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## How Are We Accelerating Transformation V ia FDR-1? 

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In sales activities, we now have a renewed sense of the real power of the Legacy brand. In March 2003, the end of the fis- cal year and just before the May launch of the new models, we successfully increased sales of existing models and were able to sell out most of our inventory. As such, we were superbly positioned to make a timely introduction of the new models. Among our other initiatives, we strengthened our used car sales and customizing services by expanding the number of G-Park outlets that offer both services. 

In the United States, although the first half of fiscal 2003 

was strong, carrying on the momentum of fiscal 2002 when sales set a new record, sales slowed in the second half as market demand conditions changed. We are nevertheless engaged in a program to improve our sales network quality. Although around 580 dealerships in the United States currently sell 300 or more Subaru cars on an annual average basis, they will be encouraged to sell more than 400, thereby raising the number of top- ranking franchise dealerships. We believe that through these measures we can increase the current annual sales from above 200,000 to 250,000 and then to 280,000 units. Specific actions include our visual identify (VI) program to give our showrooms in the United States a uniform look. We are also working to increase the ratio of exclusive dealerships and the ratio of dealerships with separate showrooms for Subaru cars. 

## Assuring Success 

## Manufacturing Strategy 

The most important development in fiscal 2003 in the manufacturing area was the suc- cess of our Cost Structure Revolution-1 (CSR-1). Under CSR-1, we are increasing our cost-competitiveness by looking at the processes that creates our cost structure, start- ing with the upstream design functions and downstream to sales and service functions. This total cost reduction program includes SG&A of Management Planning and Administration Department. We are looking for cost reductions from these efforts of ¥7 billion in Japan and ¥10 billion worldwide in fiscal 2004, and a total of ¥20 billion in fiscal 2005. 

To improve efficiency in manufacturing, we invested about ¥6 billion in May 2003 to merge our assembly lines for passenger and commercial minicars and to set up a flexible manufacturing system. These initiatives are expected to strengthen our cost competitiveness. 

Overseas, at SIA we began production of the Baja small pickup truck in July 2002. While the Baja is based on the Legacy, it took only 30 months from time it was unveiled as a concept model at auto shows in Los Angeles to bring it to full-scale production. Also in July, cumulated production at SIA since start-up in 1989 exceeded one million vehicles. 

We plan to increase annual production at SIA from the current 100,000 to 160,000 in 2005, when OEM pro- duction from Isuzu ends. Also, now that SIA has become a wholly owned subsidiary of FHI, we are scheduled to utilize facilities formerly shared with Isuzu and will therefore be able to restrict any investment at SIA that might be required to expand capacity. 

