Post by TonyV on Dec 15, 2009 2:57:22 GMT -5
Ford, Mazda to remain 'long-term' partners
Automakers to team on new technology and joint systems
Bryce G. Hoffman / The Detroit News
Dearborn --One year after Ford Motor Co. sold most of its controlling stake in Mazda Motor Corp., top executives from both companies have reaffirmed their commitment to a "long-term partnership" -- quashing speculation that the longest alliance in automotive history was breaking apart.
In meetings here over the past couple of weeks, Ford CEO Alan Mulally, Mazda CEO Takashi Yamanouchi and other senior managers have discussed how they can continue to collaborate within the framework of their new ownership structure. While their partnership will be less about shared vehicle platforms and more about joint development of automotive systems and technologies, executives from Ford and Mazda said it remains vital to their success.
"The strategic relationship continues. The business relationships continue. And they continue on the basis that they've always continued," Ford Chief Financial Officer Lewis Booth told The Detroit News. "Where it works to the benefit of both companies, we do things together, and where it doesn't, we don't."
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These meetings come as Ford works to complete the sale of its last foreign brand, Volvo, as part of an effort to refocus the company on fixing the Blue Oval. At the same time, General Motors Co. is selling its Swedish brand, Saab, and rethinking other aspects of its global operations. But Ford executives say the relationship with Mazda remains vital to maintaining the company's global presence, keeping development costs in check and refining its product development and manufacturing processes.
That was echoed by Masaharu Yamaki, executive vice president for manufacturing at Mazda and a member of its managing board.
"Our strategic alliance will remain intact," he said. "Ford will remain an important partner for Mazda."
That partnership was evident last week at the Los Angeles Auto Show, where both companies featured new subcompacts that are key to their efforts to increase U.S. market share: the Ford Fiesta and the Mazda2. As with many of their new cars and crossovers, they share a common architecture -- in this case, one developed by Mazda.
When development began, neither company planned to sell its version in the United States. But that changed when Mulally took over and ordered a fundamental revision of Ford's product strategy.
"They told us it wasn't designed to be sold here, and they felt it wouldn't be able to meet the U.S. (safety) requirements," said Steve Kozak, chief engineer for safety systems at Ford. "We said, 'We'll be the judge of that.' And we sent our team to Hiroshima (Japan)."
Two months later, engineers from both companies had figured out how to modify the platform to not only meet U.S. safety requirements, but achieve top scores in government crash tests.
Ford saved Mazda
Collaboration between Ford and Mazda was not always so reciprocal. When Ford first began buying up shares in Mazda in 1979, it desperately needed a window into the Japanese automobile industry.
"Twenty or 30 years ago, the Japanese clearly had the lead," said Booth, formerly Mazda's president and chairman. "Now, it's a little more two-way than it was. There's more mutual sharing."
If Ford needed Mazda in the 1980s, Mazda desperately needed Ford by the end of the 1990s. It had strayed from its mission as a manufacturer of sporty cars with polarizing designs and nearly bankrupted itself in a failed bid to compete head-to-head with Toyota Motor Corp. and Honda Motor Co. in the Japanese market by offering a line of plain vanilla sedans designed for mass appeal.
In 1996, Ford bought a controlling stake in the company and installed its own executives, who helped Mazda return to its roots. It also set its sights on the U.S., not Japan, as its primary market.
That strategy worked. Before the automobile market collapsed a year ago, Mazda was setting sales records every month in the United States. Then came the surprise news in November 2008 that Ford was selling off its controlling stake in the company.
Booth said the move was motivated entirely by "Ford's financial position, rather than any change in strategy."
The Dearborn automaker was struggling to secure cash as the bottom fell out of the global auto market. Ford already had sold off its British luxury brands, and then-CFO Don Leclair wanted out of Mazda, too, according to a source, but other executives wanted to keep at least a partial stake.
"We're still dependent on each other," said Derrick Kuzak, Ford's head of global product development, noting that many of Ford's newest vehicles are still based on Mazda platforms. "You cannot change that overnight."
Ford reduced its stake in Mazda from 33.4 percent to just over 13 percent, netting approximately $540 million. It remains Mazda's largest shareholder.
That move raised some serious concerns in Japanese financial circles, coming as it did in the midst of the worst crisis to hit the global auto industry in decades. Several analysts questioned whether Mazda would be able to weather the storm without Ford. But Mazda has proven surprisingly resilient.
As with most other automakers, the past year has not been kind to Mazda.
Its U.S. sales are down 23 percent year-to-date, about the same as the industry as a whole, which is down 23.9 percent, but the company's share of the market remains flat at 2 percent.
