Mazda Motor Corp.'s U.S. sales rose 9 percent through October this year, trailing the industry's 10 percent gain. But sales fell in the first 10 months at Japanese rivals Toyota Motor Corp. and Honda Motor Co., hit by Japan's March 11 earthquake and the yen's crippling exchange rate.
CEO Takashi Yamanouchi, 66, knows that he has to transform his export-dependent company to counter the impact of the strong yen. He plans to expand into emerging markets, build more cars overseas and slash Mazda's costs. He also aims to transform the company's lineup with the introduction of Mazda's Skyactiv fuel-saving powertrains and a new styling philosophy.
Yamanouchi spoke through an interpreter with Asia Editor Hans Greimel about Mazda's sales outlook, its future products and his strategies to counter the yen.
Q: What is your outlook for the U.S. auto market this year and next?
A: As an industry, it was originally expected sales would go over 13 million. But recent forecasts scale that back to 12.6 million.
For next year, the indices are not forecast to be very strong. But I hope there is some positive growth, because the U.S. market is very important for us. Not flat, but hopefully some growth.
What trends do you see for Mazda's sales next year?
Beginning with the 2012 model of the Mazda3, we'll introduce the Skyactiv gasoline engine and the Skyactiv transmission, which will achieve 40 mpg. [Showroom] traffic of older people is increasing. The Mazda3 has traditionally appealed to a younger set. But we are seeing older customers also walking into showrooms with the introduction of Skyactiv technologies. I hope this product will allow us to get incremental volume.
We don't have enough demo cars on the road yet. But the initial reaction is favorable.
Will the introduction of Skyactiv technology command higher prices?
We will set it at a proper price position. But it is not a matter of raising or lowering the price because there is no predecessor to this technology.
What percent sales growth do you see next year?
We are still in the process of finalizing that. But we haven't changed our target of hitting 1.7 million units in the year ending March 2016. And one of the drivers we see for that growth is Skyactiv technology. This year just 4 or 5 percent of our global sales incorporated Skyactiv technology. But next year it will increase to 20 percent. And by 2016 we expect to reach 80 percent. So next year, using Skyactiv as a lever, we hope to increase volume and share.
Are you still targeting U.S. sales of 400,000 units by 2015?
That depends on the foreign exchange rate and several assumptions, including that the U.S. industry returns to 17 million, which it last hit around the year 2000. So we think we may have to reduce that 400,000 somewhat, but to what extent is not really clear at this point.
But we decided recently to build the new plant in Mexico. And if the yen continues its appreciation, then we can ship products from Mexico to [the United States]. There are some obstacles to doing that, due to NAFTA content requirements. But if we can do that, we don't want to change the original target.
What vehicles are you aiming to export from Mexico to the United States by 2015?
The Mazda2 and Mazda3. The plant is to open in 2013, so by 2014 -- if all goes successfully -- it will contribute some volume. We are still studying how to do that. We still have some time.
With the yen at historic highs, we have to do something.
How close are you to getting enough local suppliers in Mexico to meet the North American Free Trade Agreement rules?
There are already a good number of Japanese suppliers operating there. Nissan [Motor Co.] is especially strong in that market. So we will rely on sourcing from some of their supply base. And there may be some suppliers from the Hiroshima area that also decide to go over.
What strategies are you using to counter the strong yen?
The reason we are struggling with the strong yen is our production is centered in Japan, and we have a high ratio of exports from here. In addition to that, the rate of exports to advanced countries historically constitutes a large portion of those exports.
There are four major actions we are trying to take.
The first is shifting the focus more toward emerging markets, including putting in plants in those regions, sourcing more parts from those regions and increasing sales in those regions.
The second is trying to shift our manufacturing footprint.
Next, we need as strong a product as possible to sustain robust margins. And that is underpinned by Skyactiv technologies and the products that embody them.
And finally, the other wheel on the axle is enhancing our sales and marketing with a sales approach that allows us to sell with low incentives.
I don't think this direction is wrong, but it will take some time.
For the time being, the best we can do is to try to improve our cost structure. We will work with suppliers to reduce costs as well as work to reduce fixed costs.
What percent of your overall parts purchasing is done overseas? Where do you want it to be?
It's about 20 percent today. But you can't ship bulky things from overseas because of expensive transportation costs. So because of that, the maximum we think we can import is 30 percent of the parts. And right now we are working hard to reach that level. Reaching that is part of the plan by March 2016, and of course we need to pull ahead that target.
Right now you are exporting about 80 percent of your Japan-built vehicles. Where should it be?
To the extent that we are building and shipping out of Hiroshima, I don't think the export rate will go down that much. We feel a responsibility to the local community to protect local production.
How much output will Mazda shift out of Japan?
Our capacity here is about 1 million units. Of the two lines in Hofu, one is operating with only one shift. So we are building about 900,000 units annually. So we are currently using virtually 100 percent of our capacity, which we'd like to protect.
So you want to keep it at 900,000 in Japan?
That's a commitment we have to the local communities.
What about the Michigan plant jointly operated with Ford? How can that help offset the yen?
We've already announced that the next model of the North American Mazda6 that was made in Michigan will have its production integrated back into the Hofu plant.
If we could have built and sold 100,000 units of the Mazda6 in the United States, we could have been profitable. We launched the current Mazda6 with that plan. But due to the global financial crisis, the segment shrank, and we had a very unfortunate launch.
So basically we are selling about half of what we initially anticipated. So the Mazda6 is being sold at a loss.
Can't you put the Michigan plant to some use?
When that product is gone, for the time being there won't be any products in the Michigan plant. And how we use that capacity afterward is something we need to discuss with Ford.
We don't have any intent to dissolve the joint venture at this point.
Could you sell your stake back to Ford?
There is nothing I can announce at this time.
Is there a possibility you would manufacture there again sometime?
We are continuing discussions with Ford.
What are you plans for a next-generation rotary engine?
We will discontinue domestic sales of the current RX-8 using the rotary engine next June and that will bring an end to its global sales.
Eventually, when an engine with better fuel economy and more powerful low-end torque is developed, it has a possibility of being resurrected. Another route to its survival would be using it as a range-extender [in an electric vehicle].
Why use a rotary engine for a range extender?
If the engine is operating at a certain rpm and under certain conditions, the rotary offers far better fuel efficiency than a regular gasoline engine.