By on February 22, 2012

Hammered by the tsunami, the Thai flood and a monster yen, the Japanese car industry is looking back at one of the worst years in modern history. Amazingly, Japan’s top three, Toyota, Nissan and Honda survived the year intact, and are looking at a profit.

Of all Japanese automakers, Mazda is bleeding the most. 70 percent of Mazda’s production is  in Japan, and 90 percent is for export. Mazda predicts that it will close the fiscal year on March 31 with a net loss of 100 billion yen ($1.25 billion.) This will be the fourth year of losses for Mazda. On top of all the disasters, Mazda has to digest a painful divorce from Ford which cut into overseas production capacities. In the words of Mazda,

“Its financial standing has temporarily worsened due to rapid changes in its business environment, including the continuing sharp appreciation of the yen since 2011, the unstable economic conditions such as the financial crisis in European countries, as well as large-scale disasters such as the Great East Japan Earthquake and the floods in Thailand.

How is Mazda going to survive this?

It will sell shares instead of cars.

In order to finance urgent investments, which target 50 percent overseas production by 2016, Mazda announced today that it wants to raise up to $2 billion via a public share offering. This means a haircut for current shareholders to the tune of a massive 69 percent dilution, Reuters says.

Some of the money will go towards building factories in Mexico and Russia, most of it will be spent in Japan. While other automakers are forging alliances to share the cost of research in new and untested technologies, Mazda fights alone. It is betting on optimizing the internal combustion engine with its Skyactiv technology, an exercise in diminishing returns.

50 percent overseas production by 2016 are widely regarded as too little, too late. Nissan and Honda only have 24 percent of global production  in Japan, Toyota has 44 percent of its global production in Japan. All of them would like to lower exposure to the yen as quickly as possible.

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67 Comments on “Mazda Re-Engineers A Damaged Balance Sheet...”


  • avatar

    My off-the-cuff analysis, worth what y’all paid for it: Toast. Might take 5-10 years, but they’re toast. They don’t have the scale to survive without Ford. Maybe Changan or some other Chinese firm will buy the brand.

  • avatar
    gear-dog

    I hope they can find a partner, they have some of the more interesting cars and ideas out there. That and I want a skyactiv ND Mata right now.

  • avatar
    GS650G

    Mazda was rescued by Ford in the 1980s and emerged as a strong player in the US market while their share in Japan lingered low. They don’t deserve to go under but without a major to support them it’s not looking good.

    Mitsubishi has a conglomerate that can support them as long as they wish, Mazda does not.

    • 0 avatar
      icemilkcoffee

      It would actually make perfect sense for Mitsubishi and Mazda to merge. Both companies have quite a bit of engineering depth despite their small size. By themselves both of these companies will have a hard time swimming with the sharks.

  • avatar
    ciddyguy

    This is sad to hear as I like my Protege5 but I think they need to perhaps up their #’s outside japan so they can build cars elsewhere for export to Europe and N.A.

    I see lots of Mazdas out there, a huge majority seem to be the 3, at least out here in Puget Sound territory.

    That said, their skyactive technology may be of diminishing returns, but we’ll have to see how the new engines etc fair in the real world as people buy and drive them.

  • avatar
    lilpoindexter

    As much as I like Mazda, not too sure about buying any of their stock.

    • 0 avatar
      redav

      I’ve actually thought about it – if they hang on long enough to get their new models out, they may have a great turn around. However, given the high yen that has to come back down, currency risk wins.

  • avatar
    PintoFan

    I can’t wait to hear the deafening silence from bailout critics after the Japanese government steps in to offer a leverage buyout/loans in 5 years.

    • 0 avatar
      Steven02

      Mazda is much smaller than GM. The gov’t might let them go under. If Toyota was in this kind of bind, then the gov’t might get involved.

      • 0 avatar
        PintoFan

        It’s possible, but I think it’s much more likely that the Japanese government will engineer some kind of shotgun wedding between Mazda and Toyota, or Mazda and Nissan. Although Mazda is small relative to other automakers with global reach, the fact that so much of their production is still concentrated in Japan means that losing the company outright would mean a huge hit on manufacturing jobs. That, and the Japanese are not nearly as shy as we are when it comes to overt economic nationalism.

