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Mazda Motor Corporation Annual Report 2009
Mazda Motor Corporation
Challenge and Opportunity
Annual Report 2009
Year ended March 31, 2009
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Table of contents

  • Page 1
    Annual Report 2009 Year ended March 31, 2009 l l a h C e e g n d n a Op tu r po t ni y

  • Page 2
    ... Safety Initiatives 32 32 33 34 35 36 Corporate Information CSR of Mazda Corporate Governance and Internal Controls Risk Management Compliance Board of Directors, Auditors and Executive Officers Forward-Looking Statements Statements made in this annual report with respect to Mazda's plans...

  • Page 3
    New Mazda3 MPS (Japanese name: Mazdaspeed Axela), European model Challenge and Opportunity Established in 1920, Mazda Motor Corporation is an automobile manufacturer headquartered in Hiroshima Prefecture in western Japan. Since its establishment, Mazda has worked to provide products and services ...

  • Page 4
    Consolidated Financial Highlights Mazda Motor Corporation and Consolidated Subsidiaries Years ended March 31 Millions of yen Thousands of U.S. dollars*1 2005 2006 2007 2008 2009 2009 For the year: Net sales Operating income (loss) Income (loss) before income taxes Net income (loss) Capital...

  • Page 5
    ... to parts exported for the overseas production of Mazda vehicles. Contribution to net sales (March 2009 fiscal year) Global sales volume (March 2009 fiscal year) [Other areas] [Japan] 24.5% [Other markets] 19.0% [Japan] 17.3% 22.2% [China] 10.7% [Europe] 25.8% [North America] 27.5% [Europe...

  • Page 6
    ...Hiroshima Plant 9 Hofu Plant 0 Miyoshi Plant Europe (number of dealerships: 2,343) Functions )''/ )''0 Regional headquarters/R&D logistics/Sales Distributors Name )''/ )''0 r Mazda Motor Europe/European R&D Centre t Mazda Motor logistics Europe y Mazda Motors (Deutschland) u Mazda Motors UK i Mazda...

  • Page 7
    ... Distributors Sales and service for dealers ( Compania Colombiana Automotriz Central :\ekiXcXe[ and South America, Middle East, Africa (number of dealerships: 750) :\ekiXcXe[ Jflk_8d\i`Z e ludin Me i o ) Mazda Representative Office (Middle East) Consignment production facilities Country Japan...

  • Page 8
    Messages from Management To Our Shareholders Representative Director, President and CEO Takashi Yamanouchi 6 MAZDA ANNUAl REPORT 2008

  • Page 9
    ...demand and the yen's rapid appreciation. Mazda is dealing with this situation over the short term by implementing emergency measures in all areas-production, sales and development-to accelerate Cost Innovation initiatives and build a streamlined and lean management structure. Over the medium to long...

  • Page 10
    ... year's subprime loan problem, coupled with a jump in raw material prices and a strengthening yen, Mazda pursued product-led growth and posted strong results overall. In addition to the positive news of the Mazda2 (Japanese name: Mazda Demio) being named the "2008 World Car of the Year," results...

  • Page 11
    ... to review our strategies and management initiatives in the fields of products, production, sales, costs and technology development looking beyond the March 2010 fiscal year. We intend to develop a specific plan to encompass the entire Company from March 2010 onward based on the three key themes of...

  • Page 12
    ...lead times for new vehicle development and made capital spending more efficient. In addition, with the market introduction of the new generation of products, we were able to improve customer service (CS) at distributors and dealers, strengthen the sales structure and demonstrate our ability to build...

  • Page 13
    ... performance with eco-friendliness and safety features. 2015 is only six years in the future, but we plan to raise the average fuel economy of all Mazda vehicles sold globally by 30%. We plan to achieve this target by introducing new series of gasoline and diesel engines as well as newly developed...

  • Page 14
    ...to build? Mazda has global sales of slightly more than 1.2 million units, giving the brand a 2% to 3% share of the global automobile industry. I would like Mazda to have a market presence, even though we are a small manufacturer, providing Zoom-Zoom and environmentally friendly cars to customers who...

