News Releases - MITSUBISHI ELECTRIC

No. 0485

October 8, 1999

MITSUBISHI ELECTRIC CORPORATION ANNOUNCES MID-TERM CORPORATE STRATEGY TARGETS FOR FISCAL 2001

Plans for sales in excess of 4 trillion Yen and before-tax profit of at least 120 billion Yen business expansion centering on IT
Taking counter-measures to move from unprofitable operations to promoting positive Core Businesses

TOKYO, October 8, 1999 -- Mitsubishi Electric Corp. (president: Ichiro Taniguchi) has formulated a plan for the achievement of the mid-term corporate strategy targeting fiscal 2001 that was announced at the end of March this year. Results from business indicators so far indicate that the company's preliminary forecasts will be achieved in fiscal 2001, on schedule. As a result, the mid-term targets previously set will now be adopted as the new mid-term planned values, and Mitsubishi Electric group companies will work from hereon in to comprehensively to achieve this plan. Measures have almost been completed regarding unprofitable sectors, and from this point forward positive measures to expand strategic operations will be promoted.

Fiscal 2001 Mid-Term Planned Results (Consolidated)

	Results for Fiscal 1998	Forecast for Fiscal 1999 (announced on May 27)	Fiscal 2001 Mid-term Plan
Sales	3,794 billion Yen	3,800 billion Yen	4 trillion Yen (minimum)
Pretax profit for the current term	- 113.7 billion Yen	20 billion Yen	120 billion Yen (minimum)
Profit% from sales	- 3.0%	0.5%	At least 3.0%
Debt ratio	40.4%	->	35% or less
Return on equity (ROE)	->	->	At least 10%

Consolidated Sales and Operating Profit Figures by Segment

(Unit: billions of yen)

	Fiscal 1998 Results		Forecast for Fiscal 1999 (Announced on May 27)		Fiscal 2001 Mid-term Plan
Sector of operations	Sales	Operating profit	Sales	Operating profit	Sales	Operating profit
Heavy electrical equipment	912.7	50.1	870.0	37.0	900	45
Industrial and mechatronics equipment	608.8	39.9	570.0	26.0	610	35
Telecommunications systems and electronic devices	1,482.3	-98.1	1,580.0	-28.0	1,780	53
Household electrical appliances	1,019.1	-4.4	1,010.0	5.0	960	7
Total	4,023.1	-12.4	4,030.0	40.0	4,250	140
Exclusions	-229.1		-230.0		-250
Consolidated total	3,794.0	-12.4	3,800.0	40.0	4,000	140

New Stage in Structural Reform for Mitsubishi Electric's Business Operations

1. The promotion of measures to counter unprofitable operational business sectors during fiscal 1998 and 1999 was highly effective, and restructuring as an vital measure is to be near-complete by the end of fiscal 1999. From now on decisive measures to expand our strategic business operations will be promoted.

2. Measures to counter loss-making divisions have almost been completed in fiscal 1999 and are expected to be fully completed in fiscal 2000. In making all divisions profitable, the following key measures will be promoted:

(1) Withdrawal from structurally unprofitable business operations

(2) Transformation of the structure of operations

(3) Strengthening and improving business efficiency of operations by promoting strategic alliances

(4) Thorough revision of expense structures

3. In the future, while the focus of measures to improve the structure of business operations will move from the elimination of loss-making divisions to that of countering low-profitability sectors, the infrastructure of all business operations and reforms will be further strengthened.

Key Performance Improvement Measures to Date and for the Future

1. Selection and Concentration of key businesses implemented over fiscal 1998 and fiscal 1999

1) Recent examples of Selection and Concentration

Measures to Strengthen Business Operations

Through Strategic Alliances

Measures to Improve the Structure of Unprofitable Business Operations

*Establishment of joint venture company for the manufacture of large capacity electric motors with Toshiba Corp.

*Strengthening of heavy electrical business operations infrastructure by buying out Fujinor in Brazil.

