dfl strategy and business performance china …...3 dfl: company overview china market &...

DONGFENG MOTOR Co., Ltd.DONGFENG MOTOR Co., Ltd.Business StrategyBusiness Strategy

March 24, 2006

2

Agenda

� DFL: Company Overview

� China Market & Industry Situation

� DFL Strategy and Business Performance

3




4

•Strong global brand•Full range of passenger vehicles around the world

•Advanced R&D and technology capabilities worldwide

• Industry leading production technology and methods

•Top class management expertise with multicultural experience

•Strong financial processes and management systems

•Strong commercial vehicle (CV) brand in China

•Comprehensive CV line-up•Large-scale, operational production facilities

•Dedicated and experienced staff

•Wide distribution network in Chinese market

•Strong CV R&D capability•Competitive Engine, Parts, and Equipment business for CV in China

Complementary Strengths Provide Advantage

5

Sunny

(Produced by Zhengzhou Nissan)(Produced by Zhengzhou Nissan)Pickup Paladin

One Company, Two Brands

TRUCKS, CV’S & BUSES PASSENGER VEHICLES

Teana

DFLDFLDFL

A single full-line auto company

Bluebird

Tiida

6

Partnership Structure

Dongfeng Motor Group Co.Dongfeng Motor Group Co.

Core automotiveoperations

Dongfeng Motor Co., Ltd. (DFL)Dongfeng Motor Co., Ltd. (DFL)

PSA/HondaJVs

Non-auto-motive

companies,etc.

Nissan China Investment Co.Nissan China Investment Co.

Asset investment8.35 billion RMB

Name inherited

Cash investment8.35 billion RMB

Commercial Vehicle

div.Passenger Vehicle div.

Parts div.

Equipment div.

50% 50%

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

LCV div.(DFAC)

(+ZNA)

7

Organization Structure – Functions and Business Units

Katsumi NAKAMURAPresident

Katsumi NAKAMURAPresident

Board of Directors (8 members)

Board of Directors (8 members)

XU Ping, Chairman(4 DF, 4 Nissan)

TONG Dongcheng VP

YOSHIDA VP, REN VP

OUYANG Jie VP

KOMATSU VP TONG VP

Finance Human Resources

Equipment

Ope

ratio

nal D

ivis

ions

Functions

SHEN Li Senior GM

ZU Fushou VP

ZU VP

Product & market

planningTONG VP OOTANI VP OUYANG VP

R&D Purchasing Manufacturing& Quality

LCV (DFAC)

Commercial Vehicles

Parts & Components

Passenger Vehicle

8

Main Business

‘05‘04

86

155

165

40.4----1Equipmentdiv.

273.1----19Parts &Componentsdiv.

51.9HQ: 120SUBs: 50601LCV

(DFAC)

284.0HQ: 150SUBs: 12020311Commercial

Vehicle div.

64.6HD: 150��270(E/’06)

XF : 90644Passenger

Vehicle div.

No. ofEmployees

[K persons]

TotalFixed Assets

[Bil. RMB]

Production Capacity[K units, 4,545h/y base*]

Production Volume [K units]

No. of Subsidiary companies

As of E/’05*) 7.5h x 2-shift x 303days (incl. work on Sat)

9

*) Registered address

XinjiangDongfeng Xinjiang

Automobile Co., Ltd.

LiuzhouDongfeng LiuzhouAutomobile 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

CV R&D 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

CV R&D Center

Commercial vehicles: LDT, Light BUS & BUS Chassis

Passenger vehicles: Teana, Bluebird

Engine: Machinery and assembly (Cummins)

Commercial vehicles: LDT, Light BUS & BUS Chassis

Passenger vehicles: Teana, Bluebird

Engine: Machinery and assembly (Cummins)

Dongfeng Hangzhou Automobile. Co., Ltd.

武漢武漢武漢武漢Wuhan武漢武漢武漢武漢

Wuhan

HQ*HQ*

広州広州広州広州Guangzhou


襄樊襄樊襄樊襄樊Xiangfan

襄樊襄樊襄樊襄樊Xiangfan

◎◎◎◎十堰十堰十堰十堰Shiyan十堰十堰十堰十堰Shiyan

★★★★★★★★

★★★★★★★★★★★★★★★★

Passenger cars: Sunny, Tiida, Bluebird Sylphy

Engines: Machinery and assembly

PV R&D Center

Passenger cars: Sunny, Tiida, Bluebird Sylphy

Engines: Machinery and assembly

PV R&D Center

Location

Major Production Base

鄭州鄭州鄭州鄭州Zhengzhou

鄭州鄭州鄭州鄭州Zhengzhou

SUV, P/U: Paladin, Pick-upSUV, P/U: Paladin, Pick-up

Zhengzhou Nissan Automobile. Co., Ltd.

