Mazda May Exit From U.S. Factory Operated With Ford

By Makiko Kitamura and Yuki Hagiwara - Feb 18, 2011

Mazda Motor Corp. may pull out from a U.S. factory it operates jointly with Ford Motor Co. after production turned unprofitable, Chief Financial Officer Kiyoshi Ozaki said.

The company will announce plans for the factory in Flat Rock, Michigan, by middle of this year, Ozaki told reporters in Tokyo today. Mazda may also consider overhauling the plant or changing the models built there, he said without elaboration.

Mazda, Japan’s second-largest auto exporter, has been hurt by the yen’s sustained rise against the U.S. dollar in recent months. The Hiroshima-based company’s U.S. sales fell 9 percent in January, as increased incentives on Toyota Motor Corp.’s Corolla compact, and demand for Hyundai Motor Co.’s Elantra sapped demand for the Mazda3, Ozaki said.

A decision by Mazda to leave the plant shared with Ford since the 1980s “wouldn’t catch Ford off guard,” said Kim Hill, an economist with the Center for Automotive Research in Ann Arbor, Michigan.

“Unlike several other Ford facilities, Flat Rock hasn’t had a major recent investment in flexibility,” Hill said. “If Mazda were to leave, Ford would probably want to look at putting something off its small-car platform in that facility.”

Marcey Evans, a Ford spokeswoman, declined to comment.

The Michigan plant needs to run at 70 percent of its full 240,000 annual capacity to make a profit, Ozaki said earlier today. Mazda aims to introduce a more fuel-efficient engine to spur demand and increase domestic production to improve economies of scale after slipping into a third-quarter loss.

Mazda will need to adjust U.S. inventory by 5,000 units through the end of March, he said.

Ford’s Stake
Mazda aims to increase domestic production 33 percent to 1.1 million units in the year ending in March 2016, compared with 827,910 units last fiscal year. The ratio of exports will also increase as demand for cars in Japan declines, he said.

Mazda’s Michigan plant produced about 54,000 units last year, Ozaki said.

Ford, the second-largest U.S. automaker, reduced its stake in Mazda to 3.5 percent from 11 percent last year, scaling back an alliance of more than 30 years. The Dearborn, Michigan-based automaker formed an automatic-transmission joint venture with Mazda in 1969 and acquired a 25 percent stake in the Japanese automaker in 1979.

The U.S. carmaker took effective control of the Japanese company in 1996, raising its stake to 33.4 percent. It reduced the stake to 13 percent in November 2008, and a share issue by Mazda in 2009 further shrank the holding to 11 percent.

New Powertrain
Mazda plans to introduce its new “Skyactiv” powertrain system across almost all models by 2015, starting with the domestic, U.S. and Australian markets this year. Earlier this month, the carmaker reported a third-quarter loss, citing the strength of the Japanese currency which reached a 15-year high in November.

The new Demio compact, the first model to use the system, will go on sale in Japan in the first half of 2011 and runs 30 kilometers per liter of gasoline under the Japanese testing system, Mazda said in October. The new car’s fuel-economy rating is the same as the hybrid version of Honda Motor Co.’s Fit and better than the current Demio’s 23 kilometers per liter.

Yen’s Impact
With exports making up 80 percent of Japan production in 2010, Mazda is more vulnerable to the yen’s impact than its domestic rivals. The strong yen against the dollar cut nine- month operating profit by 13.6 billion yen ($163 million), the company said this month.

Mazda posted a net loss of 2.7 billion yen for the three months ended Dec. 31. The company will still meet its full-year profit forecast of 6 billion yen as sales in Japan recover, Ozaki said.

While the strong yen erodes profitability of exports, Mazda needs to increase domestic output to boost economies of scale, the company has said. It aims to increase domestic production 33 percent to 1.1 million units in the year ending in March 2016, compared with 827,910 units last fiscal year, Ozaki said today.

Source;
http://www.bloomberg.com/news/print/2011-02-18/mazda-s-cash-position-won-t-improve-next-fiscal-year-cfo-says.html