Mazda North American Operations has two strong products in the Mazda3 and Mazda6. But Mazda's overall sales have been flat since those vehicles arrived. That's because the rest of the lineup is aging rapidly.
Mazda lacks the marketing funds to launch new products and prop up older vehicles with incentives to compete against the Japanese Big 3.
What's more, people know Mazda for niche vehicles such as the Miata and RX-8. But that indicates the brand's weakness: It is represented in segments that make up just 47 percent of the market.
Can Mazda get ahead of the curve? President Jim O'Sullivan spoke about Mazda's future recently with Staff Reporter Mark Rechtin.
What is your forecast for the rest of 2005 and 2006?
I see a little growth this year. It depends on how many Mazda3s we get. We have good production demand from Japan, and we have more exclusive dealers, who tend to sell more units. The Mazdaspeed6 and Mazda5 won't come until August or September in any good numbers. In 2006, we're still looking at new model introductions, so we'll increase our business over the forward years. We'll have more products in more segments.
How much gain have you realized from the decline of Volkswagen and Mitsubishi?
We have seen additional cross-shopping with VW and Mazda3, and we've seen a little from Mitsubishi. But a lot of people who bought Mitsubishis were 0-0-0 finance deals, and it's tough to trade out of those cars when they don't have any equity. We're starting to see cross-consideration of Mazda3 more so with Toyota and Honda. We need to get our brand awareness up, and we need to be smart in spending advertising money. We need to cut through the clutter without being goofy. Our awareness is not near any of the other Asian brands. It's a fact of life that people don't know us.
When we launched the Mazda6, shoppers couldn't position it near the competitive set. They didn't really know how much it cost. So when we launched Mazda3, we put the MSRP on ads to position it. Now we're putting the price point out there to help position it, not as a cheap deal but for people looking for vehicles around that transaction price.
The Mazda3 is great success. You sold 76,080 Mazda3s in the U.S. in 2004 with a tight supply. How many could you sell here if you were not constrained by capacity?
It's hard to say, because we haven't tested the upper limits. Look at the Toyota, Nissan and Honda brands year-over-year, and their variable marketing spending (incentives) is up. We want to improve residuals by pricing cars with value at entry, rather than jacking up the price and chasing volume with rebates. Residual values are still holding at 58 percent at 36 months. In the U.S., we had 30-some days of supply of the Mazda3 in June, July and August. We also hardly have any fleet on the Mazda3 other than Enterprise service loaners. We have a lease program on it, and we're spending a little on variable marketing support, but, otherwise, we've gone 18 months with no incentives in a very competitive segment. We could certainly get to 100,000 units if we had enough money to spend on variable marketing and not be stupid about it. We don't want any 30-day miracles. We also have to be careful. There's a new Civic coming.
How do you see the crossover segment evolving with vehicles such as the Chrysler Pacifica and Ford Freestyle out now and your MX-Crossport and the Toyota FT-SX waiting in the wings?
We see people coming out of traditional SUVs or needing something more than a sedan with ride height and a safe, secure feeling. They want front drive or all-wheel drive and fuel efficiency. The American public not is going to walk away from SUVs, but they will morph into crossovers because they want something more carlike. They are tired of their fourth or fifth Grand Cherokee. As Baby Boomers age, they don't need the big three-row SUVs anymore. They like the crossover for packaging. There are no defined segments anymore. Everything is bleeding on top of each other. I see that market continuing to grow relative to the industry and having a lot of players.
Can the MX-Crossport exist without penalizing sales of the Tribute or MPV?
As we grow beyond selling products that represent 47 percent of the industry, I think we have the capacity to do it. But Mazda has to be Mazda. It has to feel like a Mazda. (Mazda Motor President) Imaki said our No. 1 priority is North America. If we beef up our North American r&d, build up our dealer body with more exclusives, we can't then sit back and not enter additional product segments.
How much volume will the redesigned MX-5 Miata get? Do you worry about competition from the Pontiac Solstice?
We'll see a year-over-year volume increase. We won't see it reaching early 1990s levels because the competition is stiff with the BMW Z4, Pontiac Solstice and Saturn Sky. But we have a huge, loyal owner body, and they know only Mazda can do an MX-5 Miata. Yeah, we're concerned about other entries, but they are going to spend a lot of money launching theirs. And Mazda will resonate because it is the one area where we do have recognition. We sell more roadsters in the world than any manufacturer. GM can talk about the low sticker price of the Solstice, but that's because their base model comes with crank windows and just an AM-FM radio.
