Why Mazda Wants A Chinese Divorce From Ford

Everybody is denying that Mazda’s Chinese joint venture with Ford is quickly coming to an end. The Nikkei is unfazed by the chorus of contradiction. Today’s edition of the Japanese paper sheds more light on the impending divorce in China: Mazda wants “to give itself more latitude to navigate the growing market as it sees fit.” That’s putting it mildly.

In 2003, Mazda had entered a joint venture with China’s FAW. The successful cooperation is on-going. Three years later, Mazda was asked by Ford to join Ford’s joint production venture with Chang’an. Mazda had to split its Chinese operations into two, dividing its attention in the market. Ask the folks at Volkswagen how much fun it is to deal with two joint venture partners in China. Mazda had it even worse. The three-way Ford/Mazda/Chang’an tie-up “often had difficulty agreeing on production plans,” said a Mazda executive to The Nikkei, and he most likely was polite.

Says the Nikkei: “Against this backdrop, Mazda reviewed its China tie-up with Ford, leading to the termination decision.”

China is not only the world’s largest auto market, with around 13.64 million new cars sold. It also has turned into Mazda’s most profitable market. Ending the cumbersome three-way joint venture will give Mazda necessary breathing space, and the ability to implement decisions quickly. For instance, the only car Mazda makes at the joint-venture Nanjing factory is its Demio subcompact, a model that makes Chinese consumers yawn. With the joint venture ending, Mazda could shift the Axela production from a joint-venture plant in Chongqing to Nanjing, boosting capacity utilization.

What Mazda needs are strong partners in strong markets. The Nikkei sees Mazda getting closer with Toyota (Mazda has decided to procure a hybrid system from Toyota.) As for markets, The Nikkei opines: “Seeing that Mazda’s only emerging-market plants are in China and Thailand, it may be wise to explore linking up with a partner in other such countries, where auto demand is growing more rapidly than in developed markets.”