Mazda Motor Corporation has announced that it is seeking to raise $1.1 billion through a stock sale to fund development of hybrid and other alternative energy technologies in what many say is a long-overdue move to compete in the rapidly growing green vehicle marketplace.
Mazda’s apparent reluctance to aggressively pursue next-generation automotive technologies has been especially perplexing to analysts since Ford Motor Company loosened its ties to the Japanese automaker. Last year, Ford reduced its one-third stake in Mazda to 13.8%. Despite the reduction, Ford remains the largest single shareholder in Mazda.
As a result of the proposed stock sale, Ford’s stake will be reduced to approximately 11% share, but a spokesman for Mazda Europe said there will be no material change in the relationship between the two automakers.
Yasuaki Iwamoto, an auto analyst for Okasan Securities, contends that the change will mean that, “There are certain things that Mazda no needs to do on its own, without Ford.” Iwamoto does not expect other Japanese automakers to increase equity in response to Mazda’s move.
Citing improved global sales, cost cutting initiatives and a stronger euro, Mazda has also revised its net loss forecast to half the previous prediction.
In a statement released today, Mazda said that it will attempt to raise the $1.1 billion (95.9 billion yen) through the issuance of 315.2 million new shares of stock and 98.8 million treasury shares.
In the short-term the move could cause a sell-off of Mazda stock. According to Kazaka Securities’ analyst, Yoshihikio Tabei, the new stock offering could increase the number of outstanding shares by some 26%.
Tabei insists, however, that “in the midterm it will be positive for Mazda’s growth”. “I don’t think Mazda is doing this public offering to bolster its finances. It is for strategic purposes, aiming to invest in eco-friendly technologies,” Tabei said.
Mazda has set a target of improving the fuel efficiency of its vehicles by 30% by 2015 – primarily through improvements to its existing internal combustion engines. Beyond that, the automaker plans to add a hybrid system to comply with stricter fuel efficiency and exhaust emissions regulations.
Mazda, Japan’s fifth-largest automaker, has come under increasing pressure to offer hybrid models as the technology has grown in popularity in Japan and the U.S., which is Mazda’s largest unit-sales market. In Japan and the U.S., gas-electric hybrids also qualify buyers for government tax breaks which has contributed to their popularity.
In July, Mazda posted its third consecutive quarterly loss. Although the company expects net losses to reach 26 billion yen (approximately $289.5 million) for the fiscal year ending in March 2010, it had previously predicted losses to reach 50 billion yen. The company has also increased its global sales forecast to 1.15 million units – up by 55,000 units – in part due to better than expected sales of its Mazda3 compact model.