东风有限四年来改革路径

　　DFL’s 2003-2007 Road to Reform

　　Katsumi Nakamura

　　President of Dongfeng Motor Company, Ltd.

　　April 18th, 2007

　　Shanghai

　　Ladies, Gentlemen and Dear Friends,

　　Good evening!

　　I feel greatly honored to attend this banquet and deliver my presentation to briefly introduce Dongfeng Motor Company Limited that we call DFL. I would like to use this opportunity to share with you what I have learnt from my past four-year experience working as DFL President together with my seventy thousand people in our concerted efforts towards changing a state-run company into a globalized company with global competitiveness. In particular, I would tell a story of how Dongfeng Commercial Vehicle Company, a mainstream subsidiary of DFL, is being changed in its innovative reform over the past four years.

　　Before that, allow me first of all to give you a brief introduction about DFL– the largest automotive joint venture in China today. DFL was co-invested by NISSAN and DONGFENG with 8.35 billion RMB respectively. It covers five core business units, such as full-line commercial vehicles of heavy, medium and light duties and buses, full-line passenger vehicles of all segments, Parts and components unit and finally an Equipment unit. DFL headquarter is now located in Wuhan, but still have its primary production bases of CV, Parts and Equipments business in Shiyan, a traditional Headquarters of Dongfeng Motor Company. Now the LCV production base is mainly in Xiangfan of Hubei Province, LCV and Pick-up truck are manufactured in Zhengzhou of Henan Province, while PVs are mainly produced in Guangzhou Huadu plants except Teana being produced in Xiangfan.

　　As most of you have known, we keep “Dongfeng” as our main brand of CV while using “Nissan” as our PV brand.

　　Our mid- and long-term strategic goal is to realize sustainable and profitable growth by providing value to our customers，and make DFL a globally competitive auto manufacturer. In DFL’s “two-brand” strategy，Dongfeng CV will be positioned to be No.1 in China and among top 3 globally while Nissan PV will become one of the best brand for providing value to our customers.

　　On November 2003, DFL announced its mid-term business plan between 2004 and 2007. It was named “Plan 23 ”, namely to achieve strong growth by doubling sales and income, enrich operation through reinforcing high efficiency of operation and management to achieve two-digit operating profit margin as a result, and build up DFL-specific company culture through mutual learning and harmonizing both strengths and advantages of two companies - Dongfeng and Nissan.

　　Last year，we reached a total sales volume of 482,000 units. In 2007 this year，we target our sales at a double of year 2003 , that’s over 600,000 units. As what we have accomplished over the last three years, we will try our great efforts with an increasing enthusiasm of our 70,000 people to realize our mid-term business plan in 2007, the ending year of our 23 Plan.

　　Ever since the start of DFL operation in 2003, we adopted the concept “two wheels drive” strategy, which means to make PV& CV as two driving wheels to realize DFL’s balanced development. Now, let me briefly describe PV’s situation before telling you a story about Dongfeng Commercial Vehicle Company.

　　Over the past four years, we are persistent in pursuing to make Nissan-branded PV as one of the best brands by providing value for our customers. Based on this vision, we launched as fast as we can, one or two brand-new models every year. By today, we altogether launched seven new models, and as a result, our sales volume increased more than 3 times from 2003.

　　We focus on not only high-speed growth but also quality of management. Our manufacturing quality standard has reached the top level of NISSAN overseas plants, so we were honored the highest prize by Nissan Headquarters called “Nissan Global President Award”.

　　Now let me explain more about CV. For some historical reasons, among our total 70,000 employees, around 70% are engaging in CV and CV-related business. In DFL, CV business chain is the longest, most comprehensive and one of the two critical wheels in our “two-brand strategy”, so naturally it is a most important business area that attaches our greatest attention and efforts.

　　Dongfeng CV has been positioned as an industry leader. If we just look at its sales volume, it has already been among the top of the world. But if it compares with the real level of an international company, Dongfeng, like other local CV enterprises still has a long way to go. After the joint venture of DONGFENG and NISSAN，we set up its goal of positioning “No.1 in China and among top 3 globally”. This is mainly based on the need from the long run that Dongfeng CV Company will enhance its competitiveness both in domestic and overseas markets. Therefore, we believe that Dongfeng branding and its technology must reach a real global level and the mainstream Chinese CV companies like Dongfeng must play corner-stone role. “No.1 in China and among top 3 globally” is a long-term strategic goal，that reflects DFL’s solid determination and mission of making Dongfeng CV stronger and bigger.

