HIROSHIMA, Japan -- In June, Masamichi Kogai marked his first anniversary as Mazda Motor Corp. CEO by reaching the company's 2016 operating-profit target two years ahead of schedule. But tougher competition is forcing him to scale back earlier, bullish sales goals.
Kogai, 60, said the company will prioritize sales with high transaction prices and low incentives, even it if means lower volume and market share. The new mantra: quality, not quantity.
Kogai, an avid baseball fan and former pitcher, says you don't need a home run to win. You just need every player to get on base, an allegory for Mazda's small but successful lineup.
Kogai spoke at Mazda headquarters here through an interpreter with Asia Editor Hans Greimel about Mazda's sales outlook, its strategy for incentives and brand image and the fate of Mazda's famed rotary engine.
Q. What is Mazda's outlook for U.S. industry sales?
A. All the brands seem to be projecting volume around 17 million for the year, and we're expecting similar levels. But personally, I think we should be managing the business assuming it will go in a more conservative or negative direction.
Mazda's sales outpaced the industry for the year through October. But in October, they fell. Why?
There's absolutely no reason to worry about that. Because of model-year changeovers, the competition has a lot of old, outgoing models in stock, while we have a lot of new models. As a result, the competition is putting on a lot of incentives. We are intentionally controlling incentive levels.
Last year, the competition also had a lot of old, outgoing models, and they were very aggressive with incentives. And we consequently struggled a bit at the beginning of this year. One of the lessons learned was that holding down incentives in such situations is more beneficial to achieving subsequent growth.
Even if Mazda loses market share and sales?
That's correct. The basic performance of our product is high, and we don't have to appeal on price to our customers.
Are Mazda's transaction prices and margins rising?
Since we introduced Skyactiv technologies in the CX-5, followed by the Mazda6 and Mazda3, our transaction prices have been increasing. There are two factors behind that. One is that we've been holding down incentives. But secondly, customers have been opting for higher-grade models.
On a global basis, our per-unit profitability has substantially improved with the new models. It varies by product, but if you leveled it out on average, the profitability is about double the outgoing model. The challenge for us now is how we can sustain this. To do that, we will be taking various product actions and avoiding reckless incentives.
Last year, you said Mazda could achieve record U.S. sales approaching 400,000 units in the fiscal year ending March 31, 2016. Sales are up but below that pace. Can Mazda still achieve it?
This year [fiscal year ending March 31, 2015], we're on track to hit about 320,000 units in the United States. So for the United States, I don't consider 400,000 an absolute target for sales next year. But eventually, I intend to achieve that level.
In fact, we revised our global objective downward from 1.7 million to 1.52 million vehicles.
That is based on considering the change in demand in various markets, especially Thailand, China and Australia. Considering that, our initial objective was not appropriate.
But the competition is similarly suffering lower demand, and they are trying to make up for that with a volume increase in the United States. As a result, they have taken very aggressive actions. We've avoided being embroiled in that situation. We're holding down incentives, without pursuing volume.
But it is not just the incentives of the competitors. Their overall sales capability is also stronger than Mazda's. They have bigger networks.
What are Mazda's plans for its U.S. sales network?
We have 637 dealers. Some are successful, others not so much. We want to help improve their strengths and address their weaknesses. It's about how we can improve the quality of our sales network, rather than just increasing the numbers. It's about increasing the value of services that our dealers provide over the lifetime of the vehicle, so customers keep coming back.
What are the main goals for your tenure at Mazda?
Well, the results of a president's work are usually seen only three or four years after he leaves. I'm thinking seriously about it, and thinking about what kind of flowers I can make bloom in three or four years' time.
Will that include a successor to Mazda's Skyactiv technologies, including engines with homogeneous charge compression ignition that Mazda engineers have talked about?
I can't comment today on the implementation of HCCI. But I can say we will be striving to maximize the efficiency of our internal combustion engines. We consider that a strength of Mazda, and we will continue to focus on that area.
Next year, I'd like to make clear a midterm plan that will include profit and volume targets.
The biggest challenge will be how we can reduce costs.
If technology costs a lot, I believe you can't just force it on customers simply because it's good technology. It won't be easy, but we need technologies that can be deployed across the board, and a way of reducing costs must be developed.
