Mazda — Company History

The disappearance of cork demand and the turn to machinery

In January 1920 Toyo Cork Kogyo was established as a rescue company bringing together the cork manufacturers of Hiroshima Prefecture. It was set up in the expectation of demand for a substitute for the European cork imports that the First World War had cut off; when the war ended and imports recovered, that demand shrank and the company fell into difficulty almost immediately after its founding. In 1921, at the request of local interests, Matsuda Jujiro (松田重次郎) became its second president. Born in Hiroshima in 1875, he was an inventor of machinery who had made pumps and fuses carrying the Matsuda name in Osaka, and he took the post bringing orders for precision machinery for the Navy with him. From 1922 the company mass-produced pressed cork board, but it suffered a plant fire in 1925 and struggled with the swings between busy and slack spells in the Navy work. Matsuda looked for a way out in a commercial vehicle to replace the horse-drawn cart, and pressed his son Tsuneji (松田恒次) and others to build a three-wheeled motor truck.

In September 1927 the company changed its name to Toyo Kogyo and shifted the axis of its business to machine tools and three-wheelers. Machine-tool production began in April 1929, three-wheeled truck production in October 1931. The Mazda-Go DA, which carried Matsuda’s surname, spread among small hauliers throughout the country, and for a long time the product name was better known than the company’s. To prepare for growing output the 3,000-tsubo site became too cramped, so the company bought a 10,000-tsubo tract of reclaimed land along the Enko River at Fuchu village, at about ¥10 per tsubo, as the site of its main plant. Those 10,000 tsubo were later expanded until they were only a small part of the works. In October 1935 it also began producing rock drills, and together with machine tools its machinery division built technical strength approaching that of the specialist makers.

Recovery from war damage and a base built on three-wheeled trucks

On 6 August 1945 the atomic bombing of Hiroshima damaged the head-office plant as well. Its position at Fuchu, away from the city centre, meant that damage to equipment was comparatively light, and production of three-wheeled trucks resumed in December of the same year. Under occupation controls the company handed over its head-office buildings to serve as temporary offices for the Hiroshima prefectural government. In May 1949 it listed its shares on the Tokyo Stock Exchange, opening a route to raise from the market the funds the increased output of the recovery years demanded. Having taken up machine tools early proved a strength at a time when materials and equipment were scarce: no small number of the machine tools now in use are of our own making, and that is a great strength (大阪経済評論 Osaka Keizai Hyoron, Aug 1952).

In 1953 the company completed a painting and assembly plant for three-wheeled trucks with capacity for 3,000 units a month, taking the leading position in the three-wheeled truck industry. Matsuda Tsuneji looked back on the promulgation of the Military Vehicle Subsidy Law in 1918 as the point from which Japan’s domestic car market began to move in earnest. In 1951 Tsuneji, the eldest son of Matsuda Jujiro, became president. The mainstay three-wheeler market, however, was being pushed aside by small four-wheeled vehicles from the middle of the 1950s, and the industry was already talking of demand receding as four-wheel output rose in competition with it. Toyo Kogyo launched a small four-wheeled truck in April 1958 and entered the four-wheel business.

Choosing to go it alone on rotary technology

In May 1960 Toyo Kogyo launched the R360 Coupe, a kei passenger car. The KRBB version was priced at $833 (¥300,000), an unprecedentedly low figure among the kei four-wheeled passenger cars of the day, which stood close to ¥400,000. In October of the same year it announced that it would take over the patent rights to the rotary engine from NSU of West Germany, dividing the field with NSU and Curtiss-Wright of the United States by making petrol and diesel engines of 200 horsepower and below its own area. In February 1961 it concluded a technical tie-up with NSU and Wankel. It launched a small passenger car in April 1964, completed the Miyoshi proving ground in May 1965 and, in November 1966, the Ujina plant dedicated to passenger cars inside the head-office works, moving from a maker of three-wheelers to a full-line car maker.

