HIROSHIMA, Japan — CEO Masamichi Kogai is busy building pint-sized Mazda Motor Corp. into an automaker that can compete with its biggest rivals on the global stage.
The transformation takes off in 2019 with a blitz of new technologies and a fresh design language. Arriving then will be a mild hybrid, an electric vehicle and the company's Skyactiv-X gasoline engine, which features compression ignition for more power and better fuel economy.
Mazda will also get a little help from friends.
In August, it sealed a capital swap with Toyota Motor Corp. The partners agreed to open a joint assembly plant in the U.S. in 2021 and then formed another joint venture to develop EVs.
But first, Kogai wants to improve Mazda's U.S. operations. The market is Mazda's biggest, but lackluster sales are far below the 400,000 executives once targeted.
Kogai, 63, speaking through an interpreter, met with Asia Editor Hans Greimel on Nov. 16 at Mazda's headquarters to discuss the U.S. dealer network, big hopes for crossovers and the fate of Mazda's rotary engine.
Q: Instead of teaming with Toyota to build a U.S. plant, why didn't Mazda just expand its plant in Mexico?
A: The most important region for sales is going to be the U.S. By having a plant in the U.S., we would be able to provide our vehicles to customers in a speedy manner. Having our local products built by American people actually contributes very much to establishing our brand in the country.
That means that we, as a brand, will have deep roots there. This is our declaration that we are going to grow our business in the U.S.
In the U.S., overall sales are down but light-truck sales are surging. How is Mazda coping?
Sedans such as the Mazda3 are declining and that segment is struggling. But CX-5 and CX-9 volume is going up. We have been outpacing the gains of the SUV segment.
One issue is the relatively moderate crude oil price. In the past, when there was an increase in oil prices, people in the U.S. shifted to sedans or compact cars. But the world economy is rather stable at the moment. That type of major shift might not happen. That's what I expect.
What is Mazda doing to supply more crossovers?
We need more SUVs, and we are able to shift between SUVs and sedans. For example, the CX-5 is now being produced at the Hiroshima plant and the Hofu plant in Yamaguchi. We started that last month.
What about expanding the U.S. lineup with other utility vehicles such as the CX-4 or CX-8?
We are actually going to introduce a totally new and different type of SUV. It's a crossover SUV. You can look forward to finding out more in the future. R&d is coordinating with our North American Operations on that right now.
What we are going to have in the United States and produce there is a totally new model. It's not produced here in Japan. It won't impact the operations of our Japanese plants.
Will Mazda build more than one nameplate in the U.S.?
For the meantime, we assume just one. But in the future, we are not limiting our options to just one model.
Mazda must be expecting huge volume for this new vehicle, somewhere near 150,000, which is Mazda's allocated capacity at the new plant.
We are thinking of capacity of 150,000 vehicles. Toyota will also have 150,000 units. That scale of production is where we can expect economies of scale for parts suppliers as well.
So one nameplate with annual U.S. sales approaching 150,000 vehicles?
[Nods] We have big expectations.
What balance of light trucks to cars is Mazda targeting for its U.S. lineup after the new plant?
We used to target a 50-50 balance. But SUVs are increasing faster than that. So with our production capacity improvement, it should be about 60 percent SUVs and 40 percent sedans. We have to be able to produce that ratio.
How will Mazda reverse its U.S. sales decline?
We still need to have an improvement in the quality of sales. If we were only chasing volume, we could just add incentives. But that would deteriorate our quality of sales.
We are sticking to our right-price sales approach to improve our brand. We are building that foundation now. Customers are really seeing the value of the vehicles and not just purchasing them because of price. Customers who purchase for the true value will come back to repurchase. We can achieve sustainable growth from that. So we are in a transitional period. In order to succeed in the U.S., we need to improve and strengthen our brand.
How is Mazda changing profit margins and incentives for dealers?
We're not just giving lots of margin or incentives to dealers when they sell a certain volume. It's based on customer service and how customers evaluate the dealers. That kind of assessment was added. The relationship between the customer and dealers is being changed from price-oriented to customer care. That effect can be seen the next time customers come to purchase another car, five years or 10 years later. We are looking long term.
Just four years ago, Mazda targeted U.S. sales of 400,000 vehicles. What is possible now?
I don't talk about volume targets. Currently we are solidifying our foundation. We don't want to discount or give too much incentives, and fleet sales shouldn't suddenly be increased. If we start talking about volume targets, those are things that might become risks.
Mazda is leaning toward reviving the rotary engine for use as a range extender for an EV. But what about reviving it to directly power the wheels, like in the old RX-7?
We are not going to eliminate any option for the rotary, including using it as a range extender or a power source, because that is one of the assets we have built over many years.
But with our current conventional gasoline and diesel engines, we have a new advantage. So that is where we want to prioritize investing our resources and energy.
How will the Skyactiv-X engine help elevate Mazda?
We are going to be top in the industry in terms of the internal combustion engine's efficiency and driving dynamics. So Skyactiv-X is going to give us a big advantage.
The new generation of products that start from 2019 are going to open up a new era for us.
You were feted by President Donald Trump this month on his visit to Japan. He thanked Mazda and Toyota for building the joint assembly plant and called you to the front of the room to shake your hand. How did that feel?
I wasn't informed in advance that was going to happen. I didn't know what he was going to say, and I was really interested to hear him. I was nervous. If he likes us, that's good.