Mazda sells shares to shore-up future
BY BYRON MATHIOUDAKIS | 27th Feb 2012
Speaking at the launch of the vital new CX-5 compact SUV in Canberra, Mr Dickson said only that it will be “business as usual” in Australia, adding that he is pleased with the state of the local operation.
Mazda – Japan’s fifth-largest car-maker – announced plans on February 22 to raise up to $2 billion dollars in funds through the selling of shares and the acquisition of bank loans, to help it weather a period of sustained losses and economic difficulty brought on by an appreciating yen, the crippling 2011 natural disasters in Japan and Thailand, and the ongoing European financial crisis.
A fourth loss in a row is expected for the current Japanese financial year (ending March 31, 2012), with some analysts forecasting that figure to exceed $A1.15 billion.
More than $A1.2 billion worth of shares of common stock will be offered next month, while the loan amount is over $A800 million, to be repaid over a period of 60 years.
Last week’s share announcement – which will diminish existing shareholdings by up to 38.7 per cent – saw Mazda’s share price plummet by around 10 per cent on the Tokyo exchange. The company’s shares are currently worth one-third less than at the same time last year.
Analysts suggest the large share issue threatens Mazda’s independence because a large single investor – perhaps another car-maker – could snap up a substantial percentage of the company.
While Mazda is a volume brand in Australia, it is only a niche brand on a global scale and some analysts suggest it will have difficulty continuing to exist as an independent company.
With its financial standing temporarily “worsened” over the last 18 months, Mazda says it needs the funds in order to stick to its business plan, outlaid in 2010, that stipulated improving its brand value, accelerating manufacturing technology innovation and substantially cutting fixed costs.
A key component for Mazda is the rollout of its advanced SkyActiv chassis and drivetrain technology, as first combined in the CX-5.
Eight vehicles in total – including the next generation of Australia’s top-selling car, the Mazda3, as well as next year’s Mazda6 – are earmarked to receive variations of the SkyActiv technology by March 2016, making up to 80 per cent of the company’s automotive portfolio.
Mazda plans to recover the massive investment involved in development of SkyActiv by licensing the technology to other car-makers as part of a renewed push to increase global alliances that also includes production and marketing strategies.
However, a partnership arrangement with another manufacturer could prove problematical because of the Ford Motor Company’s existing 3.5 per cent share in Mazda – down from a 33.4 per cent high at the end of the last decade.
Mazda plans to increase overseas production from the current 30 per cent to 50 per cent by March 2016 to help lower costs and shield it from the strongly appreciating Japanese yen.
About $A500 million of the funds being raised are earmarked for new production plants in Russia, Mexico and in the ASEAN region (most likely Thailand), as well as the production of SkyActiv engines in China, to help make Mazdas more cost competitive and profitable in emerging markets.
Mazda and Ford currently have joint ventures in Thailand and China.
The 2010 strategy plan originally called a 20 per cent reduction in the cost of producing the next generation of Mazda vehicles, but the goal is now 30 per cent.
Moving production of the next-generation Mazda6 to Japan next year from the never-profitable joint-venture operations with Ford in Flat Rock, Michigan, is another small but important step in the company streamlining its efficiencies.
But getting the CX-5 firing is the top priority right now, with one executive admitting that Mazda’s future globally rests squarely with the success or otherwise of the new compact SUV.