      • 0 avatar
        supersleuth

        The thing is, they’re going to shift a lot of production out of Japan and THEN probably go belly-up anyway. By that point the government may not care so much.

  • avatar
    foojoo

    I am hoping they can dig themselves out of the hole they are in. At least, I hope they survive for the full length of my car’s warranty.

  • avatar
    niky

    Sign me up. Might be worth something in twenty years… if only as a souvenir of the last great Rotarian.

    There is a possibility the Chinese will want to buy into Mazda. Unlike Saab, Mazda actually has a working, innovative research and development arm that will be worth taking over, as well as an international distribution network.

    Or Ford could simply subsume Mazda again…

  • avatar
    JCraig

    I can’t imagine Mazda ever going under. The Japanese are perhaps the most protective of domestic industry. If the government or domestic banks don’t step in to finance them maybe a big player like Toyota will buy a chunk of the company. Mazda makes a relevant product with global distribution, there’s a lot of value in the company.

  • avatar
    DC Bruce

    Mazda seems to have the “Hail Mary” pass embedded in its corporate culture. The first “pass” was in the early 1970s when Mazda beat everyone else, including NSU (which owned the original patents) to commercializing the Wankel “rotary” engine. Problem was, the Wankel was (and is) a gas-sucker, and the car was just getting big in the markets when oil prices spiked in 1973.

    It was from that calamity that Ford rescued Mazda, which had been limping along on the “GLC” hatchback (parent car to the Mazda 3) and still trying to make the Wankel engine more reliable and less thirsty.

    Mazda succeeded, but only to a point. The Wankel engine’s torque characteristics and high fuel consumption (even with fuel injection replacing a 4-bbl. carburetor) made it inappropriate for sedan duty with an automatic transmission.

    Today, the Wankel’s favorable power-to-weight ratio is equalled by high-revving 4 cylinder engines, which use a lot less fuel in producing their power, so the Wankel has been pulled from the market.

    The next trick is the “Skyactiv” stuff, which seems to offer only marginal improvements in fuel economy vs. others’ high-reving, high compression DI engines.

    Diminishing returns indeed.

    The question for any purchaser of Mazda’s new stock issue is not the “dilution” but whether the additional capital invested will generate a proportionately higher return.

    • 0 avatar
      kvndoom

      In order for SkyActive to reach its peak compression (and thus peak fuel economy), premium gas will be required. That’s a HUGE turnoff for an “economy” car. Hyundai’s performance engines, even V6’s and turbos, can run safely on 87, with small performance losses. It will also be a gigantic roadblock to the Sky-D engine ever being sold on US soil. With diesel now being the most expensive fuel (when it used to be the cheapest) Americans won’t buy Sky-D unless it can equal Prius mileage.

      • 0 avatar
        dima

        Your point of Premium gas requirements for optimal economy is correct. However, if you do calculations, the extra cost of premium gas (it is around 25-35 cents more per gallon than regular) will yield better savings. If car can travel more miles on Premium gas, than on Regular, than cost of Premium gas will be offset and at the end, you will be saving money. The thing is, these new engines in US Mazda’s are detuned. The original SKY engine has compression rate close to 14:1, in US it is close to 12:1. This I believe is a root cause of why gas mileage is not as good as it should.

      • 0 avatar
        kvndoom

        Yeah it was detuned specifically to run on 87 for its US intro, as I understand it. And while it’s easy for you and I to do the math, most people only equate premium gas with more expensive cars, or turbos.

      • 0 avatar
        supersleuth

        The math won’t work in their favor if competitors’ cars can get comparable mileage on regular gas.

      • 0 avatar
        icemilkcoffee

        Not true- the SkyActiv engine in the US bound CX5 will have 13:1 compression ratio, which is still higher than pretty much any other production car, but lower than the 14:1 Mazda has in the other markets. The US bound SkyActiv engines are tuned for regular gas.