In May, Mazda warned that it expected to lose more than $556 million this year.
Too small and too large
One Mazda insider said the company's problem is that it is too small and too large. Though it is a full-line manufacturer, it is too small to compete directly with the titans of the industry. It also lacks the financial resources to aggressively market all of its products. But Mazda also is too big to succeed as a niche player like rival Subaru.
Despite these challenges, Mazda's outlook has been improving. In October, the company said it was selling more vehicles than anticipated and was returning to profitability. It now expects to lose just over $289 million for the full fiscal year, which ends in March.
Mazda also issued more than $1 billion in new stock -- money it plans to use to fund research into green vehicle technology and safety improvements.
"We're making money, and we're cash-flow positive. We just went to the equity markets and raised a bunch of money," said Jim O'Sullivan, president of Mazda North America. "That tells you people have a lot of faith in Mazda going forward."
Iwao Nakatani, director of research at Mitsubishi UFJ Research and Consulting Co. in Tokyo, said Mazda's resilience is typical of Japanese carmakers.
"Japanese companies are more patient and able to endure losses," he said. "It's bad for shareholders, but the competitiveness of Japanese industry has been fostered by this industrial structure. They have had to reduce costs and improve quality in order to survive."
While it seems to have found its financial footing, Mazda remains dependent on Ford for things like powertrains, which Ford say it will continue to provide.
"Beyond that, we're always open to considering new opportunities to work together," Kuzak said.
But Ford also remains dependent on its Japanese partner, and Kuzak has committed to regular meetings with Seita Kanai, his counterpart at Mazda, to ensure that information continues to flow between the two companies.
Ford still has a lot to learn from Mazda, particularly in the areas of manufacturing and product development, and both companies continue to share best practices.
Mazda provides Ford with a window into the Japanese auto business that Ford is keen to keep open. And the relationship also allows Ford to achieve even greater economies of scale. For example, by selling motors to Mazda, it is able to lower its own unit cost for those engines. And the two companies continue to operate four major joint ventures -- in China, Thailand, South Africa and Flat Rock -- that Booth said are critical to Ford's global ambitions.
Ford has given up its seat on Mazda's managing board, but Booth said that was motivated by legal considerations and not a reflection of any fundamental rift between the companies.
"Even when we were a bigger stakeholder, Mazda ran their own business," he said. "It's a remarkably enduring relationship. It's built on good business principles. It's also built on strong mutual respect between the two companies."
Automakers to team on new technology and joint systems
Bryce G. Hoffman / The Detroit News
Dearborn --One year after Ford Motor Co. sold most of its controlling stake in Mazda Motor Corp., top executives from both companies have reaffirmed their commitment to a "long-term partnership" -- quashing speculation that the longest alliance in automotive history was breaking apart.
In meetings here over the past couple of weeks, Ford CEO Alan Mulally, Mazda CEO Takashi Yamanouchi and other senior managers have discussed how they can continue to collaborate within the framework of their new ownership structure. While their partnership will be less about shared vehicle platforms and more about joint development of automotive systems and technologies, executives from Ford and Mazda said it remains vital to their success.
"The strategic relationship continues. The business relationships continue. And they continue on the basis that they've always continued," Ford Chief Financial Officer Lewis Booth told The Detroit News. "Where it works to the benefit of both companies, we do things together, and where it doesn't, we don't."
Advertisement
These meetings come as Ford works to complete the sale of its last foreign brand, Volvo, as part of an effort to refocus the company on fixing the Blue Oval. At the same time, General Motors Co. is selling its Swedish brand, Saab, and rethinking other aspects of its global operations. But Ford executives say the relationship with Mazda remains vital to maintaining the company's global presence, keeping development costs in check and refining its product development and manufacturing processes.
That was echoed by Masaharu Yamaki, executive vice president for manufacturing at Mazda and a member of its managing board.
"Our strategic alliance will remain intact," he said. "Ford will remain an important partner for Mazda."
That partnership was evident last week at the Los Angeles Auto Show, where both companies featured new subcompacts that are key to their efforts to increase U.S. market share: the Ford Fiesta and the Mazda2. As with many of their new cars and crossovers, they share a common architecture -- in this case, one developed by Mazda.
When development began, neither company planned to sell its version in the United States. But that changed when Mulally took over and ordered a fundamental revision of Ford's product strategy.
"They told us it wasn't designed to be sold here, and they felt it wouldn't be able to meet the U.S. (safety) requirements," said Steve Kozak, chief engineer for safety systems at Ford. "We said, 'We'll be the judge of that.' And we sent our team to Hiroshima (Japan)."
Two months later, engineers from both companies had figured out how to modify the platform to not only meet U.S. safety requirements, but achieve top scores in government crash tests.