10




11

China: Total Industry Volume

2,354 2,6963,316 3,720

9971,024

1,0901,170

814903

9891,020

410575

433450

0

2,000

4,000

6,000

8,000

'03 '04 '05 '06

H&MDT

LDT

BUS

PV

Forecast

4,5765,198

5,8286,360

LDT: including Mini TruckBUS: including Large, Mid, Light BUS and Mini BUS(CUV)PV: including MPV, SUV, excluding CUV

[’000 units]

Source: CAAM, adjusted by DFL Corporate Planning< Including import and excluding export >

+40%

+11%

+3%

+15%

-25%

+10%

+6%

+23%

+3%

+3%

+7%

+12%

[+: increase / -: decrease ratio]

12

Competition in Passenger Car Market

Fiercer Competition － Brand-New Model Launches

Excl. full model changes

37 8

4 42

3

104

36

6

9

310 5

9

8

10

4

7

3

0

10

20

30

40

'01 '02 '03 '04 '05 '06

MPV/SUV Basic car Small Mid/Large

11

1920

36

18

24

37 8

4 42

3

104

36

6

9

310 5

9

8

10

4

7

3

0

10

20

30

40

'01 '02

37 8

4 42

3

104

36

6

9

310 5

9

8

10

4

7

3

0

10

20

30

40

'01 '02 '03 '04 '05 '06

MPV/SUV Basic car

'03 '04 '05 '06

MPV/SUV Basic car Small Mid/Large

11

1920

36

18

24

Small (B-Seg) Mid (C-Seg) Large (D-Seg + Premium)MPV/SUV Small (B-Seg) Mid (C-Seg) Large (D-Seg + Premium)MPV/SUV

13

PV: Market Price Down Trend

- 7.8

- 14.0

- 3.1

- 20.9

- 13.6

- 24.3

-20.2 - 21.6

-12.3

- 25

- 20

- 15

- 10

- 5

0CY02 03 04 05

Large Class

MediumClass

Small Class-7.8

-14.0

-3.1

- 20.9

- 13.6

- 24.3

-20.2 - 21.6

-12.3

- 25

- 20

- 15

- 10

- 5

0CY02 03 04 05

Large Class(D-Seg)

Medium Class(C-Seg)

Small Class (B-Seg)

(%)

14’03 ’06~

HDT

MDT

LDT

Agricultural Vehicle 4-wheeled

3-wheeled

HDT

MDT

LDT

Agricultural Vehicle 4-wheeled

3-wheeled

- Overloading control- Safety- Public investment

- New Traffic Regulation

– Pursuit of “Transportation Efficiency” –<Factors>

- Large scalefreight co.

- Overloading control- Safety

Structural Change in CV Market

15



� DFL Business Strategy and Performance

16

Mid & Long-term Strategic Objectives

“Sustainable Profitable Growth”To be a Globally Competitive & Well-known

Comprehensive Automotive Manufacturer

� CV: Global Top 3[Mid-Term Focus]

– Profitability enhancement with progressive volume increase in H&M-duty trucks

– Reinforcement of product competitiveness in cooperation with Nissan for Light-duty truck business

� PV: One of the best brands providing “Value for Customers” in China[Mid-Term Focus]

– Elevation of brand awareness with increased value for customers

– Reach top level of CSI

17

Three Perspectives of our Strategy

Double-Digit Operating MarginTwo Times the Sales Volume

and Revenue

III. “Learning”

I. “Growth” II. “Operational Enrichment”

2 Partners

22

� Plan23: Plan Two Cubed (=2x2x2)

18

� How to secure sales increase

Provide “Value for Customers”Provide “Value for Customers”

� Associated Business

� Export Business Development

� Remodeling / Assembled BUS Business

� Competitive Product Line-up

� Convenient & Standardized Sales & Service

Further Business expansionFurther Business expansion

I. “Growth” Strategy

19

Sales Volume� DFL Sales Volume: Actual and Plan

66 61158 200

3002187 88

115146 174

131 285

320

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007

H&MCV

LCVZNANissan PV

299

[‘000 units]