      • 0 avatar
        charly

        Premium and diesel is not optimal for the American market but the American market isn’t that important to Mazda

      • 0 avatar
        Herm

        An inexpensive way to increase the octane is to blend in about 20% of E85 to your regular gasoline.. if your car has a turbo or computer controlled ignition timing you will often experience an increase in MPG.. even if E85 has a lower energy content than gasoline. It will take a while for the computer to readjust the timing so be patient.. if you have an older car adjust the timing yourself.

      • 0 avatar
        dima

        @icemilkcoffee
        How having lower compression engine in US is not true?
        @supersleuth
        Also, To detune engine to run on regular is requires more than compression change, computer has to be reprogrammed for different timing for spark plug ignition. From what I read, while it is true, that proper SKY engine would not give you much better gas mileage than competition, it can provide more power than the rest wile been economical. After all Mazda is a “ZOOM ZOOM” mobile. So for potential $5 more at the pump you getting more fun, well in theory.
        But than again, as someone already point out, US general public might not get it.

      • 0 avatar
        Mrb00st

        The SkyActiv motor in the 3 has a reduced compression ratio because the fancy exhaust manifold required to safely support the 14:1 ratio won’t fit in the engine bay of the current 3, which will be (hopefully) replaced soon.

        Even still, 12:1, 155 horsepower, and 40mpg sounds pretty good to me when a Corolla gets 34, and is as much fun as watching C-Span on valium

      • 0 avatar
        icemilkcoffee

        The US bound SkyActiv cars use 87 octane regular gas. See here:
        http://www.fueleconomy.gov/feg/Find.do?action=sbs&id=32211

        The fuel economy numbers are achieved with regular gas, not premium gas.

      • 0 avatar
        dima

        This is what I’m trying to say. Now with premium gas and 14:1 compression, it will go further on gallon of gas if to believe Mazda PR. So cost of premium gas will be offset by better gas mileage.

    • 0 avatar
      redav

      Considering the EPA ratings on the CX-5, SkyActiv, even with the reduced compression in the US market, does what it’s advertised to do. The Mazda3 holds its own against the competition, and its even more decompressed engine doesn’t have as much low-end torque of the CX-5, which means there’s still room for improvement.

      A big point that is missed about diesel is yes, Americans WILL buy them–look at VW’s sales. We just don’t know how many MORE people will buy them. Sky-D has certain advantages over other diesels, a big one being there’s no urea injection system, which cuts cost & weight. It’s also made using the same assembly line as the Sky-G, which should also cut costs. They claim it has the same kind of mpg increase over its predecessor as the Sky-G (20% – 30%), which likely would make it the most efficient diesel in the American market. So let’s step back and seriously think about that: a CX-5 with 310 ft-lb torque + ~42 mpg hwy for only ~$1.5k more than the gas engine–does anyone really think that WON’T sell in the US?

      • 0 avatar
        TonyJZX

        if mazda and honda are in such dire straits, how does mitsubishi survive?

        i think mazda/honda are such strong brands that there will be no doubt *someone* will invest in them… maybe the chinese

        volvo is a much weaker brand than both and they’re ok… sorta

      • 0 avatar
        Toad

        Too bad a lot of drivers cannot do math: they won’t pay 10% more for diesel fuel that can achieve 25% better fuel economy.

      • 0 avatar
        supersleuth

        Your point would have more force if we could buy a diesel car for the same price as its gas equivalent. But as things are, the “math” you cite makes earning back the diesel premium quite a long haul. The fact remains that diesels make sense in Europe where diesel fuel gets favorable tax treatment, but less sense in the US, and the market quite rationally reflects that. The zeal of diesel enthusiasts isn’t going to change that.

      • 0 avatar
        khalid_asad

        @TonyJZX.
        you are right. I think, and i beleive if GEELY international will get MAZDA, it will be better than Volvo..Ok they have already taken, but this time they should come up for mazda, and eevelop their GEELY cars with MAZDA innovation. They will be successful.