Ford saved Mazda
Collaboration between Ford and Mazda was not always so reciprocal. When Ford first began buying up shares in Mazda in 1979, it desperately needed a window into the Japanese automobile industry.
"Twenty or 30 years ago, the Japanese clearly had the lead," said Booth, formerly Mazda's president and chairman. "Now, it's a little more two-way than it was. There's more mutual sharing."
If Ford needed Mazda in the 1980s, Mazda desperately needed Ford by the end of the 1990s. It had strayed from its mission as a manufacturer of sporty cars with polarizing designs and nearly bankrupted itself in a failed bid to compete head-to-head with Toyota Motor Corp. and Honda Motor Co. in the Japanese market by offering a line of plain vanilla sedans designed for mass appeal.
In 1996, Ford bought a controlling stake in the company and installed its own executives, who helped Mazda return to its roots. It also set its sights on the U.S., not Japan, as its primary market.
That strategy worked. Before the automobile market collapsed a year ago, Mazda was setting sales records every month in the United States. Then came the surprise news in November 2008 that Ford was selling off its controlling stake in the company.
Booth said the move was motivated entirely by "Ford's financial position, rather than any change in strategy."
The Dearborn automaker was struggling to secure cash as the bottom fell out of the global auto market. Ford already had sold off its British luxury brands, and then-CFO Don Leclair wanted out of Mazda, too, according to a source, but other executives wanted to keep at least a partial stake.
"We're still dependent on each other," said Derrick Kuzak, Ford's head of global product development, noting that many of Ford's newest vehicles are still based on Mazda platforms. "You cannot change that overnight."
Ford reduced its stake in Mazda from 33.4 percent to just over 13 percent, netting approximately $540 million. It remains Mazda's largest shareholder.
That move raised some serious concerns in Japanese financial circles, coming as it did in the midst of the worst crisis to hit the global auto industry in decades. Several analysts questioned whether Mazda would be able to weather the storm without Ford. But Mazda has proven surprisingly resilient.
As with most other automakers, the past year has not been kind to Mazda.
Its U.S. sales are down 23 percent year-to-date, about the same as the industry as a whole, which is down 23.9 percent, but the company's share of the market remains flat at 2 percent.
In May, Mazda warned that it expected to lose more than $556 million this year.
Too small and too large
One Mazda insider said the company's problem is that it is too small and too large. Though it is a full-line manufacturer, it is too small to compete directly with the titans of the industry. It also lacks the financial resources to aggressively market all of its products. But Mazda also is too big to succeed as a niche player like rival Subaru.
Despite these challenges, Mazda's outlook has been improving. In October, the company said it was selling more vehicles than anticipated and was returning to profitability. It now expects to lose just over $289 million for the full fiscal year, which ends in March.
Mazda also issued more than $1 billion in new stock -- money it plans to use to fund research into green vehicle technology and safety improvements.
"We're making money, and we're cash-flow positive. We just went to the equity markets and raised a bunch of money," said Jim O'Sullivan, president of Mazda North America. "That tells you people have a lot of faith in Mazda going forward."
Iwao Nakatani, director of research at Mitsubishi UFJ Research and Consulting Co. in Tokyo, said Mazda's resilience is typical of Japanese carmakers.
"Japanese companies are more patient and able to endure losses," he said. "It's bad for shareholders, but the competitiveness of Japanese industry has been fostered by this industrial structure. They have had to reduce costs and improve quality in order to survive."
While it seems to have found its financial footing, Mazda remains dependent on Ford for things like powertrains, which Ford say it will continue to provide.
"Beyond that, we're always open to considering new opportunities to work together," Kuzak said.
But Ford also remains dependent on its Japanese partner, and Kuzak has committed to regular meetings with Seita Kanai, his counterpart at Mazda, to ensure that information continues to flow between the two companies.
Ford still has a lot to learn from Mazda, particularly in the areas of manufacturing and product development, and both companies continue to share best practices.
Mazda provides Ford with a window into the Japanese auto business that Ford is keen to keep open. And the relationship also allows Ford to achieve even greater economies of scale. For example, by selling motors to Mazda, it is able to lower its own unit cost for those engines. And the two companies continue to operate four major joint ventures -- in China, Thailand, South Africa and Flat Rock -- that Booth said are critical to Ford's global ambitions.
Ford has given up its seat on Mazda's managing board, but Booth said that was motivated by legal considerations and not a reflection of any fundamental rift between the companies.
"Even when we were a bigger stakeholder, Mazda ran their own business," he said. "It's a remarkably enduring relationship. It's built on good business principles. It's also built on strong mutual respect between the two companies."