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Old 05-12-2003, 07:09   #1 (permalink)
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Mazda to suspend U.S. output to help meet 24% profit gain goal

Monday, May 12, 2003

By Lindsay Whipp / Bloomberg News

TOKYO -- Mazda Motor Corp., a third owned by Ford Motor Co., said it will suspend operations at its U.S. plant for a week in May and July, helping to achieve its forecast 24 percent increase in net income this year.

Mazda expects net income to rise to 30 billion yen ($257 million) in the year started April 1, from 24.1 billion yen last year, the company said in a press release. The figures matched preliminary earnings released on April 25. The automaker said it will halt U.S. output between May 19 and May 23, and from July 14 until July 18 to reduce inventories.

Japan's fifth-largest automaker is counting on new model releases in its home market, the U.S. and Europe to raise profit this year, countering the effect of a stronger yen against the dollar. Mazda is trying to trim U.S. inventories after sales of the Mazda6/Atenza in the world's biggest auto market got off to a slow start.

"The company is doing extremely well in Europe," said Akihide Kinugawa, who helps manage the equivalent of $171 million at T&D Asset Management. "The issue for them now is to sort out North America where their inventories are far too high."

Unlike Europe, where the Mazda6/Atenza has been a success, demand for the model in the U.S. was initially disappointing because of uncompetitive leasing prices and the sedan's introduction into a market where incentives were peaking, Mazda has said. Sales in the U.S. fell 6.7 percent this year.

Mazda shares rose 3.6 percent to close at 229 yen in Tokyo.

Earnings Forecast

Mazda's profit forecast is less than the company's record 31.1 billion yen it earned in the year ended October 1985, according to the automaker's data. Sales will probably rise 2 percent to 2.42 trillion yen as Mazda doesn't expect the sort of gains from currency fluctuations it got the year just ended.

The company forecasts operating profit, or sales minus the cost of goods sold and administrative expenses, to jump 28 percent to a 10-year record of 65 billion yen, from 50.6 billion yen a year earlier. The company will benefit from further cost cuts and a better model mix, helping reduce incentive costs.

Mazda Executive Officer Kiyoshi Ozaki said the automaker is increasing capital expenditure by a quarter this year, to 55 billion yen as it spends more on logistics and invests in increasing efficiency.

Mazda's annual production at the Ford-shared plant in Michigan would be about 100,000 units if there were no suspension of output, Ozaki said.

Inventory Goal

Mazda President Lewis Booth said last month he wants to trim U.S. inventories to 90 days "as a first step." The company now has inventories of 117 days worth of cars, down from 125 in April, Mazda said. That's double the industry average of about 60 days.

Ozaki said the company has set a target of 80 days or below, without revealing a schedule to meet this goal.

The automaker said it plans to buy back as many as 2.1 million shares, spending as much as 800 million yen, subject to shareholders' approval in June.
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