Post-Ford Mazda to play field

MAZDA says it will continue to co-develop future vehicle platforms and engines with Ford, which remains its largest single shareholder despite reducing its interest in the Japanese car-maker from 33.4 to 13 per cent.

But it will not rule out new strategic alliances with other vehicle manufacturers, and admits that some model rationalisation may be inevitable due to the global economic downturn.

“With the new relationship we have a new agreement, but it does emphasise that we will continue to develop projects that provide win-wins for both parties, so basically there will be no change in the relationship with them,” Mazda Motor Corporation (MMC) president and CEO Takashi Yamanouchi told GoAuto last week when he visited Australia for the first time since taking the Mazda reins from Hisakazu Imaki.

“Last November I took over from Imaki-san. That was on the occasion that Ford, which held 33.4 per cent of Mazda, sold 20 per cent and reduced their holding to 13.4 per cent and as a result some of the Ford people were repatriated to Ford, resulting in a new management team that was put in place, one of which was myself to CEO.

“Ford continues to be Mazda’s biggest shareholder. On top of that we have a relationship of more than 30 years, including many joint-ventures.

“We have some joint manufacturing facilities in some countries and we’re working jointly to develop both powertrains and platforms,” he said, adding that the reduced Ford influence at Mazda would not alter its product development course.

“There are many benefits we received from Ford people and we learned from them, but at the same time I think were many things they learned from us.

“Due to the change of ownership the number of Ford people (at Mazda) has been reduced, but we continue to have frequent and close communication with Ford.

“I don’t think there’s going to be any significant impact from the reduced number of Ford people at Mazda because we sell into 140 different countries and we have many people of different nationalities working together,” he said.



Left: Mazda president and CEO Takashi Yamanouchi.

In his third visit to Australia, which has the second-highest market share for Mazda globally, Mr Yamanouchi said Ford was not involved in the development of all-new direct-injection petrol and diesel engines that would appear in new Mazda models from 2011, but would have access to them for a price.

“Ford is not involved in the improvement of the base engine, which will be seen from 2011, and will first appear in completely new vehicles. (But) If they have interest then they will be welcome to use it,” he said.

Asked if Mazda was keen to develop new strategic alliances with European car-makers, the new Mazda chief said: “If I say anything it will be big news.

“I think that as competition become more harsh, collaboration with other auto-makers is one of the things we need to pay attention to.

“We already have a strong relationship with the Ford Motor Company so it’s not that we need some alliances. We have joint manufacturing facilities with Ford in China, Thailand and the US.

“The B-car (Mazda2/Fiesta) platform Mazda took the lead in developing, but with the C-car (Mazda3/Focus) platform Ford took the lead in development. And for example the I4 (inline four-cylinder) engines Mazda took the lead in development, while for the V6 Ford took the lead.

“We try to compliment each other’s strengths. So at present we don’t have any intention with co-operating with any European makers, but you never know what might happen in the future.”Mazda, which on February 4 posted a preliminary 25 billion yen ($A350 million) operating loss for its 2008 fiscal year that ended on March 31, said Ford’s stock sell-down would not alter Mazda’s future model development plans.

“Ford was in a very difficult situation, although not as severe as GM or Chrysler.

Ford was under pressure, which is why it was more or less compelled to sell 20 per cent of (Mazda) stocks.

“We bought back seven per cent of the 20 per cent they divested – the remaining 13 per cent went to friendly investors like suppliers. (But) ¥18 billion ($A252 million) is not big enough to have any material impact on development,” said Mr Yamanouchi.

The Mazda head would not reveal if any additional new models were on Mazda’s horizon.

Suzuki currently supplies Mazda’s Japanese domestic micro-car and speculation continues to circulate that Mazda will replace its current RX-8 sports flagship with a new coupe that will be powered by Mazda’s new 1.6-litre ‘16X’ rotary engine, as well as forming the basis of the next-generation MX-5. Both two-door models are expected to surface around 2012, while the all-new small Mazda was rumoured to emerge as early as the Tokyo motor show in October.

Asked if an all-new A-segment vehicle based on Ford’s Ka and rumoured to carry the Mazda1 badge would be given greater priority than the potential RX-9 sportscar, Mr Yamanouchi said: “I can’t deny going either direction but globally we consider it necessary to have unique products not only for driving performance but the environment.

“For the smaller car I think that’s a general trend globally, but if we shift towards the smaller car it is a very heavy pressure on profitability, so we have to balance as we try to expand our customer requirements.”Mr Yamanouchi, a 42-year Mazda veteran, said his company would not reduce the number of models it produces as a result of the crash in global vehicle sales, but would not rule out a rationalisation in the number of model variants.

“When we go through that process, ultimately it may result in some rationalisation. We may decide that what we have now is what we need, but on the other hand maybe we’ll see some rationalisation.

“Regrettably when we were struggling in the past we had various products coming in and out which is why our brand was not properly defined. When we went though the crisis around 2000, we studied thoroughly that point which resulted in not having any new products for nearly two years.

“The new era began with the new Mazda6 in 2002. Since then our policy for product development has not wavered one iota,” he said.

