A little more than a year ago, marketing guru Mark Fields became CEO of Japan's Mazda Motor, the third president installed by controlling shareholder Ford Motor Co. in the past five years. Since then, slowing sales in Mazda's home market and currency-related losses from its European business have driven the auto maker back into the red. It expects to post a $458 million group net loss for the fiscal year ending Mar. 31, the first loss in three years.
What's the plan to start growing again? Business Week Tokyo Correspondent Chester Dawson and Detroit Deputy Bureau Chief Joann Muller spoke with Fields at the North American International Auto Show in Detroit about his efforts to revive Mazda's fortunes. Here are edited excerpts from their conversation:
Q: What has gone wrong since Ford bought a controlling 33.4% stake in Mazda in 1996?
A: Mazda has made a lot of progress over the past five years. We were the first Japanese company that allowed a foreign company to effectively take management control. If you read the [Japanese] media reports at the time, it was almost like...the end of the world. Since that period, we've cut purchase costs by 28%, reduced platforms from 17 to 12, cut out about $3.5 bullion in costs, cut our net debt by 50%.... But in the period of 1997-98, we tended to downplay our weakness -- the influence the yen played [on profits earned overseas]. And there were still some structural issues we needed to address. The currency turned viciously on us, and we've been living with that for the last year-and-a-half.
Q: Are you confident Mazda's unions will support its latest in a series of restructuring efforts?
A: To be quite honest, there were some issues in terms of our relationship with the union. As we announced the midterm strategy [in November], we spent a number of weeks getting very deep understanding with the union leaders. And we achieved buy-in to our restructuring actions, which includes the closure of one of our assembly plants in Japan and the reduction of about 1,800 people by Mar. 31 of this year [equal to about 9% of Mazda's total group workforce, or 18% of its parent company workers]. And we came to agreement on that in late December.
Q: What are the plan's highlights?
A: This isn't just a restructuring plan. It's a growth plan. The plan clarified our operational role within the Ford group, which was a big issue internally in the company. Analysts were also asking: What's your reason for being within the Ford group? [In the plan,] we were designated the Center of Excellence, or the center of responsibility, for developing large "I-4" engines for the Ford enterprise, which is a universe today of about 2 million units [a year]. Ford sells about 7 million units globally, so it's a big responsibility. And we were also designated Center of Excellence for front-wheel drive, midsize platforms, basically our 626 [family-sedan] vehicle.
Q: Anything else?
A: One of our key strategic holes was exposure to the yen [against the European joint currency]. We've been successful in Europe, where we've grown our business significantly over the past three years. But last year, our business went down there because of the strength of the yen. So we're going to shift some production capacity to Europe [about 100,000 cars starting in 2003] of our next-generation B-car, which is our Demio [compact-wagon] model, and next-generation C-car, which is our 323 [compact-sedan] or Protege.
Q: What about longer-term goals?
A: Through the midterm business plan period to 2004, we want to get our return-on-sales to 3% and return-on-assets to 6%. Longer term, we want to get our return-on-sales to 5% and our return-on-assets to 9% [within this decade]. From a debt standpoint, over the past four years we've reduced our debt about 50%. We used to be at about $10 billion, and it's now at a little over $5 billion. Our intent through the midterm plan is to get our net debt-to-equity [ratio] down to 50%, which is more in line with best-of-class competitors.
Longer term, we want to keep it at that level. And we want to get our [credit] rating from Moody's [Investors Services], which is now at "Ba1," back to prime level by the end of the midterm plan.
Q: Will Mazda reenter the U.S. sports-car market with the RX-8 design model unveiled in Detroit now that the once-popular RX-7 is sold only in Japan?
A: The RX-8 is not an approved product program yet, but I would expect in the next six months we'll approve it, and probably within the next two years you'll see it out on the street. This is very important for Mazda, because it's our icon product. It will have a very big benefit from a company-image standpoint. And it benefits us internally in terms of morale. Lastly, it will bring people to the showroom to see other products we have.
Our brand awareness is very low in many markets. But the new Tribute [sport-utility vehicle] is bringing people into the showrooms, and sales of many other vehicle lines are starting to increase.