DETROIT –North America CEO Jim O’Sullivan is far more optimistic about the auto maker’s future in the U.S. than he was last year when the brand was undergoing major restructuring and losing money.
Being forced to offer voluntary separation plans to its 701 U.S.-based employees was a tough pill to swallow for O’Sullivan, an industry veteran and Michigan native who launched his career atin 1976.
“Now we’re heading the other way,” he tells WardsAuto at the recent North American International Auto Show. “We’re growing, making money and launching a lot of product that we’ve been working on the last four years.”
’s U.S. sales in 2012 climbed 10.6%, compared with prior-year, to 277,046 units, according to WardsAuto data.
Mazda posted losses the prior four years but reported profits in the first six months of the 2013 fiscal year, which ends March 31.
At the recent media launch of the new Mazda6 sedan, O’Sullivan says he is confident the fiscal year will end in the black, rather than a fifth year of red ink. Earnings information will be released in April or May.
“Compared with just nine months ago, the company is in a totally different space right now,” he says. “Talk to the dealers and they say they came off a great year. We’re looking forward to the industry making a good run for next three to five years, not just in the U.S. but in Canada, Mexico and Central and South America.”
Following a strong debut in Japan, Mazda plans to launch its new 2.2L Skyactiv turbodiesel, beginning with the ’14 Mazda6 midsize sedan, later this year. The oil-burner has been the engine of choice for about 80% of Japanese buyers, but O’Sullivan is hesitant to say it will see similar success in the U.S.
“I don’t have to sell (diesels) to 100% of the market,” he says. “I’m getting 2% (U.S. market share) now, so if I can get one-half percent of people interested, it starts to help the business. And when you’re the only Asian brand offering (a diesel), it puts us in a pretty competitive position.”
Should the diesel prove popular among U.S. consumers, it likely will migrate to other Mazda vehicles, including the CX-5 cross/utility vehicle, which shares its architecture with the new Mazda6.
“The CX-5 is already package-protected for (the diesel) and engineered for it, so if there is an opportunity for us to do that, do we? That’s an open question,” O’Sullivan says.
The all-new Mazda6 is another reason for O’Sullivan’s optimism. Launching now, the sedan offers the full suite of Skyactiv technologies, including the diesel; a new 2.5L gas engine; a new transmission; chassis; and iELOOP, a capacitor-based brake regeneration system that provides power to all the vehicle’s electrical components.
Skyactiv technologies, a name meant to describe Mazda’s reinvention of traditional vehicle systems, is starting to catch on with consumers, O’Sullivan says.
“When people get into it, they understand it’s a suite of technologies, not just one thing,” he says. “People that do the research understand it now.”
O’Sullivan declines to reveal volume expectations for the ’14 Mazda6 but is confident it will sell faster than the outgoing model, which failed to attract buyers.
Mazda6 sales last year were just 33,756, far short of the segment-leadingCamry’s 404,886 units, WardsAuto data shows.
The business case for the new Mazda6 actually improved when the auto maker withdrew production last year from Flat Rock, MI, and moved it to Hiroshima, Japan.
O’Sullivan says the auto maker could not sell enough U.S.-produced Mazda6s to offset high fixed costs associated with the Flat Rock plant, which remains a 50-50 joint venture withalthough no Mazda vehicle is slated for production there.
“Do the math equation, and it’s much easier to build it (Mazda6) in Japan at ¥80 to the dollar than do it here,” he says. “Now we keep it contained within Hiroshima, and we’re doing it in one manufacturing facility with one set of tooling instead of two.”
The Hiroshima facility is the sole source for the Mazda6, exporting to North America, Asia, Europe and Australia. The same model will serve all markets. The prior-generation Mazda6 in the U.S. was larger than the car sold elsewhere.
Moving Mazda6 production to Japan makes it easier to build to demand, O’Sullivan says.
“We’re going to try and get a natural growth rate out of (the Mazda6) and protect residuals like we always do, but we’re going to work on the demand side of the curve and build the relevance of the product,” he says.
At the same time Mazda is moving production of the Mazda6 to Japan, it’s transferring production of the Mazda3 C-car and Mazda2 B-car to a new plant under construction in Salamanca, Mexico.
The facility, scheduled to go online in first-quarter 2014, will have 230,000-unit annual capacity. Mazda recently inked a deal withto build a yet-to-be-named small car at the plant, which will account for 50,000 units of total capacity, O’Sullivan says. Engines also will come from the factory.
Because small cars have tight profit margins, building the Mazda2 and Mazda3 in Mexico, where labor rates are considerably lower than in Japan, should boost the auto maker’s bottom line.
Mazda also is developing hybrid-electric technology with Toyota. O’Sullivan says despite the collaboration, it has no plans to offer a hybrid in the U.S., although it will do so in Japan. Hybrids don’t make sense in the U.S. because Mazda’s suite of Skyactiv technologies offers the same benefits at a lower price, he says.
O’Sullivan predicts U.S. sales this year will be 15 million-15.5 million units. While the competition is predicted to be fierce in the U.S. as auto makers look to offset losses in Europe, Mazda has faced this dynamic in the past.
“It’s going to be a competitive market. But I’d rather go to battle with the product lineup we have right now, with all the new stuff, than by throwing incentives out there or just coming up with an advertising campaign,” he says. “It will be very fierce competition, but at end of the day we’re just carving out our fair share.”
– with Tom Murphy