322425

485

620Plan

H&MCV: HDT, MDT, Large BUS, and Mid BUSLCV*1: LDT, Light BUS, and DF-branded MPV

*1) NISSAN VALUE-UP scope

Sales volume of Zhengzhou Nissan Auto. Co. is included from 2005

20

Passenger Vehicle <NISSAN Branded>

252412

59

56200

300

44 28

2215

-

100

200

300

2003 2004 2005 2006 2007

Tiida

Teana

Sunny

Bluebird

[’000 units]

Full ModelChange

+ New modelPlan

+ New model

66 61

158

21

Rank Maker Volume Share Vs. Last same period Rank Volume Share1 上海通用 (SH-GM) 324,742 10.2% 28.8% 3 252,053 10.0%2 上海大众(SH-VW) 287,118 9.0% -19.1% 1 355,006 14.0%3 一汽大众(Faw-VW) 277,097 8.7% -7.7% 2 300,118 11.9%4 北京现代(BJ-Hyundai) 233,668 7.3% 62.2% 5 144,090 5.7%5 广州本田(GZ-Honda) 230,768 7.2% 14.2% 4 202,066 8.0%6 天津一汽(TJ-FAW) 193,008 6.0% 48.1% 6 130,306 5.2%7 奇瑞(Chery) 189,158 5.9% 118.5% 11 86,568 3.4%8 东风日产(DF-Nissan) 157,516 4.9% 159.1% 14 60,784 2.4%9 吉利(Geely) 149,969 4.7% 51.2% 8 99,197 3.9%

10 天津丰田(TJ-Toyota) 147,438 4.6% 67.2% 10 88,188 3.5%11 神龙(DF-PSA) 140,399 4.4% 57.5% 9 89,129 3.5%12 悦达起亚(DF-Kia) 110,008 3.4% 76.1% 13 62,452 2.5%

Total of above 2,440,889 76.4% 30.5% 1,869,957 74.0%Others 755,073 23.6% 15.0% 656,788 26.0%Total 3,195,962 100.0% 26.5% 2,526,745 100.0%

05/1-12 04/1-12

PV: Top 12 Makes

22

New Model Launch in ’06

Picture: SYLPY in Japan

23

Dealer outlet development plan

Dealer development aiming simultaneously for scale & quality Strict management of facility standards & brand image

0 100 200 300 400No. of outlet

'07

'06

'05

'04

'03

� PV Dealer development

Dealer outlet built based on standard policy

Sales Network – Nissan Passenger Vehicle

SSICSI

2003 2004 2007

No. 10 No. 5 Top levelNo. 9 Top level

2005

No. 5No. 3No. 1

� Customer SatisfactionIncl. 2nd Tier Dealers

24

2004 / Mar / 24 Announce R&D Center establishment2004 / Dec / 6 Start construction2006 / Mar / 20 Complete

DONGFENG - NISSAN PV R&D Center

Total investment: 330M RMB

Area: 200,000 m2

DF-Nissan PV R&D Center as one of the Nissan’s global R&D bases develops vehicles, matching with Chinese market needs, based on the products developed by Nissan.

25

New Engine Plant in Huadu, Guangzhou

Investment: 3,000M RMB

Casting AssemblyKD

WarehouseMachining1st Stage

Machining2nd Stage

Area 390,000㎡㎡㎡㎡ Floor 145,000㎡㎡㎡㎡Engine HR16DE, MR20DECapacity 180k units (��360k by ’08)

26

Truck Sales <Dongfeng Branded>

Market Share Position- ’05 actual -

<H&MDT>

<LDT>

DFL 28.9%FAW 27.0%CNHCV 10.2%Shaanqi 5.6%Beijing 4.8%

Beijing 32.2%JAC 9.6%DFL 8.1%Yuejin 6.2%Jiangling 6.0%45

69

6156

109 69

0

50

100

150

200

250

2003 2004 2005 2006

HDT+Semi-trailer

MDT

LDT

[’000 units]

*) Reference: definition of segmentation has been changed

*

195215

194

230

4569

6156

109 69

0

50

100

150

200

250

2003 2004 2005 2006

HDT+Semi-trailer

MDT

LDT

[’000 units]

*) Reference: definition of segmentation has been changed

*

195215

194

230

(Plan)

