info@kaizen-factor.com Toyota, Lexus, Scion Connoisseurs

Will Toyota take a financial stake in Mazda?

Home / Hybrid / Will Toyota take a financial stake in Mazda?

Does each and every bit of information, rumor and innuendo reported by the legacy major print car magazines appear on their websites? Conventional wisdom would suggest so, but, in reality, that is not always the case. Car and Driver, for instance, tends to lag a month or two before their columnists’ writings migrate from the print edition (where they first appear) to their website. Other magazines (notably England’s Car and the United States’ Automobile and Motor Trend) have certain print content that rarely if ever appears online. A good example of this is the latter publication’s MT Confidential column by Mike Connor. Its reports of future automotive rumors, product plans and trends are of hit-or-miss veracity, but many are intriguing enough that they are worth passing on and commenting upon. Connors’ May 2013 suggestion that Toyota’s side of the sports car collaboration with BMW would be “a Lexus sports car positioned to compete with the Mercedes SLK, BMW Z4, and entry-level Porsche Boxster” was certainly compelling enough for us to write a commentary piece. The August 2016 print issue of Motor Trend was particularly rich in such thought-provoking rumor reports from Mr. Connors. We already commented on the possibility that 2017 would mark the end of Lexus’ CT line. Reading on a bit from that comes this passage on Mazda and Toyota’s future:

Is Mazda looking to get sold? This spring, Mazda North American Operations employees were offered “very attractive” voluntary separation packages. One insider we spoke to hypothesized that Mazda might be looking to pretty up the balance sheets for a prospective buyer by getting rid of some more highly compensated employees. Why? Sales are up, but margins are razor thin for the small, independent manufacturer, especially as Japan’s currency woes continue. So who would be the most likely candidate? Toyota, who established a technological partnership with Mazda last year, ostensibly to study hybrid, fuel cell, and manufacturing programs.

On June 30th, a few days after the appearance of that report, SAMA (the Southern Automotive Media Association) hosted a ride-and-drive / short-lead press preview for the new 2nd-generation Mazda CX-9 crossover. There, I asked Tamara Mlynarczyk, Mazda North America’s Manager of Public Affairs about those rumors. She seemed genuinely surprised to hear about them, and, naturally, had no further comments to make. Yet, a month later, the release of Mazda’s financial results for the first quarter of the April 2016-March 2017 Fiscal Year reflects some of Mike Connor’s concerns. Naomi Tajitsu of Reuters noted that

Mazda…reported a 1.7% fall in operating profit during the first quarter, hurt by a sharply stronger yen, although it managed to log slight growth in global sales…

Growth in global vehicle sales was driven by increases in Europe, China, and other markets although sales were flat in the United States. Sales fell in Japan…

Mazda maintained its forecast for a 25% slide in full-year operating profit, as it expects to take a hit of around 81 billion yen due to currency volatility…

Mazda has assumed a rate of 110 yen to the U.S. dollar but the yen is currently trading even higher at 104 to the dollar.

while Hans Greimel of Automotive News adds that

Mazda Motor Corp. reported a 42% decline in net income in the latest quarter as foreign exchange rate losses hit earnings and sales slipped in the key markets of North America and Japan…

As one of the country’s most export-dependent automakers, Mazda is especially sensitive. About 63% of Mazda’s global output is concentrated in Japan, and roughly 80% of that is exported overseas…

North America, the company’s biggest market, saw sales decline 2% to 113,000 vehicles. Sales in the home market fell 31% to 39,000 units.

Europe bucked the trend, with sales up 22% to 66,000 vehicles.

What about those “very attractive voluntary separation packages”?
A Google search on the subject during this year turned up nothing, but Mazda has certainly been down this road before. That online search did turn up a spate of stories from March 2012 (the most informative being an Automotive News account) on voluntary (or, in some cases, involuntary) buyouts offered to its U.S. employees between 15 March and 3 August 2012.

