Revision of Forecast Financial Results, Additional Allocation to Accrual for Product Liabilities and Reversal of Deferred Tax Assets

Although motorcycles sales in Asia have been robust, demand for Yamaha Motor Group's mainstay products ― motorcycles, marine products and power products ― has been sluggish in Europe and the United States, with no sign of recovery in sight. Consequently, the Yamaha Motor Group's consolidated sales have declined, compared with the figures for the same period of the previous fiscal year. In addition, the yen is persistently strong against the U.S. dollar. These negative factors have created very harsh business conditions for the Yamaha Motor Group.

Against this backdrop, during the second half of fiscal 2009, the Company will pursue group-wide countermeasures designed to return the Yamaha Motor Group to profitability on an operating income basis in the fiscal year ending December 31, 2010.

In fiscal 2009, the Company projects a decrease of 45.0 billion yen in marginal profit resulting from production cutbacks in Japan, which are intended to reduce market stocks (distributors' stocks and inventories) in Europe and the United States. The stock adjustment is a response to an increase in marginal profit due to the restoration of production volume in Japan for fiscal 2010. The Company will post an additional expense for stock sales promotion in Europe and the United States to its previous projection, totaling 6.0 billion yen.

Meanwhile, the Company will continue promoting the thoroughgoing cost reduction programs it started at the beginning of fiscal 2009, including additional targets for urgent expense cutbacks. It will also seek to generate free cash flows by further reducing market stocks in Europe and the United States.

In the effort to improve profitability by reducing fixed expenses, the Company plans to post an expenditure for business structural reforms, including an impairment loss on its manufacturing equipment and facilities, amounting to 48 billion yen, as a temporary expense for fiscal 2009. The Company also recorded deferred income taxes amounting to 29.8 billion yen for the first half of fiscal 2009. This figure arises from a reversal of deferred tax assets and other factors.

Consequent to these developments, the Company has revised its forecast consolidated and non-consolidated business results for the fiscal year ending December 31, 2009 downward substantially from the original forecasts announced in February 2009.

The revised forecast is based on the assumption that one U.S. dollar and one euro will equal 90 yen and 130 yen, respectively, during the second half of fiscal 2009.

As a part of the consolidated financial settlement for the second quarter of fiscal 2009, the Company allocated an additional 3,717 million yen accrual for product liabilities to selling, general and administrative expenses. The additional allocation was implemented in response to the claim situation involving side-by-side vehicles manufactured by Yamaha Motor Manufacturing Corporation of America, a transportation equipment manufacturing subsidiary in the United States. Including the additional amount, the Company allocated a total of 8,614 million yen to accrual for product liabilities for the first half of fiscal 2009.

As a part of the consolidated financial settlement for the first half of fiscal 2009, the Company allocated 29,839 million yen (26,479 million yen on a non-consolidated basis) to deferred income taxes by a reversal of deferred tax assets, based on the finding of its own review.