Mazda Heads Into 2016 With Momentum

The Japanese auto manufacturer produces most of its 1.4 million vehicles near its Hiroshima headquarters.
By Anton Wahlman ,

Mazda's founder and CEO Jurijo Matsuda was getting ready to celebrate his 70th birthday on the morning of Aug. 6, 1945. It turned out to be a bad day. It was the day that the U.S. dropped the atom bomb on Hiroshima.

The bomb detonated just above the center of the city, but Mazda's headquarters and factory are located by the city's docks. A small hill between the harbor and the city center was just just high enough to insulate Mazda's facilities from the blast, which killed about 70,000 people. 

Against the odds, Mazda survived arguably the most lethal event in human history. More recently, it seems to be headed in the right direction, partly due to a technology-sharing agreement with Toyota. The company's engines and designs are well-regarded. 

In the late 1950s, the Japanese government tried to merge many of its domestic automakers to increase their global competitiveness. But by using a German rotary engine technology -- the NSU Wankel engine -- the company avoided this fate and thrived. From 1957 to 1967, output grew from 40,000 cars per year to 400,000 cars per year.

For much of the past 60 years, Mazda's fortunes have zig-zagged from good to bad -- and back again. Ford substantially controlled the company for approximately 20 years through 2010.

More recently, Mazda has set on its own course. If you consider its products, you will see a consistent design language across almost all its cars. That language will be on display when the company starts selling its redesigned CX-9, a large SUV, in 2016. 

Most of Mazda's production facilities are near the Hiroshima headquarters. Last year, Mazda produced 1.4 million cars. About 920,000 of them were made at four plants in Hiroshima and nearby Hofu. Individually, each of the four facilities produces between 240,000 and 275,000 vehicles. The company recently opened up a new, but smaller, factory in Mexico.

One of the most interesting things about Mazda is how fast it can produce custom-ordered cars. A retail customer in Japan who orders a car on Nov. 14  can expect delivery on Nov. 28. It takes Mazda three days to schedule production, four days to finish the car and a week to transport and deliver it. That's dramatically faster than any other automaker.

Mazda is well-known for its rotary engine, although this is currently not in production. The company is in the process of developing a new-and-improved version.

It is also known for its high-compression gasoline engines, which can achieve up to 14:1 compression, higher than any other gasoline engine in the market. Mazda is also developing a new diesel engine, which it intends to make the lowest-compression diesel engine in the market.

Mazda will eventually have a strong presence in the hybrid, plug-in hybrids electric cars and hydrogen fuel-cell car market via a far-reaching agreement with Toyota a few months ago. In the next few years, Mazda will begin to offer versions of its cars based on various alternative-powertrain technologies from Toyota.

Mazda also makes the Scion iA for Toyota in its new Mexico plant. It's basically a Mazda 2 with a trunk and a new front fascia. This car started appearing in U.S. dealerships September 1.

In the U.S. Mazda is on track to sell more than 300,000 cars in 2015. With the launch of the CX-9 large SUV, that number could grow. The company currently does not offer cars with Google's Android Auto, Apple's CarPlay, 4G LTE or WiFi functionality. It will be a key challenge for Mazda to catch up with market leader GM, which offers all of those on all of its models -- and with other automakers who offer some of these features.

Mazda saw strong improvement in sales and profitability in 2014 and 2015. It will be interesting to see if the combination of the company's strengths and weaknesses lead to market share gains, or market share losses, in 2016 and beyond.

This article is commentary by an independent contributor. At the time of submitting this article for publication, the author was long AAPL and GOOG. Mazda paid for transportation, meals and lodging at a factory visit near a major industry trade show.

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