　　Over the past four years, Dongfeng CV keeps a steady development. Both CV Sales Satisfaction Index （SSI） and Customer Satisfaction Index （CSI）maintain a high level in the industry with SSI ranked No.3 and CSI ranked No.2 in 2006.

　　Over the past four years，what we have primarily done was enriching and optimizing product line.

　　According to our market trend forecast, HDT TIV has basically maintained a steady increase. However, the HDT market share deceased from 2004 to 2005. A rush-buy situation that we had forecasted due to the strict policy of overloading control resulted in a big market need in 2004 as a short period. But when it came to 2005, the market trend was bounced back and the market needs shrank by a big margin as a result of the government macro economic control on over-heating and increasing diversification of the transportation tools.

　　Along with the China economy booming and the adjustment of policy and regulation in the automotive industry, CV’s market trend towards the super heavy-duty truck with strong horsepower become obvious. However, model mix change in TIV was more sensitive to some policies and regulations than we expected. This is characterized by a Shifting from Cargo to Trailer due to the readjusted regulation of “fee charge by weight”, therefore bringing a big market demand for multi-axle trailers capable of heavy pay loads. On the other hand, because of the fact that the strict policy of execution of overloading control was not well fulfilled as previously forecasted to result in a speedy market demand for heavier and strong horsepower HDT, the current actual market needs still remains at the segment between 260-290 horsepower.

　　However, Dongfeng CV traditionally was powerful just in medium duty and its extended medium heavy duty segments. In order to achieve the breakthrough in the real heavy duty segment with big horsepower as in China called “super heavy-duty”，Dongfeng CV finally developed an all-new HDT platform after three years of great effort.

　　We named it “Dongfeng Tianlong” and it was launched on May 18th last year. We will show you the result of our effort at a press conference tomorrow and give a high-profiled demonstration at the Shanghai Motor show open the day after tomorrow. You will see our Tianlong’s dynamic power with a modernized styling in the Exhibition Hall of E2. It’s also the first time in China’s CV exhibition history that you see those strong-power trucks being displayed inside the hall.

　　The launch of Tianlong series gives a full demonstration that Dongfeng CV today is strong and powerful in the high-end big-horsepower HDT truck segment. Therefore, Dongfeng’s full-line product availability from its traditional MDT, Medium HDT to today’s Tianlong Super HDT will guarantee to its successful accomplishment of the long-term strategic goal of No. 1 in China and among Top 3 Globally”.

　　I have to mention that different from introducing of NISSAN brand PV directly from DFL’s one parent company of Nissan Motor，Dongfeng Tianlong is an all-new HDT platform fully relied and developed by DFL itself. In the research and development process, we absorbed today’s global most advanced technology and leveraged Nissan way of R&D process management. For example, we strictly monitor and examine the performance, quality and cost control in every process milestone point.

　　D310 cabin was co-developed with NISSAN Diesel. It looks very powerful and modernized. You feel comfortable sitting inside and it’s safe in driving. Based on the technology introduced from Renault, dCi11 engine is the adaptation product that has reached international level. Other key components that we used on Tianlong were also updated, such as DANA axle, ZF transmission, upgraded Cummins engine, etc. On this Shanghai Motor Show，we will also display these key components.

　　Dongfeng Tianlong is specified into two primary platforms of cargos, transportation vehicles, construction and special-purposed vehicles with 11 series, the horsepower covers from 260-420. Based on these two platforms, we will gradually extend to many derivative models to satisfy the specific market needs.

　　Since its debut in May last year and after nearly a year of gingerly customers’ evaluation，Dongfeng Tianlong has been honorably evaluated and appraised by increasing number of customers for its excellent power, fuel efficiency, safety and liability. In October last year at the first China International Commercial Vehicle Fuel Saving Contest, three models of Dongfeng Tianlong harvested all 8 Best awards that include “the most fuel saving award” and “ high performance award” in the corresponding categories. After the tentative driving of Dongfeng Tianlong, many group customers bought Tianlong again after buying it for the first time on trial basis. They gave such comments as “the best fuel consumption and quality in locally-made”, “the comparable performance to the imported ones”, “service far exceeding to those imported”，and “the best domestic models to replace the imported trucks.”

　　By the end of last month，accumulated sales of Dongfeng Tianlong has exceeded 4000 units；in the just-ended March alone, Tianlong sales broke through one thousand. In 2007，we target Tianlong sales at 17,700 units.

