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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
2
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
3
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.
4
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
5
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
6
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 -
7
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
8
“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
9
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
10
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
11
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
12
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
13
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
14
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
15
Significant Growth
III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233
16
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
17
Significant Growth
Teana for Japanese Market
Sunny
III.III. MidMid--term Business Plan : Plan 2term Business Plan : Plan 233
18
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
19
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
20
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)
21
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
22
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
23
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
24
– 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>
25
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
26
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
27
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
37
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
28
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
29
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
30
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
31
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 *
32
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
33
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
22
“A globally competitive, comprehensive automotive manufacturer”
34
DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN
DONGFENG MOTOR Co., Limited MID-TERM BUSINESS PLAN
“Plan 23”““Plan 2Plan 233””