Arab Today, arab today some of the zoomzoom may have gone out of mazda
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Some of the zoom-zoom may have gone out of Mazda

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Arab Today, arab today Some of the zoom-zoom may have gone out of Mazda

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Hammered by last year’s Japanese earthquake and tsunami, all but abandoned by long-time partner Ford Motor Co., and largely ignored by American buyers, Mazda has been struggling to reverse its waning momentum.  Profits are down -- even though sales in the key U.S. market are running ahead of the overall American automotive recovery -- forcing the maker to begin a series of “substantial” employment cuts later this week. Hoping to stand out in an increasingly crowded and competitive market, Mazda is doubling down on a new technology, dubbed SkyActiv, that it claims can deliver most of the benefits of a hybrid at a fraction of the cost. It may be too little too late.  With Ford having sold off all but a minimal stake in its Japanese partner and no longer sharing the hefty cost of developing new products, some observers fear that Mazda can no longer go it alone -- something even its CEO grudgingly admits may force it to share the SkyActiv system to get some much-needed assistance. “It’s a very serious situation because they don’t have a Ford to fall back on or another partner in the wings,” said George Peterson, chief auto analyst with AutoPacific, Inc. He describes the cuts set to begin at Mazda’s U.S. headquarters in California this week as “substantial.” The maker isn’t yet saying how many of its employees will be offered voluntary buyouts, but it is expected to follow with additional, involuntary cuts in the coming weeks. The news has taken few by surprise.  From its global headquarters in Hiroshima, Mazda Motor Corp. has predicted a dismal 100 billion yen loss -- or $1.2 billion at current exchange rates -- for the current fiscal year.  The company plans to raise 151.2 billion yen in a record share sale in hopes of offsetting what will almost certainly be its worst loss in 11 years. A sizable share of that red ink is due to the impact of Japan’s natural disaster last March.  It reportedly cost the maker 80,000 units of production and $433.2 million in overall losses -- the fourth-largest figure among all Japanese makers. But the situation has been complicated by lopsided exchange rates, which fell as low as 76 yen to the dollar earlier this year. Rates have now rebounded only slightly to about 83 yen to the dollar. Yet ironically, Mazda is now more dependent upon its cost-disadvantaged Japanese production base than any other manufacturer.  And the situation is going to get worse when it walks out of a decades-long joint venture in Michigan, dubbed Auto Alliance, where it is currently producing the midsize Mazda6 alongside Ford’s Mustang. Mazda hopes to offset that by building a new plant in Mexico to handle smaller models, such as the Mazda3, that are especially sensitive to exchange rates. Peterson says the company simply doesn’t have the money to open that plant right now, however. “It’s not the first time Mazda has been in trouble,” the analyst points out. Indeed, Mazda nearly folded in the 1970s when it turned out that the maker’s distinctive Wankel rotary engine had serious quality problems. It slowly dug itself out of that crisis but fell into another financial hole barely a decade later. Salvation came from Ford, a long-time affiliate, which began building up equity in the small Japanese firm. Eventually, Ford held a 33 percent stake and, under Japanese law, was able to appoint its own management team, which at one point included Mark Fields, now Ford’s President of the Americas. After joining the U.S. maker in 2006, however, new CEO Alan Mulally decided to draw down that stake. Ford now holds a minimal 4 percent and is largely severing product and powertrain development ties. Mazda officials have put on a game face, insisting that this has freed them up to follow their own path without the compromises inherent in an alliance.  The payoff has been SkyActiv. The comprehensive system involves the transformation of just about every element of the automobile, from chassis design to the smallest water pump. But the key features are a lighter yet stronger body and more efficient gasoline and diesel powertrains. The first full example of the new approach is the CX-5 crossover which recently began rolling into U.S. showrooms. With highway fuel economy of up to 32 mpg, the new model is nearly as efficient as comparably sized hybrids -- but at a base MSRP of $21,490, the CX-5 has a significant cost advantage.If anything is being spared Mazda’s budget-cutting knife, it’s the marketing department which is heavily advertising the new technology. The good news for the maker is that U.S. sales are up 48 percent for the first two months of 2012. Product chief Robert Davis noted, during a recent interview, that 60 percent of the initial buyers traded in other brands. While an automaker might hope to leverage such a high-tech system to its own advantage, Mazda CEO Takashi Yamanouchi recently acknowledged the maker might have to offer SkyActiv up as a bargaining chip as it “actively” searches for a partner to replace Ford. “We are considering every option,” the executive acknowledged last month. Part of the problem is that as good as Mazda claims SkyActiv is, the company also concedes it will eventually need to add hybrids to its powertrain line-up due to ever tightening fuel economy mandates in Japan, Europe and the U.S. “It’s partner or die,” said David Cole, chairman-emeritus of the Center for Automotive Research, in Ann Arbor, Mich. Mazda has shown a surprising ability to maneuver itself out of trouble over the years, and SkyActiv could be the weapon it needs to battle back.  But the situation is “tenuous at best,” adds Peterson. There is little room for mistakes -- or more losses.

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