Mazda halts production amid joint venture row

PUBLISHED : Tuesday, 25 April, 2006, 12:00am
UPDATED : Tuesday, 25 April, 2006, 12:00am

Carmaker suspends assembly of the Mazda 3 due to flaw in approval process

Mazda Motor Corp has stopped production of a popular new model because of disputes among its mainland partners, dealing a blow to its ambitions for the booming market, sources said yesterday.

On Friday, Mazda announced in Tokyo it had temporarily suspended manufacturing of the Mazda 3 compact car due to a flaw in the process to acquire government approval for the model's production.

It began production on February 27 with great fanfare at its joint venture in Chongqing with Changan Auto and Ford Motor, at a ceremony attended by the city's mayor and Changan's chairman.

It was targeting sales in China this year of 20,000 Mazda 3s at a price of about 178,000 yuan each to compete with Nissan's Sunny, Toyota's Corolla and Volkswagen's Bora. It launched the model at the Beijing Auto Show on March 8.

The suspension is a serious setback to Mazda's plan to expand its share of the Chinese market. Its target is 300,000 vehicles by 2010, triple last year's sales of 134,00, which was itself an increase of 51 per cent over 2004 and double the rate of growth for the passenger car market as a whole.

He Miao, an official at Mazda's public relations division, said the firm hoped to resume production as soon as possible but that it had no timetable. She did not elaborate.

Sources said that the official explanation was implausible, adding that the suspension was probably due to a dispute between Mazda's two Chinese partners.

Mazda owns 15 per cent of the Chongqing venture, which it bought earlier this month from Ford, which owns 33.4 per cent of Mazda. The venture has since changed its name from Changan Ford Automobile Corp to Changan Ford Mazda Automobile Corp.

Mazda also has two partnerships in which it does not own equity, both with First Auto Works (FAW). The one in Changchun produces the Mazda 6, a middle to high-end model, and the second - FAW Haima Hainan - which produces the Mazda 323 Familia.

Sales of Mazda models in China are handled by FAW Mazda Motor Sales, a distribution company jointly owned by Mazda and FAW which also makes the Bora in a joint venture with Volkswagen.

The sources said Changan and FAW disagreed over how to market and price the new model, with Changan wanting a high price and FAW wanting a lower one.

Mazda's success last year in China was part of the rise of Japanese models which accounted for 27.4 per cent of the market.

Changan, Ford and Mazda are jointly building a second production base in Nanjing, with an annual capacity of 160,000 Ford and Mazda models when it goes on stream next year. Next door, they are building an engine plant, also due to start production next year.

In the 12 months to last month, Mazda's global production was 904,200 units, a rise of 11.3 per cent from a year earlier with exports up 16 per cent to 650,625. Mazda is expected to announce record profits for 2005-06, with analysts forecasting an increase of 8.7 per cent.