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July 17, 2009

Notice Regarding China-based FAW Jilin

DAIHATSU MOTOR CO., LTD. (Daihatsu) signed a memorandum on June 30, 2009 regarding a change in the framework of the joint business with China FAW Group Corporation (FAW) and FAW Jilin Automobile Co. Ltd. (FAW Jilin Auto) in accordance with its technology licensing agreement with FAW Jilin Auto.

(1) In June 2007 Daihatsu, together with FAW Jilin Auto, an affiliate of FAW, began sales of the Xenia (Chinese name: Sen Ya), a compact multi-purpose passenger car. However, two years after the beginning of sales, and facing a situation where only 5,100 units were sold in 2008, meetings with the partners FAW Jilin Auto and FAW began to be held regarding business-related issues and policies to break through the current impasse, as well as regarding measures to advance their joint business in the future. These talks led to a revision in the framework of their alliance and an agreement to further enhance management efficiency.

(2) Content of Agreement

  1. Change the product brand from "Daihatsu" to "FAW."
  2. Continue the current licensing agreement for technology and do not alter the cooperative relationship with FAW Jilin Auto and FAW.

*Discussions are currently underway regarding issues that include the time period and details regarding the two points listed above, as well as how the vehicle body and parts manufacturing company established jointly by Daihatsu and FAW Jilin Auto in April 2006 will be handled.

(3) Background to the Agreement

  1. It became clear that, despite establishing the business infrastructure of FAW Jilin Auto and making steady progress in the transfer of technologies from various fields, in order to further increase sales it had become necessary to raise the recognition level of the Daihatsu brand and resolve issues regarding such aspects as the competitiveness of brand pricing and the sales system.
  2. Faced with this situation, and given the rapid worsening of the business climate and outlook for performance in the wake of the global economic downturn, Daihatsu has decided to implement a policy of further strengthening its main businesses and revising its projects from the perspective of prioritizing and centralizing its business resources, as well as to revamp its product brands in China.
  3. Intensifying competition in the market for compact vehicles in China has led FAW Jilin Auto and FAW to conclude that in order to promptly increase sales it is necessary to revise the framework of business so that it heads in a direction that stimulates the comprehensive brand power of FAW.

Daihatsu intends to spur the continued development of the joint business of FAW Jilin Auto and FAW in China, while at the same time focusing its resources for the development, production and sale of inexpensive, fuel- and resource-efficient vehicles, thus bringing about a thorough reorganization that results in a business that is simple, slim and compact.

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