Mazda seeks RM12 billion loan to weather coronavirus
Carmakers are still reeling from the effects of the coronavirus pandemic, with prolonged global shutdowns of factories and dealers causing a severe impact on their bottomline. Mazda is no different, having requested 300 billion yen (RM12.1 billion) in financing from three of Japan’s biggest banks (or megabanks) and other institutions to navigate its way out of the storm, according to the Nikkei Asian Review.
Those banks that Hiroshima has requested loans from include the Mitsubishi UFJ Financial Group (MUFG) Bank, Sumitomo Mitsui Banking (which owns a minority stake in the company) and Mizuho Bank, along with the Sumitomo Mitsui Trust Bank and the state-owned Development Bank of Japan. They are expected to agree to provide the loans, with some of them having already released funds, the financial publication said.
Mazda had reportedly already been struggling with slow sales, and the pandemic – which has triggered the temporary closure of its plants in Japan and the United States – has turned its cash flow negative. The company is said to be planning to use those funds to build up its cash reserves and help prepare for the possibility of the pandemic drawing out.
It had nearly 500 billion yen (RM20.2 billion) in cash and around 63 billion yen (RM2.6 billion) in securities as of December, and it also secured a credit line of around 200 billion yen (RM8.1 billion) from Sumitomo Mitsui Banking and other financial institutions. Its free cash flow from April to December 2019, however, was negative 130 billion yen (RM5.3 billion).
The impact of the coronavirus on the carmaker has been huge, sales having fallen 14% in February and 33% in March compared to the same months last year; most of its main plants in Japan and elsewhere have also been suspended since the end of March. The pandemic has compounded a difficult period for Mazda, which has been in dire straits even before the disease’s unprecedented spread.
In November, it revised its operating profit outlook for the financial year that ended in March to 60 billion yen (RM2.4 billion), down 27% from the previous year and significantly lower than its initial estimate of 110 billion yen (RM4.5 billion). Then in February, the company downgraded its sales estimate from 1.55 million vehicles to 1.5 million, a decline of 60,000 units compared to the preceding fiscal year.
The reduction in sales stemmed from Mazda’s recent attempt to move upmarket. The company launched two new models – the Mazda 3 and CX-30 – last year, with higher prices that has reportedly alienated customers. This, the Nikkei Asian Review said, has resulted in lower sales in North America, which accounts for nearly 30% of Mazda’s sales. It also tried to limit dealer incentives, often used to offer showroom discounts, to build its brand value – a strategy that has apparently also backfired and has led to dismal sales globally.
Mazda is not the only carmaker badly hit by the coronavirus, with financing also requested by Toyota (1 trillion yen, or RM40.4 billion), Nissan (500 billion yen, or RM20.2 billion), General Motors (US$16 billion, or RM69.4 billion) and Ford (US$15.4 billion, or RM66.8 billion).
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