Bringing the rotary mechanism conceived by Dr Wankel to volume production was a hard problem. In 1963 the company set up a Rotary Engine Research Department with Yamamoto Kenichi (山本健一) as its first head, gathering about 47 engineers from across its divisions. Yamamoto recalled in later years that an authority on internal combustion engines had dismissed the rotary as something that would never come to anything, and that the wind blowing on him inside the company was harsh as well. Having solved the problems, beginning with the wear of the apex seals, on 30 May 1967 the company launched the Cosmo Sport, the world’s first car with a two-rotor rotary engine. Total displacement was 491cc × 2, maximum output 110PS and top speed 185km/h. When the government resolved in cabinet in October 1969 that capital liberalisation would take effect from October 1971 and the finished-car makers moved towards foreign tie-ups and mergers, Toyo Kogyo returned its own capital tie-up to a blank sheet and chose to go alone on its own technology.

How the oil crisis turned the rotary into a weakness

The first oil crisis of October 1973 thrust the rotary’s poor fuel economy in front of the market, and in January 1974 the US Environmental Protection Agency announced that a rotary engine consumed some 50 per cent more petrol than a reciprocating one. In Japan too its poor fuel efficiency was reported. Inventories at home and abroad swelled to 200,000 units, equivalent to three months of production, and sales of rotary-powered cars in the United States halved year on year. In the year to October 1975 the company fell to an ordinary loss of $57.9M (¥17bn). Losses that did not appear on the face of the accounts — $80.3M (¥24bn) of write-offs relating to the US sales company, repair costs for 80,000 defective vehicles and the like — ran to the order of $167.2M (¥50bn).

Some 65,000 people depended on Toyo Kogyo and its first-tier subcontractors for their income; in Hiroshima City one person in four was said to be connected with the company, which accounted for roughly a fifth of the prefectural economy. Being so embedded locally that it could not bring itself to cut staff even as results deteriorated was pointed to as an obstacle to the rebuild. In October 1974 it accepted directors from Sumitomo Bank and Sumitomo Trust & Banking. President Matsuda Kohei (松田耕平) described the arrangement as a pipeline for funds with a two-year limit, but from then on the company was placed under Sumitomo Bank’s direction. The bank created a cost-control department, seconded staff to dealers and extended emergency loans, then sent its managing director Murai Tsutomu (村井勉) in as vice-president, hardening the rebuild from support into full custody. Isoda Ichiro (磯田一郎), the bank’s president, decided on the rescue on the grounds that letting Toyo Kogyo fail would put its employees out of work, break its subcontractors and devastate the Hiroshima economy.

As a plan to rebuild sales, the AM scheme was introduced, sending company staff out to dealers across the country; in December 1977 a policy was set out to widen secondments that had been running at a thousand-odd people on one-year rotations to 5,000 people on three-year terms. On the ground, voices were raised: car selling is punishing work even in your twenties — for an amateur in middle age it is harder still, and the cohorts that followed went as if their turn had come round for conscription (プレジデント President, Jan 1978). Isoda told Matsuda Kohei in June 1977 that he was being removed, and in December of that year installed Yamasaki Yoshiki (山崎芳樹), a career company man, as president. With exports strong and domestic sales growing, the year to October 1978 produced a record ordinary profit of $74.6M (¥15bn).

A foreign umbrella chosen by the main bank

Sumitomo Bank sounded out Nissan, Toyota and Mitsubishi about a tie-up, but each declined, saying it had no capacity to look after Toyo Kogyo. Ford had struck the company from its list of candidates after talks collapsed in 1972, under Matsuda’s presidency, but the Sumitomo Bank pair of Isoda Ichiro and Tatsumi Sotoo (巽外夫) drew it back to the table. President Yamasaki made the final decision at the end of 1978, and said of the 25 per cent shareholding that too low a figure would leave Ford uncommitted while too high a one would cause problems of its own, so that was where the line was drawn. MITI, too, actively supported 25 per cent, on the view that the national interest lay in committing Ford deeply enough that it could not withdraw whatever happened. In November 1979 the 25 per cent stake was realised through Toyo Kogyo absorbing Ford Industries, Ford’s Japanese arm — Ford’s dowry was effectively nil.