* Cooperation in the field of instrumentation control systems with Yamatake

* Outsourcing of US cellular phone production

* Strengthening of framework to promote DVD operations by establishment of joint venture with Funai Electric

* Establishment of display monitor joint venture company with NEC

* Joint development of DLP digital projection television with US company Texas Instruments

* Cooperative development of next-generation system LSI products with Matsushita Electrical Industrial Co., Ltd. and Matsushita Electronics Industry Group

* DRAM production and technical cooperation with Taiwan TSMC Vanguard Group

*Termination of UK company Apricot Computers Ltd.

* Termination of analog CTV production in the US and the UK

* Termination of European consumer VCR operations

* Closing down of US semiconductor production company

* Domestic integration of assembly and testing line of European semiconductor manufacturing company

2) Priority allocation of resources to strategic business operations implemented up to present:

(1) Shift of personnel to strategic business operations

- Increase in personnel in next-generation communications systems business operations

approx. 700

- Increase in personnel of satellite systems business operations

approx. 200

- Increase in the number of engineers and SE working on system LSI products

approx. 500

(2) Increase in production capacity of strategic business operations

- Increase in production capacity of French cellular phone plant (upping annual output from 1.5 million to 6 million units)

- Establishment of comprehensive network (ATM, optical undersea cable, W-CDMA, etc.) testing environment and integrated production line for telecommunication equipment for carriers

-Completion of new satellite plant (Kamakura region)

-Increase in microdevice processing and multi-layer wiring capacity in conjunction with the expansion in system LSI product operations (Kumamoto, Saijo, Kochi Factory)

2. Measures to improve short-term performance (on a non-consolidated basis)

1) Steady promotion of measures to rectify high-cost structure

- Compared to the targeted reduction in fixed expenses of 100 billion Yen by fiscal 2000 (relative to fiscal 1998 figures), a reduction of 90 billion Yen is expected for fiscal 1999.

- With regard to the target reduction in variable cost ratio of 2 percentage points by fiscal 2000 (relative to fiscal 1998 figures), a reduction of approximately 1 percentage point is expected to be achieved in fiscal 1999.

2) Restrain and improve efficiency of resources allocation

- With regard to the target of reducing capital investment in fiscal 1999 by 20% relative to fiscal 1998 figures, a reduction of approximately 10% is expected due to an increase in some strategic expenses.

- A 10% improvement in efficiency in development expenses for fiscal 1999 relative to fiscal 1998 expenses looks to be achieved as planned.

- The number of personnel recruited in fiscal 2000 is planned to be 350, 40% down from figures for fiscal 1999.

3) Debt reduction

- By improving asset efficiency and improving the efficiency of resource allocation, borrowings for fiscal 1999 are expected to be approximately 100 billion Yen less than in fiscal 1998.

Future Promotion of Business Operations Strategy

1. Expansion of CCV Solutions Business Operations

1) Open Digital Network Infrastructure

(1) Strengthen communications systems operations supporting the creation of next-generation communications infrastructure.

- Strengthen ATM network, W-CDMA infrastructure and subscriber wireless access (FWA) towards global development

- Stable expansion of optical submarine cable business

- Business promotion of ground-based digital broadcasting systems

(2) Expansion of satellites and satellite equipment business

2) Open Digital Network Terminals

(1) Expand next-generation portable phones including W-CDMA (Goal: 25% share of domestic market, Europe 10%, North America 25%)

(2)Pioneer and promote market development in PDA by introducing multimedia communication equipment

Promote new business for the Home Network of the digitalized era (DLP digital

projection TVs, home servers, home gateways, etc.)

