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| Q.1 |
Mitsubishi Corporation is said to be creating a new paradigm as a sogo shosha (a general trading company). In what ways is the company changing? |
| A.1 |
In the past, the primary role of general trading companies was as a "global trader." Essentially, general trading companies were an intermediary for transactions between their Japanese and overseas customers, earning commissions for their involvement in facilitating imports and exports. In conjunction with intermediary services, these companies extended financing and made investments. But these activities were conducted solely for the purpose of increasing the volume of business. The situation is different today. General trading companies still base operations on this intermediary role, but are now playing a leading role in business activities. Mitsubishi Corporation is building value chains that extend from upstream to downstream operations, in the process providing sophisticated financing schemes and making investments with high risk profiles. One example of these financial schemes is the securitization and sale of real estate like shopping centers. In addition, we are making increasing use of strategic investments, in which we actively participate in the management of portfolio companies through the provision of large amounts of capital and human resources. The products and services handled by Mitsubishi Corporation are constantly changing. At present, our core businesses include the development of metal resources and energy, the import and distribution of foodstuffs and food products, and automobile sales business (see A02). We are targeting new business fields too, like medical and nursing care and environmental services, to establish a presence in more business domains.
For more information on this subject, please click here. |
| Q.2 |
What are the main businesses supporting Mitsubishi Corporation's earnings? |
| A.2 |
We have seven business groups, but in the fiscal year ended March 2007, four of those groups contributed about 90% of our consolidated net income: the Energy Business Group, the Metals Group, the Machinery Group and the Living Essentials Group. Major components of these groups are LNG, coking coal, automobiles, and foodstuffs and food products, respectively. In the LNG market, imports by Japan's electric and gas utilities account for about half of global trading volume. And Mitsubishi Corporation is involved in about half of Japan's LNG imports. Currently, we have investments in LNG production and sales operations in four countries: Brunei, Australia, Malaysia and Oman. Furthermore, we are developing new LNG businesses in Indonesia and on the Russian island of Sakhalin. Coking coal ranks alongside iron ore as a vital raw material for making steel. We have worked with BHP Billiton Limited, a major natural resources firm, to develop a source of high-grade coking coal in Australia that is used to produce high-quality steel. This coking coal is sold to steelmakers around the world. In the automobile market, we have a diverse global business portfolio. Our activities include the manufacture of auto parts, automobile sales, sales financing and a variety of peripheral activities such as system development. Regarding foodstuffs and food products, our activities extend from the import of ingredients to food processing, distribution and retailing. For decades, we have efficiently supplied food products that meet customer needs in the massive Japanese consumer market.
For more information on this subject, please click here, as well as our annual report. |
| Q.3 |
What are the primary objectives of INNOVATION 2007? |
| A.3 |
INNOVATION 2007 was launched in July 2004 as a four-year medium-term management plan. Please refer to the section of the 2004 annual report concerning this plan for more information. INNOVATION 2007 includes an investment strategy, a plan for refining employee skills and many other elements. The objective was to build an operating framework capable of raising consolidated net income to 180 billion yen in the plan's last year, and then consistently generate net income of more than 200 billion yen thereafter. Subsequently, though, our consolidated net income has far exceeded this earnings target because of a substantial increase in market prices in the natural resources and energy field, a business sector that has been a strategic priority for some time. We therefore announced updates and revisions to the plan, having entered the second-half "step" stage of the plan. Click here for more information. |
| Q.4 |
What business fields will be priorities during the "step" stage of INNOVATION 2007? |
| A.4 |
During the INNOVATION 2007 "hop" stage, MC focused on the following 10 businesses as core businesses to strengthen. Of course, we will also move aggressively in other fields that have good growth prospects. But INNOVATION 2007 seeks to provide a base for sustainable earnings growth by investmenting 700 billion yen to the 10 priority business sectors.
INNOVATION 2007 priority business sectors:
<Core businesses>
Natural gas, crude oil resources, metal resources, automobile operations, overseas IPP (Independent Power Producer) business, resource-based chemicals, foods (commodity), foods (products), financial services, and medical and nursing-care related businesses.
<Future strategic fields>
Nanotechnology-related businesses, fuel cells, advanced chemicals and other new fields
During the "step" stage, MC will additionally invest 1.2 trillion yen mainly in the above business sectors, aiming to generate consolidated net income of 400 billion yen or more from the fiscal year ending March 2009 onward in the subsequent "jump" stage.
For more information on the review of our achievements in the first two-year "hop" stage and the revision of the second-half "step" stage of the plan, please click here.
