Mazda Re-Engineers A Damaged Balance Sheet

Bertel Schmitt
by Bertel Schmitt
mazda re engineers a damaged balance sheet

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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  • Joe_thousandaire Joe_thousandaire on Feb 23, 2012

    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.

  • Junebug Junebug on Feb 23, 2012

    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.

  • TheEndlessEnigma In 2022 I put my college (then 21 year old) daughter into a 2022 Mirage SE, this year I put my college age 21 year old son into a 2023 Kia Soul LX. They are both very happy to have and both very happy with their vehicles, both are low cost to run and insure.
  • CEastwood If there are 10 laps or less left after a crash and a red flag only let the first ten cars finish the race . I watched the race from about the halfway point and the crashes caused near the end were caused by drivers who had zero to very little chance to finish in the top five .
  • Alan I blame COVID, the chip shortage, container shortage and the war in Ukraine. This aggression is evident in normal daily driving of late.
  • Alan $10 000 is a bit rich for a vehicle that most likely been flogged all its life, plus it's a VW. Lots of electrical gremlins live in them.
  • Alan Mitsubishi, Hino and Izuzu trucks are quite common in Australia. Another factor that needs to be taken into account are the cheap Chinese trucks and vans that are entering the market in Australia and becoming more popular as reliability improves, with huge warranties. Businesses want the cheapest logistics. Plumbers, concreters, builders buy many of these in their lightest versions, around 2.5 tonne payload. Hino/Toyota could use the cheaper competitor in Mitsubishi as a competitor against the Chinese. You don't see too many of the Japanese/Asian trucks in the rural areas.