May 23, 2001

Fuji Heavy Industries Ltd.
New TQF21 01 Rolling Plan
(fiscal 2001-2005)

Fuji Heavy Industries Ltd. (FHI), has decided on the "01 Rolling Plan" for the five years 2001-2005, based on reconsideration of "New TQF21 (Total Quality Fuji 21)," the strategic five-year medium-term business plan announced last year.
Based on the status of the automotive segment, including continued weakness in overall domestic demand, changes in the European market due to foreign exchange, achievement of fiscal 2000 goals in the U.S. market where sales constantly marked favorable figures and progress in synergy with the GM Group, the "01 Rolling Plan" sets alliance strategies and numerical goals to 2005, extending by one year the original 2004 end of the period.

The plan's objectives encompass management's vision of being a "global player with premium-brand" as well as improvement of corporate values with a focus on working in harmony with society and the environment while establishing a sound position in the GM Group by virtue of offering unique products and satisfying all those who have a stake in the company, including customers.

As for the effect of the GM alliance, it is often mentioned as a crucial strategy that has spread from its roots in management communications to work in a wide range of fields. Elements that bring a true win-win situation are established as the most important factors for the group after further expansion as a result of the inclusion of FIAT. More progress is envisioned while taking into account management independence and brand originality.

-- Outline of New TQF21 01 Rolling Plan --
There is a numerical goal (640) for all departments to meet as well as action plans to achieve goals.
(Billions of yen) (Thousand units)
Management targets (fiscal 2005) Sales targets (fiscal 2005)
Net Sales
Operating income
Ordinary income
Net income
Interest-bearing debt
1,770 +35%
134 +64%
128 +79%
71 +214%
335 -8%
Domestic Minicars *1
Domestic small vehicles
Domestic Total
181 +4.3%
173 +34.1%
354 +17.0%
North America
Other regions
Overseas Total
285 +45.5%
70 +91.2%
95 +108.5%
45 +61.8%
Global Total
804 +38.3%
*1. Minicars: Engine displacement of 660cc or less
Note: Percentage figures are based on comparison with the year 2000. Sales targets include sales of parts for overseas manufacturing.
[Management Targets]
1.Earnings targets
(Billions of yen/US$1)
2000 2001 2003 2005

01Rolling Plan
Net Sales 1.311.8 1.400.0 1.590.0 1.770.0
Operating income 81.6 84.0 92.0 134.0
Ordinary income 71.5 77.0 87.0 128.0
Net income 22.6 40.0 47.0 71.0
Foreign exchenge rat 109 115 105 105
2000 2001 2003 2005
923.1 960.0 1.136.0 1.317.0
56.4 67.0 66.0 101.0
54.4 64.0 62.0 97.0
30.3 33.0 33.0 54.0
109 115 105 105
2.Key management indicators(consolidated)
(%,Billions of yen)
2000 2001 2003 2005

01Rolling Plan
ROE 8.0 10.7 10.3 12.6
ROA 2.1 3.3 3.7 5.2
RONA 3.9 6.6 6.4 8.6
Interest-bearing debt 365.1 375.0 360.0 335.0
R&D 46.6 54.0 55.0 51.0
Facility invesment 43.6 69.0 86.0 62.0
D/E ratio 1.02 0.96 0.74 0.55
3.Sales plans by market
(Thousand units)
2000 2001 2003 2005

01Rolling Plan
Domestic Minicars 174 174 168 181
Small cars 129 131 171 173
Total 303 304 338 354
Overseas North America 196 202 231 285
Europe 37 43 57 70
Other regions 45 48 66 95
Total 278 292 354 450
TOTAL 581 596 693 804
Note: The non-consolidated sales volume figures above include finished cars and parts used in overseas production.
4.Production capacity
Factory Scheduled
Output affer
capacity buildup

