Rebuilding the Corporate Financial Structure to Enhance Profitability

Rebuilding our financial structure to further improve financial performance remains a primary management objective. Our aim is to strengthen our balance sheet to reduce financial debt to the fullest extent possible by generating positive cash flow throughout our operations.

With the objective to further improve our financial structure, our top 200 managers have been working to achieve an incremental 100 billion yen positive cash flow. An important ingredient in this process is to determine how we optimize asset utilization and return. The anticipated results of this initiative are incorporated in our 170 billion yen positive cash flow objective for fiscal year 2000.

Our long-term objectives are to achieve a 5% return on sales, a 7% return on assets, a debt-to-equity ratio of 50% and to consistently grow shareholder value.

Rebuilding and Strengthening Domestic Sales Channels

Rebuilding the dealer organization in Japan is a key priority. We have already restructured the sales channels from four to three dealer channels (Mazda, Mazda Anfini and Mazda Autozam channels). The next step of our concerted efforts is to improve dealer operations and financial performance.

One of our initiatives to improve dealership business efficiency is termed the "One-Operation" dealer program. During the fiscal year, the consolidation of such functions as management and administration of dealerships by prefecture was undertaken to dramatically improve both cost structure and efficiency as well as eliminate unprofitable outlets. These efforts have contributed to substantial improvement in financial performance and overall structure. As of July 1, 1999, this program has been implemented at 43 dealerships in 17 prefectures. Combined with the Sales Promotion Program across nationwide domestic dealerships and our customer satisfaction improvement activities, these measures and programs have contributed to enhancing overall sales efficiency.

In fiscal 1999, we decided to make a further commitment to strengthen Mazda dealership operations in the form of subordinated loans totaling 145 billion yen. This permitted dealers to reduce bank debt, thereby providing more time to concentrate on the primary objective of selling Mazda vehicles and providing the best quality services to customers.

Cascading Brand Management Strategy

In fiscal 1999, we cascaded throughout the organization, our brand management strategy. This was the third phase in rebuilding our brand image. The first phase began with the introduction of a new brand symbol in 1997. During the second phase we integrated our three brand strategies for Japan, North America and Europe into a single global brand strategy and introduced Mazda's new family face, comprised of our brand symbol and unique five-point grille.

The third phase was intended to help all employees understand the key brand personality and product attributes which we plan to embody in all of our new products starting with Premacy, which was launched in the Spring of 1999. The essence of the Mazda personality is defined as "Stylish," "Insightful" and "Spirited," with primary product attributes of "Distinctive Design," "Exceptional Functionality," and "Responsive Handling and Performance." Like human DNA, these fundamental attributes are what make Mazda unique from our competitors, including brands in the Ford Group, and what will provide a consistent message as well as ensure an emotional connection with our customers around the world. The cascade process was designed to insure that there is a customer focus on every element of our business, from planning, design and engineering, to manufacturing, communication and sales and service. This strategy is a central business initiative - a global thrust aimed at driving all of our efforts and a significant part of our entire growth strategy. By successfully implementing this strategy, we intend to stand out from the competition in the global market, increase customer satisfaction and leverage our brand value for profitability. These characteristics are explained in more detail in the special feature section.