Mazda Motor Corp. President Mark Fields recently unveiled a restructuring plan aimed at Mazda's main problems: high costs at home, and exposure to the strong yen because of an over-reliance on exports.
Fields was interviewed on Nov. 22 by Staff Reporter James B. Treece to discuss the plan and Mazda's future. See Page 22 for more of Fields' views, part of the Talk from the Top series by Automotive News.
What is your sales forecast for the total market in Japan, the United States and Europe next year?
This year, excluding heavy trucks and what we call heavy wagons, we're seeing the U.S. market and the European market at about the same, 17.3 million. I think that's a record for the U.S. Here in Japan, 6 million.
We have not squared away yet on our 2001 calendar numbers. But I think we're going to see a decline in both North America and Europe. The big question is: Is it a huge decline? I believe it will not be. The industry will still be strong by historical standards, but it will be off the pace of the last two years. And we're starting to see some inkling of that in the last two months, with the SAAR (seasonally adjusted annual sales rate) in the U.S., with interest rates going up and the gas prices. This month (November) might be an anomaly because of the uncertainty of the elections, but hopefully that'll be squared away by January.
What is the sales forecast for Europe?
We'll probably see a decline, but probably not as much in a relative sense as in the U.S., because I think the economic fundamentals in Europe are actually pretty good. And when you look at the euro, in a relative sense, it's really driving exports out of a lot of markets.
But in both cases, I don't see huge declines. I can't get any more specific than that.
We forecast anemic growth. This year I think we forecast 1 to 2 percent growth. Because last year it was 5.86 or 5.87 million units and we called this year at 6 million. I think we'll see a similar amount of growth next year. Basically stable, a little bit of growth, but nothing to base huge assumptions on.
What happens to Mazda's volumes?
In the U.S., even with the decline, I think you'll see Mazda volumes go up. It won't be unreasonable growth, but I believe that we'll gain share for a couple of reasons. First, we'll have a full year of the Tribute. That's starting to bring a lot more customers into the showroom who are starting also to see that we offer other vehicles as well. One of the issues we face in the U.S. is overall awareness.
Plus we're going to be introducing a new vehicle, new in the U.S. market, the Protege 5, which is a five-door sport wagon. That will come sometime in the first half of next year. Probably around mid-year. We'll also have a few other surprises or two, special editions, things of that nature, to help sharpen the Mazda brand DNA.
What's your strategy for Mazda's volume in Europe?
Our intent is to grow the business. The issue is the currency issue. From 1996 to 1999, we grew the business by double digits every year. This last year, we're probably seeing a decline of 10 percent. That's a combination of a couple of factors. In our biggest market, Germany, the industry there is down about 10 or 11 percent. On top of that, throughout Europe, our price competitiveness has been eroded to a certain degree, because in some cases we've had to pass through price increases to compensate for the strengthening of the yen. We've shouldered a lot of that, but we've had to pass through some of that.
Next year, we're going to have the Tribute. We're going to have some freshenings that have already been launched here in Japan but will hit Europe, like the 323 freshening, the MX-5 Roadster (Miata) freshening, and the Millenia, which is called the Xedos 9 in Europe. So that will help.
What's the strategy for volume in Japan?
We're going to face a tough challenge next year. As a matter of fact, we have no new product next year. But we are going to have over 50 product actions on existing vehicles, utilizing limited editions. And we'll make some innovative marketing approaches, like we did with the Tribute. But at the end of the day, I think it'll be tough to grow the business on a share basis.
What percent of your U.S. sales do you expect the Tribute to represent?
Our highest volume product will be the 626. The Tribute will be our third-highest selling product, more or less, because we're planning on selling about 40,000 units, and that will be right up there with the 323 and the MPV. I see it within one of the top three products.
You will be sharing a plant with Ford in Europe. Will you be building both the B and C car in the same plant, or split among two plants?
We'll announce that early next year.
About what percent of that plant's output will be Mazdas?
If you look at last year's sales, we sold almost 238,000. You can imagine, if I said it's going to be 10 percent lower this year, that it'll be around 210,000 to 212,000. We have some growth baked into the plan period, but 100,000 units will still represent a decent amount of our sales in Europe. It won't be the majority.
The products we will be building there will be in the more price-sensitive segments, so our margins have less room to play. Therefore, by producing in Europe, you shield yourself from the currency exposure, you save on the cash flow in terms of putting a car on a boat for four months, and you can respond much more quickly to marketplace and customer-requirement changes.
The products we'll export out of Japan will be higher-margin products, so we'll have a little bit more ability to remain competitive in the market place if there are currency movements.
But how much share of mind will you have from the European plant's manager?
Within the plants that we will use within Ford, I won't tell you share of mind, but I can tell you this: We've had some very good discussions and engagement with Ford up front. We will also make sure that we have a senior person on the ground in Europe, most probably at a director level, to head up our R&D and manufacturing operations there, working with our Ford counterparts.
Where were the delays in deciding on the European plant? Was it with the union here in Japan, as some of the Japanese press have said? Was it the lack of a track record in working with Ford of Europe, as opposed to the long history of Mazda and Ford of North America working together? What had to be ironed out the most?
There were a lot of factors that had to be ironed out. First is just looking at how they stack up on a variable-cost basis. Second was logistics, overlaying logistics costs, duties, freight, things of that nature. Then making assumptions about currencies.
It wasn't delayed. If you look at our product cadence, when our programs are maturing, now was the natural time to make the decision. Both companies are making decisions about body-shop investments, things of that nature.
It took a while to do the analysis, but I wanted to make 100 percent sure that my directors knew all of the facts, and that we could make an intelligent business decision and not a knee-jerk reaction.
When you do a C/D car, is that for Ford, Volvo, Jaguar, and right down the list?
This is going to mature over time. Our first step is to launch the next-generation 626 and Capella. We're engaging the other brands right now. I can't say whether it will extend all the way up to Jaguar. Those are things that are still meant to be worked out. But the first step is to clearly delineate and demonstrate our excellence in this area. We will do that with the next-generation 626 and Capella, and we'll have the conversations with the other Ford brands as we go along.
That sounds like the Ford group may have designated Mazda as the center of excellence, but Ford of Europe or Ford of North America has not said, 'Yes, and we will ride with Mazda on this.'
I think from a Ford group standpoint, we've agreed that Mazda would be the center of excellence. Is there full agreement amongst the individual brands? I can say no, but I think over time we'll get the agreements. That's the intent.