Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, December 28, 1993 TAG: 9312280088
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: TOKYO LENGTH: Medium
Ford, which has held a minority stake in Mazda for 14 years and once took lessons from Mazda's management, now will take a bigger hand in operating Mazda. Ford will appoint a vice president and other officials for Mazda, and there was some speculation that Ford eventually could increase its 24.5 percent interest.
The decision comes against a backdrop of rising trouble in Japan's once pre-eminent automotive industry, where the news nowadays is stagnant sales, layoffs, production cutbacks and plummeting profits - similar to the pain the U.S. automotive industry endured through much of the 1970s and '80s.
Detroit, meanwhile, is in the midst of a renaissance, helped partly by the high prices of Japanese cars in the United States and the Americans' record of improving reliability and quality.
Although American cars have yet to achieve any significant sales in Japan, sales of U.S. vehicles in the United States have been increasing at double-digit percentage rates. The United States is expected to overtake Japan this year as the world's biggest vehicle producer for the first time in 13 years.
Mazda expects to lose 32 billion yen or $288 million this fiscal year, vs. a profit of 2.6 billion yen last year. It is forgoing a dividend for the first time since its stock was listed in 1949.
"Mazda has been going through some very difficult times; the red ink continues to spread and deepen," said Chris Cedergren, an analyst at the AutoPacific Group, a consulting and research firm in Thousand Oaks, Calif. "Ford wants to get more involved so it can help Mazda weather the storm."
Cedergren called Ford's increased involvement a "situation where Ford is helping from a management standpoint, maybe from a watchdog standpoint, too. Who knows, this might even lead to an increased equity stake."
Mazda President Yoshihiro Wada said the agreement with Ford would improve long-term cooperation between them in development and production of cars.
"It's not just for the benefit of one side. It will take better advantage of the strengths of both companies," he told a news conference.
Under the new arrangement, Ford will increase the number of directors it nominates from four to seven. Four of those seven will be given management positions - one as an executive vice president.
That will give Ford an extraordinarily influential role in Japan's fourth-largest automaker. But for now, Ford said it will not invest any more money or boost its equity stake.
"The steps we are taking will add new strength and potential to what is already acknowledged to be one of the most successful of all international business associations," said Wayne Booker, Ford's executive vice president of international automotive operations.
On the Tokyo Stock Exchange, Mazda stock rallied 14 yen to 398 on reports of the agreement, announced after the market closed. Ford stock finished at $64.50 a share, down 37 1/2 cents, on the New York Stock Exchange.
"It's good for Mazda," said Ben Moyer, an automotive analyst in Tokyo for Merrill Lynch Research International. "Now the foundation is there for Ford to take a more active role."
Mazda suffered a 22 percent sales drop to 876 billion yen or $7.9 billion in the six months ended Sept. 30.
The company said Saturday it plans to give 1,600 workers at two factories four extra days off in January because of weak sales. In November, it gave 25,000 workers two extra holidays.
Ford acquired its stake in Mazda in 1979, when Mazda was struggling to recoup the costs of developing its innovative rotary engine. As Mazda recovered, American automakers were yielding market share to Japanese imports, which consumers found more affordable and reliable than many U.S.-made cars.
Ford learned from Mazda about efficient "just-in-time" manufacturing principles and incorporated them in its own factories, improving quality and costs.
But Mazda expanded sales channels and models rapidly in the late 1980s, just as Japan's economy was hitting the end of its rapid expansion.
In early 1993, Ford and Mazda scrapped plans to build cars jointly in Europe. The decision was seen as a serious blow to Mazda, because the European Community is tightening rules on imports of cars from Japan.
by CNB