At this point, let us review Mazda’s past alliance history…

As Mazda winds down its Ford alliance, …
Historically, Mazda has been most closely associated and allied with the Ford Motor Company. After early 1970s collaborations involving Mazda trucks rebadged as Fords for North America (2nd-gen Mazda B-Series compact pickup / Ford Courier) and Australia (1st-gen Mazda Titan medium-duty commercial truck / Ford Trader), in 1979 Ford took a 7% stake in Mazda. By 1996, the Ford stake grew to 33.3%. At its peak, the fruitful alliance between the two culminated in a quartet of non-Japanese Mazda president/CEOs (Henry Wallace, James Miller, Mark Fields and Lewis Booth) later making their triumphant returns to Ford; and numerous Ford/Mazda product collaborations, such as the Ford C1 / Mazda BK platform shared by the 2nd-gen European Ford Focus, 1st-gen Mazda3 and Volvo C30 and the larger Mazda-designed GG / Ford CD3 platform used by the 1st-gen versions of the Mazda6 and the American Ford Fusion / Mercury Milan / Lincoln Zephyr/MKZ triplets.

As the Great Recession financial crisis hit in the fall of 2008, Ford was fortunate enough to avoid the bankruptcies that befell its compatriots General Motors and Chrysler, but, as part of its survival strategy, Ford wound down or sold off its stakes in most of its foreign holdings, such as the Premier Auto Group and Mazda. In the case of the latter, by November 2012, the Ford stake was down to about 2.1%.

2016 saw a couple of milestones in the..er…decoupling of Ford and Mazda. The first of these is the aforementioned launch of the 2nd-generation Mazda CX-9, which sees the last of Mazda’s Ford-sourced engines, the Mazda MZI / Duratec 37 Ford Cyclone V6 replaced by a turbocharged version of Mazda’s Skyactiv-G 2.5-liter, 4-cylinder engine.

Then, on 11 July 2016, a bare-bones news release announced the end of the AutoAlliance Thailand-built pickup truck collaboration between Ford (T6 Ranger) and Mazda (BT-50), with the latter being replaced by a Mazda-badged version of the Isuzu D-Max pickup truck in markets outside North America. Most reports remain silent on the timing for this move, but WardsAuto suggests it will be in 2018, while Jalopnik predicts “a changeover around the 2018 or 2019 model year, at which point the D-Max will probably go through a refresh as well”. This is not, however, the first Isuzu / Mazda collaboration, as the Mazda Titan medium-duty commercial truck, has been a rebadged Isuzu Elf (N-Series) since 2004.

Oh, and we should remind you that, since November 2006, Toyota’s 5.9% stake in Isuzu makes it the 3rd-largest stakeholder in the truck maker. And, no, General Motors is not one of the 2 larger shareholders. In fact, the Thai market (historically the world’s 2nd-largest for pickup trucks behind the United States) is about to see some soap opera-worthy shifting of alliances as…

General Motors quits an Isuzu collaboration…
The current, 2nd-generation Isuzu D-Max pickup truck also has a Thai twin: the 2nd-generation Chevrolet Colorado, which shares only its roof and door panels with its North American counterpart. So will there be D-Max / BT-50 / Colorado triplets for Thailand and other markets? Nope. Less than 2 weeks after the Mazda / Isuzu announcement came word, via Reuters that

General Motors Co and Isuzu Motor Co have agreed to stop working together on developing midsize pick-up trucks made in Asia, as the U.S. automaker focuses on the higher end of the market while the Japanese firm sticks to selling vehicles for everyday commercial purposes…

“The direction each company wanted to take (for the vehicles) was changing,” an Isuzu spokesman said, adding that the Japanese truck maker intended to continue making trucks to be used as workhorse vehicles in markets including Australia, the Middle East, and Asia…

One GM executive said the “unique requirements” for GM are about the strategic shift it began making last year in Southeast Asia where it is now trying to focus more on competing in the higher end of the region’s truck and SUV markets…

“It doesn’t make sense for us trying to copy the business strategy of the Japanese rivals in Southeast Asia,” the executive said.

GM’s revamped strategy is especially pronounced in Thailand, where the automaker is now launching sleeker pick-up trucks.

