DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN · PSA/Honda JVs Core automotive operations...

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DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN

DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN

December 3December 3ｒｄｒｄ 20032003

Dongfeng Motor Co., Ltd.Dongfeng Motor Co., Ltd.

K. Nakamura, President & CEOK. Nakamura, President & CEO

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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Dongfeng Motor Co., Limited established June, 2003

I. IntroductionI.I. IntroductionIntroduction

BeforePartnership StructurePartnership Structure

Dongfeng Motor Co. LTDDongfeng Motor Co. LTD

PSA/HondaJVs

Core automotiveoperations

Non-auto-motive

companies,etc.

After

Dongfeng Automotive IndustryInvestment Co., Ltd.

Dongfeng Automotive IndustryInvestment Co., Ltd.

PSA/HondaJVs

Non-auto-motive

companies,etc.

Nissan Motor Co. Ltd.Nissan Motor Co. Ltd.

By Asset By Cash

Commercialvehicle

business

Passengervehicle business

Parts business

Equipment business

50% 50%

Dongfeng Motor Corporation Dongfeng Motor Corporation Dongfeng Motor Corporation Dongfeng Motor Corporation

Name inherited

Core automotive operations

Dongfeng Motor Co., Ltd.Dongfeng Motor Co., Ltd.

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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II. Brief BackgroundII.II. Brief BackgroundBrief Background

DONGFENG BRAND NISSAN BRAND

1. Focus of the largest foreign investment in the Chinese auto industry, at $2 Billion

2. Deepest partnership in terms of cooperative level management, technology exchange, brand management

• Strong global brand

• Full range of passenger vehicles

• Advanced R&D and technology

• Industry leading production technology and methods

• Top class management expertise

• Strong financial processes and management systems

• Strong CV brand in China

• Comprehensive CV line-up

• Steady track record sales

• Large-scale, operational assets

• Dedicated and experienced staff

• Wide distribution network

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One Company, Two BrandsOne Company, Two Brands

II. Brief BackgroundII.II. Brief BackgroundBrief Background

DONGFENG BRAND-Commercial Vehicles -

BluebirdSunny

22

33

55

44

115 new models by 2006

NISSAN BRAND-Passenger Vehicles -

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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“Create Value with Sustainable Profitable Growth”

Commercial Vehicles:Global Top 3

Passenger Vehicle:One of the best brand in China, providing “Value for our customers”

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Vol. (000 units)100 200

5%

10%

O.P. Margin (%)

’07

’03

[HDT & MDT Business]

B

C

A

a

Commercial Vehicles:Global Top 3

bc d

A, B, C… : Global manufacturera, b, c… : Chinese local manufacturer

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Passenger Vehicle:One of the best brand in China, providing “Value for our customers”

Vol. (000 units)100 200 300

CSI

Leader

Best level

Above ave.

Average

Below ave.

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Double-digit Operating Margin

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

Three Perspectives of Strategy

Two times the sales volume and revenue

III. “Learning”

I. “Growth” II. “Operational Enrichment”

2 partners

Plan 23: Plan Two Cubed (= 2x2x2)

2 2

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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74 90

226 240

150

300240

280

320

310

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007

Commercial Vehicles

Passenger Vehicles

Sales Volume PlanSales Volume Plan

DFL TOTAL: Double vehicles sales volume for 4 years• Passenger Vehicle (PV): +224k ( 74k,’03 300k,’07)• Commercial Vehicle (CV): + 94k (226k,’03 320k,’07)

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Newly IntroducedFull Model ChangeMinor Change

Heavy, Middle & Light Duty Trucksand Buses

2003 2004 2005 2006 2007Commercial Vehicle Product Line-up

Passenger Vehicle Product Line-up

Small, Medium, Upper Cars & MPV

2003 2004 2005 2006 2007

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Newly IntroducedFull Model ChangeMinor Change

Heavy, Middle & Light Duty Trucksand Buses

2003 2004 2005 2006 2007Commercial Vehicle Product Line-up

Passenger Vehicle Product Line-up

Small, Medium, Upper Cars & MPV

2003 2004 2005 2006 2007

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Significant Growth

Teana for Japanese Market

Sunny

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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74 90

226 240

150

300240

280

320

310

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007

Commercial Vehicles

Passenger Vehicles

Sales Volume PlanSales Volume Plan

DFL TOTAL: Double vehicles sales volume for 4 years• Passenger Vehicle (PV): +224k ( 74k,’03 300k,’07)• Commercial Vehicle (CV): + 94k (226k,’03 320k,’07)

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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R&D Capability Enhancement R&D Capability Enhancement Commercial Vehicles:

No.1 R&D Capability in China

Passenger Vehicles: Localization & Capability Development to introduce new products timely

Technical Cost Reduction : 35%(CV), 50%(PV) of the purchasing cost reduction

Quality Improvement : Target achievement of internal quality index

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

QCD target achievement – Technological knowledge, processes and R&D management know-how

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Sales & Service Quality ManagementSales & Service Quality Management

Expansion of high quality sales & network

100

>400

0

100

200

300

400

500

2003 2007

Number of Sales Network (PV)

Uniform approach to sales policies & standards

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

90

>300

0

100

200

300

400

2003 2007

Number of 3S Dealer (CV)

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III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

