Economic storm hits Japanese car makers

PETER LOUISSON
Last updated 12:59 02/03/2012

Two Japanese companies are facing tough times as the global economy struggles to make headway. Neither is likely to follow in Saab's vehicle tracks, but there is a distinct possibility of a shakeup in the industry at some point. In both cases, well, one at least, the local distributors of these products are faring fine.

The firms we refer to are Mitsubishi and Mazda, under pressure for very different reasons. Mitsubishi Motors has had a decade to forget, beginning with cover-ups at senior management levels to avoid recalls (in a truck division), and later with product direction, which resulted in a meek "fightback" and more recently a halt in production of niche vehicles and a move to global environmentally responsible models.

Mitsubishi Motors announced last week that it was halting production of Colt and Outlander at its sole European vehicle factory in The Netherlands. As of next year European-bound product will be sourced from Thailand and Japan. The writing has actually been on the wall for some time in Europe; back in 2009 the company moved its European operations from The Netherlands back to Japan, at a time when it was changing tack from being a regional manufacturer of SUVs to a global supplier of environmentally friendly passenger cars. Like the iMiEV:

Bike passes car

Mitsubishi operations in the US came close to the brink recently, but a last-minute deal will see the ASX produced there, alongside a slimmed-down range of other models. The company recently made a decision to can all of its niche sports offerings, and concentrate on global mass-market models, mainly in the small car area, and electric vehicles.

Mitsubishi Motors is in the fortunate position of having other Mitsubishi affiliates to help it through tough times, but these may not be in tip-top condition either; Japanese banks are dealing with a stagnant domestic economy, and Japanese electronics firms are facing record losses presently.

The past 10 years have been lean for profitability at Mitsubishi Motors, and therefore R&D budgets have been stretched thin. That has been reflected in its products, with few new offerings, and models like Lancer not expected to get its 2013 makeover. Evidently the iMiEV is doing reasonably well in its domestic market, but electric vehicles in general are selling primarily to corporates and are not yet making headway or money for any company. New vehicles have been thin on the ground from Mitsubishi, about the only one of note lately being the ASX. The Colt is overdue for replacement, though a new model is due out late in 2012. And a "new" Outlander is scheduled for next year, though expect plenty of carry-over features.

Mazda's woes are quite different. You'd never know the parent company is facing hardship, for product has been selling well both sides of the Tasman. Mazda, Japan's fifth biggest auto maker, has lost money for each of the past three years, and in the latest financial year is expected to post a substantial loss. Most will be astonished at this, given the Mazda3 has, at times, been the bestselling vehicle in Australia. However, on a global scale it is still a niche player, with 2011 output of less than 1.3 million units. The investment in SkyActiv technology could well have stretched resources, though it will filter through most of the company's new product, around 80 per cent, in the future. The strategy will also reduce the cost of producing new models by up to 30 per cent.

Mazda CX-5

The first of the new SkyActiv products arrives soon, in the form of the CX-5 crossover, one of the most anticipated vehicles of 2012, and a vehicle which is said to be critical to Mazda's immediate financial future. A smaller crossover using the same technology is likely, to be known as the CX-3. Mazda is also working to increase overseas production, from 30 to 50 per cent over the next four years, as the strengthening yen continues to erode profits. Production facilities are earmarked for China, Russia, Mexico and Thailand.

Mazda recently announced it is raising $2 billion, some of it through sales of shares, to help it weather a period of sustained economic difficulty, exacerbated by the tsunami in Japan and flooding in Thailand. The share price is currently down one-third on what it was this time last year, and with Ford no longer being a significant minority shareholder (it used to own one-third of Mazda's shares but now holds just over 3 per cent) experts suggest the company could be a takeover target. Meantime, Mazda is keen to license its SkyActiv technology to other auto manufacturers, as key alliances mean increased production possibilities.

Finally, amid the gloom, a glimmer of hope for Saab, again. There's a suggestion that its production facilities might well suit a major cashed up third-world auto player. The Swede seems to have nine lives.

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7 comments
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mjp   #1   09:59 am Mar 04 2012

no mention of the strong Yen which is affecting all Japanese brands and their ability to return profits home?

Gavin   #2   12:02 pm Mar 04 2012

Surely Mitsubishi nz can survive for much longer with the Range products (or lack thereof) that they have. The question is : why buy one of their cars with a ten year warranty when the local distributor might not be here in the future to honor it!

Mazda wil fair better I Believe.

peter   #3   08:18 am Mar 05 2012

The Mazda SP 23 was an awesome drive, and the MPS was verrry quick both great little pocket rockets. But the Bloated CX 7 and CX 9 Why ? There's precious little Zoom Zoom in these shockers.

The Trickster   #4   12:37 pm Mar 05 2012

Gavin #2 12:02 pm Mar 04 2012

Interestingly I was reading about Studebaker and Packard the other day, and that was the exact reaction that the general public had towards them in the early 50's which ended up with them sunk (after their merger) in the late 50's/early 60's.

Perhaps writing on the wall for Mitsi?

matt   #5   01:04 pm Mar 05 2012

There is plenty of zoom zoom in the Turbo 2.3 CX-7...

cm   #6   04:57 pm Mar 06 2012

No mention of the stiff competition from the Korean and Chinese brands which are quickly shaking off their stigma and making aggressive inroads into the international car market.

As these car makers start chewing away at the Japanese car makers it will be the lesser brands that suffer first and the strongest - Toyota - that will hold out the longest.

Bryan   #7   04:14 pm Mar 14 2012

Mitsi been reading a British Leyland management handbook? Poor management decisions, vague product planning, under investment in new mmodels. Recalcitrant unions replaced by mother nature. *sigh*

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