

Elaboration:

200 people directly involved from Japan, USA, Europe 2,000 ideas assessed 400 proposals submitted to Executive Committee Decisions made official by Board Meeting Oct 18th

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

NISSAN REVIVAL PLAN BUSINESS DEVELOPMENT

Target: Profitable Growth

Actions: New product opportunities

NISSAN REVIVAL PLAN BUSINESS DEVELOPMENT

Target: Profitable Growth

Actions: New product opportunities Associated businesses development Brand identity and brand power Lead time reductions

BUSINESS DEVELOPMENT
Reduce Product Lead Times

Car/powertrain development time Order to delivery time Foreign market Start of Sales

NISSAN REVIVAL PLAN BUSINESS DEVELOPMENT

Target: Profitable Growth

Actions: New product opportunities Associated businesses development Brand identity and brand power Lead time reductions Alliance with Renault

NISSAN REVIVAL PLAN PURCHASING STRATEGY

Target:
100 95 - 8%
(cosr baseline)

20% front-loaded cost reduction over 3 years

90 - 7% 85 80 75 FY99 FY00 FY01 FY02 - 6.5%

NISSAN REVIVAL PLAN PURCHASING STRATEGY

Target: Actions:
Centralize parts and material purchasing Include services in global purchasing strategy

20% front-loaded cost reduction over 3 years

Reduce the number of suppliers

NUMBER OF SUPPLIER GROUPS 1999/2002

50% Reduction in Number of Suppliers
(group suppliers)

1,145 600

1999

2002

NISSAN REVIVAL PLAN PURCHASING STRATEGY

Target: Actions:

20% front-loaded cost reduction over 3 years

Centralize parts and material purchasing Include services in global purchasing strategy Reduce the number of suppliers Partnerships with competitive global suppliers Challenge specifications and standards Alliance with Renault

NISSAN GLOBAL MANUFACTURING 1999/2002

Target: Achieve optimum manufacturing efficiency and cost effectiveness

Actions:

Reduce vehicle assembly and powertrain manufacturing capacity

MANUFACTURING CAPACITY IN JAPAN 1999/2002

Capacity at 3,660h/yr. Capacity at 4,400h/yr. (fully loaded 2-shifts)
100%
tion utiliza city Capa

3.0 2.0 1.0 0.0 1999 1999r

77%
50%

53%
2.00 2.40
30% reduction

1.65
0%

2002

MANUFACTURING CAPACITY IN JAPAN 1999/2002

Capacity at 3,660h/yr. Capacity at 4,400h/yr. (fully loaded 2-shifts)
100%
tion utiliza city Capa

3.0 2.0 1.0 0.0 1999 1999r

82%
50%

53%
2.00 2.40 1.65

0%

2002

NISSAN REVIVAL PLAN MANUFACTURING

Assembly Plant Closures: Murayama Plant Nissan Shatai Kyoto Plant Aichi Kikai Minato Plant Powertrain Closures: Kurihama Plant Kyushu Engine Shop Date: March 01 March 01 March 01 Date: March 02 March 02

NISSAN GLOBAL MANUFACTURING 1999/2002

Target: Achieve optimum manufacturing efficiency and cost effectiveness

Actions:
m

Reduce vehicle assembly and powertrain manufacturing capacity Rationalize and simplify industrial organization

Kyoto Aichi

Tochigi

Kyushu

Shonan

Murayama

Oppama

7 plants 24 platforms
ar S u ch/ n n Cu y / be Al m e Pr r a es B l ea Pr u e im b i er r d a/ C G ef 20 iro /I3 C 0 re Sk /M w y ax C line im ed /L a ric au C Glo rel ed ri a r C ic G w ed l ric oria s C eda im a/ n Pr Q4 es 5 id en t Si lvi Fa a i W rlad in y Av en gro ad ir Pr ai R r 'n es St ie Te sa ag rra /P ea re no sa /C g ar av Se e an ren /E a lg ra n Sa d fa C ri iv ilia D n at su n

NISSANS CAR ASSEMBLY SYSTEM 1999 (Japan)

NISSANS CAR ASSEMBLY SYSTEM 2002 (Japan)

7 6

Shonan Kyushu Tochigi

Oppama

im a C ed FF ric -L se da n C ed ric G lo ria FR -L Av en ir Pr ai rie

nd

a Sa n fa ri

na

ag

re

ra

ax

av

re

es

Se

lg

ar

Pr

/E

0/

/I3

iro

4 plants
* plus Kyoto producing only Civilian -- low volume

ef

15 platforms

Te

rra

no

at

su

NISSANS CAR ASSEMBLY SYSTEM 2004 (Japan)

