Mazda zooms to success
Quirky Japanese carmaker becomes fastest growing U.S. brand
Bryce G. Hoffman / The Detroit News
The bosses at Mazda Motor Corp.'s U.S. headquarters could only chuckle when they learned the automaker's CX-9 crossover was a finalist for the North American Truck of the Year award.
It was the third time in five years a Mazda had made the top-vehicle list but they had yet to take home the prize. And their sleek new crossover was not very truck-like.
Always a bridesmaid, they joked, never a bride.
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"If we win it this time," vowed Mazda product development chief Robert Davis, "I'll wear a wedding dress."
Davis made good on his promise this week when he brought the trophy home to his troops in Irvine, Calif., along with the Sport/Utility of the Year award from Motor Trend magazine and another month of record sales.
That kind of quirkiness has long defined Mazda and helped make it the fastest-growing full-line automotive brand in the United States last year, when everything seemed to go right for Japan's most idiosyncratic marque.
Mazda racked up record sales in the United States and worldwide in 2007. On Wednesday, it reported another profitable quarter and is expected to post record earnings for a seventh straight year when full-year results are released in April.
Mazda's success has come from charting its own course, offering polarizing products that people either love or hate, focusing on performance more than fuel economy and maintaining a commitment to the Wankel engine -- which uses a rotor instead of pistons -- long after the rest of the industry turned its back on the design.
Mazda's net profit increased to $627 million in the year ended March 31, 2007, from $568 million in 2006 and $427 million in 2005. The black ink puts it in stark contrast to Ford Motor Co., which owns a controlling stake in Mazda. Ford continues to lose U.S. market share and reported a $2.7 billion loss for 2007. That makes Mazda's contribution to Ford's coffers -- $204 million last year, up from $168 million in 2006 -- all the more welcome.
But Mazda provides Ford with something more valuable than cash. Mazda-designed architecture underlies most of Ford's new vehicles. The company has become a major part of Ford's research and development efforts, as well as the model for its new, global product development system.
"Mazda has been a very important ingredient," Ford CEO Alan Mulally told The Detroit News in a recent interview. "Clearly, their experience in design and manufacturing and driving customer acceptance of smaller vehicles is a real asset."
Ford's relationship with Mazda is not a one-way street. Mazda executives say their success has only been possible because of the economies of scale its relationship with Ford yields.
"We could never have done a car like the CX-9 without Ford," Davis said. "We wouldn't even have a V-6 engine."
Most important of all, analysts say, Ford let Mazda be Mazda again.
"Ford integrated them, but let them be what they had been -- and not just another brand," said Michael Robinet, vice president of global vehicle forecasts for CSM Worldwide in Northville. "They have rediscovered what their role in the market is, and that is building strong entries that offer aggressive design and affordable performance."
The other car company
At its best, Mazda has always marched to the hum of its own rotary engine.
The company began as a cork manufacturer in Hiroshima, entering the automotive business with a unique three-wheeled truck in 1931. Its first passenger cars were just as quirky, as was its decision in the 1960s to embrace the Wankel rotary engine.
By the 1990s, however, Mazda had lost its way. It was trying to out-Toyota Toyota Motor Corp. with a series of blandly conventional me-too cars in a bid to increase volumes at home and abroad. Ford, which had already allied itself with Mazda, intervened to save the company from bankruptcy in 1996.
The decision was controversial in Japan, where many resented the idea of an American manufacturer taking over a Japanese company. But Ford allowed Mazda to once again produce the kind of sporty, distinctive cars that have long been its strength.
Having the right products is only part of Mazda's success story.
"It's also been the confidence of the management in Japan in North America, their investment in the North American market," said James O'Sullivan, president and CEO of Mazda North America. "It's getting the dealership network aligned, too. It's been significant changes in the culture. It's the product lineup. And it's getting on the consideration list of consumers over an extended period of time."
According to many insiders, O'Sullivan is one of Ford's unsung heroes -- a former Lincoln brand manager who, along with Mazda President and CEO Hisakazu Imaki, deserves much of the credit for the brand's recent success.
"They were the guys," said Mike Rocchi, former chair of the Mazda dealer council and president of Faulkner Mazda in Philadelphia. When Imaki took over in 2003, one of his first actions was to announce a radical reorientation of the brand, shifting its focus from Japan to North America. It was a well-timed move, considering that the Japanese car market was collapsing.
O'Sullivan was tapped to lead the effort. He inherited a dealership network that was on the verge of revolt and made fixing it his top priority.
"We had one of the weakest distribution networks in the United States," he said, noting that close to 70 percent of Mazda's dealers were also pedaling other brands out of the same lot.
O'Sullivan offered long-term rent assistance to dealers who agreed to make Mazda their exclusive brand. Backed by Imaki, he also promised them that the needs of U.S. consumers would factor heavily in future product plans.
Today, over 50 percent of Mazda's dealers in the United States are exclusive to the brand.
Staying on message
Analysts say Ford could learn a lot more from Mazda than just how to build small cars.
Aside from BMW and its "ultimate driving machine" catchphrase, no other automaker has stuck with a marketing message the way Mazda has stuck to "Zoom-Zoom," according to Jim Hall of 2953 Analytics LLP in Birmingham.
"They have been consistent in their message and have consistently delivered products that back it up," he said. "It isn't just the product either. It's how they positioned it in people's minds."
Mazda does not just promise to put the soul of a sports car into everything it makes; it actually delivers on that promise, Hall said. It even did the improbable, bringing to market a sporty, cool minivan in the form of the Mazda5.
Even its older products like the entry-level Mazda3 remain fresh. This 5-year-old design accounted for much of Mazda's U.S. sales gains last year. Attracting younger buyers is a real challenge for most automakers, but Mazda is second only to Toyota's youth-oriented Scion brand in the median age of its customers -- 43.
Mazda's sales were also helped by the introduction of two new crossovers -- the CX-7 and CX-9 -- that have taken the brand into entirely new segments of the market.
The CX-9 was the first car that Mazda's North American team designed from scratch. This by-Americans-for-Americans approach has been a major success for Mazda, taking the brand into a new segment of the market and almost single-handedly lifting its average transaction price.
"It's allowed us to expand the brand," O'Sullivan said. "We were able to change where we play in the market. We're selling a tremendous amount of the Grand Touring edition, which is an over-$40,000 car."
The CX-9 is bringing new customers into Mazda's showrooms. More importantly, O'Sullivan said, it is bringing old customers back.
One of Mazda's biggest weaknesses was that it had nowhere to send customers who outgrew its mid-market vehicles like the Mazda5 and Mazda6. There was the edgy RX-8, but that has always been a niche vehicle with limited appeal.
"We haven't had a relevant product for them to go into," O'Sullivan said. "Now we have a full showroom."
That showroom will get a big boost later this year when Mazda introduces an all-new version of its Mazda6 sedan. Significantly, the U.S. version will be larger and offer more backseat legroom than the international version recently unveiled in Japan.
But even with that, O'Sullivan acknowledged that it will be a real challenge for Mazda to maintain its momentum through 2008.
"As we go forward this year, we're being very humble," he said. "We're pleased with the trends. But this year is going to be a very challenging year for everyone."
You can reach Bryce Hoffman at (313) 222-2443 or
bhoffman@detnews.com.