Ford Boosts Role in Mazda Management : Autos: In a reversal of fortune, the U.S. company takes seven more seats on the board of its Japanese partner.
Reflecting a dramatic shift in the relative strengths of the U.S. and Japanese auto industries, Ford Motor Co. will boost its role in the management of Mazda Motor Corp., the money-losing auto maker in which Ford holds a major stake.
Analysts speculated that Japanese banks may have demanded an increase in Ford’s influence as a condition of offering new loans to Mazda, which is projecting a loss of $288 million for the year ending March 31.
Under terms of an agreement announced Monday, Ford--which has owned 24.5% of Mazda since 1979--will nominate seven directors to the Japanese company’s board. Four of the directors will also hold management positions within Mazda, including one as an executive vice president, Mazda President Yoshihiro Wada told a news conference.
Up to now, Ford has nominated four directors to the Mazda board, with just one holding a management post. The company has had 42 managing or non-management directors--a number that will increase with the new appointments--so the Ford nominees will hardly dominate the board.
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Wada stressed that the new arrangement between the companies is a step toward greater partnership in “global and long-term” strategic planning.
“Business relations have been limited to a project-by-project level between Mazda and Ford,” Wada said. “But we can have a more broad-based business strategy with the new agreement. Having a top official from Ford, we can have closer communications between us, mainly in the areas of product development and manufacturing.”
The agreement was announced after the close of trading Monday on the Tokyo Stock Exchange. Early reports of the deal contributed to a 3.5% jump in the value of Mazda shares, but the stock gave up that gain and was down slightly in early Tokyo trading Tuesday. In trading Monday on the New York Stock Exchange, Ford slipped 37.5 cents per share to close at $64.50.
The move toward a greater U.S. management role reflects Detroit’s resurgence in the world marketplace. Japanese manufacturers, by contrast, are suffering from recession at home and the effects of a strong yen on export sales.
The infusion of Ford personnel also seems aimed at helping Mazda recover from plunging sales. Mazda lost $146.5 million for the six months ended Sept. 30, partly because of aggressive expansion plans started in the 1980s that left the auto maker with excess capacity and personnel just when the Japanese car market foundered.
However, Wada insisted that the agreement “has nothing to do with our company’s financial situation” and instead seeks to achieve new economies of scale.
“It’s not just for the benefit of one side,” Wada said. “It will take better advantage of the strengths of both companies.”
However, Mazda is under so much financial pressure that it recently announced it will not pay a dividend for the first time since 1949, when its stock was first listed. It has also announced a special four-day shutdown of two factories in January, affecting 1,600 workers.
In a statement released from Mazda’s Hiroshima headquarters, Wayne Booker, Ford’s executive vice president for international automotive operations, described the new deal as part of an “evolutionary” change in the two firms’ relationship.
“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,” Booker said.
Still, some U.S. auto analysts were wary about the announcement.
“I suspect there’s more than meets the eye here,” said David Healy, an analyst with S.G. Warburg & Co. “It’s been a longstanding story that Mazda needed bailing out and Ford was going to do it, although those stories had died down. Whether more management relationships with Ford is a condition for more loans by Mazda banks is an issue we don’t know at this time.”
In July, 1992, Ford bought a 50% stake in Mazda’s Flat Rock, Mich., plant for about $380 million. The transaction was seen as a move by Ford to ease Mazda’s cash problems and maintain operations of the Flat Rock plant, which Mazda opened in 1987 with a $550-million investment.
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The plant, renamed AutoAlliance International, makes the Ford Probe and Mazda 626 and MX6 cars.
At its U.S. plants, Ford makes a version of its Explorer sport utility vehicle for Mazda, along with its Ranger compact pickup.
Ford and Mazda each hold a 45.1% equity interest in Autorama Inc., which distributes Ford vehicles in Japan. Ford sells a variety of Mazda-assembled products in Japan under the Laser, Telstar, Festiva and Spectron names.
Ford-Mazda Chronology
A chronology of Ford Motor Co.’s association with Mazda Motor Corp.:
* 1970: Mazda Motor Corp., a subsidiary of Toyo Kogyo Co., begins U.S. sales operations.
* 1979: Mazda, with sales plummeting during the oil crisis of 1973-74, gets an infusion of capital from Ford Motor Co., which buys a 25% stake in Toyo Kogyo.
* Oct. 7, 1982: Ford announces it is seeking an alliance with a Japanese auto maker to build vehicles in the United States. Toyo Kogyo, Japan’s No. 3 auto maker, is considered a likely candidate.
* April 4, 1983: Executives from Ford and Toyo Kogyo discuss a possible joint venture between the two companies similar to the General Motors Corp.-Toyota Motor Co. agreement.
* Nov. 30, 1984: Mazda Motor Corp., the new name of Toyo Kogyo, announces plan to build a $450-million manufacturing plant in Flat Rock, Mich.
* Oct. 28, 1987: Ford announces it will begin selling its Taurus cars in Japan in 1988 through the Autorama network of independently franchised dealers, which is owned by Mazda.
* April 19, 1989: Mazda announces that Ford will supply engines for a new generation of cars built by Mazda in the 1980s. Two days later, Ford announces it will make a light truck in the 1991 model year that will be sold to a subsidiary of Mazda.
* Aug. 7, 1990: A 1991 Mazda Navajo sport utility vehicle is assembled at Ford’s Louisville, Ky., plant. It marks the first time a foreign company will sell a vehicle built by a domestic manufacturer. Mazda makes Ford Laser and Telstar models in Japan.
* Jan. 7, 1992: Ford says it will ship Mazda-built Ford Probe cars with the steering wheel on the right side to Japan beginning in 1993.
* June 17, 1992: Ford increases its equity and involvement in Autorama. Ford and Mazda each own 36.5%, with the remaining 27% owned by independent investors.
* July 1, 1992: Ford completes purchase of a half-interest in Mazda’s $760-million auto assembly plant in Flat Rock to form AutoAlliance International.
* April, 1993: Ford breaks ground on a $14-million electronics application center in Higashi-Hiroshima, Japan, which will serve Mazda, its largest customer in Japan.
* Dec. 27, 1993: Mazda says it will allow Ford to take a larger role in its management by appointing a vice president and other officials.
