Mazda’s Having Problems Also

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Yesterday’s dead pool article mentioned the dire straits Mitsubishi’s in but wait – there’s more.

Mazda Motor Corp.’s operating profit tumbled 71 percent in the latest quarter, as swinging foreign exchange rates hit earnings and offset small sales gains.

Operating profit dropped to 13.7 billion yen ($117.3 million) in the automaker’s fiscal third quarter ended Dec. 31, from 47.5 billion yen ($407.0 million) a year earlier.

Net income declined 32 percent to 23.8 billion yen ($203.9 million) in the three months, the company said Thursday while announcing financial results.

Revenue fell 5.3 percent to 802.3 billion yen ($6.87 billion), as global retail sales inched ahead 1.6 percent to 387,000 million vehicles in the fiscal third quarter.

Big foreign exchange rate losses undercut Mazda’s operating profit, as the Japanese yen appreciated in value against the U.S. dollar and other currencies. Shifting exchange rates lopped 37.0 billion yen ($317.0 billion) off the company’s quarterly operating profit.

Results were also hurt by falling sales in every major market, except China.

The contribution of sales and vehicle mix to operating profit in the quarter was unchanged over the previous year, as incentives increased and margins shrank.

Retail volume in North America, Mazda’s biggest market, shed 4.5 percent to 107,000 units in the third quarter. Sales in Japan and Europe fell as well.

 

Mazda’s U.S. sales slid because the company tried to moderate incentive spending as rivals put more cash on the hood, especially in the competitive sedan segment. Mazda will lift some incentive spending to stoke sales, Executive Vice President Akira Marumoto said.

“Rival carmakers ramped up incentives for their summer campaign and Christmas campaign, but we didn’t follow them, which led to a big decrease in sales,” Marumoto said.

“That’s why we will narrow that gap.”

Deteriorating sedan sales in the U.S. also forced Mazda to trim its North American sales forecast for the current fiscal year ending March 31, Marumoto said.

Mazda had expected North American sales to increase 2.5 percent to 449,000 vehicles in the current fiscal year. But it now expects sales to drop 1.4 percent to 432,000 units.

Europe operating profit fell 54 percent to 1.2 billion yen ($10.3 million) in the period, compared with a 2.6 billion yen ($22.3 million) operating profit a year earlier.

European sales decline 3.4 percent to 57,000 units.

Citing increased costs for recalls in Japan and reduced wholesale volumes in Japan and North America, Mazda trimmed its global profit forecast for the fiscal year ending March 31.

Mazda now expects full-year operating profit to drop 43 percent to 130 billion yen ($1.11 billion), from a year earlier. It had earlier predicted operating profit would drop to only 150 billion yen ($1.29 billion). Mazda also lowered its net income outlook to 90 billion yen ($771.1 million), representing a 33 percent drop from the previous year. It had earlier forecast net income of 100 billion yen ($856.8 million).

The tempered outlook comes despite Mazda’s recalculating its earnings forecasts to account for what are expected to be more forgiving foreign exchange rates.

 

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4 COMMENTS

  1. I work for Mazda at a very low level and speak only for myself.

    The writing is beginning to appear on the wall for the small remanufacturing facility that rebuilds automatic transmissions and RX-8 rotary engines on the East Coast. Recently high-level personnel from Japan and then the vice-president over the facility visited, and just after the latter came an urgent push to get production numbers up. Anyone who has seen high-ranking company officials suddenly appear with little notice at any facility can tell you that it’s usually not good news, but more a prelude to shuttering the facility.

    The three employees from Japan who are assigned here all go back within a few months of one another in late 2019–early 2020, and the first to go back will be the engineer who oversees transmission production. 2019 is also the year that the last of the 8–year RX-8 engine warranties expire, on the few 2011 models that were sold here, so production of reman RX-8 engines will not need to continue. The timelines all seem to come together to spell doom in two years. But if Trump imposes a “border adjustment” tax as his administration has proposed, that would place tariffs on the parts we bring in for the reman operation, possibly killing it even sooner.

    The figures we see that the media discuss suggest that the company is barely profitable. One person commented on another blog that the bank in Japan that controls Mazda wants to either sell the company or close it in the near future to get the potential liability off its books—yet the obvious candidate, Toyota, has instead just become involved with Suzuki despite announcements in 2015 about cooperation with Mazda.

    I’m looking for other work for this and other reasons. The future seems very limited here, but I emphasize that’s just my opinion and I’d like to be proven wrong.

  2. The reality is that the economy is very weak. It’s as simple as that. That means most will struggle, even large companies.

    If you look at most government actions, its clear they want it the way it is. If they wanted the economy to be better there could be things that could be done (or NOT done). Want to increase employment? They could get rid of payroll taxes and forced unemployment insurance. They could stop passing things like Obamacare. They could get rid of income taxes. They could make the unions collect their own dues instead of putting it on the employers accounting. All those things decrease employment, or make jobs that would have been full time into part time ones.

    But they don’t even do things like that. Therefore we have the problems we have.

    • rich, you hit the nail on the head. Ever falling wages are killing off what was once the middle class in this country. Before I was so unceremoniously laid off, I was making twice what I did driving a truck in ’74, back when I could afford to buy a new vehicle and sorta plan a future. I recall quitting a job in ’88 because I was only making $10/hr. A huge amount of jobs where I live don’t even pay that now. This ain’t rocket science….and people wonder why millenials live at home with their parents. It might be because families are doubling up in dwellings due to very high rent since the housing bust in ’08 and no increase in wages with money being worth 10% less every year for the last many years. Yes, I know what the govt. says about inflation but they lie lie lie.

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