own directions by deciding on a single comprehensive direction for the Company as a whole. We believe this attitude is having amajor positive effect on the motivation and awareness of everyone at FHI. For example, the Aerospace Company was in effect overshadowed by FHI’s automotive business and had in fact lost some momentum. But thanks to the start-up of FDR-1, we returned to the roots of FHI’s aerospace business to target synergies between automobile and aerospace activities, and, after hammering out a long-term vision, we were frankly aston- ished by the improvement in the motivation of members of the Aerospace Company. We further believe our design reform will have a major impact on the awareness and motivation of everyone at FHI. Design is something that can be immediately seen and appreciated, and our new designs will enable all our staff to connect clearly with the directions we are heading in terms of quality and manufacturing. A key issue for the next four years of FDR-1 will be how to cultivate these initiatives into solid accomplishments.  Global Enterprise with Key Positions in Japan and the United States As I have mentioned, FHI must develop a consistent brand presentation all around the world. A substantial portion of our earnings comes from the U.S. market, subjecting our flow of earnings to fluctuations in currency exchange rates. In fiscal 2003, we established our high-performance strategy in the United States, and our unit sales in both Canada and Australia have hit record levels for five years running. As this and other developments suggest, we have made solid progress toward building brand equity for the future in overseas markets overall.  On the other hand, the event that had the impact of obliging us to rethink our strategy was the dissolution of our joint venture agreement with Isuzu Motors Ltd. In formulating FDR-1, we had anticipated that Isuzu might withdraw from production in the United States but we had not anticipated that our joint venture Subaru- Isuzu Automotive Inc. would become our wholly owned subsidiary by January 2003. Additional costs to be incurred as a result of the pullout by Isuzu will be covered through 2014 by compen- sation payments from Isuzu. Accordingly, the circumstances assumed under FDR-1 are not expected to change significantly. However, now that both the manufacturing and sales companies have become wholly owned subsidiaries, we must develop new plans as quickly as possible for our U.S. operations to reach the goal of selling 300,000 units annually in North America. At the same time we make our U.S. operations be able to stand on their own, we must restructure these activities as a business oriented to the North American domestic market so they are no longer so heavily influenced by changes in foreign exchange rates.  The product strategies to attain this objective will differ between Japan and the United States. Developing a product portfolio that will have global offerings common to each market as well as products suited to individual markets will be a major key to success. Our global product offerings will include the new Legacy model, which are scheduled to be launched for U.S. market in 2004. Then, in 2005, we plan to introduce a cross-over model focusing on the North American market. Along with these offerings, we will bolster our sales capabilities in North America Annual Report 2003 5 New Legacy Product Strategies Next-generation “pr emium” compact cars (N-PF N-PS)* High  speed  cruising Accel eration Start Warm-up IGN-ON GLYPH<L50539> Realize strategic pr oduct portfolio and brand-building scenario GLYPH<L50539> Reform organization and design mindset Development of flagship car for North America Development of new concept minicars Revolution in design Developing new design language Developing strategies on a global scale Brand value Introduction of pr emium Legacy 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 *N-PF: Next-generation new platform N-PS: Next-generation hybrid power source