What do you tell your rural dealers who squawk about the age of the B series?
It's not going away. You can only do so much with our resources, even with Ford's backing. We are giving our dealers higher-volume vehicles across North America, and product development is prioritizing those first. They like what's coming, and they are pacified with that. But full-sized trucks are coming down on top of compacts pricewise, and it's pretty tough when you have the strength of the Ford dealer organization and the voice they have with Ranger. I'm sure rural dealers want to sell more trucks, but some dealers want some more cars.
How is Canada doing?
We have 4.8 percent market share in Canada, compared to 1.6 percent in the U.S. Canada could easily have sold another 10,000 units on top of the 80,000 total they did in 2004.
Where will gasoline prices go? Does a lineup with a sporty flair connect with buyers who may be looking for something more economical?
Fuel prices influence household incomes in terms of discretionary spending. There's a definite negative impact. But from our venue, being sporty is not about having a 450-horsepower type of product; it's about driving dynamics and ergonomics. For someone who needs performance, we offer a pretty good alternative with a 2.3-liter turbo with 274 horsepower in the Mazdaspeed6. It was designed with European fuel conditions in mind. The Mazda3 is sporty, but fuel consumption is not high. If people are thinking of downsizing and want fuel-efficient packages, we offer some emotion there. We offer a lot more choices, too. We have four versions of the Mazda6 and two iterations of the Mazda3.
Might you change your advertising to show the economical side?
No, I wouldn't change it. Zoom-zoom is a feeling. It's not about zero to 60; it's about ride and handling.
How is Mazda progressing with opening exclusive showrooms?
We're at 33 percent at the end of 2004, and we want 50 percent by mid-2007. That's 50 percent up-and-running showrooms. By that I mean stand-alone exclusives, which are not necessarily carrying the Retail Revolution look. Right now there are about 100 Retail Revolution stores in some step of the process. It can be a struggle. The Irvine (Calif.) Auto Mall dealer has Mazda jammed in there with GMC. Talk about representing our brand. They're right across the street from Mazda headquarters. But now they are building a stand-alone dealership right next door to the current store.
Mazda's ad spending was up 26 percent in 2004 from 2003, according to TNS Media Intelligence. What was your marketing strategy last year? Do you plan on doing it again this year?
I don't know where they got their numbers. We were up a little in 2004, but not that big. We'll be up a little more this year. We were launching a lot of new cars last year, and magazines are a good place to get awareness. We also were talking more about our full line, which was new for us. For the upcoming fiscal year (which began April 1), we won't spend as much in print, and we'll do more alternative marketing. There are a lot of things you can do to create buzz and traffic. It's how you get innovative and get exposure besides spending a ton of money on network. As we evolve in the second half of the year, we will be out there in different media. The ads for Mazdaspeed6 will also talk about how it is an extension of the rest of the Mazda6 line. The MX-5 Miata launch will involve a lot of PR stuff. For the Mazda5 (a six-seat minivan) launch, maybe we'll be doing things with some other partners.
What do you think of the satellite radio deal between XM and Hyundai, where all Hyundais get standard XM installed? Will Mazda offer more satellite radio?
Our customers care. We started offering Sirius in the last year. It's a bold move for Hyundai. But you have to ask what's the variable cost and what did XM kick in to do it. I almost see satellite radio going the way of other audio systems, with higher take rates, especially on the higher-end cars. My kids all want to drive my Mazda6 because it has satellite radio. It's a way to offer value instead of a $500 rebate. But if it's a standard feature, what if a customer wants Sirius instead of XM?
When will Mazda become an executive's destination instead of a way station at Ford Motor? It seems to be a great steppingstone, but no one ever really seems to stay at the top. Are you willing to make that sort of commitment?
You'd be surprised how many people at Ford want to come work for Mazda. Yeah, some of that is because it's in California. But I'm committed to Mazda. I'm willing to stick around as long as Ford and Mazda want me to. But you make God laugh when you tell him you have your day planned. We do need stability in Mazda management. There have been a lot of changes in the last 10 or 12 years. I'd like to stay and help build the business. Sticking around provides stability to dealers and confidence with owners. People are starting to want to come for Mazda. They see something happening here. President Imaki isn't going anywhere. Ford Motor (execs) are cheerleaders and coaches for us, especially when you have former Mazda guys like Phil Martens (now Ford's group vice president for product creation) in top jobs in Dearborn. This is the toughest job I have had, with the most pressure and the most lost sleep, but I love it.
You may e-mail Mark Rechtin at