Japan-US Opportunities and Challenges: Achieving Mutual Success in Changing Global Economy (Session: Competition and Business Expansion)

Thanks you for that kind introduction. And thanks very much for the opportunity to speak with you today.

I am pleased to be here because I believe the discussions today are very important for economic future of the Midwest; and equally important for the economic future of Japan.

The regions represented here are two of the world's greatest industrial heartlands, with particular importance for the automotive industry.

For Mazda... these two areas are the sites of our most important production facilities... and the distribution keys to two of our three key markets.

Our home base is in western Japan: in Hiroshima, where our headquarters and largest plants are located; and slightly further west in Hofu, where we have a major assembly and transmission plant.

In the US, Michigan is the centre of our manufacturing presence. Dearborn is the headquarters of Ford, Mazda's global partner. And Flat Rock, just south of there, is the site of our largest plant outside Japan.

Since 1992, our Flat Rock plant has operated as Auto Alliance International -a joint venture partnership between Mazda and Ford.

As such, Mazda is among the few companies that can testify with authority to the tremendous strengths Japan and the Midwest share as bases for global industrial success in the 21st Century.


There is a flip side, however.

At Mazda we are acutely sensitive to the forces that threaten the pre-eminence of the Midwest and Japan in the global auto industry.

Make no mistake... this is a threat both regions share in equal measure, from a variety of local, regional and global forces that are generating significant challenges.

Mazda has enormous fixed investments in both places, and we depend on the tremendous depth of talent, experience, know-how and technology that each has to offer.

So clearly Mazda shares with many of the organizations represented here today, a common purpose to defend long-term prosperity in the two regions. And I'd like to take this opportunity today to share with you some of our experiences and the lessons we have learned at Mazda, to see how they might apply to the dual challenge these regions face of Competition and Business Expansion.

Competition is something we are very familiar with at Mazda, as is the need to rise to the challenge of great adversity.

Mazda is a mid-sized player in a very crowded and competitive global market -a market that recently has mainly rewarded massive size and financial strength.

A changing auto market environment in the early 1990s brought our company to the brink of extinction.

We had to change and had to restructure our business... which as everyone knows is not easy in any organization.


I'm very happy to report that we have skillfully learned how to change and evolve.

And now it is true to say that Mazda is back.

After many difficult years, in fiscal year 2001 we were back in the black -recording the largest profit improvement in our 82-year history.

That achievement sets the stage for a new era of product-led growth... with the launch of an all-new family of products that embody a new brand vision, which emerged from intensive reflection on who we are and what we need to become.

In May, we launched the mid-size Mazda6 -Mazda Atenza as we call it in Japan -which has already exceeded our expectations in Japan and Europe.

We are in the process of rolling out the launch across the globe. Response has been tremendous in Australia, sales made a rapid start in Israel and we will arrive in the US and Canada in the next few months, as we launch production at Flat Rock.

Last month, we launched our all-new entry in the small-car segment, which is the only growth segment in Japan. Our new Mazda Demio has generated great press reviews, our advertising is proving very popular and our dealers are excited about their sales' prospects.

Early next year, we will launch our brand icon model. The rotary-powered RX-8 will be a sports car like no other. It will combine superb performance with practicality never before seen in a sports car.

But how did we get from the brink of extinction to such excitement? And are there any lessons to learn about our business in the current era of competition and expansion?

First and foremost Mazda was fortunate that our crisis was so acute that the need for fundamental change could not be denied by any of the company's stakeholders. It really was a case of 'adapt or die' -and no one could deny it.

So that is the first lesson: face up to the challenge squarely:

Second lesson is that turning the tide requires a decisive blueprint for recovery, change and growth.

Mazda's blueprint is a five-year plan that took the management team eight months to devise... because it was developed in the year 2000 we call it the Millennium Plan.

I came aboard two years into the plan, at the beginning of this summer, totally committed to implementing it... and not imposing some new idea of my own.

One simple reason for that -the Millennium Plan is working.

The plan is based on four pillars, restructuring and reform, business growth, synergy with Ford, and personnel development.

The first phase of the Millennium Plan was severe. The company took and implemented some very tough decisions to get our business model right and to align our structure with demand for our products.

Our actions covered the range of our activities, our financial structure and performance, our personnel, our manufacturing network and our distribution network. We have dramatically cut costs at the same time as maintaining investment in new product development.

We are also rebuilding our brand.

Mazda should be distinctive in the market place... a brand that inspires passion and pride in our employees, and total delight in our target customers.

Over the last three years, we have completely reviewed and redefined our brand strategy and we have realigned our product development to ensure that every new car we build fully delivers our brand promise to customers... Stylish, Insightful and Spirited cars that are innovative, a little different from the mainstream, but above all real drivers' cars.

A clear, strong and globally consistent brand image is very important to our future success.

