It's a pleasure to be here this morning. I say this because to my knowledge, it has been a very long time since Mazda has had an opportunity to present at this forum.
The theme of this year's congress is "Meeting the Challenge of a Connected World."
Decades before computers and global commerce were commonplace, Supreme Court Justice Oliver Wendell Holmes, said, "The greatest thing in this world is not so much where we are, but in what direction we're moving."
The world has changed tremendously since Holmes' day, but his observation still holds true.
At Mazda, the direction we aim to be moving-in this connected world-is our true north. As one wise man has said, "True north speaks to a constant awareness of your goals and standards."
We all face thousands of choices daily. But when we know exactly what we want to achieve-our "true north"-decisions become simple.
The trick, of course, is getting that lock on "true north."
At Mazda, we have changed the way we do business…we have re-examined everything.
We have set a new direction and our true north is now clear.
We know what Mazda has at its heart that will ensure our company's survival and success.
And we know where we see Mazda in the future-both as Mazda, and as a partner with Ford Motor Company.
Mazda is an 81-year old company with a strong engineering heritage, great innovative products, and a dedication to pursuing advanced technologies.
But, until quite recently, we were a company with an identity crisis.
In the past, Mazda's heritage has been one of "daring to be different," and of doing the "unconventional rather than the conventional."
People talked about the "Mazda spirit." And people joined our company because of our history-they joined because we were not like the other competitors in Japan-because we had a unique and exciting identity.
An understanding of this identity was clear throughout our organization-and expressed itself clearly in our products and services.
A hugely successful example of this is our Mazda Miata, which was recognized two years ago by the Guinness Book of World Records as the "world's top-selling lightweight open two-seater sports car.
Another example is the rotary engine-a unique, technology - synonymous with Mazda .
Mazda rotary engines have won major racing victories at such places as Daytona.. And, in 1991, our rotary engines achieved one of the most prestigious honors for performance and power-a first-place victory at the grueling Le Mans 24 Hour race -making Mazda the only Japanese car to win the LeMans
That heritage-a reputation for performance, and for an exciting driving experience, for innovative technology and packaging with practical flare - defined Mazda until the recent past - and as you will see shortly, in re-engineering our company we have drawn extensively on the inspiration from our past successes.
Over the last five or ten years however, I believe we've made some right moves, but we've also made some mistakes.
And I think it's worth recapping briefly where we've been and how we got to where we are today.
For a number of years, Mazda has had a host of what I call "legacy" issues. These included a substantial increase in fixed costs and debt from a growth strategy launched in the late 1980s that was not successful..…. the collapse of Japan's bubble economy and the resulting erosion of our home market; … a strong yen that decimated our export profitability… and profitability issues with our global distribution network.
These issues created a very weak financial structure, which in turn hindered our efforts to address our challenges quickly and effectively.
But-most crucially-by the middle of the decade, we were saddled with an unclear and inconsistent brand image, as well as products that had, for the most part, become "middle-of-the road."
Since the late 1990s we've been hard at work transforming the company, with the first goal of stabilizing it, secondly to make meaningful progress in getting it back into competitive shape, and thirdly to start growing our business consistently.
Have we been successful? Well….
But we needed to do more …
While we exceeded our cost reduction objectives and achieved many significant milestones in our operating areas, we did not fully meet our growth objectives.
In large part, this was the result of the brand and distribution issues I mentioned. It also reflected actions by our competitors that we hadn't fully anticipated, and a suddenly stronger yen, especially versus the euro.
So what was our response?
In November 2000, we kicked off our Millennium Plan-a growth-oriented, mid-term strategic plan with a five-year timeline that will serve as our roadmap as we restore Mazda to sustained, profitable growth.
The Millennium Plan has four pillars; growth, restructuring & reform, people and synergies with Ford.
Looking at the restructuring and reform pillar first, we implemented a number of initiatives focused on improving our bottom line and business structure:
But we don't believe you can cost cut to ongoing recovery. So on the growth pillar of the Millennium Plan:
Our relationship with Ford is also a key pillar of our Millennium Plan.
Mazda and Ford are the only companies among those that have established alliances that are now selling products jointly developed -Tribute and Escape. And these products are major successes in North America and other parts of the world.
Ford has designated Mazda as the Center of Excellence for the new large I-4 engine family, which will be featured in many of our new products for the global market.
And the Mazda 6-our all-new mid-size car-is the first product from a front-wheel drive mid-size architecture that will be used not only by Mazda, but also by other brands in the Ford Group.
Our cooperative initiatives cover the waterfront-distribution, logistics and other operating areas, technology sharing, and, importantly, people development.
In the area of our people, the 4th Pillar of our plan, we have significantly reformed our HR policies and are in the process of totally reforming our corporate culture with management development initiatives involving many of our employees, revised remuneration systems and the introduction of a number of leading edge HR practices.
Since launching our Millennium Plan, we've seen the changes in way we do business in improved results.
In November, we announced a profit for the first half of the financial year. ($10 million)
This is represents a $91 million turnaround year on year on a net profit basis, and over $130 million on an operating basis….and is a significant improvement on our initial forecast.
We are now projecting to be profitable at every level for the full year - both on an unconsolidated and consolidated basis.
We are building a track record of delivering on our commitments.
And frankly we sense momentum building as we move closer to the introduction of our next-generation products.
And so to Mazda's future. Where are we heading? What is our true north?
Well, the present restructuring, and rationalization we're seeing in the industry are spurring many changes that affect not only Mazda, but all automakers.
Within the next ten years, we'll see the auto industry become ever more global and interconnected in order to answer legislative and consumer demands for increasing levels of safety and value and convenience.
We have to pay attention to those changes.
And the one most critical change we'll see-very soon-is that there won't see any bad products-only good, very good, and great products.
