Mazda, Subaru brace for Trump's trade policies
Smaller automakers more exposed due to limited US production
TOKYO -- With U.S. President Donald Trump demanding that even Japanese automakers put "America first," Mazda Motor and Subaru maker Fuji Heavy Industries are growing concerned over the potential impact of tariffs and other trade protections that could limit access to the world's largest car market.
"We don't know what direction things will go," Mazda President and CEO Masamichi Kogai told reporters Sunday when asked about Trump's pledge to renegotiate the North American Free Trade Agreement. "What's important for us is to develop more attractive products and boost sales."
Ford Motor CEO Mark Fields, one of the loudest critics of the Japanese auto market, had once served as president and CEO of Mazda as part of the companies' past partnership. "I have no particular comments" regarding Fields, Kogai said.
Mazda expects to sell 1.55 million cars worldwide for the fiscal year ending in March, with the U.S. accounting for 15%, or about 230,000 units. But roughly 80% of the vehicles it sells in the country are shipped from Japan and the rest from Mexico. Exchange rates have a huge impact on sales.
Trump is calling for a 35% tariff on cars made in Mexico, which would make it a significant burden to build vehicles in the country. For an automaker of Mazda's size, building a new plant in the U.S. will be a challenge. It could face a tough decision depending on what Trump's policies shape up to be.
Six Japanese companies -- Toyota Motor, Nissan Motor, Honda Motor, Mitsubishi Motors, Fuji Heavy and Mazda -- currently sell autos in the U.S. market. Toyota had previously promised to invest $10 billion in the country, and made another announcement Jan. 24 on its roughly $600 million investment in a plant in Indiana. President Akio Toyoda has also met with Japanese Prime Minister Shinzo Abe.
Fuji Heavy's only overseas factory is located in Indiana. The automaker just doubled annual output capacity there in December to around 400,000 vehicles, hiring an additional 1,500 or so workers and bringing the total to about 5,500. It plans to ramp up capacity to 440,000 units by fiscal 2018.
Fuji Heavy has doubled annual sales in the U.S. to about 615,000 units in the five years through 2016, accounting for 60% of global sales. Its exports from Japan were hit hard by the strong yen earlier this fiscal year, but the recent softness in the currency is expected to mitigate the expected drop in profits. The company is hoping to sell up to 670,000 vehicles in the U.S. in 2017. But it is looking to produce just around 60% of the vehicles locally -- less than Toyota and other big automakers. It will be affected significantly by any tariffs or movements in the exchange rate.
Japanese autoparts makers face uncertainties as well. The Japan Auto Parts Industries Association says that the number of Mexican production bases operated by its members had doubled in five years to 109 as of March 2016.
Yorozu, which supplies suspensions and other parts to Nissan, is expanding two plants in Mexico and plans to have the added production up and running by the end of the year. "We will consider a response if the U.S. takes further steps toward protectionism," said Chairman and CEO Akihiko Shido.
U-Shin, which makes parts for Mazda and other companies, has moved production from the U.S. to a Mexican plant set up in 2012. "We will consider reassigning some production back to the U.S.," a company representative said.