After the tie-up Toyo Kogyo accelerated its build-up of production capacity and its move into the North American market, completing the Hofu Nakanoseki transmission plant in December 1981 and the Hofu Nishinoura passenger-car plant in September 1982. In May 1984 it changed its name from Toyo Kogyo to Mazda. It reinforced the domestic brand with the RX-7, a premium coupe carrying a rotary, and the Roadster, a small sports car sold abroad as the MX-5. Borrowings, which had stood at $1.1B (¥325bn) at the end of October 1975, had fallen to $823.2M (¥196bn) by the end of the year to October 1983. In January 1985 it established a local production subsidiary in the United States, Mazda Motor Manufacturing (USA) Corporation. Even after the rebuild, Sumitomo Bank continued to send in officers, including the managing director responsible for accounts, and important matters such as the move into the US plant were treated as the bank’s to decide. In June 1992 the subsidiary was converted into an equally owned company with Ford and renamed AutoAlliance International.

The expansion to five channels and its collapse

In 1988 Mazda set out its “B-10” plan to double domestic sales from 400,000 to 800,000 units over five years. The aim was to correct a structure that leaned on exports for 60 per cent of sales, and Yasumori (安森), the executive vice-president who led the plan, argued that survival required a share of at least 10 per cent and that this meant selling 800,000 units. The reasoning was that shaking off the image of a maker of trucks and mass-market cars, and taking on the top makers in passenger cars, called for new channels. The pillar was a five-network structure, the same as that of Toyota — a company selling five times as many cars at home. For Mazda, inferior in scale, many voices from the outset feared a reckless bet.

In 1989 the three existing networks — Mazda, Mazda Auto and Autorama — were joined by Autozam, opened in June, and Eunos, opened on 1 September, making five. Adding channels on its own would have cost $1.4B (¥200bn) to $2.2B (¥300bn) in land and store construction alone, so the company drew in firms from other industries that had land and capital: of the 111 companies that joined Eunos, 16 came from outside the trade, among them Mitsukoshi, JR Kyushu and Showa Sangyo. Outlets doubled from 1,607 at the end of December 1988 to 3,089 at the end of June 1992. In November 1991 Mazda Auto was renamed Efini and made the network for premium passenger cars, and to keep supplying new models to five networks the company multiplied sister models sharing the same basic structure.

The expanding sales network and the proliferating sister models swelled development spending and fixed costs, and with the smallness of its scale unremedied the break-even ratio reached 97.5 per cent. Domestic sales stalled with the collapse of the bubble, the strong yen compounded it, and the year to March 1994 recorded an ordinary loss of $431.4M (¥44bn). Domestic output fell steeply from just over 1.43 million units in 1991 to 770,000 in 1995. From 1993 the company began consolidating its sales network, and in May 1994 converted Autorama into Ford stores, but surplus capacity could not be cut so easily. With $1.2B (¥160bn) of convertible bonds falling due for redemption by the end of the 1998 financial year and a depressed share price leaving no prospect of conversion into equity, Mazda — which even at its best earned an ordinary profit of $744.3M (¥70bn) — could not secure the redemption funds and gave up on rebuilding under its own power.

A rebuild run Ford’s way under foreign presidents

The shape of the move under Ford’s wing was broadly settled at the end of October 1995, in a meeting between Ford’s chairman and president Trotman, in Japan for the Tokyo Motor Show, and Sumitomo Bank’s chairman Tatsumi. In May 1996 Ford raised its shareholding from 24.5 to 33.4 per cent and took control, and in June sent in Henry Wallace as president. President Wada Yoshihiro (和田淑弘) explained that at the existing 24.5 per cent there were legal obstacles to making the co-operation thorough. Wada, who had disliked having the company called a subsidiary, said at the press conference announcing Wallace that Mazda had to develop as part of the Ford group, taking down the banner of independent rebuilding. Senior MITI officials read the 33.4 per cent as a signal that Ford did not, at least for the time being, intend to abandon Mazda.

The rebuild Wallace pursued was a financial rationalisation that avoided plant closures and lay-offs. Holding down capital spending to cut interest-bearing debt, he reduced the workforce by not replacing leavers, from 30,164 at the end of March 1993 to 24,891 at the end of March 1997. Gary K. Hexter, the executive vice-president who directed finance, preached cash-flow management — a company cannot go on spending more than comes in — and set deadlines for the sale of assets it did not need. Its holding of shares in Sumitomo Bank, its main bank, fell to a tenth, from 16.97 million shares at the end of March 1993 to 1.57 million at the end of March 1997, and the proceeds went to repay borrowings. The Demio, launched in August 1996, was the first big hit in a long while, and the half-year to September 1997 produced an operating profit of $58.7M (¥7bn), bringing a full-year operating profit into view for the first time in five years.

