Mazda Motor Corp. will officially open its new assembly site in Salamanca, Mexico on Feb. 27, 2014. The site provides Mazda with a low-cost production base as well as an export platform for shipping cars to the United States, Europe and Latin America. The site could also serve as a natural barrier against swings in the yen's exchange rate.
All of these advantages could permit Mazda to enjoy a more stable growth as well as a balanced international footprint and, with possible links to Toyota Motor Corp. Despite all these benefits, the move also risks overextension at a time when US light-vehicle sales growth tends to be going flat and when emerging markets are slowing. Because of over-dependence on Japanese exports, Mazda for years saw its profits impacted by strong yen.
In 2012, Takashi Yamanouchi, Mazda's then-chief executive and current chairman, rolled a structural reform plan that entails boosting overseas output to shield the carmaker from currency fluctuations; cutting costs; increasing sales; and tapping other carmakers for product alliances – all of which come together in Mexico.
The new site will provide Mazda a major yen-hedging output presence in North America. Likewise, vehicles built at the site are cheaper to build and more profitable to sell.
The Salamanca site will also be home to a product-sharing deal with Toyota that provides a hedge against a downturn in demand. For now, the yen's depreciation has allowed Mazda to book a ¥97 billion ($921.9 million) foreign-exchange gain in the nine months ended Dec. 31, resulting to a net profit of $735.8 million. [source: automotive news - sub. required]