This means only one thing-brand image will be more critical than ever.
We are keenly aware of this as we look to Mazda's future.
For a time we lost our grasp of Mazda's brand image. We moved to the middle of the market to a quote-unquote "safer" area of design, engineering and marketing. That move distanced us from what made us successful.
As a result of our move to the middle we began competing with other manufacturers on their terms.
That's been a losing dynamic for us, which for a company with as competitive a heart and as compelling a heritage as Mazda's, was both unpalatable and unprofitable.
Today our strategy is not to compete with any other company. Instead we are returning to our roots-
We intend to be successful the way Mazda has always been successful-competing on our terms, not on somebody else's.
That means creating vehicles that thoroughly emit the Mazda DNA. Now some people say product is everything. Others say brand should be the number on focus. At Mazda we don't have the option.
We believe the brand and product development have to operate in complete harmony at the heart of our strategy.
This simple chart shows how brand personality and product gel at Mazda. On a practical level we also work cross-functionally, ensuring marketing, sales and R&D share the same goals.
The result of this integration should be that when people think of Mazda, they think "Zoom Zoom".
Zoom-Zoom is our global brand message.
These two words capture a feeling, that we describe as "the childlike love of motion" This is the feeling we want to stand for the Mazda experience.
It means that when you get into a Mazda, it will not be a vanilla car or a vanilla driving experience. It won't be an uneventful or joyless experience.
We'll go beyond way beyond basic performance so as not relegate our cars to the realm of plain family cars for example.
We have used Zoom Zoom in advertising in North America, Australia and Europe, where it has had a significant impact. We are also introducing it in Japan to achieve a consistent global brand identity.
The most important part of our Millennium Plan-and the real test for the plan-is of course our new products.
In this regard, the Tokyo Motor Show last October was a real "coming out" party for the Millennium Plan and Mazda.
It was the first "strike" in "rekindling the spark" at Mazda through products that embody the Mazda heritage redefined for the new Millennium.
These products were on display for the first time on this continent at the Detroit show last week.
They are the first to fully embody the Mazda DNA I just described and they show just how we will reassert ourselves in the market.
Here's the Mazda 6-the first of a series of next-generation products from Mazda-this is an entirely new mid-size vehicle-and a turning point for Mazda.
Mazda 6 goes on sale in Japan and Europe in later this year, and will be on sale in North America by the end of the year.
The Mazda 6 story will continue through 2002-and beyond-with a variety of exciting new derivatives.
Here's the revolutionary RX-8. This vehicle is our brand icon. It fully exemplifies Mazda's brand DNA-and fully brings the "spark" back to Mazda.
As a 4-door sports car, Mazda RX-8 is an entirely new market proposition.
It uses a front-midship layout to support excellent driving dynamics and the innovative functionality of the freestyle door system.
While having genuine sports car styling, the Mazda RX-8 will offer an interior package spacious enough for four adults. This is the production styling and you will see this car on the road in early 2003.
And the heart of RX-8 . . . our next-generation rotary engine, the lightweight, compact Renesis.
Smaller in size with enhanced performance compared with the present rotary engine. Substantially improved fuel efficiency and cleaner emissions.
One of the product and growth strategies of the Millennium Plan is to quickly develop low-investment derivatives from our new core products-derivatives targeted at specific customer groups.
Here's one possibility - the Secret Hideout concept.
Last year, a group of young designers and engineers from Mazda conducted market research by going out and sharing the lifestyle of the target customers.
They came back with an idea for vehicle that would meet the wants and needs of these customers.
That idea is the Secret Hideout-"a mobile retreat where young people can feel excitement and relaxation".
Similar to the Secret Hideout, but targeted at different consumers, is the MX Sports Tourer-a concept also derived from our new family of core products.
This new type of wagon features both driving pleasure and environmental friendliness, as well as the "stylish," "insightful," "spirited" elements of the Mazda brand. MX Sport Tourer is an innovative near-future car, which combines a sports car and space wagon.
These new products are the direct result of our integrated strategy.
They show you what is just around the corner for our company and they are an early indicator of the kind of company we will be in the future…. let me tell you what Mazda won't be.
In the near future, Mazda will no longer be described as "the struggling Mazda Motor Corporation"-or the "ailing" Mazda Motor Corporation-or the "debt-ridden" Mazda Motor Corporation.
Here's a picture of the Mazda I believe will emerge sometime in the next ten years:
Where will Mazda be vis a vis Ford within the next decade?
Mazda will remain the flag bearer for the Ford Automotive Group in Japan.
Ford has recognized Mazda as a global center of excellence for developing front-wheel-drive, mid-size vehicle architectures for the Ford Group-and as a center of excellence for engineering new large four-cylinder engines.
I see Mazda playing a leading role in manufacturing, manufacturing technology and manufacturing flexibility in the Ford group, and I believe we'll enjoy a growing role in the Ford group through our leadership in small powertrains, and possibly in some areas of emissions, economy, and specialized areas such as lightweight body construction.
We believe that the Millennium Plan that we've developed is an excellent framework to guide us into the future.
I believe the strategy embodied in the Millennium Plan will endure over the plan period, although tactics of the Plan may, of course, change as new internal and external factors emerge.
Strategies are necessary and good ones are essential for success in a very competitive and rapidly changing world.
But we know strategies alone won't get the job done.
A wise man once said that the formula for business success is "a teaspoon of strategy, and an ocean of execution."
We're focusing steadfastly on execution.
We know where we are heading and what we have to do to be successful.
We are on course for our true north and every team member at Mazda Motor Corporation is focused on the compass.
We may face a new set of challenges, but we are building a track record of delivering on our commitments.
Thank you for your time and attention this morning. I'd now like to open the floor to any questions.