Mazda has right mix to chase 120,000 more US sales

Wed, 05 Dec 2012

The Mazda MX-5 Miata was named to Car and Driver magazine's Ten Best list for the eighth year in a row and for the fourteenth time overall. The CX-5 tops or comes in as runner-up on every AOL Autos staff poll we take on compact crossovers. The Mazda3 is a perennial favorite among auto critics. That's three clear, unquestioned winners in the Mazda showroom. So, why does Mazda seem to struggle sometimes for recognition and clarity in the marketplace?

For that, I chatted with Mazda North American Operations President, Jim O'Sullivan, who has run the outfit since 2003. O'Sullivan, a former Ford sales and marketing executive who came to Mazda from Dearborn, MI when Ford owned a controlling stake in Mazda, is one of the quieter, but very menchy, leaders in the industry whose longevity in the job speaks to the stability of Mazda.
After several years of moving laterally in the US in terms of sales, Mazda seems poised to make a move now just as Subaru and Volkswagen – Mazda's natural rivals – have done. November sales were almost 22,000 vehicles, the best November the company has posted since 1994. Year-to-date sales are up 9.1 percent versus last year. O'Sullivan needs momentum, because his masters in Japan have decided that he needs to hit 400,00 sales by 2015, up from about 280,000 this year.

The news at the Los Angeles Auto Show for Mazda was the showing of the all-new Mazda6. That car, while much upgraded from the current model, will face there stiffest competition in the industry from a gaggle of new designs from VW, Ford, Honda and Nissan, and pretty recent makeovers from Toyota and Hyundai. "Mid-sized sedans is the Fallujah of the auto industry," says O'Sullivan in typical frank, glib manner, referring to the city in Iraq that has been the site of many fierce battles. "But hopefully, this time, we won't be introducing the car into the teeth of another horrible recession like we did with the last one."

In typical Mazda fashion, where there needs to be some quirk of differentiation, the Mazda6 will be launched with a clean-diesel version, making it and the Volkswagen Passat the only entries in the category to offer an oil burner. "It's an obvious place for us to get incremental sales," says O'Sullivan.

He's going to need every one of them to hit his goal, and without a US assembly plant to produce volume.

What Mazda does have is a planet in Mexico to turn out 140,000 Mazda2 and Mazda3 models (plus 50,000 small cars for Toyota). The engines for those cars are coming from Mexico as well. Mazda, which still owns half of the Flat Rock, MI assembly plant with Ford, has handed over all production to Dearborn so Ford can make Fusion sedans there instead of Mexico. Mazda6, CX-5, CX-7, Miata and Mazda5 minivans are all coming from Japan now. That has, in the past, limited supply of key vehicles, like the CX-5 and Mazda3.

To help reputationally, Mazda quality, once a question mark, also has been heading in the right direction. In the 2012 J.D. Power Initial Quality Study, the company sits well above the rest of the industry at 97 problems per 100 vehicles, compared with an average of 102. That's better than Hyundai, Audi, Subaru, Ford and Volkswagen, and within spitting distance of Toyota at 88 and Nissan at 99.

O'Sullivan comes across as unflappable. Maybe that comes from holding the same gig for 11 years, having essentially the same advertising positioning – Zoom Zoom – for 15 years, and being married to the same lady for more than 30 years. The company, he notes, will be operationally profitable in the current fiscal year, for the first time since 2008 when the Wall Street meltdown and economic collapsed sapped the whole industry.

With industry sales coming in close to 15 million this year, though, which seems like where the industry is likely to hover for the next three years, Mazda is going to have conquest some other brands to get the 120,000 additional sales O'Sullivan and Japan are looking for. Volkswagen is climbing in sales, and Toyota, Nissan and Honda are all bouncing back fast to pre-Tsunami levels. That leaves Detroit for Mazda to wrench sales from, including its old partner Ford.

Given the perennial admiration of the Mazda3, Miata and now CX-5 by the auto press, though, we are expecting the Mazda6 to probably do just what O'Sullivan needs it to do – achieve pretty superior ratings and rankings from the media. It will be up to him to turn those laurels into more sales and leases.

By David Kiley