Even though Mazda dealers netted 30 percent more profit in 1999, with 85 percent of all dealers in the black, the strong yen and tight budgets are threatening to stir up rancor between the factory and dealers.
Mazda sales rose slightly last year- and, with a reduced dealer count, that made it easier for dealers to make a profit, said Richard Beattie, president of Mazda North American Operations. But with the yen strengthening, Mazda has been forced 'to tighten our belts everywhere,' he said after the Mazda make meeting at the NADA convention.
The launch of the new MPV in the fall helped push up fourth-quarter sales 7 percent. The barrage of MPV advertising in the fourth quarter gave that product the highest awareness of any minivan in the segment, including Chrysler's and Honda's strong sellers.
The arrival of the Tribute compact sport-utility in June will give incremental volume to Mazda, which has been out of the segment since the Navajo was dropped from the lineup. 'At long last, the Tribute will give us the spark we've been missing,' Beattie said.
Dealer council representative John Koons III, owner of Koons Mazda in Suitland, Md., predicted that the Tribute will be 'right on the market.' Larger than a Jeep Cherokee but smaller than a Ford Explorer, the Tribute will be priced in the $19,000 to $25,000 range.
Perhaps for fear of cannibalizing Explorer sales, Ford is not making a big deal out of its Escape version of the Tribute, Koons said, adding, 'Mazda is going to make a big deal out of it.'
NOT ALL ROSES
But Beattie admitted that 'not everything is rosy with the franchise.'
Mazda's biggest volume product, the 626 sedan, is facing long odds against the Toyota Camry and Honda Accord, which Beattie contends have heavy lease deals. What's more, 626 residual values are lower than the segment leaders, so even if Mazda wanted to compete on payment, it would lose money on the back end, Beattie said. The same situation holds true for the aging B-series pickup, which is an assembly line twin of the better-priced Ford Ranger.
'We started moving gradually away from leasing about 18 months ago. We knew it would be painful, but the alternative was expensive,' Beattie said. When pressed about how to sell more 626 and B-series units, Beattie confessed: 'I honestly don't have the answer. But we're working on it.'
Dealers had other issues as well.
MORE AD SUPPORT
Koons said dealers complained about the lack of co-op advertising support.
'The area marketing groups get all the support, but the dealers hardly get any,' Koons said. Whereas Koons typically gets back every penny of his $30,000 monthly Volkswagen ad budget, he typically sees about $8,000 in co-op funds returned on the $50,000 he spends on Mazda ads every month.
What's more, Mazda is talking about taking away that limited co-op support and spending it instead on more brand advertising. That issue was not resolved at the meeting.
Another sour point: Mazda makes dealers take responsibility for lease turn-ins. Most automakers have a third party handle the turn-in process.
'If we miss a dent or a scratch, we have to pay for it. It gets combative,' Koons said. 'If a customer is turning in a lease but wants to buy a new car, then we're negotiating on the trade-in and the sale. Then the sales managers start letting a ding or scratch slip by, and we get a bill from Mazda. It would be so much easier to have a third party handle it.'