Economic storm hits Japanese car makers

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:

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.

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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