27

CV: H&MDT TIV � Deterioration of market demand in 2005 – -25% vs. ’04

0

100

200

300

400

500

600

J F M A M J J A S O N D

K'04 Actual

'05 Actual

'06 Forecast 448

433

575

258

260

177

’04 Actual

’06 Fcst

’05 Actual

Cumulative market sales volume by month

28

DONGFENG STYLE: ““STRONG AND SMARTSTRONG AND SMART””

USP1. “Ergonomics” design• Easy operation• Comfortable interior• Shock absorbing system

USP2. “Safety” design

USP3. “Aerodynamic” design

Launch of “New Generation Cabin” Model

� Unique Selling Points

29

HDT/MDT Sales Network development plan

Expansion of 3S-Image Dealers

'07

'06

'05

'04

145

125

105

80

45

45

45

50

65

90

110

130

0 50 100 150 200 250 300

3S Image ｄealer 3S Function dealer Single sales dealer

Commercial Vehicle Dealer Network

30

LCV Sales – DFAC

15 16 15

363

15 12

1433

24

232

6

16

0

10

20

30

40

50

60

70

80

90

100

2003 2004 2005 2006 2007

Small Truck

Prince

Duolika

Kangba

Jinba

DF Star

Small Dump

Dump

DF Pick-up

BUS

6661

8690

95[‘000 units]

Objective Objective

31

DF Star Jinba

Duolika facelift

Products of DFAC Light-Duty Trucks

Kangba

32

Dealer outlet built based on standard policyDealer outlet development plan

Via 3S shops’ construction continual increase, quality is improved alongside network quantity rise. ※DBIS: Dongfeng Brand Image Shop

0 100 300No. of outlet

'07

'06

'05

'04

'03 Indicate 3S DLR

200

DBIS

Open-air market

LCV Dealer Network Development

33

II. “Operational Enrichment” Strategy� How to accelerate cost reduction & productivity improvement

To enrich “Value for Customer” by attractive products & competitive prices(keeping DFL’s profitable growth)

Purchasing Cost Reduction

Manufacturing and Logistics Expenses Reduction

Quality Improvement

Productivity Improvement

Manuf. Logistics(SCM)Planning R&D After-

ServiceAssociatedBusinessPurchasing S&M

"Price (�� Cost) Competitiveness" through the overall Value-chain

34

Cost / Expense Reduction� KPI progress: ’05 Actual

10

6

16.6

11.9

0

5

10

15

20

PV CV

'05 Objective'05 Actual

Purchasing Cost Reduction

Cost Reduction: Cumulative against the end of ’03 as a base

20

7

31.1

10.4

0

5

10

15

20

25

30

35

PV CV

'05 Objective'05 Actual

Logistics Exp. Reduction

[%] [%]

35

Quality Improvement

0

10

20

30

40

50

60

2003 2004 20050000

10101010

20202020

30303030

40404040

50505050

60606060

2003200320032003 2004200420042004 2005200520052005

HDT MDT5135

1319 16 19

Qua

lity

Inde

x

Qua

lity

Inde

x

� Commercial Vehicle – Drastic improvement by introducing Nissan’s Quality Management System

� Passenger Vehicle

– “Global Best Level Quality” with Nissan Quality Control

36

Productivity Improvement� Headcount Rationalization with Productivity Improvement

6661 57 56

0

20

40

60

80

2003 2004 2005 20060

2

4

6

8

10

12

Mid & Long-term Contracted Employee headcounts Productivity

000 persons units/employee

(Objective)

37

Support from NISSAN� Number of Nissan Expatriates by site



◎◎◎◎

★★★★★★★★

★★★★★★★★★★★★★★★★

十堰十堰十堰十堰Shiyan十堰十堰十堰十堰Shiyan

襄樊襄樊襄樊襄樊Xiangfan襄樊襄樊襄樊襄樊

Xiangfan

HQ and CV Business

LCV Business and PV Plant

PV Business

37 40 37

4

45

0

10

20

30

40

50

2003 2004 2005 2006

HQ/Admin. MFG Vehicle MFG Engine

29

39 39 38

23303030

2221

0

10

20

30

40

50

2003 2004 2005 2006


5 610 10 8 7

0

10

20

30

40

50

2003 2004 2005 2006


武漢武漢武漢武漢Wuhan武漢武漢武漢武漢

Wuhan

(Plan)

(Plan) (Plan)

<Total Expatriates in ’06(Plan) >HQ/Admin. 89MFG Vehicle 30MFG Engine 26TOTAL 145

38

DFL Production Capacity Utilization

110%101%

89%88%

83%

89%85%76%

90%89%

0

100

200

300

400

500

600

700

2003 2004 2005 2006Plan

2007Plan

20%

40%

60%

80%

100%

120%CVPVCV utilization ratioPV utilization ratio

Production volume[’000 units]

Utilization ratio[%]

Utilization ratio: Calculated based on the actual production preparation situation of each production line and facility without overtime working

39

Centralized Cash Management

Commitment Facility

DFL Treasury

DF Finance Co.

