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Ford to Sell 20% Stake in Mazda
Published: 11/18/2008
Global Insight Perspective | |
Significance | Mazda has announced today that Ford is to sell 20% of its stake in the Japanese manufacturer, and that Mazda itself will re-acquire some of these shares. |
Implications | Given the financial pressures that Ford is facing, it is unsurprising that it has been forced to take this step in order to shore up its liquidity. |
Outlook | Despite the steep reduction in Ford's shareholding in Mazda, the relationship between the two companies is unlikely to change and they will continue to share production operations and collaborate on the development of new model architecture. By selling its shares to businesses close to Mazda, Ford could even increase its stake again in future. |
Mazda has announced today that its largest shareholder, U.S. automaker Ford, is to sell off a 20% stake in the Japanese business. In a statement, the Japanese firm said that this will reduce Ford's share in the business to just over 13%, from 33.4% currently, and allow the U.S. automaker to raise capital to fund a "product-led recovery". Mazda's chairman, president, and chief executive officer (CEO), Hisakazu Imaki, added that the two companies will continue their strategic relationship, which includes the sharing of platforms and powertrains.
Part of the stake that is being sold will be acquired via a share buy-back by Mazda itself, according to a release on the Mazda corporate Web site. The Japanese automaker will purchase 96,802,000 shares, equating to 6.87% of shares issued and around one-third of all shares being sold by Ford. It plans to spend around ¥17.9 billion (US$185.1 million) on the transaction, which will take place tomorrow. The rest of the stake will be acquired by what Mazda referred to as a group of its "strategic business partners".
Outlook and Implications
The announcement confirms the rumours that have circulated over the past couple of months. There has been a certain sense of inevitability about the move given that the U.S. automaker desperately needs to raise funds in order to maintain its liquidity levels in the face of continuing losses (see United States: 10 November 2008: Ford, GM Report Dire Financial Results for Q3 as U.S. Politicians Act) and a declining domestic market. General Motors (GM), which is suffering similar woes, has been forced into similar action, with Suzuki having announced that it was buying back around 3% of its own shares held by GM (see Japan - United States: 17 November 2008: Suzuki to Buy Back 3% Stake Held by GM). These moves are perhaps even more pertinent at the moment given that both companies are looking to the U.S. government for federal aid. The creation of additional liquidity from divestible assets will not only improve the companies' cash buffers, but also prove to Congress that they are doing all they can to salvage the situation.
Despite the reduction in Ford shares in Mazda, it seems unlikely that the relationship between the pair will change. Both companies are now reliant on each other through their shared development of B-, C1- and D1-segment offerings that are the mainstays of each automaker's line-ups. Much of the development of the architecture of the new Ford Fiesta was primarily carried out by Mazda, which sells its own version of this model as the Mazda2/Demio, while the next-generation Axela/Mazda3 will share the architecture of the next-generation Ford Focus, as is the case with the current generation. The pair also shares manufacturing plants in various countries, including its joint-venture (JV) operations with Changan in China, as well as a new passenger car manufacturing plant in Thailand that will join its pick-up assembly facility. Given the intertwined nature of the two automakers' businesses, it would be extremely difficult for them to break ties, and not particularly advantageous either. With Ford selling part of its stake to Mazda and its partners, it is unlikely to see another business attempting to fill its shoes either, and it retains the possibility of building its stake back up again once its financial situation improves.Most Viewed Articles
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