To the casual observer, Mazda appears to be on a hot streak. The new 6 is great and just beat the Honda Accord in our comparison testing. The CX-5’s 43,319 sales in 2012—the highest for a Mazda crossover in nearly a decade—helped propel the company to its best year since 2007. The company expects 300,000 U.S. sales in 2013, a mark it hasn’t hit in almost 20 years, and in February, its stock soared 12 percent on increased 2012 profits, a huge gain after four straight years of financial losses.
Despite all this, Mazda’s future is wracked with uncertainty, a worrisome notion for those who love affordable fun cars. Mazda’s divorce from 30-year-plus partner Ford deprived the Japanese brand of critical economies of scale, greatly increasing its costs. And last year’s economic windfall was the product of a variable the company doesn’t control: currency fluctuation. Mazda made more money than expected in 2012 because of the weakening yen, which earned the company a greater return on the many vehicles it exports from Japan. If the yen’s value swings the other way, to the stronger position it has generally held the past four years, Mazda’s profits will suffer. Something has to change.
Suitor: Toyota
Relationship history: Mazda licenses Toyota's hybrid system for the Japanese-market 6, and recently agreed to build the Yaris successor at its new assembly plant in Mexico.
Will you accept this rose? It probably can't. Given Toyota's dominance of the home market, it's almost unimaginable that the Japanese government would approve any arrangement that increases the company's market share.
Suitor: Nissan
Relationship history: Mazda buys Nissan's commercial vans and sells them as its own in Japan; discussions between the two companies have increased since Ford disappeared from the picture.
Will you accept this rose? Unlikely. Mazda's agreements with Toyota could keep Nissan at arm's length.
While the U.S. business looks good, its sales here represent only about one-quarter of Mazda’s global total, and the vehicles that seem so promising in the States are heavily compromised elsewhere. The CX-5 is well-sized for the American and European markets, but smaller, B-segment crossovers will be the next growth area in much of the globe. Mazda lacks an answer to vehicles such as the forthcoming Honda Fit–based SUV, Ford EcoSport, Chevrolet Trax, and Volkswagen Taigun. It’s the same story with the 6. Mid-size sedans in the U.S. have been getting larger and larger, but aligning the 6 with its top competitors here has left the car too big for Mazda’s other major markets in Europe and most of Asia.
Even the Mazdas that aren’t size-compromised are in trouble. The race to more-efficient engines and lower curb weights is driving up development and manufacturing costs for all automakers, but Mazda’s cost increases are compounded by the exit of its longtime partner in Dearborn. Operating as a virtual Ford subsidiary once gave Mazda low-cost access to platforms, drivetrains, and even whole vehicles. With Ford mostly out of the picture, that gravy train ends. Unfortunately for Mazda, the 2 and 3, which together comprise nearly half of the brand’s global sales, are spun from Ford pieces. To even maintain its already inadequate per-unit profits on these cars, Mazda will have to reduce the cost of their replacements or charge more for them.
George Peterson, president of the analysis firm AutoPacific, explains that in the short term, Mazda’s profits on the 6 and CX-5—both built on a low-cost, Mazda-engineered platform—are high enough to offset slim margins on small cars. But while the company can control its own manufacturing costs, the industry’s continued consolidation means Mazda won’t be able to control rising supplier prices. It has a patchwork of small partnerships [see “Hook-ups"], and CEO Takashi Yamanouchi says sustaining these relationships is a cornerstone of his recovery plan. But in the long term, Mazda must replace Ford with another partner that can help it keep purchasing costs at a sustainable level.
Mazda has much to offer. It consistently produces engaging vehicles, and its ability to design products for low-cost manufacture is a rare skill in any industry. Perhaps the greatest hope lies in Mazda’s new tie-up with Fiat. Currently confined to just a one-product agreement, the deal is set to yield an Alfa Romeo roadster from the next Miata. Fiat supremo Sergio Marchionne has mentioned that cooperation between the two companies could expand beyond this project. Roadsters alone will do little to change the company’s fortunes, but if this endeavor leads to a deeper cooperation, the Miata just might save Mazda.
you boys like mexico?
To better isolate itself from currency fluctuations, Mazda is building a factory in Salamanca, Mexico. Scheduled to open in the first quarter of 2014, the plant will have an annual capacity of about 200,000 vehicles. Mazda will build the 2 and 3 there, as well as a small Toyota. To fully realize the benefits of local production, though, Mazda also needs a local source for engines.