Mitsubishi Motors and MHI Announce Joint Development of a New Generation Diesel Engine

TOKYO - June 20, 2006: Mitsubishi Motors and Mitsubishi Heavy Industries have agreed on a joint development project for a new generation diesel engine to be used in cars exported to Europe. After the agreement is finalized, development will begin in earnest with a target of beginning mass production in 2010. Demand for diesel engines has been growing as the European market calls for lowering CO2 emissions. Mitsubishi Motors, together with efforts in electric vehicles, is developing this engine as a nucleus of its environmentally friendly technology.

The engine will be a two-liter class unit aimed for use in small to mid-sized cars. In addition to meeting Europe's strict new emissions standards (Euro5*), the unit is aimed to achieve best-in-class levels of output and emissions performance. Development will be completed in mid-2009, and the engine will be introduced to Mitsubishi Motors' key European market models.

Mitsubishi Motors currently uses proprietary diesel engines in its European market Pajero SUV model as well as in the Triton pickup (L200) manufactured in Thailand. In small and mid-sized cars however diesel engines are supplied by Volkswagen AG and DaimlerChrysler AG.

In addition to possibly providing engineering expertise gained through experience in industrial and marine diesel engines, as well as in gas turbine technologies, Mitsubishi Heavy is studying the provision of equipment and systems for development and testing. Also, expert engineers may be dispatched from Mitsubishi Heavy to Mitsubishi Motors to aid in the project.

Going forward, Mitsubishi Heavy will continue to provide technical expertise and support to aid in the execution of Mitsubishi Motors' revitalization plan, while also expanding co-development projects and other businesses that benefit both companies.

* Euro5: A new emission standard to be enacted from 2010. The new standard calls for stricter standards for particulate pollutants and emissions of nitrogen oxides over the current Euro4 standard.

About Mitsubishi Heavy Industries, Ltd:

Mitsubishi Heavy Industries, Ltd. ('MHI'; TSE: 7011), headquartered in Tokyo, Japan, is one of the world's leading heavy machinery manufacturers, with consolidated sales of 2,792 billion yen in fiscal 2005 (ended March 31, 2006). MHI's diverse lineup of products and services encompasses shipbuilding, steel structures, power plants, chemical plants, environmental equipment, industrial and general machinery, aircraft, space rocketry and air-conditioning systems. For more information, please visit the MHI website (http://www.mhi.co.jp).