Mazda’s Having Problems Also

Yesterday’s dead pool article mentioned the dire straits Mitsubishi’s in but wait – there’s more.

Mazda Motor Corp.’s operating profit tumbled 71 percent in the latest quarter, as swinging foreign exchange rates hit earnings and offset small sales gains.

Operating profit dropped to 13.7 billion yen ($117.3 million) in the automaker’s fiscal third quarter ended Dec. 31, from 47.5 billion yen ($407.0 million) a year earlier.

Net income declined 32 percent to 23.8 billion yen ($203.9 million) in the three months, the company said Thursday while announcing financial results.

Revenue fell 5.3 percent to 802.3 billion yen ($6.87 billion), as global retail sales inched ahead 1.6 percent to 387,000 million vehicles in the fiscal third quarter.

Big foreign exchange rate losses undercut Mazda’s operating profit, as the Japanese yen appreciated in value against the U.S. dollar and other currencies. Shifting exchange rates lopped 37.0 billion yen ($317.0 billion) off the company’s quarterly operating profit.

Results were also hurt by falling sales in every major market, except China.

The contribution of sales and vehicle mix to operating profit in the quarter was unchanged over the previous year, as incentives increased and margins shrank.

Retail volume in North America, Mazda’s biggest market, shed 4.5 percent to 107,000 units in the third quarter. Sales in Japan and Europe fell as well.

Mazda’s U.S. sales slid because the company tried to moderate incentive spending as rivals put more cash on the hood, especially in the competitive sedan segment. Mazda will lift some incentive spending to stoke sales, Executive Vice President Akira Marumoto said.

“Rival carmakers ramped up incentives for their summer campaign and Christmas campaign, but we didn’t follow them, which led to a big decrease in sales,” Marumoto said.

“That’s why we will narrow that gap.”

Deteriorating sedan sales in the U.S. also forced Mazda to trim its North American sales forecast for the current fiscal year ending March 31, Marumoto said.

Mazda had expected North American sales to increase 2.5 percent to 449,000 vehicles in the current fiscal year. But it now expects sales to drop 1.4 percent to 432,000 units.

Europe operating profit fell 54 percent to 1.2 billion yen ($10.3 million) in the period, compared with a 2.6 billion yen ($22.3 million) operating profit a year earlier.

European sales decline 3.4 percent to 57,000 units.

Citing increased costs for recalls in Japan and reduced wholesale volumes in Japan and North America, Mazda trimmed its global profit forecast for the fiscal year ending March 31.

Mazda now expects full-year operating profit to drop 43 percent to 130 billion yen ($1.11 billion), from a year earlier. It had earlier predicted operating profit would drop to only 150 billion yen ($1.29 billion). Mazda also lowered its net income outlook to 90 billion yen ($771.1 million), representing a 33 percent drop from the previous year. It had earlier forecast net income of 100 billion yen ($856.8 million).

The tempered outlook comes despite Mazda’s recalculating its earnings forecasts to account for what are expected to be more forgiving foreign exchange rates.