Mazda expects a more stable growth with the new plant in Salamanca, Mexico

Article by Anita Panait, on February 25, 2014

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]

Topics: mazda, mexico

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