…and Mazda draws closer to Toyota.
The change in Mazda pickup truck alliances outside North America is but a side note to its developing ties with Toyota. These can first be traced to a late March 2010 announcement that Toyota would be licensing its Hybrid Synergy Drive technology to Mazda. On November 2013, the Hiroshima carmaker launched the fruit of that initiative: the Japan-only Axela Hybrid, a hybridized version of the current 3rd-generation (BM) Mazda3 2.0-liter sedan. Both Toyota and Mazda have been somewhat coy as to which Prius componentry made its way to Mazda’s Axela Hybrid, but Auto Express states that the batteries, electric motor, CVT gearbox and hybrid control systems are the same as in the Prius. Both New Zealand’s Motoring and Autocar tell us, however, that they are 1st-generation version 2 (late 1990s) Prius components. In other words, think the original Toyota Hybrid Synergy Drive system componentry, rather than the then-current THSIII from the 3rd-gen Prius. Autocar‘s account notes that,

Nevertheless, this is a sophisticated hybrid with a complex epicyclic transfer box and CVT to juggle power between the petrol engine, electric motor and front-wheels.

It also benefits from the latest knowledge in tuning and setting-up hybrid systems, so Mazda says it has extracted the maximum from the hardware.

A year before the Axela Hybrid launch came the second major volley in Toyota / Mazda collaboration: An agreement by Mazda to produce 50,000 units per year of “a sub-compact Toyota-brand vehicle, to be based on the Mazda2, to start production around the summer of 2015” at Mazda’s Salamanca, Guanajuato, Mexico assembly plant. Although the initial news release touted an annual production capacity of 140,000 units for the plant, subsequent reports cited a total capacity of 230,000 units per year, roughly divided as 160,000 Mazda3s, 20,000 Mazda2s and 50,000 Toyota Yaris iA sedans (or Yaris R in Mexico and Puerto Rico).

Then came a pivotal announcement in mid-May 2015 that Toyota and Mazda would “enter a mutually beneficial long term partnership”. The press release was short on specifics, but several pundits suggested that Toyota would offer its plug-in hybrid and fuel cell technologies to Mazda. In return, Mazda would provide its fuel-efficient gas and diesel engine Skyactiv technologies to Toyota. The mood at the announcement in Tokyo was reportedly quite playful. As our Asia editor Bertel Schmitt tells it:

Prodded by a Reuters reporter who compared today’s festivities with a wedding party, Akio Toyoda first said that this is “an engagement, and not yet a wedding.” However, a few remarks later, both CEOs kept carrying on about a marriage, and the babies that would come from it, and how lovingly and responsibly both proud fathers would bring the babies up.

Automotive News’ Hans Greimel adds more detail:

“Engagement announcement.” “Marriage.” “Wonderful baby.”

Akio Toyoda and Masamichi Kogai sounded more like doe-eyed lovebirds than CEOs last week when they unveiled a wide-ranging cooperation tie-up between Toyota Motor Corp. and Mazda Motor Corp…

Even as both leaders sidestepped the question of a capital tie-up, their language at a hastily called news conference quickly lapsed into romanticized ramblings about getting married and making babies.

“This is an engagement announcement, not a marriage announcement,” Toyoda said. “Engagement is the most fun and happy time. Both sides see only the positives in each other.”

Continued Toyoda: “I expect both parents to get stronger. If we can give birth to a baby, with strong love, we want to nurture that baby so that the baby, the car, can be loved by other people as well.” Mazda’s Kogai heartily agreed: “I’m sure we can have a wonderful baby.”

The origin of the decision to formalize their cooperation was unclear, Toyoda said. “Just like with a boyfriend and girlfriend, it’s hard to describe which made the first move,” he said. “We just somehow realized that we were drawing closer and closer together over time.”

As Bertel Schmitt so aptly summed it up,

It looks very much like a modern relationship, where both parties move in together, and who won’t get formally married unless the test of daily realities has shown that the marriage will last.

But will Toyota ultimately take a financial stake in Mazda, as it did with Daihatsu, Subaru and Isuzu? Or will this remain an alliance without cross holdings in the manner of the product collaborations with France’s Peugeot Citroën or the broad-based partnership with BMW? Time to trot out the “time will tell” and “stay tuned” clichés…

Recent Posts

Leave a Comment

You must be logged in to post a comment
Contact Us

Got a question? Got a tip? E-Mail us!

%d bloggers like this: