Mazda's Business Plan Aims for 27% Profit Growth

Mazda Motor gained on Friday after the Japanese automaker unveiled a new business plan aimed at boosting its operating profit by more than 27% in four years through further product-led growth and accelerated cost cuts.

The Hiroshima-based carmaker one-third-owned by Ford Motor easily surpassed its profit target under the current business plan ending this month as it won drivers over with the Mazda3 compact, Mazda6 sedan and other cars, while also benefiting from a weaker yen.

Mazda said it would continue along that path, staying focused on its core models so as not to dilute the brand, while improving profit margins through stepped-up cooperation with Ford and enhanced manufacturing efficiencies.

"Creating further synergies with Ford will be a top priority," Chief Executive Hisakazu Imaki told a news conference.

"For a true win-win relationship, we need to work even harder than before," he said in a comment that appeared to dispel any remaining speculation that its cash-strapped partner could sell part of its stake in Mazda.

By the end of the four-year plan in March 2011, Mazda wants an operating profit of over 200 billion yen ($1.70 billion), compared with its forecast of 158 billion yen for 2006/07. It aims to lift its operating margin to 6% by then from a projected 4.9% for this year.

It will add one new core vehicle to its lineup during the plan, increase capital expenditure by 50% and research and development spending by 30% over the next four years.


Mazda's new business plan had also been anticipated for details on how it would address its stretched production capacity as sales expand in Europe and emerging markets such as China.

Mazda wants to boost global retail sales to more than 1.6 million vehicles, or 30% more than the 1.234 million units sold in calendar year 2006.

In a move that some analysts hailed as prudent, Mazda said it would expand capacity with minimal investment at two existing domestic factories, by a combined 98,000 units a year to 996,000 vehicles in the business year starting in April.

Mazda acknowledged that it remained vulnerable to adverse currency swings due to its heavy dependence on exports, but said it would work to create a buffer against such headwinds through improved efficiencies at its manufacturing facilities.

Last year, the automaker built about 1.31 million vehicles globally -- about three-quarters of them in Japan, which accounts for just one-fifth of its global sales volume.

"For Mazda, the only sound option was to expand its existing facilities," said UBS Securities auto analyst Tatsuo Yoshida. "The fact that they opted against a greenfield site was positive. That would have been too risky at their current sales volumes."

Executive Vice President Robert Graziano said Mazda was still studying various options for adding capacity overseas, including discussions with Ford about expanding their joint venture factory in Thailand.

"We're presently in discussions with the (Thai) government," he said, adding that a decision would be announced in due course.

With most of its sales growth occurring overseas, Mazda's exports shot up 18% last year -- faster than the 13% surge in overseas production -- leading to big windfalls from a weaker yen.

In addition to four domestic plants, Mazda owns joint venture factories with Ford in the United States and Thailand, as well as a three-way venture in China with Changan Automotive Group.