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New Year Message from President Omiya

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In 2012 the Japanese economy remained sluggish, with no progress achieved toward pulling the nation out of deflation and the strong yen eroding the earnings of its export industries. Compounding matters were the strong winds of adversity kicked up by the diplomatic rows with neighboring countries and energy issues. The global economy meanwhile managed to sustain overall growth, albeit at an extremely modest level, with expansion of the Southeast Asian economies offsetting the debt crises that plagued Europe and the U.S. economy's lagging recovery.

Amidst this business environment, the MHI Group is charged with the task of applying its comprehensive capabilities toward achieving the goals set in the 2012 Business Plan drawn up last year. This plan indicates the path the Group must pursue to secure its future, and 2013, being the second year of its implementation, is a crucial year in the quest to achieve the plan's goals.

With this in mind, we wish to make requests in three important areas as we start off this new year.

1. Enhancement of Our Strengths and Synergies through Consolidation and Reorganization of Business Headquarters (Launch of 4 Domains)

Under our 2010 Business Plan, we pursued a stronger business structure on a companywide basis, implementing reforms targeting a dynamic and resilient organization under which allocation of business responsibilities would be more clearly defined. Last year we also adopted the "strategic business unit" approach and created 64 SBUs each able to make strategically important decisions. This year, leveraging the results already achieved, we will continue to undertake further, even more comprehensive, consolidation and reorganization of our business headquarters to enable greater synergies. Specifically, in view of similarities within various SBUs in terms of the nature of their product operations, applied technologies and quality control programs, we will consolidate and reorganize into four domains: "Energy & Environment," "Machinery, Equipment & Systems," "Transportation" and "Defense & Space." This initiative will enable efficient use of our human, material and financial management resources transcending beyond conventional parameters, allowing for application of the respective business strengths of each domain and realization of enhanced global competitiveness enabled by the new structure's greater synergy merits.

At the same time, reforms – no less pervasive than those introduced into our business departments – will also be implemented to make our corporate departments more sophisticated and more efficient. Human resources will be directed into our sales and service segments as a vital way to strengthen the support provided by these areas to our business operations.

Our reform program for 2013 is thus large in scale and will serve to fundamentally change our organizational structure. The reforms we carry out will enable us to turn our comprehensive strengths to even greater advantage, in our underlying quest to grow into a global entity on par with our competitors in terms of both scale and earning capacity. I ask for the cooperation of all employees as we move forward with these dynamic developments.

2. Acceleration of Our Global Business Expansion

Through the years the MHI Group has implemented a host of reforms aimed at enabling us to become an agile and resilient global player. To drive this movement further forward, acceleration of our business expansion initiatives is a pressing necessity. Competition in the global market is fierce, however; and in order to come out a winner as a leading global company, in November 2012 we made the bold decision to undertake business integration with Hitachi, Ltd. in the core area of thermal power generation systems. We have also assembled a large number of necessary mechanisms in recent years: for example, by installing a comprehensive representative to oversee the Asia-Pacific region, which is a strong growth market, and by establishing a financial subsidiary in North America.

This year, in our business departments we will add unprecedented speed to our development of new business models aimed at increasing added value, focusing on all aspects from product development and supply to sales and servicing. We will also accelerate our global network building of shared factories. In our corporate departments, I would like to see greater sharing of, and higher efficiency in, tasks that support our global business developments, as well as all-out efforts made in the provision of advanced business infrastructure.

3. Attainment of Higher Levels of Safety and Reliability

Last year a number of serious problems were experienced that were attributable to flaws in design or product quality, events that caused significant inconvenience to all those affected. Needless to say, product safety and reliability constitute the core foundations of technology, and these factors do not allow for any compromise whatsoever. In all departments – design, manufacturing, quality assurance, research and development – I would therefore like for all employees to return to the basics, to consider what technological verifications should be undertaken today and ponder what technologies should be developed for tomorrow. I would like every effort to be directed into a "return to technology" in order to enhance our technological capabilities even further. And I would like every conceivable initiative to be taken to secure optimal safety and reliability.

This year will be a critical milestone in our production of the first unit of the MRJ: Japan's very first jet wholly manufactured domestically. In this respect, 2013 will see the eyes of the world focusing on what we will achieve. I thus ask all employees to make every effort, to take the utmost care, in all aspects that are linked to preventing any mishap in this aircraft's production, installation work, operation, etc.

Various reforms undertaken until now have been extremely fruitful. This year we will set our aim even higher and take our reform program to a new plateau. By working together in harmony, I am confident that collectively we can build a new MHI Group for tomorrow.