        I beleive, based on my experiance, MAZDA & Honda are the best Japnies cars after Lexus & Infinity…I use Mazda6 Zoom Zoom, its really fun to drive.

    • 0 avatar
      rnc

      if mazda and honda are in such dire straits, how does mitsubishi survive?

      A massive conglomerate that will recapitalize over and over again in a war of attrician (even toyota’s massive financial resources don’t compare to Mitsu)

  • avatar
    obruni

    i figured they were in trouble when they moved production from the US back to Japan while the other manufactuers were shifting overseas.

    its a shame, I really do like its engineering approach.

    I hope that someone scoops up the MX-5 to survive on its own as a niche play, like Caterham or Ariel.

    • 0 avatar
      Tosh

      Mazda should make a Miata Shooting Brake (hatch) to compete with the Toyota 86 (which does not have a hatch– why!?). Then I could at least drive myself to the airport….

  • avatar
    imag

    I’ll kick down for some Mazda stock. It won’t be enough to matter, but I don’t mind feeling I owe them something for all the great memories: a GLC, an RX-7, a Miata.

    And if they can get that Kodo face on everything they make ASAP, they have some chance of a return. It’s amazing when you figure how much that Nagare misstep must have cost them. That was the ultimate demonstration that good design should take into account production realities.

    Anyway, the way I figure it, the world needs another Miata and one more RX-7. I hope they can pull it out…

  • avatar
    bryanska

    I disagree that the ICE engine is doomed to diminishing returns. You can fuel them with natural gas or hydrogen, and both of these are still kicking around.

    The fact remains that ICE will be cheap and reliable for many years to come. I can’t wait for the electric Miata, but if I’m to stay below $20k (or inflation’s equivalent), an ICE engine is in my future.

    Plenty of technologies can be added to the SkyActiv quiver: laser ignition, stop/start, electrically driven components vs. belt driven, extreme cooling, servos, low-drag, the list goes on.

    Don’t forget that in the late 70s, all that Japanese tech like turbo and OHC saved their bacon. Japanese designers were planning on tackling the American market with large American-style cars. Mazda was doubling down on the Wankel. When the oil crisis hit, Japanese manufacturers scrapped several new designs. To stay competitive, they loaded up their old engines with every technology on the books. Turbos and OHC, for example, were old tech even in the 70s.

    Mazda is simply repeating Japanese car history. They’re throwing every trick in the book into the proven ICE engine. It’s a recipe for low cost, both in production and ownership. Plenty of people still have range anxiety, and ICE is for them.

    • 0 avatar
      WheelMcCoy

      @bryanska –

      +1

      For the last 20 years or so, efficiency hasn’t been a priority. There’s certainly room for improvement of the ICE and other components of a car.

      Mazda does, however, have a future plan for a hybrid, at least according to AutoBlog Green:

      http://green.autoblog.com/2010/03/29/mazda-to-license-hybrid-technology-from-toyota/

      Instead building it themselves, Mazda would license the technology from Toyota.

      I hope Mazda survives and thrives. They make interesting, fun, affordable cars.

      • 0 avatar
        redav

        Mazda created a hierarchy for environmental progress:

        1. Optimize the ICE because for the next few decades, the ICE will dominate automobiles.
        2. Electrification. Electric steering, idle-stop, regenerative braking (I-ELOOP)
        3. Hybridization meaning incorporating electric drive
        4. Full electric vehicles.

        Notice that without #1 & #2, hybrids won’t be optimized. And without #3, #4 is just theoretical. IMO, it’s the best approach to the problem. They just need to get their next gen products out the door ASAP.

  • avatar
    minneapolis_lakers

    People here see the trees but not the forest – Mazda is a part of the deep-pocketed Sumitomo keiretsu.

    IMO a likely outcome is Mazda will be eventually absorbed into Toyota (part of the Mitsui keirestu). Sumitomo and Mitsui have already merged their respective banks.

