Bigger Not Always Better, Mazda North America Chief Says

MONTREAL – Mazda North American Operations’ top executive dismisses the notion that for an auto maker to survive in today’s market it has to have partnerships and huge volumes.

Although that strategy is advocated by industry leaders such as Carlos Ghosn, CEO of the Renault SA-Nissan Motor Co. Ltd. Alliance, and Sergio Marchionne, chief of Fiat Automobiles SpA and Chrysler Group LLC, it doesn’t ring true in the case of Mazda Motor Corp., says MNAO CEO and President Jim O'Sullivan.

“If you have a small market share in only one market, and that’s the only market you’re a player in, then yeah, you have an issue,” O’Sullivan tells Ward’s at a recent media event here. “But if you look at Mazda globally, we’re strong in Canada, Australia, Japan, and we have growth plans in the U.S. market.”

Mazda sold about 1 million vehicles globally last year. In comparison, behemoths such as Toyota Motor Corp. delivered 6.8 million units and Ford Motor Co. posted 4.7 million, according to Ward’s data.

Despite the large discrepancies, Mazda is “solidly profitable” O’Sullivan says, declining to reveal details. Plus, bigger is not always better. “The question becomes how much bigger can you get? But if you’re a player like us that has growth aspirations, there’s some upside.”

Whether a moderately sized Mazda can prosper long term increasingly is being asked by analysts and industry observers as the relationship between the Hiroshima-based auto maker and Ford shows signs of cracks.

Ford in 2008 cut its stake in the Japanese car company from 33.4% to slightly more than 13%, a move that netted the Dearborn, MI-based auto maker about $540 million.

Mazda3 in short supply in some regions of U.S.

And just last month reports surfaced the partners’ Changan Ford Mazda Automobile Co. Ltd. joint venture planned to break up, with each auto maker establishing its own China business strategy.

O’Sullivan declines to comment on the JV but insists the relationship with Ford has never been stronger. He likens it to siblings who remain close after they’ve moved away and built separate lives.

“We’re going to continue to have a strong relationship, but relationships continue to evolve and change,” he says. “If you don’t evolve, you’re going to get stale.”

Ford and Mazda continue to seek out potential strategies that could benefit both auto makers, and their executive ranks are closely intertwined, he says.

Last year, Philip G. Spender went to Ford, leaving his post as Mazda’s representative director and executive vice president, while former Ford executive Thomas A. H. Pixton now serves on Mazda’s board of directors.

“If that relationship was going to dissipate, why would we take a Ford guy and give him a more senior position at Mazda?” O’Sullivan says.

Although O’Sullivan says he’s content with Mazda being a smaller player on the global automotive stage, he says the company would like to grow in all regions, noting he expects double-digit gains in the U.S. this year and a bigger market share in Canada.

“Do we think we’ll be as big as Honda and Toyota in the U.S.? No. But can we be a more significant player than we are today? Absolutely,” he says.

Mazda’s growth strategy is geared toward slow and steady. O’Sullivan emphasizes it won’t be fueled by pushing excess inventory on dealers or throwing heavy spiffs on the hood.

So far, Mazda has been successful plotting its way through a tumultuous industry hit hard by the global recession. O’Sullivan says the auto maker was able to weather the storm by keeping a close eye on inventories, but he admits to shortages of some vehicles in the U.S.

“Right now, we’re experiencing some spot shortages on (the) Mazda3 and (the) Mazda6,” he says. “When you’re up 35% year-on-year like we were last month, and it is all retail driven, sometimes you get some inventory spikes in terms of people running out of cars.

“A lot of brands will store (vehicles) at the ports, but then inventory gets old; it ages (and) you get lot-rot. We don’t do that. We’ve been able to pick production up in Japan to fill those voids over the next several weeks to 30 days. They’ll start arriving at the ports at the end of the month.”

O’Sullivan says criticism Mazda lacks “green” vehicles, such as hybrids and electric vehicles is unwarranted. The auto maker recently inked a pact with Toyota to share hybrid technology, he notes, and plans to bring to North America its new fuel-efficient 4-cyl. Sky-G direct-injection gas engine and Sky-D diesel mill. Its 6-speed automatic Sky Drive will arrive as early as 2011.

“We’re the only ones bringing diesels in right now of any of the Asian brands, and we think that’s pretty significant news,” he says.

As for pure EVs, O’Sullivan remains skeptical. “What portion of the global market in the next 10 years will really be EVs? Hybrids, I definitely agree there’s growth potential. But even hybrids will have a gas or diesel engine.”

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