September 25, 2009

Daihatsu Adopts Procurement Guidelines
to Reform Cost Structures

DAIHATSU MOTOR CO., LTD. (Daihatsu) announced today that it adopted Procurement Activity Guidelines intended to dramatically reform its cost structures so it can survive in a time of increased global competition with regard to cost and high fuel efficiency.

Daihatsu has been implementing the SSC (simple, slim, compact) concept at the Oita (Nakatsu) Plant No.2 and the Kurume Plant of Daihatsu Motor Kyushu Co., Ltd. and is expanding activities to other plants in order to reduce the costs of internal manufacturing. Daihatsu recently conducted a fundamental review of procurement activities with respect to purchased parts, which account for a substantial portion of manufacturing costs, and is reinforcing its mini vehicle focused cost-cutting activities through initiatives such as the thorough application of open and fair business practices.

Within the Toyota Group, Daihatsu handles the production of small cars and seeks to establish at an early date a business model suitable for the mini vehicle business. Through the manufacture of low-cost, fuel-efficient, and resource-saving vehicles Daihatsu will aim to conduct business in ways that are valid throughout the world.

Summary of the Procurement Activity Guidelines and Details of Activities

Procurement Activity Guidelines

Daihatsu will collaborate with suppliers to respond in a timely manner to environmental changes and manufacture high-quality products at low prices that are suitable for mini vehicles.

1. Daihatsu will construct new, low-cost procurement infrastructure based on open and fair practices without adhering excessively to past procedures.
2. Thorough cost cutting will be implemented in collaboration with suppliers to achieve mutual growth and build relationships based on trust.
3. Senior management will carry out the principle of genchi-genbutsu (going to the source of a problem and clarifying the problem with one's own eyes) and establish a professional procurement organization with a thorough understanding of value founded in products, manufacturing, and costs.

Details of Activities

1. Information specific to mini vehicles will be gathered from all suppliers worldwide and its usage encouraged to ensure open and fair procurement activities.
2. A simple and slim supply chain that thoroughly eliminates waste will be established to maximize added value.
3. Daihatsu will work with suppliers to develop high-quality, inexpensive parts that are easy to manufacture and can contribute to high fuel efficiency and resource conservation and to increase the use of common parts (thus reducing the number of different parts) in order to achieve the benefits of economies of scale.
4. Procurement reform will be positioned as a company-wide activity and an inter-departmental committee will be established. The role of the Purchasing Group will be clarified and all its functions strengthened in order to create an optimal organization that can handle various business transaction formats.