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| Q.5 |
Please describe Mitsubishi Corporation's management systems. |
| A.5 |
Mitsubishi Corporation overhauled its management systems in 2000 with a view to upgrading risk management and better deploying resources. The first step was to replace an organization that had been divided up into small departments and teams with business units (BUs) as the main strategic, organizational and earnings unit. The performance of the BUs is measured by using Mitsubishi Corporation Value Added (MCVA). An exclusive Mitsubishi Corporation derivative of the EVA® (Economic Value Added) concept, MCVA measures whether a given business is generating enough value to equal or exceed the expectations of shareholders. This is done by measuring the return at a given business in relation to risk. Every year, senior management evaluates the MCVA of the BUs and, based on that evaluation, determines the strategy for the next year. Each BU is assigned a mission–Build, Stretch or Restructure–and progress toward achieving the missions is closely monitored. With this approach, we have a management system that is even better able to redeploy capital and people and quickly identify businesses having no prospects for improvement. Adopting this system has significantly raised our earnings. In the fiscal year that ended in March 2002, profitable BUs generated earnings of about ¥140 billion while unprofitable BUs had losses totaling more than 70 billion yen. By the year that ended in March 2005, aggregate earnings had increased to about 370 billion yen while losses were just below 20 billion yen, respectively.
For more information on this subject, please click here. |
| Q.6 |
Please explain why Mitsubishi Corporation has extended support to Mitsubishi Motors Corporation (MMC). |
| A.6 |
Mitsubishi Corporation has conducted a variety of business on a global level with MMC since this company's inception. Overall, our business operations with MMC are a core element of our automotive business. In April 2004, DaimlerChrysler, a major MMC shareholder that had been involved in MMC's management, announced that it would not make an additional equity investment in MMC. In response to this decision, in May 2004, Mitsubishi Corporation and a number of other companies purchased preferred stock newly issued by MMC. We purchased preferred stock worth 40 billion yen. In addition, Mitsubishi Corporation decided to extend additional support to MMC following this company's announcement of a revised Revitalization Plan at the end of January 2005. Based on this decision, Mitsubishi Corporation injected 70 billion yen by purchasing common stock and preferred stock issued by MMC in March 2005, and injected another 30 billion yen by purchasing preferred stock issued by MMC in January 2006.
When considering actions to take concerning MMC, supporting MMC was not the only option that was considered. We undertook an extensive comparative analysis of all possibilities and options available to us. This included the scenario of not supporting MMC and the consequences of that decision. Along with Mitsubishi Heavy Industries, Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., companies that are also providing support, we carried out detailed due diligence of MMC's revised rehabilitation plan with outside experts and other parties. This process led us to form the opinion that the plan was conservatively prepared, incorporating all conceivable risks, and that it was achievable.
Mitsubishi Corporation uses MCVA as its internal performance indicator for measuring economic value. With respect to conventional returns on the 100 billion yen in additional support, there is little chance of MCVA (see A05) becoming positive any time soon. However, we were convinced of the economic rationale for this assistance as a result of a comparative analysis of the value impairment associated with not providing assistance, and taking into account such factors as the importance of automobile operations in the context of our longer-term strategy. This thinking led to our decision to extend additional support to MMC.
MMC launched Outlander, a mid-size SUV, in November 2005, and began selling the new "i" minicar in January 2006 at dealerships throughout Japan. Moving into the second half of fiscal 2007, MMC has also launched the fully redesigned Pajero SUV and eK Wagon models in Japan. The "i" was awarded the "Good Design Grand Prize 2006" and has won other plaudits. Although demand for automobiles is declining as a whole in Japan, MMC is recording a steady increase in unit sales in the domestic market year on year. Sales are also strong in Europe, Central and South America, the Middle East and Africa. While sales are down in Asia, including Indonesia, where there has been a drop-off in demand overall, MMC achieved the profitability goals of its Revitalization Plan for the first half of fiscal 2007 and is making steady progress with that plan. Furthermore, steady improvements are being made with respect to corporate reform, particularly involving CSR, which was a major issue at MMC. Under the leadership of the current senior management team, MMC is steadily implementing a raft of initiatives designed to achieve the goals of the revised Revitalization Plan. Mitsubishi Corporation is determined to continue extending as much cooperation as possible to MMC as a business partner to bring the new plan to a successful conclusion. |
| Q.7 |
What action has Mitsubishi Corporation taken in regard to compliance? |
| A.7 |
Mitsubishi Corporation has always maintained a strict audit system in line with Shoji Komei (integrity and fairness), one of its Three Corporate Principles. However, the recent spate of high-profile cases of corporate misconduct has prompted Mitsubishi Corporation to take additional action, such as bringing forward measures to further strengthen its auditing system. For further details on these measures click here.
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| Q.8 |
How is Mitsubishi Corporation active with respect to the environment and corporate citizenship? |
| A.8 |
Our activities have always been guided by the Three Corporate Principles. We are dedicated to doing business worldwide with fairness and integrity. Through these activities, we strive to enrich society in all ways. At the same time, we take steps to help preserve the global environment. Environmental considerations are a key component of all our business activities. We are engaged in many environmental projects, including a program to restore tropical rain forests. In addition, for more than three decades, we have been engaged in education, social welfare and other programs that make contributions on a regional and global scale. For more information, please refer to our Sustainability Report. |
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