  • avatar
    Rental Man

    It would be great if Mr. Steven Lang could take a few moments and put on his old analyst hat and break down his thoughts about Mazda stock investments.
    Thanx in advance…

  • avatar
    Eyeflyistheeye

    FIAT or Volkswagen would be a natural match for Mazda, as FIAT has no Japanese partner and VW is going through the divorce with Suzuki. Suzuki’s another possibility, they used Mazda-derived engines in the Vitara V6 and the Esteem, although I doubt the wisdom of two struggling companies merging.

    As much as Honda’s stinking up the joint right now, I can’t see how acquiring Mazda would help them in any manner.

    Toyota’s holdings in FHI and Isuzu if they were to acquire Mazda would receive raised eyebrows from the EU and US regulators even if the Japanese government were to encourage it.

    • 0 avatar
      minneapolis_lakers

      Toyota-Mazda alliance does not need to be capital; it could work just as well operationally, for example, the hybrid synergy system. For Japanese companies, capital is the easy part – capital is so plentiful in Japan in general and Sumitomo in particular – their bank and trading company have more money than most countries.

  • avatar
    ekaftan

    In 1987 my mother bought a 323 station wagon. It was not much better gas wise than her Peugeot 504, but the reliability was astonishing. Were the 504 failed to start half of the winter, requiring a push start (we lived on a hilly city, so parking it nose down was the norm), the 323 never, ever failed to start at the first turn of the key and went on to be my car until 1992 and then went on to my aunt until almost the year 2000. in 92 I got an MX6 that my father had replaced with a Lancia Thema Turbo and I proceeded to use that car until it had 240.000kmts, a number unheard of down here in those years.

    The 504 was 9 years old in 1987 and was almost scrap by then. The 323 was a bit ragged by 13 years old, but still ran like clockwork.

    That car made my family Mazda lovers until the 626 turned into the Mazda 6 and price went too far up. We had 3 626s and an MPV and all had over 200.000kms when they were sold.

  • avatar
    200k-min

    I’m going to take the other side, there’s nothing about Mazda that really would make me cry if they were to disappear. Over the years I’ve spent many hours riding in or driving 323’s, 626’s, Millenia’s, Protege’s and 3’s 6’s, etc. Of all the brands out there that I have personal experience with Mazda is up there.

    My analysis is over the past 20 years there has been nothing of theirs that somebody else didn’t do better. Even the much lauded “3” wouldn’t even get a passing glance from me next to a new Focus. When the “6” came out I thought, hey, finally a sporty mid-size that will be more fun than my Accord. Bought one and drove it for about a year. It was flimsy and all together not as good as my trusted Accord (which I still own). The Honda is also more fun to drive as I put better suspension and tires on it.

    So, at the end of the day, who cares? Mazda’s are ok, but I’d still take my money elsewhere.

    • 0 avatar
      imag

      Who did a better Miata?
      Who did a better FD RX-7?
      Which car company did more to support club racing in the US?

      • 0 avatar
        PintoFan

        GM made a better FD RX-7, it was called the C5 Corvette. It had the added bonus of not being powered by a pencil sharpener that burns oil. The S2000 would be a reasonable Miata replacement- it’s just as slow and gutless as the real thing, it just doesn’t have the “fun to drive” hype machine behind it.

      • 0 avatar
        serothis

        @pintofan

        The rx-7 was much prettier and could go around corners. Meanwhile, the c5 corvette would wrap it’s self around a tree when it met a corner. Oh and the c5 engine also burned a lot of oil. And at the end of the day cost more than the rx-7.

        The s2000 (which also had oil burning issues) was heavier, didn’t have as balanced weight distribution and harsher ride than the mx-5. All while costing $35k BASE price.

      • 0 avatar
        PintoFan

        You couldn’t show me a track that an FD could lap faster than a base C5 coupe. Have fun with your lolcantturn meme though. I wasn’t aware that LS series engines had any problem with burning oil, probably because they don’t.

        You were right about the S2000 being hideously overpriced, though. It doesn’t matter because I would never own either car.

      • 0 avatar
        serothis

        “You couldn’t show me a track that an FD could lap faster than a base C5 coupe. Have fun with your lolcantturn meme though. ”

        That’s a bold claim. I hope you have evidence to support it.

