KAWASAKI-SUZUKI ALLIANCE ENTERS NEW PHASE The “alliance” announced in August 2001 between Kawasaki Heavy Industries, Ltd., (KHI) and Suzuki Motor Corporation (SMC) will now focus on potential exchanges of indirect resources, rather than on direct OEM product exchanges. It was originally formed as a mechanism to allow sharing of parts sourcing, platform production of OEM units, and joint development of new products. Following a successful three-year arrangement, both companies have considered factors related to sales volume, profitability, customer reaction, influence on brand image, and competitiveness of each OEM product. The two brands have jointly agreed that more focused, independent development activity will serve to further enhance their respective brand identities with their loyal customer bases. This modification to the alliance relationship will mean that OEM product sales will be discontinued, and the following models will not be available from Kawasaki, effective with the 2007 model year: KLX125A/B, KSF80A, KSF50A, KDX50A KHI product development has been accelerated during the initial alliance phase, as more resources were able to be placed against brand-specific product needs. The company will continue to develop new models to replace some of the above. Meanwhile, the KSF400A will still be produced for model year 2007. Achieving significant savings in development resources was a primary goal of the relationship with SMC, and having done that, KHI is in a stronger position for investment spending against future product introductions. The market environment is such that expectations for new technologies and their product applications are ongoing, and KHI is intent on continuing to deliver excellence in these areas. The alliance with SMC, and its benefits to our dealers, will be reviewed on a regular basis. Joint activity will be determined based on careful review of the effect it will have on both retail profitability and customer loyalty.