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Old 05-02-2003, 23:19   #1 (permalink)
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Mazda may miss debt reduction target for 2005

Friday, May 2, 2003

By Detroit News staff reports, Bloomberg News and wire services

TOKYO -- Mazda Motor Corp., which owes 678 billion yen ($5.7 billion), may sell bonds or seek bank loans this year to invest in new models and repay existing borrowings, making it likely it will miss a debt reduction target.

Japan's fifth-largest automaker, a third owned by Ford Motor Co., plans to reduce its net debt to 50 percent of shareholders' equity by March 2005 from 208 percent. Mazda, which has net debt, or gross debt minus cash, of 404 billion yen, has reduced borrowings by nearly two-thirds in the past seven years.

"It's quite possible (reaching the target) could take longer than 2004," Gideon Wolthers, Mazda's Chief Financial officer, said in an interview referring to the year ending March 2005. "The important thing is the objective remains the same. We continue to focus on debt and we're making good progress."

Mazda's dilemma is either to reduce and lower interest costs or invest in new products to help boost earnings, as it doesn't have substantial non-auto assets to sell. The company aims to spend 3.6 percent more on research this year and is working with Ford developing models like the revamped Familia sedan.

"Mazda doesn't have many options at hand to reduce debt, so they have to use cash flow," said Norihito Kanai, who helps manage the equivalent of $2.5 billion at Meiji Dresdner Asset Management Co. "It's a matter of how they can invest more efficiently with Ford to increase returns from their investment."
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