Mazda Agrees to Manufacture Cars for Toyota at Mexican Factory

Mazda Motor Corp. (7261), the only Japanese automaker that’s been unprofitable for the past four years, will build cars for Toyota Motor Corp. (7203) at a Mexico plant currently under construction.

Production of the Toyota-branded vehicle, a sub-compact based on the Mazda2, will begin in mid-2015 at a rate of 50,000 units per year, the companies said in a statement today. The agreement will help Toyota strengthen its lineup in North America and increase production efficiency at Mazda, the companies said.

Mazda is selling assets, shifting production to outside Japan and improving gas mileage on models including the CX-5 sport utility vehicle and Mazda6 sedan to reach its first annual profit in five years. The plant in Mexico, scheduled to start production by the year ending March 2014, will help Mazda counter a strengthening yen which makes Japanese-made cars less profitable.

Toyota will invest “an appropriate portion” of production equipment costs and development costs related to the Toyota vehicle, and also costs related to the plant’s capacity increase, it said in the statement. The vehicles will be sold through Toyota dealerships, it said.

Toyota shares fell 0.5 percent at its close in the Tokyo Stock Exchange, before the companies announced the agreement. Mazda shares was unchanged from yesterday.

Mazda’s new plant, with an annual capacity of 140,000 units, will be located in Salamanca City, Guanajuato State. The company will build Mazda2 and Mazda3 vehicles at the factory.

Mazda exported 75 percent of the cars it made in Japan this year, making it more vulnerable to gains in the yen than other Japanese automakers.

To contact the reporter on this story: Ma Jie in Tokyo at jma124@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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