Mazda Motor Corp. ("Mazda"; head office: Fuchu-cho, Aki-gun, Hiroshima Prefecture; president: James E. Miller) and IBM Japan, Ltd. (head office: Minato-ku, Tokyo; president: Kakutaro Kitashiro), reached a basic agreement on October 7 in which Mazda will consign (outsource) most of the development, maintenance, and operation of its information systems to IBM Japan. For the purposes of these operations, IBM Japan will establish a new IT (information technology) service company in November. The new company will be fully financed by IBM Japan.

This basic agreement represents a meeting of minds between the two companies on a number of levels. Mazda aims to improve the efficiency of development, maintenance, and operations processes and improve the quality of its service, while at the same time strengthening its planning and strategy development functions. It also intends to promote a transformation of business processes through the use of information technology. IBM Japan, on the other hand, aims to establish a foothold for its service business in the Chugoku District and to bolster its overall service business capabilities for customers especially those in the manufacturing industry.

Based on the outsourcing agreement to be signed by the two companies, IBM Japan will undertake the development and maintenance of all of Mazda's information systems except those in the area of research and development, as well as all operations involving Mazda's three host computers, two supercomputers, 10,000 personal computers, and the networks that link these computers. The term of this outsourcing agreement will be ten and one half years from December 1 of this year, and the agreement is expected to be worthapproximately 50 billion yen. This is the largest outsourcing agreement to be concluded in the domestic automobile industry or any other manufacturing industry.

The company to be established by IBM Japan --IBM Global Services Japan Chugoku Solutions Company* -- will have approximately 350 employees at the outset. This staff will be comprised of employees transferred from Mazda C&T Co., Ltd., Mazda's wholly owned information systems subsidiary ("C&T"; head office: Minami-ku, Hiroshima City, president: Takashi Itakura), as well as assignees from Mazda's information systems division and from IBM Japan. Mazda C&T will transfer business operations including systems operation, data entry, and systems development to the new company in December of this year, and C&T itself will be dissolved in March 2000.

[*Outline of New Company]

Company name: IBM Global Services Japan Chugoku Solutions Company (also called "IGSCH")

Location: Minami-ku, Hiroshima City, Hiroshima Prefecture

Capital: 10 million yen (invested entirely by IBM Japan)

President and Representative Director: Kenji Ono (currently responsible for IBM Japan's financial solutions services for western Japan)

Establishment: Expected to be on November 4, 1999

Operation is expected to start on December 1, 1999.

Number of employees: Approximately 350

Major business operations:

(1) Providing services based on an outsourcing agreement with Mazda
(2) Consulting services in other areas, related to development, maintenance, and operation of information systems, as well as commission work in these areas
(3) All operations incidental to or related to the foregoing