The results of all these actions are impressive...as I said, a return to profit and an entirely new... and brand consistent... model line-up is being launched between this summer and end of 2003.

We have now entered what we call the growth phase of the Millennium Plan. With our new products, we are now in a position to attract new customers and grow sales and market share.

So we are heading in the right direction. But we cannot relax or reduce the pressure, nor sit back and toast our success.

We have to stick to the task of methodical and deliberate implementation of the strategy. This unwavering commitment to our overall strategy is the third important lesson I would like to share.

On-going implementation is critical for us. Just look at our global business environment.

In our home market, Japan, in the USA, Europe and Asia outside Japan, we face significant competitive challenges. Economies remain uncertain; the threat of recession is real. In response, our competitors are attacking with aggressive marketing and significant cost cutting, which are squeezing our margins.

The only thing we know is that this is not going to change soon. We must maintain momentum in our transformation and in the market place. We must continue to improve our business.

That is why our focus will continue to be the full implementation of our Millennium Plan. But we also know that no one measures you on your plans. We have to grow our sales volumes and our business. And we have to continue to improve our business structure. This is essential for our ongoing prosperity.

We continue to work on and improve our distribution networks around the world, particularly in Japan, USA and Europe. And our partnership with Ford grows ever stronger as it matures... the partnership at AAI is a great example which I will cover in more detail in a moment.

We also know that our plan is only as good as the people who implement it. So we continue to build on the excellent technical and business strengths our team has, through education programs and reforms in our personnel policy and management areas, that I believe will make us a beacon of best practice here in Japan.

But the fourth lesson is be flexible. Within your strategic blueprint you have to be prepared to make tactical changes according to the demands of the ever-changing market and competitive environment.

To this end, we are introducing tactical changes in the Millennium Plan ... for example, we announced this May a doubling in our cost reduction targets over the period of our Millennium Plan, driven by a combination of competitor actions, regulatory changes and low-cost sourcing opportunities.

Low cost sourcing... one of the competitive threats I mentioned earlier... also demands a response and is something we are looking at closely, while maintaining our commitment to run our plants in excess of 100 percent straight time utilization.

Writ large, what this means is that we just have to get better and better at what we do in all areas that we work... including Japan and the Midwest.

The final lesson is raise your gaze to see the global picture. Our strategy is up and running and succeeding in Japan and Europe. The next major step we are taking is in the Midwest, at Flat Rock.

When it opened in 1987, Mazda's Flat Rock assembly plant was one of the first so-called transplants.

Mazda chose to work at the heart of American motor manufacturing... to work within the established system. And to work in strong partnership with a great American company... Ford.

That made Mazda a distinct rarity: a Japanese automaker with a workforce represented by the United Auto Workers.

But Auto Alliance International -as it has been known since 1992 -defied skeptics by developing a strong reputation for quality.

Despite that, in recent years the plant has suffered from changing market demand and from Mazda's need to develop the new brand strategy I just described. As a result it has had one of the lowest utilization rates in North America.

Combined with the cost advantage enjoyed by newer, non-union transplants down South, that put the plant on the endangered list.

And that could have been the end of the story.

But I am pleased to report that all the stakeholders in AAI have come together in an effort that will not only save the plant...but make it one of the most efficient in North America.

The strong partnership with Ford means we are now jointly investing 644-million-dollar in an aggressive expansion program that will make AAI one of the most advanced, flexible assembly plants in the world... incorporating the best practices of both Ford and Mazda.

For Mazda this was an important step that has allowed us to reaffirm our long-term commitment to manufacturing in Michigan.

AAI will be one of two global production sites for our new Mazda6, which is possibly one of the most important models in our history and certainly the first of our all new cars built under the Millennium Plan.

And I am pleased to report that Mazda's commitment is matched by the dedication of our workforce at AAI who are determined to exceed global quality and productivity benchmarks.

And the third piece of very good news was announced last month. The Michigan Economic Development Corporation granted AAI a Business Tax credit worth approximately 95 million dollars over a 20-year period. And the City of Flat Rock chipped in with a local tax abatement worth up to 31 million dollars over 12 years.

I hope from my speech you can see just how important these two regions are to Mazda.

But to close, let me just highlight, that Mazda's recovery is the product of Japanese and Midwesterners working together.

On our management team at Mazda, in addition to Japanese you will find Britons, South Africans and others... but many have come to Hiroshima straight from the Midwest.

And in Flat Rock you will find more than 160 Japanese staff from Mazda working on the start up of the new Mazda6.

The bottom line is that Japanese and Midwesterners work together better than anyone might have expected.

And the work we have done, as one global team, has taught us many lessons about competition and business expansion. And we continue to learn along the way that you have to:

Mazda is now also benefiting from these lessons; we now are competitive and this is the year that we start to expand our business -- but we believe these lessons are true not just for a Japanese company, but are relevant for regions and countries as well.

Thank you very much.