Mazda CEO targets higher sales, upscale brand image
AUTOMOTIVE NEWS: When will Mazda's streak of red ink end?
TAKASHI YAMANOUCHI: The foreign exchange rate has the biggest impact on our performance. We absolutely need to return to profitability this year. So far, that won't be a problem. It's my commitment to achieve a profit at the end of March.
Photo credit: BLOOMBERG
TOKYO -- After Mazda Motor Corp.'s fourth straight year of net losses, CEO Takashi Yamanouchi has the company poised to rebound to profit and big sales growth.
The export-reliant automaker is fighting the yen's unfavorable exchange rate with a plan to build cars -- including one for Toyota Motor Corp. -- at a new plant in Mexico.
Yamanouchi, 67, also is banking on Mazda's new line of chassis, frame, engine and transmission systems, known collectively as Skyactiv technologies, to move the brand upscale. The goal: Minimize incentives and command better residuals.
Yamanouchi spoke through an interpreter with Asia Editor Hans Greimel about Mazda's comeback plan.
Q: What are your priorities as CEO?
A: I became president after the Lehman Brothers collapse and my first mission was to achieve a return to profitability.
I've been president for only four of Mazda's 92-year history. For 18 years, Sumitomo Bank came in to lead the business. And that was followed by 12 more years during which Ford controlled the company. So for 30 years, in a sense, Mazda people have not been in direct control of the carmaking.
Only in the last four years have we become independent.
What is your U.S. sales outlook?
The Mazda3 with Skyactiv, which is strong today, will also contribute significantly next year.
With the production constraints being eliminated on the CX-5 and the addition of a 2.5-liter to the lineup next year, we will see very strong growth in that product.
And we have high expectations for the CX-9's recent refreshing. Next year, we'll also have the full-year impact of the Mazda6 and, in the latter half, we also plan to introduce a diesel.
In the first half of this year, we've only deployed Skyactiv technologies in the CX-5 and Mazda3.
Skyactiv has the secondary effect of enabling dealers to reduce discounts as well as improve residual values, which enhances dealer profitability.
What is your midterm U.S. sales goal?
When we reach 1.7 million units globally [in the fiscal year ending March 31, 2016], we have an objective for what portion should come from the United States.
Knowing that dealer motivation is growing and that they are actively investing in their franchises, it should be at least 400,000 units. So it's a significant jump from current levels.
But we don't intend to increase the number of stores.
What role will the Mexican plant play in the expansion?
I can't disclose the number of Mazda2s and Mazda3s from the plant that will be destined for the United States. But that volume will be incremental volume. If it takes the place of production in Hiroshima or Yamaguchi, it would lead to hollowing out of the employment, production and economy of those regions.
Will Mazda2 sales grow because of Mexican output?
When we ship the Mexican-produced Mazda2 to North America, it won't be the current vehicle but a full-model change incorporating the full set of Skyactiv technologies. It will be more competitive in terms of the exchange rate, as well as having superior technology.
We foresee greater demand for that product in Canada and Mexico than in the United States.
Because of the exchange rate, we're not able to dedicate too much marketing to the current generation. But with the new model, we think we can get a fresh start.
Will you be co-developing the car built in Mexico for Toyota?
Using the Mazda2 that incorporates Skyactiv, we will build a product that has a Toyota top hat. Toyota will be making the decision on the top hat. But we will be involved in the styling and engineering.
For Toyota the volume will be 50,000, and that will be on top of the two-shift 140,000 units for Mazda production. Toyota will bear their share of facility and tooling investment. It will provide the Mexican plant a more stable operation as well as help reduce per-unit cost.
Will you pursue similar tie-ups with other carmakers?
For a company of our size, in order to vie with the giants of the industry, we have a certain strategy. The ultimate aim is whether these alliances will strengthen our brand as well as strengthen our business foundation.
There is no mention of an equity relationship in this strategy.
Right now, Mazda has an equity relationship with Ford, although Ford's equity holding has come down. But we continue to have dialogue and exchange information with Ford. Especially in Thailand, we have a very strong relationship with Ford.
You have stopped building cars at Auto-Alliance International in Flat Rock, Mich., owned jointly with Ford. Are you negotiating a change in the plant's ownership?
The last Mazda came off the line on Aug. 24. Currently, AAI will be dedicated to building Ford products. When I was chairman of AAI, there was a period when that plant built only Mazda vehicles without any Ford units. So it's the reverse situation now, nothing beyond that. We still remain half owner. There is still no decision on whether a Mazda product will be put back into the plant.
Are you holding onto it in case you need the future capacity?
The Mexican plant is mainly for building small cars. So it wouldn't be a substitute for AAI. But if Mazda and Ford are building cars with separate platforms and architectures, there would be little synergy.
The time when AAI had its maximum efficiency was when it was building the Ford Probe and Mazda6. They had the same platforms and engines. But the top hats were different. We built a total of 240,000 units annually at that time, which allowed the plant to be profitable.
Does the Mexican plant offer enough capacity to deliver U.S. sales of 400,000 units?
Right now, people believe through simple arithmetic that, with Mazda's 140,000 and Toyota's 50,000, it will be just a 190,000-unit plant. But I think there are various possibilities that could turn the plant into a bigger operation.
What is your outlook for production in Japan?
We have committed to maintain the current level of domestic production at 850,000 units.
When we introduced the CX-5, we said we could ship out of Hiroshima to 100 countries with the exchange rate at 77 yen to the dollar and 100 yen to the euro and still be profitable. When we started production, profits were even greater than expected.
It's partly the result of hardly any incentives and the CX-5's achieving very high residual values. With better residuals, we can offer cheaper monthly lease rates.
Why did you have availability problems for the CX-5?
We initially assumed production of 160,000. This is our first time in the sweet spot of the light SUV segment. We assumed we could get 4 percent of the global 4 million-unit segment.
But we still have tons of back orders. We sold 100,000 units in the first half. But we still have about 30,000 backlogged orders. So we used summer vacation to increase capacity to 200,000. In the coming New Year holiday, we will further increase capacity to 240,000.
Talk about your plan to move Mazda upmarket.
Even if we achieve our target of 1.7 million, we will still be just 2 percent of the global industry.
The question is: In the global market, what is the significance of a player with a mere 2 percent? It's something that we frequently discuss internally.
We've come to the conclusion if we make ordinary products for the mass market, there would be no reason for us to exist.
The rotary engine is one distinctive element of our technology, as is Skyactiv. Even if we're small, we want to be a brand that shines and is loved by our consumers.
That's how we aim to achieve being like premium. In a broader sense, it's not relying on discounts but having consumers understand the value of our product.
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