  • Page 15
    ... a production structure that can flexibly address changes in demand. 3. Reviewing sales networks and policies in major markets. Q10 Finally, what are your thoughts with regard to raising shareholder value? Paying a continuous, stable dividend is one of Mazda's most important management policies...

  • Page 16
    ... Director Senior Managing Executive Officer and CFO Q. Please recap and explain the main points of the March 2009 fiscal year results. The March 2009 fiscal year was a very difficult one for Mazda, with net sales of ¥2,535.9 billion, a ¥28.4 billion operating loss and a ¥71.5 billion net loss...

  • Page 17
    ... reception by customers of Mazda's product strategy. Q. What is the Company's current financial position? In terms of cash flow, free cash flow for the third quarter (three-month basis) was negative by more than ¥170.0 billion, but primarily as a result of emergency inventory adjustments, we...

  • Page 18
    ... business efficiency through integrated planning for models to be introduced in the future-spanning market segments, models and model classes-the use of common architectures for various platforms and parts, and the building of a flexible production system that can handle volume changes and new model...

  • Page 19
    ... circumstances. I ask for the continued understanding and support of shareholders and investors going forward. * Programs to provide subsidies for the purchase of new vehicles to replace old vehicles. Net sales Operating income (loss) Net income (loss) 2,030 (50) (50) MAZDA ANNUAl REPORT 2009 17

  • Page 20
    ... segment. In terms of sales, the nine sales subsidiaries for car parts across Japan were merged in July as Mazda Parts Co., ltd., to strengthen our domestic sales structure. By building a new structure for supplying parts to the entire Mazda Group, we are able to respond to customers more quickly...

  • Page 21
    ... Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section North America North American sales declined 14%, to 347,000 units, but with solid sales of the Mazda3 and Mazda5 we increased or maintained market share in each country. Mazda3...

  • Page 22
    ... addition to the Mazda2, despite sales in Europe for the year declining 2%, to 322,000 units, Mazda's market share rose 0.2 percentage point, to 1.7%. Mazda3 MPS Sales volume Sales volume (Thousands of units) Market share (%) March 2009 Fiscal Year Results The financial crisis has had the effect...

  • Page 23
    ... expand the sales network while at the same time work to increase efficiency per showroom. Along with the expansion of the sales network, Mazda (China) Training Centers were opened in March 2009 in Beijing, Shanghai and Shenzhen, to train showroom management, sales staff and service staff. 130 129...

  • Page 24
    ...sales finance companies. 273 235 216 238 228 )'', )''- )''. )''/ )''0 (Years ended March 31) Sales volume (Australia) Sales volume (Thousands of units) Market share (%) 79 67 77 65 59 8.0 7.5 6.1 6.6 6.8 )'', )''- )''. )''/ )''0 (Years ended March 31) 22 MAZDA ANNUAl REPORT 2009

  • Page 25
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Major Product Lineup MAZDA2 (Japanese name: Mazda Demio) MAZDA Global sales volume CX-7 Global sales volume 192,000 Sales market â- â- â- â- 53,000 Sales market...

  • Page 26
    ... Zoom-Zoom" plan, which was formulated in March 2007 as a long-term vision for technology development to enhance brand value. n Basic Policy: Provide all customers who purchase Mazda cars with the joy of driving and excellent environmental and safety performance. The Sustainable Zoom-Zoom long-term...

  • Page 27
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Major Initiatives in Mazda's Plan for Technology Development Powertrain Technology initiatives Newly developed direct-injection gasoline engine Targets Increase ...

  • Page 28
    ... in terms of strength and rigidity, then using tools like CAE (Computer-Aided Engineering) to enhance them, we are working to thoroughly optimize structures while also enhancing safety. Developing New Manufacturing Technologies We are working on development and use of processing and adhesion...

  • Page 29
    ... shown to improve fuel economy by 8% to 10% (according to statistics gathered in Japan). The new Mazda3 and Mazda Biante models are equipped with idling stop systems. This system will also be used in next-generation engines. Step 2 Regenerative Braking*1 This technology converts kinetic energy into...