Further Business Expansion of CVFurther Business Expansion of CV

Improvement of service & after-sales parts business

Shift to assembled bus business　(incl. Plant rationalization)

Export business opportunities

Expansion of remodeling business 　(Special Purpose Vehicle)

Significant Growth

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Existing Resources EfficiencyExisting Resources EfficiencyNo Plant Closures

Stable employee headcount

Increased rationalization and capacity utilization

Significant Growth

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

0

20

40

60

80

2003 2004 2005 2006 20070

2

4

6

8

10

12

Contracted Employee headcounts Productivity000 persons units/employee

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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– Centralized Purchasing – Establishment of Competitive Suppliers Panel– Technical Cost Reduction (R&D / Manufacturing)

3

12

5

20

0

5

10

15

20

25

2004 2007

Commercial VehiclesPassenger Vehicles

(%)

Cost Reduction Target VS 2003

Purchasing Cost ReductionPurchasing Cost Reduction

%

Operational Enrichment

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

<Average in the scope of cost reduction activities>

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Registered address

XinjiangDongfeng XingjiangAutomobile Co., Ltd.

LiuzhouDongfeng Liuzhou

Automobile Co., Ltd.

Commercial: H, MDT and buses chassis

Engine: Machining and assembly

Components: Transmissions, axles, Radiators, interior parts, power steering, others

Equipments: Dies, Tools, Machining center

Commercial: H, MDT and buses chassis

Engine: Machining and assembly

Components: Transmissions, axles, Radiators, interior parts, power steering, others

Equipments: Dies, Tools, Machining center

Commercial vehicles: LCV, pickupsPassenger vehicles: Bluebird, new modelsEngine: Machinery and assembly

Commercial vehicles: LCV, pickupsPassenger vehicles: Bluebird, new modelsEngine: Machinery and assembly

Dongfeng Hangzhou Automobile. Co., Ltd.

武漢Wuhan武漢

Wuhan

HQ*HQ*

広州Guangzhou広州

Guangzhou

襄樊Xiangfan

◎十堰

Shiyan十堰

Shiyan

★★

★★★★

Passenger cars: Bluebird, Sunny (陽光), new models

Engines: Machinery and assembly

Passenger cars: Bluebird, Sunny (陽光), new models

Engines: Machinery and assembly

Dongfeng Nissan Diesel

Major Production Hubs Major Production Hubs Operational Enrichment

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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Manufacturing Efficiency Manufacturing Efficiency

– Productivity Improvement 　Eg. Genba-Kanri, IE, Plant Rationalization, Optimum Production Allocation

Productivity Improvement (CV)

Operational Enrichment

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

1.0

1.6

0

10

20

30

2003 2004 2005 2006 20070.5

1

1.5

Direct + Semi-direct labor Productivity000 persons

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Logistics Expenses Reduction• Reconstruction of logistics network• Operational efficiency improvement

Inventory Reduction• Flexible production control• Integrated total logistics management

Improvement in Supply Chain ManagementImprovement in Supply Chain ManagementOperational Enrichment

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20

30

0

10

20

30

40

2004 2007

Commercial VehiclesPassenger Vehicles

33

25

5

0

5

10

15

20

25

30

35

2003 2007

Commercial VehiclesPassenger Vehicles

Logistics expenses reduction ratio (VS 03 actual)

Vehicle Inventory Reduction – Days Supply % days

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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Learning

Company culture and mindset evolution to enhance performance :

– Establish a “Learning Culture”

Company-wide management innovation– Learning & Implementation of “Global Management Practice”

Human Resources capabilities enhancement– Educational training, Performance-based appraisals & rewards

““PeoplePeople”” determine determine How effective in Management / Operation Quality & Speed How effective in Management / Operation Quality & Speed

III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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IV.IV. Financial ProjectionFinancial ProjectionKey Financial Figures

(000 units, 100 million RMB)

* : 4 years total is expected to be 15 billion RMB**: Figures for 2nd half of 2003 on the full scope basis of DFL

2004 2007

Sales Volume ( ) : Full year (300) 140 330 620CV (226) 100 240 320PV (74) 40 90 300

Sales Revenue 170 400 800Operating Margin 8.0% 8.0% 10.0%

Operating Profit 13.6 32 80

Net Debt -10 -14 -2030 40 35

2003 Jul. - Dec.**

CAPEX *

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AgendaAgendaAgenda

I.I. IntroductionIntroductionII.II. Brief BackgroundBrief BackgroundIII.III.MidMid--term Business Planterm Business Plan

Significant GrowthOperational Enrichment Learning

IV.IV.Financial ProjectionFinancial ProjectionV.V. ConclusionConclusion

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Double digits in profitability(= O.P. margin)

“Operational Enrichment”

Name of the Plan: “Plan 23” (Plan Two Cubed) 2x2x2 = 8

Double Sales Volume & Revenue

“Growth”

Unity & Harmony by DF and Nissan (2 partners) “Learning”

V.V. ConclusionConclusion

Sales Volume of 620 k units, Sales Revenues of 80 billion RMB in 2007Operating Profit Margin of 10% in 2007 Strong, unique partnership

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“A globally competitive, comprehensive automotive manufacturer”

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DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN

DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN

“Plan 23”““Plan 2Plan 233””