DFL

Subsidiaries

Local Banks

Liquidity Support

Entrustment Loan

Entrustment LoanCollection Payment

ICBCCMB

MHCB

Operated by

Designed by

Dealers

Suppliers

Collection

Payment

Excess Cashof HQ & Sub.s

Repay unnecessarydebt from group perspective

40

Financial Expense Reduction8,072

5,801

2,152 2,222 1,950

0

2000

4000

6000

8000

'03/Jul 1st 2003 2004 2005 2006 (Budget)

342

156108 102

0

100

200

300

400

2003 2004 2005 2006 (Budget)

9,247 8,5986,745 7,514 6,800

0

2,000

4,000

6,000

8,000

10,000

'03/Jul 1st 2003 2004 2005 2006 (Budget)

� Bank Borrowings

� Cash on Hand

� Finance Expense

[M RMB]

[M RMB]

[M RMB]

41

III. “Learning” Strategy� How to establish solid business base and bring out a latent potential

Management / Operation Quality & Speed Improvement

Nissan’s management know-how transformed into “Dongfeng - Nissan Management Way”

� Transparency of management decision through Management Committee

� Implementation of global management practice

� Company Culture & Mind-set Evolution

• P-D-C-A cycle management• KPI control• CFT Activities• QCD improvement

• Education / Training• Teamwork• VISION / MISSION / BEHAVIOR

42

“Dongfeng - Nissan Management Way”Lead by top management themselves, discussed at workshop activities together with both Chinese and Japanese key persons�� Cross Cultural and Cross Functional Management

1. Mutual understanding of and respect for different values2. Creating a mutual trust relationship3. Common understanding of management objectives and

establishing an environment for collaboration

43

VisionVision・・・・・・・・MissionMission・・・・・・・・Guiding Principles of Dongfeng NissanGuiding Principles of Dongfeng Nissan

’05

Plan23

(’04-’07)

Mid-term and long-term plan

Guiding Prin

ciples

Guiding Prin

ciples

①①①① Vision①①①① Vision

②②②② Mission②②②② Mission

’04Founded in June, 2003Founded in June, 2003

Solid foundation for future development of DFL-PV; Enhancing the amalgamation between Chinese and Japanese

parties

Dongfeng Nissan：：：：A fish jumps over the dragon gate to become a dragon

Interaction with “NISSAN VALUE-UP” plan

PV objectivePV objective One of the best brand in China, providing “Value for our customers”

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

③③③③

DFL Objective ：：：：“A globally competitive, comprehensive automotive manufacturer”DFL Objective ：：：：“A globally competitive, comprehensive automotive manufacturer”

Philosophy of the Core Culture

44

“Dongfeng - Nissan Management Way”

Enrich People’s Life

人人人人 · 車車車車 · 生活生活生活生活

� VISION:

ShareholdersShareholders EmployeesEmployees

SocietySocietyPartnersPartners

��

��

CustomersCustomers

� MISSION:

��

Providing creative and superior values to all the stakeholders:

– Customers, Shareholders, Dealers, Partners, and Employees

Create Value and Prosperity Together

45

以最具价值的汽车产品和服务为顾客提供丰富的人性化的移动生活体验

Valuable Products and Services Promise Rich, Humanized car ownership experience.

45

Dongfeng - Nissan Guiding Principles

1. �� = Customer Driven

2. �� = Innovative & Proactive

3. �� = Fair & Transparent

4. �� = Communication & Cross Functional

5. �� = Cost Conscious & Profit Driven

6. �� = Learning & Devotion

46

““A Globally Competitive, ComprehensiveA Globally Competitive, ComprehensiveAutomotive ManufacturerAutomotive Manufacturer””

DONGFENG MOTOR Co., Ltd.DONGFENG MOTOR Co., Ltd.Business StrategyBusiness Strategy

dfl strategy and business performance china …...3 dfl: company overview china market &...

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