  • Page 30
    ... Reduction in Engine Restart Time The i-stop idling stop system onboard the new Mazda3 (Japanese and European specifications) achieves a roughly 10% improvement in fuel economy (10-15 mode in Japan) by shutting off the engine when waiting for a traffic light to change or other short periods, without...

  • Page 31
    ... Development of the Aqua-tech Paint System Using Revolutionary Water-based Painting Technology Mazda has successfully introduced the newly developed Aqua-tech Paint System for vehicle body painting at its Ujina Plant No.1 in Japan from June 2009. The innovative new technology achieves the world...

  • Page 32
    ...Mazda5 and Mazda2 received five-star ratings in the "protection for adult passengers" category, in 2005 and 2007, respectively. These awards confirm Mazda's solid leadership with the world's highest levels of impact safety. * Euro NCAP: European New Car Assessment Programme. An independent body that...

  • Page 33
    ... that Support Accurate Recognition, Judgment and Operation A key goal at Mazda is to build cars that accurately detect and judge driving conditions and inform the driver so that he or she can respond correctly. One effort in this direction is our research and development on human-machine interfaces...

  • Page 34
    ... customer satisfaction and the Company's service brand, improving product reliability, etc. Taking consideration of the work environment, promoting work-life balance, cultivating a climate of respect for human rights, etc. Participating in local community activities, promoting traffic safety...

  • Page 35
    ... policies and measures of importance for all of the Company and to make reports necessary for business management, as well as various other advisory bodies tasked with assisting the president in decision making. the Board of Corporate Auditors' annual audit plan. There are no business relationships...

  • Page 36
    ...supports effective controls from accounting and tax-management perspectives. Internal Auditing Framework Mazda has the Global Auditing Department for the internal auditing of its headquarter. In addition, in each of its major operational centers in North America, Europe, Australia and South America...

  • Page 37
    ... them. In the March 2009 fiscal year, Mazda followed up with a monthly series entitled "Compliance Communications," using familiar situations to further heighten employees' understanding of compliance. Some of this information is also shared with other Group companies. MAZDA ANNUAl REPORT 2009 35

  • Page 38
    ... of Secretariat, Global Auditing, Human Resources, Corporate Services, Compliance, Risk Management and Mazda Hospital Masahiro Moro Assistant to the Officer in charge of Global Sales; In charge of Global Marketing 36 Akira Koga General Manager, Corporate Planning Div. MAZDA ANNUAl REPORT 2009

  • Page 39
    ...Management's Discussion and Analysis Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Assurance by Key Management Independent Auditors' Report MAZDA ANNUAl REPORT 2009...

  • Page 40
    Ten-Year Summary of Consolidated Financial Statements Mazda Motor Corporation and Consolidated Subsidiaries Years ended March 31 2009 2008 2007 2006 For the year*2: Net sales Domestic Overseas North America Europe Other areas Cost of sales Selling, general and administrative expenses Operating ...

  • Page 41
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Millions of yen 2005 2004 2003 2002 2001 2000 Thousands of U.S. dollars*1 2009 ¥2,695,564 845,620 1,849,944 761,684 634,233 454,027 1,972,574 640,043 82,947 73,...

  • Page 42
    ... billion net loss. â- Global sales volume was down 7.5%, at 1,261,000 units. â- The dividend was reduced by Â¥3, to Â¥3 per share. â- Overview of the Mazda Group The consolidated financial statements for the March 2009 fiscal year include the accounts of Mazda Motor Corporation, 54 consolidated...

  • Page 43
    ... and Safety Technology Corporate Information Financial Section Nevertheless, Mazda's consolidated results fell short of the previous year's levels because of lower sales volumes and the yen's appreciation. Looking at sales volumes in major markets, despite the introduction of the new Mazda Biante...

  • Page 44
    ..., for a ¥28.4 billion operating loss. The major components of this decline were ¥86.5 billion from lower sales volume and a deteriorated model mix, a ¥102.0 billion negative foreign exchange impact from the yen's sharp appreciation since the onset of the financial crisis and ¥44.0 billion in...