7 6

Shonan Kyushu Tochigi

Oppama

-L

SM

dM

dS

-L

CV

RL

-L

FR

LL

4 plants
* plus Kyoto producing only Civilian -- low volume

12 platforms

Ol

Ol

CV

CV

FF

NISSAN GLOBAL MANUFACTURING 1999/2002

Target: Achieve optimum manufacturing efficiency and cost effectiveness Actions:
m m m

Reduce vehicle assembly and powertrain manufacturing capacity Rationalize and simplify industrial organization Reduce operating costs by globalizing :
m

logistics

best practices

benchmarking

Extended use of F.M.S. (Flexible Manufacturing System)

NISSAN REVIVAL PLAN S, G & A

Target: Actions:
m m m

Reduce S, G & A costs by 20%

Incentive reductions by brand power restoration Main-source global advertising Distribution structure streamlining

NISSAN REVIVAL PLAN S, G & A

Distribution Structure Streamlining
m

Revamp domestic dealer organization

m m m m

reducing dealer affiliates by 20% closing 10% of the retail outlets opening longer hours create Prefecture business centers (common back offices)

m m

Streamline regional structure in North America Restructure European dealer network by

m

leveraging the Alliance with Renault with common hubs and back offices

E-commerce alliance with Carpoint

NISSAN REVIVAL PLAN S, G & A

Target: Actions:
m m m m

Reduce S, G & A costs by 20%

Incentive reductions by brand power restoration Main-source global advertising Distribution structure streamlining Reduce fixed overhead costs

NISSAN REVIVAL PLAN FINANCIAL MANAGEMENT

Target: Actions:

Improve Financial Management Reduce Financial Costs

Centralize financial operations worldwide

develop global financial controls and risk management create global treasury, funding and cash management

No shareholdings are considered strategic Dispose of land, securities and non-core assets Reduce inventory to sales by 30% Alliance with Renault

NISSAN REVIVAL PLAN R&D

Target: Actions:

Optimize R & D Capacity

Move to globally integrated organization Promote joint cost reduction activities with suppliers

Nissan 333 program

Focus on core technologies Alliance with Renault

NISSAN REVIVAL PLAN ORGANIZATION

Target: Move from multi-regional to global organization Actions: Actions

Create a worldwide headquarter strategy

corporate planning management control brand management

Globally controlled functions R & D Finance

Manufacturing system

Purchasing

H.R.

NISSAN REVIVAL PLAN ORGANIZATION

Target: Move from a multi-regional to a global organization

Actions: Empowered Program Directors for cross-functionality and profit orientation

Performance oriented compensation: bonuses, stock option schemes implemented in 2000 Performance based career advancement

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

NISSAN REVIVAL PLAN

Nissan Group Employees
150

148

140

Previous consolidation method 131

Reduction of 14% (21,000)

130

120

Natural attrition Increase in partFuture consolidation time -- flex time Spin-offs method Early retirement

Forecast level 127

110 Apr 99 Apr 99 FY 02

(including temp & part time at start of FY99)

NISSAN REVIVAL PLAN IMPACT

HEADCOUNT REDUCTIONS: 21,000 people worldwide Breakdown 4000 in manufacturing 6500 in Japanese dealer network 6000 S, G & A 5000 spin-offs (500) R&D

NISSAN REVIVAL PLAN IMPACT

Financial Impact:

200 billion Yen provision* booked in FY 99

* Provisions cover write-down of assets and social costs

NISSAN REVIVAL PLAN 1 TRILLION YEN COST REDUCTION

Actual Costs
Misc. 3% 100 R&D 3% Manufacturing 11 % 75 SG&A 23%
2% Others 10% Manufacturing 28% SG&A

Planned Contributions

50 Purchasing 60% 25

60% Purchasing

0 FY 98

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

NISSAN REVIVAL PLAN Commitments

Profitability targets FY 00 FY 02 Return to profitability Operating profit > 4.5% of sales

NET INDEBTEDNESS EXCLUDING SALES FINANCE

3 (trillion yen) 2.5 2 1.5 1 0.5 0 89 90 91 92 93 94 95 96 97 98 99 02target

50 de % cr ea se

REVIVAL PLAN OUTLINE

Introduction
I) Diagnosis Past Performance: Facts/Figures Past Performance: Analysis + Opportunities Revival Plan Elaboration Key Contents Impact Commitments

II)

III)

Conclusion

NISSAN REVIVAL PLAN