Mazda shores up finances with shares
Manufacturer to resolve short-term liquidity problems in the wake of tsunami, floods and rising YenMazda issued a press release late last week, announcing it will offer over a billion new shares and draw down a ¥70 billion loan to see it through what the company describes as "rapid changes" in the "business environment".
In short, the share issuance and "subordinate loan" compensate for an apparent cash-flow problem resulting from two natural disasters affecting Mazda plants last year — the tsunami in northern Japan during the early part of 2011 and the floods in Thailand later in the year — and the surging Yen, which has hurt Mazda's ability to compete in world markets.
Mazda had planned at this time to embark on ambitious growth program, contingent in part on the company's SKYACTIV engineering and manufacturing concept and also reliant on new factories in Mexico and Russia. SKYACTIV, through Mazda's Monotsukuri Innovation system, will result in major savings in the cost of goods sold, but for the company to reap that reward it must first invest in the technology in its factories. Hence the share issue and subordinate loan.
Based on a press release from Mazda in November last year, the Russian plant will be a joint venture with OJSC Sollers. To be built at Vladivostok, the new plant will be geographically close to Japan and in a position to take advantage of the port facilities there. Russia is Mazda's second largest market in Europe, according to the press release, so the new factory will likely be fully committed to Russian domestic sales; with any exports bound to be a tiny fraction of the factory's total output.
The situation is reversed for Mazda's Mexico plant, well located to produce and ship cars into the US and Canada, but also possibly Brazil. Like the other three 'BRIC' nations (BRIC – Brazil, Russia, India, China), Brazil's economy is 'emerging' at a rapid rate and is believed to be the fourth largest automotive market in the world. So it's very much a territory where Mazda wants to be represented. As the company revealed in its press release announcing the joint venture in Russia, the company is "expanding its business in emerging markets".
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