Mazda turns to resurgent Ford for help

TOKYO — TOKYO -- With its losses growing and its basic strategy gone awry, Mazda Motor Corp. yesterday made what would have been an unthinkable announcement for a major Japanese automaker just a few years ago: It said it was ceding more control to its largest shareholder, Ford Motor Co., and that it expected Ford to help shape its future.

Ford has owned nearly 25 percent of Mazda for 14 years, and the two have a number of ventures focusing on production of specific models, including the Ford Probe and Mazda pickup trucks.


But yesterday's announcement, which caught analysts by surprise, appeared to go far beyond the old arrangement.

While some here interpreted the move as "a desperate bid for survival," as one television news program put it, analysts said it fell short of the large cash infusion or merger that some had speculated Ford might make to shore up Mazda.


The analysts said the announcement hinted instead that Mazda was seeking a lifeline rather than an equal partner.

Mazda, which is expected to lose nearly $300 million this year, said Ford would increase the number of representatives on its board from four to seven members. More important, four of those board members will be based in Japan and will help manage Mazda.

One of the new Ford representatives, none of whom have been named yet, will become one of three executive vice presidents. That will make him or her one of the handful of principal executives running the Japanese automaker and perhaps the most senior foreign executive at a major Japanese industrial company. Mazda is Japan's fourth-largest automaker.

Mazda had distinguished itself as the pioneer of an unusual rotary engine, but the autos that used the engine never gained widespread acceptance and nearly bankrupted the company a decade ago. Today, the only export model that uses the so-called Wankel engine is the powerful RX-7.

In the late 1980s, Mazda expanded at a headlong pace, while Ford was losing billions of dollars.

Mazda has introduced a number of sporty and streamlined models in recent years, including the once hugely popular Miata. But demand has weakened around the globe, leaving Mazda with the burden of heavy expenses and overcapacity.

"Mazda's strategy has been mistaken recently, and this is a response to that," said Andrew Blair-Smith, an auto analyst in Tokyo with Barclays de Zoette Wedd Securities.

"They over-invested in new models when the market was getting weak. Mazda's stock rallied today, but I think the market is still looking for a monetary commitment from Ford," he said.


Mazda said in its announcement, "In order to strengthen the competitiveness of each company, Mazda and Ford have agreed that their cooperation should evolve from its present form, primarily a project-by-project approach, to one with improved potential for long-term strategic planning and cooperation."

It added that the cooperation would be focused on the development of new models and on manufacturing. It also stated that the aim was to use existing plants more efficiently, rather than to expand or develop new plants. In short, it was a manifesto for an era of diminished expectations.

Mazda's President Yoshihiro Wada also sought to blunt speculation about mergers or more extensive links by saying the new arrangement would make the two companies more competitive "while maintaining our respective identities."

The entire Japanese auto industry has been hit hard over the last two years by falling demand in Japan -- which is in the midst of a deep, stubborn recession -- and declining market share in the United States.

Detroit's Big Three automakers have wrested back a sizable portion of the market from the Japanese the old-fashioned way -- by producing better autos and marketing them aggressively. Detroit has also benefited from the rising value of the yen, which has caused Japanese-made products to be more expensive in the United States.

Mazda has been hurt worse than some of the larger Japanese companies because it expanded more energetically during the good times in the late 1980s, adding new models and expanding its Japanese distribution system.