　　Today we launched throughout China and overseas the globally-competitive Tianlong. In the future, we will continuously expand Dongfeng CV platform and diversify the models to satisfy the increasing market requirement, and further our breakthroughs on Medium-duty, Light-duty and key components. The optimization of Dongfeng CV product line will be carried on and on without ending.

　　Additionally, as our CV’s quality and performance being improved, we are accelerating our export to overseas. In 2003, we only exported 1300 units with a sales revenue of 14.6 million U.S. dollars But four year later in 2006, our overseas sales reached 10,800 units with an income of 168.2 million U.S. dollars. From the current high level of price to performance ratio, I firmly believe that we have great opportunity to export.

　　Thus, we can see that one advantage of DFL’s “two-brand strategy” is that both can fully play their strengths. Based on the succession and development of Dongfeng’s good tradition，Dongfeng CV takes a full use of Dongfeng and Nissan joint venture to introduce, absorb and practice Nissan’s management experience and way of operation so as to effectively enhance its operational quality and efficiency. Over the four years, Dongfeng CV has been dramatically changed not only on the aspect of product, but more importantly on the quality of management and operation.

　　During the four years，Dongfeng CV has absorbed a lot of advanced management models and experience. In the most significant field of groundwork management, we applied many cost effective tools, such as QCD improvement, KPI performance evaluation, CMS cash management system, SAP finance accounting information system and so on. And thanks to all these achievements, Dongfeng CV production way（DCPW）is being built up. Great optimization has been realized in almost every field, such as product planning, R&D, purchasing, manufacturing, sales and marketing. The improvement of groundwork management has greatly enhanced the whole management ability and competitiveness of Dongfeng CV Company.

　　For example, on the aspect of product quality，now the point of HDT quality measurement we name it “CS-VES” has been decreased to about 10 points from 50 points in the year 03.

　　On the aspect of cost control，compared with 2003, the actual cost of CV parts purchasing in 06 decreased by 15.9% from a planned target of 9.6%；on the aspect of production efficiency，the average labor production efficiency has been greatly raised by two times against the beginning year 2003.

　　Through management transparency, mutual learning of each other’s strength, practice of world-advanced management concept and method，through the cultural harmony of Dongfeng and NISSAN and continuous education and training， Dongfeng CV’s management ability as a whole has been enhanced，which lays a solid groundwork for its future growth.

　　Finally as my conclusion of this presentation, I would like to share with you my feelings from working experience with DFL:

　　Over the four years，DFL, the joint venture with the biggest investment, the biggest number of employees and the most comprehensive business line, has been moving steadily on the track. I have a lot of experience in the four years, but in my opinion, the following points are important for the healthy growth of joint venture.

　　One, Take the joint venture’s interest as the supreme principle.

　　Although there are expatriates dispatched from both Dongfeng and Nissan parent companies in DFL, joint venture’s maximum interest is our fundamental concept and the highest principle. Just under the direction of the highest principle we can reach the consensus in both thinking and action, therefore can build up a strong team. At the same time, it can pilot our company to a correct direction while raising the management efficiency;

　　Two, Keep management transparent through frequent communication and respecting each other’s difference.

　　We established Management Committee as the highest decision-making body of DFL so as to form the mechanism of discussing the main issues and making decisions. In addition, we also formed several Committees related to specific areas to discuss specific issues and make decisions, such as Product, Investment and Human Resources etc. These improved mechanisms have ensured the information transparency. Through these committees, both sides respect with each other, maintain cooperative working climate and work for the supreme interest of the joint venture. So, mutual trust for win-win situation is the corner stone to ensure a joint venture’s healthy development.

　　Three, Learn from each other and reform proactively.

　　We are from different companies and naturally have different way of operation. We take it as the difference of company culture between Dongfeng and Nissan, but at the same time as a good opportunity for us to study from each other. Each side has its own strengths and weakness, when we study together we can learn from the other’s strength to make up for our weakness, so that we can each complement with other’s strength and weakness to push forward DFL’s reform and innovation.

　　Four, take “the market and customer-focus” as DFL’s basic vision.

　　Above all, we are a joint venture and ultimately to win profit. But the profit can only be made from customers’ support. Therefore, it requires us to always think from the viewpoint of market and customers. Over the last four years, we have repeatedly emphasized and also practiced this “market and customer-focus” management concept and taken it as the core of our daily operational work.

　　Being growing faster through enthusiastic reform，DFL is moving forward on the road of globalization. In this hard-working process, I sincerely hope to get the continuous support from every one of you and media friends.

　　Thank you！