  • Page 45
    ... rating under the Euro NCAP evaluation standards for new cars in February 2009, officially placing the Mazda6 among the safest cars in the world. Also in February, Mazda provided Mazda MPV and Mazda6 cars with a cutting-edge system to support safe driving, developed by Mazda, for Japan's ITS-Safety...

  • Page 46
    Management's Discussion and Analysis Financial Position Total assets as of March 31, 2009, stood at ¥1,801.0 billion, which was ¥184.6 billion lower than at the previous year-end as a result of reductions in inventories and trade receivables. Cash and cash equivalents ("cash") decreased ¥3.2 ...

  • Page 47
    ... and fixed expense reductions, the effects of lower sales volume and a deteriorated model mix from lower demand and the yen's appreciation against major currencies are seen as outpacing these improvements. Our exchange rate assumptions for the year are ¥95/U.S. dollar and ¥125/euro. Global sales...

  • Page 48
    ... Mazda Group The Mazda Group sells products in Japan and around the world, including in North America, Europe and Asia. An economic downturn or declining demand in these markets could adversely affect Mazda's business results and financial position. 2. Exchange Rates The Mazda Group exports products...

  • Page 49
    ...the Mazda Group's business results and financial position. 7. International Business Activities In addition to Japan, the Mazda Group sells its products and carries out business activities in markets around the world, including the United States and Europe, as well as developing and emerging markets...

  • Page 50
    Consolidated Balance Sheets Mazda Motor Corporation and Consolidated Subsidiaries March 31, 2009 and 2008 Thousands of U.S. dollars (Note 1) 2008 2009 Millions of yen ASSETS 2009 Current assets: Cash and cash equivalents Trade notes and accounts receivable Inventories (Note 5) Deferred taxes (Note...

  • Page 51
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Millions of yen LIABILITIES AND EQUITY 2009 2008 Thousands of U.S. dollars (Note 1) 2009 Current liabilities: Short-term debt (Note 8) Long-term debt due within ...

  • Page 52
    Consolidated Statements of Operations Mazda Motor Corporation and Consolidated Subsidiaries Years ended March 31, 2009 and 2008 Thousands of U.S. dollars (Note 1) 2008 2009 Millions of yen 2009 Net sales Cost and expenses: Cost of sales Selling, general and administrative expenses ¥2,535,902 2,...

  • Page 53
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Consolidated Statements of Equity Mazda Motor Corporation and Consolidated Subsidiaries Years ended March 31, 2009 and 2008 Millions of yen Equity attributable to ...

  • Page 54
    ...Sale of investment securities Purchase of additional shares of stock in subsidiaries from minority shareholders Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Acquisition of intangible assets (Increase)/decrease in short-term loans receivable Long-term...

  • Page 55
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Notes to Consolidated Financial Statements Mazda Motor Corporation and Consolidated Subsidiaries 1. BASIS OF PRESENTING CONSOLIdATEd FINANCIAL STATEMENTS The ...

  • Page 56
    ... Companies changed the estimated useful lives of property, plant and equipment in calculating depreciation expense in accordance with the revised Corporate Tax Code of Japan. Also, in the year ended March 31, 2008, the Domestic Companies changed the depreciation method 54 MAZDA ANNUAl REPORT 2009

  • Page 57
    ...' retirement benefits in an amount calculated based on the internal corporate policy. Commencing in the year ended March 31, 2008, the Company reached a decision to terminate retirement benefits to directors and corporate auditors. Refer to Note 3 for more details. MAZDA ANNUAl REPORT 2009 55

  • Page 58
    ... paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed. Amounts per share of common stock The computations of net income or loss per share of common stock are based on the average number...

  • Page 59
    ...from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section In addition, adjustments for the following six items specified in PITF No. 18 from IFRS or U.S. GAAP to Japanese GAAP should be made as necessary in the consolidation process...

