Last year was a disaster for Mazda Motor Corp. in Europe. Sales tumbled 15 percent to 182,893 units, by far the worst of any Japanese brand there.
Part of the problem was a feeble yen-euro exchange rate. In addition, Mazda made a bad call. At the start of the year, Mazda's market surveys predicted that Europeans would continue to buy cars with older, Stage II level of emission controls. Customers would not be eager to buy vehicles with newer, more costly Stage III pollution controls.
The predictions were wrong. Customers wanted the cleaner cars. Mazda's European office immediately warned headquarters in Hiroshima, recalls Shigeharu Hiraiwa, director in charge of corporate communications. Hiroshima replied: 'Too late. They're already on the boat on the way over.'
Building vehicles in Spain
To avoid such marketing blunders, Mazda needs to build cars in Europe. That would shield the company from currency fluctuations, and it would allow Mazda to respond more quickly to market conditions.
So in early 2003, it will begin building the Demio tall wagon in Ford Motor Co.'s assembly plant in Valencia, Spain. The plant will produce 40,000 Demios a year. Production of the 323 - also known as the Familia and Protege - will come in 2004, raising Mazda's output to 100,000 eventually.
That is the latest in a series of steps to synchronize Mazda's future product plans with that of Ford's, which owns a controlling 33.4 percent of Mazda. The Valencia plant will ease Mazda's reliance on costly exports of vehicles from Japan. About 95 percent of all Mazdas sold in Europe are produced in Japan. Because of the strong yen and weak euro, that could lead to disaster. Consider the consequences: For the fiscal year ending March 31, Mazda expects to post a net loss of ¥49.5 billion, or $412 million. That loss is largely due to currency fluctuations.
To avoid the whims of the fluctuating euro, Mazda will boost production outside Japan. To do so, the company will sell vehicles in Europe that were made in Thailand, Europe and the United States. By 2004, about 36 percent of all Mazda models will be produced outside Japan, up from 5 percent today.
Jointly designed vehicle
One such model is the Tribute, a sport-utility based on the Ford Escape. The Tribute is the first jointly designed vehicle since Ford took control of Mazda. Mazda will export units built in the United States to Europe.
Meanwhile, the Demio and 323 will share a platform with the Ford Focus. Mazda is the center of excellence within the Ford Group for mid-sized front-wheel drive cars. That means the platform for the next 626 and Capella models could be used for the next-generation Ford Mondeo. But it is not clear whether Ford of Europe has agreed to that.
The two companies will share powertrains, too. Mazda buys a V-6 engine from Ford for use in its MPV sold in North America and in Japan. In turn, Mazda will design a family of I4 engines for use by Mazda and Ford worldwide.
But the two automakers will not share everything. Mazda has no intention of sharing the proposed RX-8 sports car, successor to the fabled RX-7.
'I'll share with Ford the design philosophy,' says Mazda product-planning chief Philip Martens. 'But that's designed to be a Mazda platform.'