3) Open Digital Network Solutions

(1) Focus the company's total capacity towards the ITS business

- Expand the ETC (electronic toll collection) system utilizing our superior encryption technology

- Promote development for AHS-i (information service for travel support road system)

(2) Expansion of our superior business areas including satellite communications systems, surveillance control systems, image communications systems and large imaging systems

(3)Information systems business will be concentrated on Internet solutions based upon information security

2. Thorough strengthening of system LSI products

1) Establish superior market position in system LSI products business

Strengthen MCU area market position by utilizing industry-leading embedded

Flash memory technology

(2) Expansion of M32R as a Core Business for rapid market area penetration

(3) Expansion of business operations centering on leading-edge ECA, eRAM, dedicated applications system-on-a-chip products, mainly in the fields of communications, digital information electrical appliances, and motor vehicles

2) Promotion of strategic alliances related to system LSI products

(1) Acceleration of cooperative development with Matsushita Electrical Industrial Co., Ltd. and Matsushita Electronics Industry Group

(2) Acceleration of cooperative framework in HomeAPI with Microsoft Corporation.

3. Improve profitability of Core Businesses

1) Promotion of global operations

Strengthen overseas sales, service and local production of power equipment, elevators/escalators, FA equipment, and motor vehicle equipment with an aim to become one of the top three corporations in the world in this business area.

2) Improve competitiveness in key Core Businesses

Improve competitiveness and expand sales in key markets by promoting technology development, IT applications, cost competitiveness and sales strength.

(1)Power: Ensure stable business scale in the field of power generation centering on transmission and distribution.

(2)Transport: Maintain top share in domestic market by expanding information telecommunications and automotive electronic products

(3) Public: Strengthen competitiveness of operations in the water environment field, and expand the ITS business and disaster prevention system.

Elevators/escalators: Maintain top share in domestic market by strengthening cost competitiveness in products such as machine room-free elevators.

Housing and home appliances: Strengthen competitiveness in air-

conditioners and refrigeration equipment.

(6) Factory Automation: Strengthen competitiveness of main products including sequencers, inverters, servo motors, CNC, and laser discharging machines.

(7) Automobile equipment: Strengthen competitiveness and expand major product lines such as starter motors, alternators, electric power steering, and car navigation system.

Promotion of Corporate Strategy

1. Optimize placement of group personnel

Plan for a personnel scale and placement that will generate maximum efficiency as a corporate group. The number of personnel in the whole group will be reduced by 14,500.

(1) Mitsubishi Electric (non-consolidated) will reduce 6,000 staff mainly by seconding personnel to outside the group and restraining new recruitment.

(2) Domestic affiliate companies will reduce personnel by 2,400.

(3) Overseas affiliate companies, while pursuing rationalization and business efficiency, will optimize personnel scale considering the necessity of business expansion and localization in the competitive global market.

2. Reorganization and strengthening of affiliate companies

1) Integrate domestic Japanese affiliates (180 companies down to 140 companies)

(1) Enhance efficiency of the group by integrating similar and common operations.

(2) Promote regional integration in order to strengthen sales routes and their own businesses, in addition to the sale of businesses which have weak links to Mitsubishi Electric.

(3) Implement integration of insurance agent operations and overseas distribution operations handled by group companies.

2) Sharing of common works within the group companies

Plan the sharing of personnel and payroll operation services, accounting support services, and maintenance & operation of information systems.

3) Expand affiliate companies' own businesses

Strengthen businesses with a focus on network & communication services, medical & health care services, gwellnessh services, environment & recycling, and the energy field.

3. Financial strategies

1) Improve efficiency of receivable accounts and inventory assets by facilitating liquidity.

2) Expand group finances by developing a CMS (Cash Management System) framework based on the Yen, Dollar and Euro, which the company's major affiliates in the world are based upon.

3) In conjunction with this new system, improve cashflow, thereby achieving a consolidated debt ratio in fiscal 2001 down to 35% or less.

Strengthening of business marketing power

Strengthen the management/SE framework of sales agencies and branches, and core/strategic business operations of CCV Solutions.

Divert non-direct sales personnel to the front-line and further increase the number of front-line people by 1000 compared to fiscal 1998 by utilizing engineers.

From this fall, establish special activity departments in our main sales branches to take pre-orders of CCV Solutions products

5. Change in framework of management planning system

The company's management planning system will be changed in order to enable the company to take quick measures for business restructuring in line with drastic changes in the business environment. A management plan for a single fiscal year (budget) will be formulated together with a mid-term business plan covering the next two years, which will be rolling every year.

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