  • Page 60
    ..., CCA's financial statements do not reflect such adjustments. In the consolidated statement of operations for the year ended March 31, 2008, the effects of adopting the new standard on operating income was none and those on income before income taxes were immaterial. 58 MAZDA ANNUAl REPORT 2009

  • Page 61
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Additional Information Change in estimated useful lives of property, plant and equipment As the Corporate Tax Code of Japan was revised on April 30, 2008 to ...

  • Page 62
    ... amounted to ¥28,262 million ($288,388 thousand). In the consolidated statement of operations for the year ended March 31, 2008, a total impairment loss of ¥2,196 million was recognized, which primarily consisted of impairment on idle assets by the Domestic Companies. 60 MAZDA ANNUAl REPORT 2009

  • Page 63
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section 8. SHORT-TERM dEBT ANd LONG-TERM dEBT Short-term debt as of March 31, 2009 and 2008 consisted of loans, principally from banks with interest averaging 1.50% and 1.60...

  • Page 64
    ... equally to each service year using the estimated number of total service years. For the years ended March 31, 2009 and 2008, accrued pension cost related to defined contribution plans amounted to ¥2,079 million ($21,214 thousand) and ¥2,226 million, respectively. 62 MAZDA ANNUAl REPORT 2009

  • Page 65
    ... paid for new shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus. Under the Corporate...

  • Page 66
    ... with the applicable provisions of Japanese GAAP. For the year ended March 31 2008 Statutory tax rate Equity in net income of affiliated companies Valuation allowances Prior year income taxes Tax credit Other Effective tax rate 40.4% (2.4) (1.7) 2.1 (3.3) 0.2 35.3% 64 MAZDA ANNUAl REPORT 2009

  • Page 67
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section Deferred tax assets and liabilities reflect the estimated tax effects of loss carryforwards and accumulated temporary differences between assets and liabilities for ...

  • Page 68
    ...financial officer. Derivative contracts are concluded under the directions of the Company's Financial Services Division in accordance with the established rules of the Company. Derivative transactions are executed and the balances are managed by each individual company; the president of each company...

  • Page 69
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section 16. LEASES As discussed in Note 3, commencing in the year ended March 31, 2008, the Domestic Companies early adopted the new accounting standard for leases to ...

  • Page 70
    ... to Consolidated Financial Statements Thousands of U.S. dollars For the year ended March 31, 2009 Japan North America Europe Other areas Total Elimination or corporate Consolidated Net sales: Outside customers Inter-area Total Costs and expenses Operating (loss)/income Total identifiable assets...

  • Page 71
    Messages from Management Review of Operations Mazda's Environmental and Safety Technology Corporate Information Financial Section For the year ended March 31, 2009 North America Thousands of U.S. dollars Europe Other areas Total International sales $7,118,367 $6,667,163 $5,761,062 $19,...

  • Page 72
    ... statements and other financial information included in the company's annual report for the year ended March 31, 2009 are presented fairly, in all material respects, in conformity with the generally accepted accounting principles in Japan. President and Chief Executive Officer Senior Managing...

  • Page 73
    ... solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements. Hiroshima, Japan June 24, 2009 MAZDA ANNUAl REPORT 2009 71

  • Page 74
    ..., Australia Phone: +61 (3) 8540-1800 Fax: +61 (3) 8540-1920 Directory (As of March 31, 2009) RESEARCH ANd dEvELOPMENT SITES Hiroshima Head Office, Mazda R&D Center (Yokohama), Mazda Motor of America (U.S.), Mazda Motor Europe (Germany), China Engineering Support Center MANuFACTuRING SITES Japan...

  • Page 75
    ...Foreign institutions and others 30.7% 435,555,321 shares Japanese financial institutions 34.3% 486,407,445 shares Nippon Life Insurance Company Japan Trustee Services Bank, Ltd. (Trust Acount 4) Notes: 1. Mazda Motor Corporation owns treasury stock of 106,920,914 shares, but it is not shown in the...

  • Page 76
    Mazda Motor Corporation New Mazda3 (Japanese name: Mazda Axela), European model This report was produced from soy ink. Printed in Japan