The yen’s strength from the middle of 1999 worsened earnings again at Mazda, with its high export ratio. In November 2000 president Mark Fields announced a medium-term plan on the grounds that the company could not survive with its present cost structure, setting out to close the second Ujina plant, with capacity of 266,000 units a year, by the end of September 2001 — cutting domestic production capacity from 1.05 million units to 790,000 — and to shed 1,800 of its 10,000 indirect employees through voluntary retirement. It was the first full closure of a domestic plant under Ford’s ownership. The 2000 financial year brought a net loss of $459.4M (¥50bn) and a return to paying no dividend. In August 2003 Imaki Hisakazu (井巻久一) became the first career company man in sixteen years to take the presidency, drawing a line under a period in which Ford had sent in four presidents in seven years.

Standing alone after losing its capital backer, and trying again

After the Lehman shock of September 2008, Ford gave priority to rebuilding its North American business and in November of that year cut its holding in Mazda from 33 to 13.8 per cent, taking Mazda out of the scope of equity accounting. Mazda sank into four consecutive years of net losses, from the year to March 2009 to the year to March 2012, posting a net loss of $1.3B (¥108bn) in the year to March 2012. It carried out public share offerings of about $1.1B (¥100bn) in 2009 and, in March 2012, of $2.0B (¥163bn) — the full extent of its authorised issue — and took $877.3M (¥70bn) of subordinated loans from financial institutions. Its export ratio, at 80 per cent, was the highest in the industry, so it took the hardest blow from the extreme strength of the yen; shares outstanding rose by as much as 68.5 per cent. Ford went on slicing its holding from 2010 and sold the remaining 2.1 per cent in the six months to September 2015, dissolving a capital tie-up of 36 years.

In February 2012, a week before the share offering was announced, Mazda launched the CX-5, a new SUV and the first model to make full use of the SKYACTIV technologies for higher combustion efficiency; together with the Kodo (魂動) design language, which set out to express a sense of motion, it carried the renewal of the model range. Yamanouchi Takashi (山内孝), who became president in 2008, said the company could make a profit exporting anywhere at ¥77 to the dollar. Alongside the product renewal built on its own technology it also changed the way it sold. Discounting and self-registration had become routine, pushing trade-in values down and trapping Mazda’s customers in a cycle in which they could only move on to another Mazda — mocked as “Mazda hell” (マツダ地獄) — so from 2010 Inamoto Nobuhide (稲本信秀) drove a shift to selling at list price with sales incentives held down. Residual values, which had sometimes fallen to about half the new price after a single year, improved to 80–90 per cent. Under Kogai Masamichi (小飼雅道), who became president in 2013, global sales in the 2015 financial year reached a record 1.534 million units, and operating profit for the year to March 2016 was $2.1B (¥227bn).

In August 2017 Mazda signed a business and capital alliance agreement with Toyota Motor, each taking about $445.8M (¥50bn) of the other’s shares, so that Toyota acquired 5.05 per cent of Mazda and Mazda 0.25 per cent of Toyota. In March 2018 the two established Mazda Toyota Manufacturing USA, an equally owned joint venture in the state of Alabama; under Marumoto Akira (丸本明), who became president in 2018, it began volume production in January 2022 and builds the CX-50. Sales in the United States grew on the “large product” range made up of the big CX-90 and CX-70 SUVs, and in the year to March 2024 Mazda sold 375,000 vehicles in the United States — three-tenths of its global sales — recording a record operating profit of $1.7B (¥251bn) and net profit of $1.4B (¥208bn). In the year to March 2025 operating profit fell to $1.2B (¥186bn) as sales incentives rose. Because the whole large-product range is built at the Hofu plant, under Moro Masahiro (毛籠勝弘), who became president and CEO in 2023, the company is directly exposed to additional US tariffs.