RX8Club.com - Mazda, Ford alliance complex

Interesting read, sounds like some cloak and dagger stuff going on.

Mazda, Ford alliance complex

Officials insist relationship will continue, but challenges arise after U.S. carmaker sells controlling stake in Asian firm.

Ever since Ford Motor Co. said it would sell its controlling stake in Japan's Mazda Motor Corp. in November, the two automakers have insisted that their close, collaborative relationship will not change.

The reality is more complex.

Behind the scenes, walls are going up in Hiroshima and Dearborn. Ford employees have been instructed to stop sharing confidential information with their Mazda colleagues, while Mazda has barred Ford staff from attending some meetings.

Many of these moves are driven by antitrust concerns. Still, they raise questions about how close the two companies can remain, and that could have implications for product development at Ford and Mazda.

"They've had a very symbiotic relationship," said analyst Jim Hall of 2953 Analytics LLP in Birmingham. "The risk for Ford is they lose Mazda's small car expertise," Hall said. "They think they can make it up with Europe, but Mazda can do it cheaper.

"The biggest risk to Mazda is their ability to get components on a global basis is reduced because their volumes are so low."

There are other risks, too. Mazda is already exploring opportunities to chart its own course in China, which could put it in direct competition with its former parent in a key emerging market. And many in Japan wonder how much Mazda can do without Ford's backing, particularly with the notoriously hands-on Japanese banks taking a new interest in the automaker's affairs after buying shares from Ford. "The thing that Ford gives Mazda, historically, is capital -- and that keeps the Japanese banks off its back," Hall said. "Now, the banks are a major shareholder."

Add to this the continuing weakness in the global auto market, and the challenges facing Mazda become clear.

Mazda, which began 2008 with record sales, is being hit hard by the global economic downturn. The increasing strength of the yen is a particular liability, given its focus on the U.S. market, according to analyst Takaki Nakanishi of JPMorgan. "The company has already announced that it will cut 1,500 of the 1,800 temporary factory-floor jobs at its (Japanese) production sites by the end of January," he said. "We expect conditions to slide to the point at which it will have to make a difficult decision on whether or not to downsize still further."

In its home market, Mazda is eclipsed by Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. But it has carved out a niche as a manufacturer of sporty cars and crossovers. It also has realigned its business model to focus on the North American market.

Mazda did that by leveraging Ford's global scale. Their alliance dates back to 1969, when the two companies launched a joint-venture to produce automatic transmissions. Ten years later, Ford acquired a 25 percent stake in its struggling Japanese partner, ultimately increasing that investment to a controlling stake in a bid to save Mazda from financial collapse in the 1990s.

Now, Ford is the one in financial trouble, which forced the Dearborn automaker to sell most of its stake in Mazda for about $540 million.

Ford remains the largest single shareholder in the Japanese car company, retaining a stake of just over 13 percent. That is enough to keep a seat on Mazda's board, but not enough to guide Mazda policy.

Executives at both companies insist the close collaboration will continue.

Derrick Kuzak, Ford's head of global product development, told The Detroit News that he is still having monthly meetings with his counterpart at Mazda.

"We have changed the ownership, but our intention is to continue to learn from each other," he said. "It's clear how much we at Ford value the partnership with Mazda."

Kuzak acknowledged that Ford has borrowed much from Mazda in the form of vehicle platforms, as well as design and engineering processes. But he said Ford has evolved those and will continue to develop them independent of Mazda.

But that independence cuts both ways. While Ford and Mazda still have a joint venture in China Chang'an Automobile Co., Mazda has its own alliance with the far stronger First Automotive Group Corp. That is the same company that Toyota partners with in China, as well as Volkswagen AG.

Mazda has never really been able to leverage that relationship because of its commitments to Ford, but Hall said that could change quickly.

"Mazda doesn't have Ford's name, but they could definitely be a competitor," he said.Mazda says it is eager to continue its relationship with Ford -- one that has also provided much needed powertrains.

"It has been the most successful alliance in automotive history," said Jim O'Sullivan, president of Mazda North America, who pointed out that the two companies still operate several joint ventures around the world, including the Auto Alliance International plant in Flat Rock. "These relationships remain unchanged, and they will continue."

Other relationships have changed, including O'Sullivan's. Like several Mazda executives in North America, he was still a Ford employee -- until Dec. 31. He now works for Mazda.

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