Mazda Motor Corp will likely see earnings fall in North America this year due to negative impacts from a weaker dollar and a rise in material costs, a top official told the Reuters news agency.

“Profits are following (sales growth in North America but) this year is going to be somewhat tougher than last year,” executive vice president John Parker reportedly said, citing, among other factors, price pressures in oil and steel-based products.

“I also think we have work to do inside Mazda on the cost structure,” he told Reuters.

The news agency noted that improving profitability in North America remains a crucial task for Mazda, which has succeeded in increasing US sales by double-digits in the last nine months thanks to the launch of more versions of the 6 [Atenza in Japan] and the new 3 [Axela].

North America reportedly was the only loss-making region for Mazda in the 12 months to March 31, when it posted its best overall operating profit in a decade of 70.2 billion yen ($US647.6 million).

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In North America it had an operating loss for the year of 600 million yen on a point-of-production basis as sales fell 6% to 327,000 units, Reuters added.

Parker reportedly said Mazda needed to work on expanding revenues without increasing fixed costs – not just in North America but in the whole company – by rebalancing its budget to allow for necessary increases in spending such as in the product development area, while cutting other costs and keeping variable expenditures under constant attack.

According to Reuters, Parker singled out China as having the greatest growth potential for Mazda along with North America, and added that negotiations with its local partners and one-third owner Ford to improve distribution and manufacturing capabilities there were “making good progress”, but he declined to say when the long-awaited announcement would be made.

He told an industry conference earlier, however, that it was “two to three months premature” to discuss the issue, the report said.

Reuters noted that Mazda does not assemble its own cars in China, instead licensing two units of First Automotive Works, the country’s top vehicle maker, to make its vehicles.

Mazda sold 80,000 cars in China last year and has targeted sales of 110,000 units this year. By 2010, it aims to sell 300,000 vehicles in the world’s fastest-growing major car market, the report said.