01Rolling Plan
Small cars Car bodies Yajima 4,800/month 32,200 8 billion
Car bodies SIA 5,300/month 14,800 15 billion
Engines SIAOizumi 13,000/month 51,000 27 billion
Tranmissions Oizumi 13,000/month 50,000 13 billion
Mini cars Car bodies Main Factory - 24,500 -
Engines and transmission Oizumi - 24,500 -
TOTAL 63 billion
Annual net car body production following capacity buildup: 71,500units/month * 12month=858,000units annually
[Plans for individual segments]
Further develop Subaru DNA, a core element of horizontally opposed engines/AWD, and establish a sound position in the GM Group. At the same time, address strategic preparations for the Next Generation such as cooperative research on state-of-the-art technology and establish capacity of 800,000 units in the unique compact and premium Subaru lineup.
Progress of Alliance Synergies with GM and Suzuki
Items included in this plan are shown below. Status varies from those in the planning stage to those already under way.
1. Product
Multi-Passenger Wagon for Japanese market
In cooperation with GM, Subaru will launch a new vehicle into Japan's rapidly growing multi-passenger vehicle segment this Fall. The new vehicle was developed by Opel, the GM operation in Germany and will be assembled at GM's Thailand plant for sale under the Subaru brand in Japan with Subaru specific features.
Joint development program in Taiwan
Studying a joint development program for the Taiwan market based on the Impreza assembled at Ta-Ching Motors in Taiwan. It will be distributed through to both Subaru and GM brands.
Joint Minicar program in China
Studying possible business collaboration with GM in China, including local production of Minicars
Multi-Passenger New Concept SUV joint development project
FHI and GM are jointly developing a new concept multi-passenger SUV for possible launch in 2005. The product will use a Subaru platform and differentiated versions will be manufactured and distributed under both Subaru and GM brands. Subaru's version will first launch in North America, followed by expansion into other international markets.
Introducing OnStar
In the U.S. market, Subaru is planning to introduce OnStar, a telematics service provided by GM's OnStar subsidiary, starting with 03MY.
New vehicle development initiative for European market
In cooperation with GM and the other GM alliance partners, FHI is considering development of compact, light-weight, high fuel efficiency vehicles for the European market utilizing FHI's CVT technology.
2. Engineering
AWD-CoE (All-Wheel Drive - Center of Expertise)
FHI has already placed engineers at GM both in Europe and USA, and has started engineering collaboration to develop AWD systems for GM's next generation vehicles. In Japan, FHI has opened an AWD-CoE Center at its Tokyo R&D facility with 20 engineering staff in order to support the AWD programs at GM.
CVT-CoE (Continuously Variable Transmission - Center of Expertise)
FHI has been providing manufacturing support to Fiat-GM Powertrain, Hungary. Studying possible expansion of CVT businesses as a group, including FHI CVT local production.
Joint R&D for environmental issues
GM and FHI have agreed to jointly develop mid-long term advanced technology for exhaust gas reduction and exchange technology in this rapidly developing field.
Joint R&D for advanced technology
FHI and GM are cooperating in more than 30 technology areas -- including integrated vehicle control, alternative propulsion such as Fuel Cell and Hybrid powertrain, lightweight structure, safety and manufacturing. This cooperation will result in ongoing joint R&D activities, where each partner will utilize its strengths to avoid duplication of investment costs.
3. Manufacturing
Contribute to quality improvement in Asian region
FHI has been supporting quality improvement at the GM Thailand plant in connection with the Japan domestic introduction of the new multi-passenger vehicle.
Subaru vehicle CKD assembly
Studying CKD assembly of Subaru vehicles at GM Thailand plant and sale of the vehicles under the Subaru brand in Thailand and neighboring markets. CKD assembly in Latin America region is also under consideration.
4. Sales
Sales expansion of Subaru vehicles in Asian region
As already announced, FHI is marketing the Forester in the Philippines through GM Autoworld. Following this initiative, FHI is considering the use of GM Autoworld network to expand sales of Subaru vehicles in the Asian market.
Sales expansion of Subaru vehicles in North America
FHI is working to improve the Subaru sales network and accelerate development of Subaru vehicle sales with the collaboration of GM in the U.S. market. FHI is strengthening sales to corporate customers through participation in the GM commercial fleet sales programs.
Improve financial services using GMAC
In Taiwan, local Subaru dealerships have started to provide sales financing through GMAC. In Europe, Subaru Italy will begin using GMAC next month. FHI is investigating further utilization of GMAC to improve financial services in other areas of FHI's business.
5. Purchasing
Cost reduction by utilizing WWP (GM World Wide Purchasing Process)
Since last year, FHI's Purchasing Division has assigned dedicated staff to work with GM Group purchasing activities utilizing joint price negotiations with business partners. Actual costs have already been reduced for 10 categories of purchased parts and materials. It is planned that 10% of total annual purchasing value of this year would be through WWP process and a final goal is to achieve 30%.
Parts commonization with Suzuki
FHI and Suzuki are studying parts commonization, following the development schedules of each company.
6. Logistics
Subaru Ota Parts Center to provide service parts support to GM Japan
Subaru Ota Parts Center is to provide handling services of GM service parts for GM Autoworld in Japan from August 2001. FHI can utilize available warehouse space, which was opened up by FHI's on-going efforts to reduce inventory and transportation costs. GM will be able to avoid significant facility investment.
Cooperation between Subaru European Logistics Subsidiary and GM European Logistics
To improve logistics in Europe, FHI has established a European Logistics Company with Mitsui & Co., Ltd. and a local distributor. FHI is planning to cooperate with GM Group logistics divisions to improve logistics in the European region.
7. IT
Network connection
FHI has connected its network with GM by a dedicated line for digital data exchange and improvement of communication infrastructure.
Promote system compatibility
In accordance with the progress of each joint development project, system compatibility is being improved in various areas, including engineering, service technology, styling design, purchasing and manufacturing.
8. Others
Motorsports/Auto Shows
FHI is closely communicating with GM Motorsports activities with the goal to improve racing competitiveness and brand benefits. FHI is working with GM's global auto show team to develop closer cooperation and greater brand impact at major auto shows world-wide.
Utilizing GM settlement function
FHI is considering utilizing GM's global transaction function in order to improve hedging of foreign exchange risk, improving transactions within the group and simplifying international transactions.
Four divisions
Realization of strong individual divisions is the most important factor. Resource allocation in competitive areas where further growth can be expected is being reconsidered.
1. Management targets of individual divisions
(Billions of yen)
Net sales Operating income
Industrial Products 50 2.5
Bus and House 20 1
Transportation and Ecology 20 1
Aerospace 90 7
2. Key elements of individual divisions' plans
Industrial Products
Aim to become No. 3 in the world in small general-use engines by launching a new series of products and implementing the Global Robin Plan through joint business startups with China.
Bus Manufacturing and House Prefabrication
In the severe bus market, rationalize production capacity with a minimum of two buses per day, and expand renewal business and parts sales in order to broaden value chain. Launch a new house product.
Transportation & Ecology Systems
Transportation prioritizes profitability while aiming to be independent by doubling sales in environmental business such as the Fuji Mighty waste collection vehicle, waste treatment plants and robots.
Promote a business style of making proposals based on integrating sales and engineering to obtain prime business as well as international joint projects. At the same time, address asset reduction and productivity improvement to pursue strength in the management system and a growth scenario of 100 billion yen net sales.



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