Mazda struggling, seeking $2 billion+ through stock, loans

Mazda is in poor financial condition, having warned investors to expect a loss for 2011 that could amount to $1.3 billion US Dollars and now reports indicate that the Japanese automaker could try to improve their financial situation through issuance of new company stock and some substantial loans.

Rumors indicate that Mazda is considering issuing around 690 million new shares of company stock to the public which would generate around 100 billion Japanese Yen - around $1.3 billion US Dollars. A stock offering of this size would dilute the current value of Mazda stock by roughly 38.7%. These rumors, combined with the expected announcement of a 100 billion Yen loss through 2011 have caused a gradual decrease in the value of Mazda stock. In addition to the possible issuance of new stock to the public, Mazda is rumored to be in talks with a variety of banks with the total value of those loans expected to be in the area of 70 billion Yen – or roughly $872 million US Dollars.

Mazda is Japan’s fifth largest automaker but the strong Yen has hit them as hard as it has any of the Japanese automakers, with 70% of their vehicles sold around the world being built in Japan and 90% of those vehicles were shipped to other markets. A key component for Japanese automakers to improve their success right now is to build vehicles outside of Japan and Mazda plans to use the 170 billion Yen to improve production facilities outside of their homeland.

Mazda hopes to renovate its factory in Thailand in order to increase the production there along with constructing a new production facility in Mexico. The goal of building the Mexican plant and improving the Thai plant would be to increase the amount of Mazda vehicles built outside of Japan from the current ratio of 30% to 50% within four years. This would allow Mazda a far greater chance of getting their heads above water as the global auto industry recovers.

Unfortunately, with 2011 being the fourth straight year where Mazda has posted a significant loss, 170 billion Japanese yen may not be enough for Mazda to improve the Thai plant, build the new Mexican plant and keep the company afloat. Sales are down and rumors suggest that the company is going so far as to consider marketing their SkyActiv engine technology to other automakers, so the next few months could be a tumultuous time for Mazda. The company expects to have their super fuel efficient SkyActiv engines in all of their vehicles by 2016 and this technology could make their vehicle family one of the most efficient in the global industry but things need to improve soon if the company is to keep pushing forward and the 170 billion Yen could go a long way in procuring the future of the Mazda brand.

Source: Reuters