After many years of thinking about it, but lacking either the money or the management willing to invest in Europe, Mazda - under the close eye of Ford - has finally bowed to the inevitable. It may have had the desire to invest in the past, but Mazda lacked either the financial or management wherewithal to do so. Without a production base in Europe - ideally within the eurozone - it is going to be very difficult, if not impossible, for a mainstream automotive brand to compete in the core segments of the European car market.
Mazda will make the Demio replacement in Spain

Nissan, Toyota, Honda and Mitsubishi have been European producers for several years and the first three have recently expanded their European operations despite losses in Europe and financial problems at home. But until now, Mazda had resolutely bucked the trend - true, it has had some Ford Fiestas, made at the soon to be closed Dagenham plant to the east of London, rebadged as Mazda 121s. However, this project was hardly a conspicuous success - hence the decision to import the Demio from Japan instead.

Having seen its European market share decline steadily in the last couple of years, drastic action was called for: poorly performing distributors have been taken under the direct control of a new centralised Mazda Europe operation in Germany, a new model introduction programme (driven by Japan) has been drawn up and - perhaps crucially - the decision has been taken to make a true Mazda in Europe.

Plans confirmed officially by Mazda on its website call for production of 40,000 units of the Demio replacement, a car positioned in the highly competitive European B, or supermini, segment. Manufacture at the Ford plant in Valencia, Spain, will begin in late 2002 or early 2003 and Mazda expects its production volume to rise to up to 100,000 units a year soon after. It seems likely that a second model, probably in the larger C segment, or possibly an MPV based on a C platform, will be added to Mazda's European production line-up. Press reports are somewhat confused on this issue, with some suggesting that a new 323 estate or station wagon will account for the additional 60,000 units to be made in Spain, while others suggest the C segment car will be made at another Ford plant, probably Saarlouis in Germany.

Whatever the final manufacturing footprint that Mazda settles on, the company is moving into the core of the European car market, a highly competitive arena. The B segment was worth around 3.6mn units in 2000, equivalent to 24% of the market, while the C segment totalled over 4.2mn units in 2000, or 28% of the market. In both segments, Mazda's current presence is small and has been in decline in the last few years. Mazda had less than 1% of the B segment in 2000, and only a slightly higher share (1.3%) of the C segment in 2000, itself a fall from 2.2% in 1996.

Mazda is moving into the core of the European car market

Mazda's poor performance in the sales charts has been due to a combination of factors; its image and reputation in Europe has relied over-heavily on the success of its MX-5 sports car (this has been one of the segment-defining cars in the 2-seater sports segment). Despite representing less than 10% of its sales in Europe in 2000, it remains the model for which Mazda is arguably best known in the market. With its higher volume models, the 121/Demio, 323, Premacy (the small MPV based on the 323) and the 626, Mazda's presence is marginal in most markets and barely registers in others - hardly surprising when its West European share was only 1.2% in 2000 (it was 1.4% a year earlier).

The decision to manufacture Mazdas in Europe is much overdue. It is also an inevitable one for the company to have taken for it to become anything other than a very marginal player in the region. However, the decision to utilise a Ford plant is just as significant for Ford. For many years, the European car-manufacturing sector has - it is frequently said by many shrewd observers - been beset by over-capacity. Too many cars were coming off European assembly lines for European consumers. Despite this, the Japanese vehicle manufacturers have installed around 1 million units capacity, while several plants - at BMW, Mercedes-Benz, PSA and others on occasion - have strained to produce enough of certain models. Whether there really is excess capacity is another question - it may of course be that the "excess capacity" is actually at plants which make cars which fewer and fewer consumer want.

One of those brands suffering in particular has been Ford, whose European operations have been haemorrhaging cash for several years. However, it is only in the last year that Ford has begun to address its structural problems in the region. After many years of what can only be described as indecision at best, Ford accepted that times had changed and a new modus operandi was necessary in Europe. Dagenham will soon end car production and major changes have been made at all Ford's other European car plants; capacity has been cut at Genk where the Mondeo is made, while Cologne has been reconfigured radically and become the main Fiesta plant.

Mazda's decision is significant for Ford

Valencia has been designated a "flex" plant in the new Ford manufacturing strategy - it will continue to make the Focus, but Saarlouis will probably make more than it has in the past (it will also make the MAV, Ford's much-delayed entry into the C MPV segment). Some press reports suggest Valencia will be limited to 150,000 Focus units a year (it made nearly 200,000 in 2000). Valencia will also make 100,000+ Kas and slightly more Fiestas (although the production line should be flexible enough to vary the respective output of these two models). With Valencia seeing its annual capacity rising from 370,000 to 450,000+ units by 2003, Mazda's decision to make cars in Spain is not only sensible in that this will help to improve its parlous market position, but it should also help Ford ensure maximum utilisation of this "flex" plant.

Valencia - which has been producing two models for some time - is seen as a very flexible plant, with the added benefit of a highly integrated supplier park close by; this already has 38 suppliers located right next to the car plant, with at least 11 more poised to join. Conveyor belts deliver parts and sub-assemblies direct to the right point on the line, saving time and handling costs. Producing in Spain makes sense for Mazda, but it also makes a major contribution towards improving Ford's financial situation in Europe. The factory will be better used and with Ford and Mazda replacement programmes scheduled to coincide (the new Ford Focus platform will not only produce a number of Focus variants, but it will also form the basis for the new Volvo S40/V40 and the Mazda 323 programme). Platform engineering should allow development and component costs to be reduced further. Welcome to the new automotive world order.

Mazda car sales in Western Europe
Mazda share
Source: JATO Dynamics

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