Ford Works To Unload Some of Its Mazda Stake
By Chris Haak
10.16.2008
According to a report in Japan’s Nikkei business daily newspaper, Ford has approached auto parts supplier Denso (which is part of the Toyota Group of companies, and supplies parts to Toyota as well as to several other manufacturers) about the possibility of selling some of its 33.4% stake in Mazda. The 33.4% that Ford currently owns gives Ford control of the company, so selling that stake in a cash-raising move could result in Ford giving up control of Mazda, though according to sources cited in the aforementioned article, Ford is only talking about selling less than 1% of Mazda’s stock.
Ford’s stake in Mazda is valued at about $1.36 billion, and while that is a big number, it alone will not be enough fundraising to support Ford’s cash burn for the next few years. According to Nikkei, Ford has also approached 20 or 30 other companies about purchasing some of its stake in Mazda. Further, according to Bloomberg, it is likely that in the next few weeks, Mazda may itself buy back part of its own company from Ford. Mazda would likely not be going alone in the repurchase, but would likely join with other Japanese companies in the purchase to spread the risk.
Ford ceding control of Mazda wouldn’t likely have any short-term repercussions for either company, but longer-term issues might surface. For instance, Mazda-based platforms now underpin several Ford vehicles, such as the Fusion, MKZ, and Milan. The well-regarded Mazda3 compact car also shares its platform with the European Focus (which is going to eventually make it to the US) and Volvo S40/C30, and the Mazda2 and Ford Fiesta subcompacts are very closely related. If Ford still retained a significant ownership stake, it might still maintain access to Mazda’s chassis development expertise, but without absolute control of the company, Mazda may feel free to move in a different direction that Ford doesn’t care for.
Conversely, without the production scale that the Ford derivatives of the Mazda products brings to the table, Mazda may find itself without resources to adequately develop new vehicles. Many of Mazda’s current products are attractive and well-regarded, so it would be a shame to see the company take a step or two backward in that regard.
Another issue is that Mazda and Ford currently jointly operate a plant in Flat Rock, Michigan that builds both the Mazda6 midsize front wheel drive sedan and the Ford Mustang rear wheel drive sport coupe. The fate of that facility would also have to be determined in any divestiture on Ford’s part, though with the tooling in place for both vehicles, it seems unlikely
The bottom line: anything not chained down, including the kitchen sink, is fair game for Ford, Chrysler, and GM to sell as they try to generate cash to keep the lights on during these darkest hours in their history. We’ll see a lot more news like this in the coming months, and the auto industry will be a VERY different place in 12 months, if not in 6 months.
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