Mr Yamanouchi said Mazda was well positioned to weather the current financial storm because Mazda had already reduced its inventory levels and continued to retain an untapped ¥200 billion ($A2.8 billion) line of credit.

“In the current economic crisis all auto-makers’ biggest headache is how to get financing,” he said. “The major corporations have a mountain of inventory so they need a lot of cash. So it’s whether you use cash on hand or you go to the bank.

“Top companies are scrambling for cash and even for a smaller company like us ¥170 billion ($A2.4 billion) of cash went out the door. At the same time we reduced the level of debt by about ¥110 billion yen ($A1.5 billion) and we have a main bank which we rely on, so we haven’t had to rely on public or government assistance for survival like others have.

“In the US it is to avoid bankruptcy, in our case it is more a case of risk management. In the last quarter we achieved positive cashflow of ¥40 billion ($A559 million) and we think that trend will continue,” he said.

Mr Yamanouchi said he was planning for two more years of economic downturn and expected some markets would recover more quickly than others, but he warned that none would return to ‘normal’ levels.

“Generally, I think we are facing two more years of difficult conditions, depending on the market. And after that two years the markets will not go back to where they were before. Perhaps your market will grow after that, but globally I don’t think that will be the case.

“So I’m telling my people internally that focus, efficiency and speed are the keys. The markets will not go back to the way they were before. That’s why we need to focus selectively and work with speed.

“We have decided that to decide Mazda’s brand DNA we will only produce products that match that DNA. There are many types of customers in the market and we would be satisfied if Mazda appeals to only 10 per cent of the market,” he said.

Mr Yamanouchi said Mazda hopes to maintain or even grow its market share in difficult automotive industry conditions.

“Right now Mazda sells 1.3 to 1.4 million units (annually), which is a mere two to three per cent of the global auto market, so you could say that if we truly appeal to just 10 per cent of customers we will succeed. But for those 10 per cent we have to be a brand that provides complete satisfaction.

“It is extremely difficult to develop next year’s plan in a financial crisis, but our consensus is that any plan is to either grow or maintain our share. Over the past seven years and even over the past two months we have grown our share.

“We want to develop a plan that will maintain that growth. Market share is the key index. It is truly difficult to forecast the future, so it (maintaining share) depends on how much the market shrinks.

“Two years ago when the world was basically peaceful we sold 1.36 million vehicles. In the recent fiscal year that ended in March we forecast 1.24 (million global sales) but we ended up with 1.26 million, so our volume fell from 1.36 to 1.26.

“So if you extrapolate that I wonder what’s going to befall us next year. We base our volume assumptions on what happens in the second half of our fiscal year – October to March – so if you double that it could be a good indicator of what to expect.

“We’re working to ensure that even with reduced volume we will be able to achieve good cashflow and profitability,” he said, before adding that Mazda’s official 2008 fiscal year financials would be revealed in May, when MMC would also issue its FY2009 forecast.

Mr Yamanouchi said Mazda production grew in the first two quarters of its 2008 fiscal year, but dropped sharply in the third following the Lehmann bank collapse on September 15 and fell further between January and March this year in an effort to reduce stock levels.

“It was a very tough decision to cut production this much, but as a result we were able to get our stocks in line, which had a very positive effect on cashflow. In the final quarter our plan was to do a little more in terms of inventory adjustment,” he said.

Mr Yamanouchi said Mazda’s current stock levels were close to ideal and production would increase from April, but he fired a parting shot at the stockpile allegedly amassed by arch-rival Honda.

“Because of the sudden downturn, all brands have suffered inventory bloating. Especially the major brands in the US have suffered extreme inventory conditions,” he said.

“I don’t want to talk about others but I know that Honda is especially suffering under extremely heavy over-stock conditions. That’s reflected in the fact that among the Japanese brands they had the lowest per unit incentive, now they have the highest.

“Mazda has suffered similar conditions but in our case it is on a smaller scale. We too suffered from overstock and in Europe we have three months of inventory and in the US we have about 120 days of stock in dealers.

“Immediately after we saw the situation we cut production drastically and right now we are very close to where we want our stock to be. At the end of March we were able to achieve optimum inventory levels, but we want to work even harder to get the stock to ideal levels.

“When you consider what can happen it behoves us to take this action,” he said.

Finally, Mr Yamanouchi said Australia continued to be one of the top-performing markets for Mazda globally. The Japanese brand increased its local market share by 3.1 points between 2002 (4.4 per cent) and 2007 (7.4 per cent), and last year attracted eight per cent of Australian new-vehicle sales.

Thanks largely to the Mazda3, which was Australia’s top-selling vehicle in January and will be replaced this week, Mazda achieved a record share of 9.7 per cent in January and holds an 8.9 per cent of the market after the first quarter of 2009.

“I look forward to coming to Australia because it is one of the benchmark markets for Mazda, with best-practices as we see it,” he said.

“We know that because dealer satisfaction is always top-notch and the CS (customer satisfaction) is also top-rank. So as a result this is the second highest market share that Mazda has globally.

“Within the Mazda group globally Mazda Australia is a benchmark market for us, so all the other markets come to Australia to learn how they’re doing the operation,” said Mr Yamanouchi.

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