        As for you not knowing about the the oil burning. I would chalk that up to two reasons. One the ls line didn’t intentionally inject oil like a rotary (so it wasn’t as heavily criticized) and two you either never owned a c5 corvette or wandered into a corvette forum. It’s a fairly common complaint among corvette owners (especially pre-2001) for oil consumption issues. Ironically owners I know say they top off with a quart of oil every 2k miles, which is comparable to my rx8 which does so every 1500 miles.

        Now of course I’ll say the newer corvettes (c6) don’t have the same issues but then again the c6 isn’t from the same time period as the rx7.

      • 0 avatar
        rx8

        Geez another IGNORANT bunch talking crap again…
        IT is NOT a fault that a Rotary burns a little oil (less than a 370Z) as it is meant to.
        As for Mazda. The issue is currency and nothing to really offset it when most of their cars come out of Japan.
        If you cant understand or have never imported then you are just fan boys commenting.
        Most markets have increased for Mazda, Australia #3 last month ahead of FORD.
        The USA ‘IS THE ONE’ that is costing Mazda and their Ford/Michigan plant, which is a total cash burner for them.
        Pathetic management at MNAO..this company needs to get rid of ex Ford executives who treat Mazda as their play thing.
        Mazda are going through a usual 10 years model re-generation.
        They have some fantastic all new product around the corner.

  • avatar
    ReturnofSAM

    As much as people will say non-Japanese plants are just as good, I take comfort in knowing my Mazda is Japanese built. I’ve been to the Hiroshima plant, and it’s a gem.

    Nice headline. Shall we start the deathwatch now? (sarcasm off)

  • avatar
    flomulgator

    SkyActive D with it’s incredibly low 14:1 compression ratio would be a fantastic candidate for propane injection. I could see the mix values being incredibly high compared to anything else, and the benefits being very significant.

    A agree that Nagare (as it appeared in production, which was different than concept) was a poor choice. However, their next design step looks like a handsome recovery.

    I think being absorbed into a larger company is a recipe for disaster for a car company of that size….its a temporary fix that often has a bad or lethal outcome.

    And finally, where’s my diesel-hybrid wide body Wankel dammit!

  • avatar
    righteousball

    IIRC Mazda does have a big ass conglomerate backing it and it’s called Sumitomo… they’re the one who arranged for the Ford deal back in the day (the first time, 70s).

    Also I believe Mazda does have a deal with Toyota to license HSD at some point. Skyactiv is meant to tide them over in the meantime.

    At the recent CX-5 launch Mazda’s official line is that they’ve greatly streamlined the manufacturing process, so that they’re making 15% more profit on it over the CX-7 and will profit at the current exchange rate. Something like that. True? I wonder.

    I’m realistic about someone else picking them up, but I’m a big Mazda fan. I remember seeing their early-90s batch of cars and they just made Toyota and Honda look old-fashioned and constipated by comparison. I’ve got a very soft spot for the two Amati cars… Now I’m aware that they probably all look generically Japanese to some of you, but Mazda has been THE great anti-Toyota tonic for me for 20 years. For every ugly thing Toyota’s had the audacity to put out (they can’t help themselves but make stuff like the MR-S xD), there’s a Mazda that recovers my faith somewhat. So here’s to hoping.

  • avatar
    joe_thousandaire

    They may survive by leasing some of their tech like sky-active to other companies struggling with CAFE (Chrysler perhaps?) The biggest consistent problem I see with Mazda in the U.S. is their dealership network, for every real stand-alone Mazda dealer there are three Mazda/Hyundai/Subaru “your import specialist” strip-mall hacks. Not the way to build brand image and value.

  • avatar
    Junebug

    We bought a 2010 Mazda 3 for our daughter alomost 2 years ago. No problems to report and car looks/runs as good as new. We were lucky to have a great dealer nearby, that is a problem not faced by Toyota buyers I grant you, but, we have never had to go back for anything. I do the oil changes (much easier than my GTI) and nothing has broke, come loose, or malfunctioned.


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