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Mazda Motor Corporation Annual Report 2010

Annual Report 2010
Year ended March 31, 2010
Gearing Up, Going Forward





Table of contents

  • Page 1
    Annual Report 2010 Year ended March 31, 2010 Ge ng i ar , p U G ng i o F d r a w or

  • Page 2
    ... the Company's investment and financial strategy going forward. 15 24 24 26 27 28 29 30 31 Special Feature: FOR INCREaSEd CORPORatE valuE Framework for Medium- and Long-Term Initiatives-5 Pillars Review of Operations At a Glance Japan North America europe China other Markets Major Product lineup...

  • Page 3
    ... spirit. We positively support environmental matters, safety and society. Guided by these values, we provide superior rewards to all people associated with Mazda. Mazda marked the 90th anniversary of its founding in January 2010. during the past 90 years, the Company has faced various changes and...

  • Page 4
    ... 2009 2010 Thousands of U.S. dollars*1 2010 For the year: Net sales Operating income (loss) Income (loss) before income taxes Net income (loss) Capital expenditures Depreciation and amortization*2 Research and development costs Free cash flow* At the year-end: Total assets Equity*4 Financial...

  • Page 5
    ...\og\e[`kli\j& ;\gi\Z`Xk`feXe[Xdfik`qXk`fe :Xg`kXc\og\e[`kli\j9`cc`fejf]p\e ;\gi\Z`Xk`feXe[Xdfik`qXk`fe9`cc`fejf]p\e IF<  ...)''- )''. )''/ )''0 )'(' 8jf]DXiZ_*( )''- )''. )''/ )''0 )'(' 8jf]DXiZ_*( )''- )''. )''/ )''0 )'(' P\Xij\e[\[DXiZ_*( MAZDA ANNuAl RePoRT 2010 3

  • Page 6
    global Network Fiscal years ending March 31 Graphs on the map are unit sales by market (...Japan North America Europe China Other markets 18.5% 25.7% 20.0% 16.5% 19.3% )''- )''. )''/ )''0 )'(' )''- )''. )''/ )''0 )'(' P\Xij\e[\[DXiZ_*( P\Xij\e[\[DXiZ_*( 4 MAZDA ANNuAl RePoRT 2010

  • Page 7
    ... America Europe 887.7 844.0 668.9 519.2 2,919.8 887.3 1,017.9 789.1 553.2 3,247.5 880.1 1,015.3 888.6 691.8 3,475.8 620.3 697.6 653.4 564.6 2,535.9 575.0 574.6 477.3 537.0 2,163.9 Japan North America Europe Other markets 26.6% 26.5% 22.1% 24.8% Other markets Total MAZDA ANNuAl RePoRT 2010...

  • Page 8
    ... not only to our customers, which goes without saying, but also to business partners, communities, and all stakeholders who have supported Mazda's growth and development. Overview of March 2010 Fiscal Year outside stable emerging markets including the Chinese market, automotive demand during the...

  • Page 9
    ... increase via public offering and the sale of treasury stock shares was also carried out in the fall of 2009. This created a structure to proactively invest in eco-friendly and safety-related technologies, and at the same time strengthened the company's financial structure. MAZDA ANNuAl RePoRT 2010...

  • Page 10
    ... to develop nextgeneration products and environmental technologies, while at the same time returning to a growth track with the aim of increasing sales. We are forecasting a 6% increase in global sales, to 1.27 million units. We will work to increase or maintain 8 MAZDA ANNuAl RePoRT 2010

  • Page 11
    ... introduction of new models and aggressive sales promotion activities. In terms of products, in addition to the global launch of the new Mazda5 (Japanese name: Mazda Premacy), the Mazda2 (Japanese name: Mazda Demio) will be released in North America and the Mazda8 (Japanese name: Mazda MPV) in China...

  • Page 12
    ... both companies can benefit, and to further develop a mutually complimentary relationship. Returns to Shareholders and Increasing Corporate Value Returns to shareholders are one of Mazda's most important management policies. The full-year dividend for the March 2010 fiscal year was ¥3 per share...

  • Page 13
    ... the right direction by providing Zoom-Zoom cars. March 2009 fiscal year 28.4 Volume & Mix KfkXc:fjk @dgifm\d\ekj ¥(.,%'Y`cc`fe Marketing Expenses +22.7 Others +84.3 March 2010 fiscal year 9.5 Foreign Variable Exchange Costs +68.0 60.6 Fixed Costs +107.0 76.5 MAZDA ANNuAl RePoRT 2010 11

  • Page 14
    ...strengthen Mazda's financial structure? In addition to extensive cost improvements, funds procured through a capital increase strengthened the financial structure. offering and the sales of treasury stock shares in November 2009. As a result, the equity ratio at the end of the March 2010 fiscal year...

  • Page 15
    ... production in highly competitive countries. In addition to our joint-venture plant with Changan Automotive Group and Ford in China, a new joint plant with Ford answer Mazda's high export ratio means that we have a high sensitivity to changes in foreign exchange rates, but we are not addressing...

  • Page 16
    ... the March 2011 fiscal year, with operating income of ¥30.0 billion. We are aiming for profitability in all profit categories through ongoing efforts to improve earnings. We are also aiming for continued positive free cash flow. We are forecasting sales growth on an increase in global sales volume...

  • Page 17
    ... Strategy Expanding and reinforcing production and sales structures in emerging markets in which Mazda has already established a presence Pursuing further synergies Brand value Monotsukuri Innovation Environmental and Safety technologies Emerging Markets Ford Synergies MAZDA ANNuAl RePoRT 2010...

  • Page 18
    ... drive of Mazda vehicles. Mazda is also increasing the number of main dealers in Germany, and we are working to build optimal sales networks in all european markets. Strengthening Brand loyalty Programs are being formulated and put in place to enhance customer loyalty toward the Mazda brand and...

  • Page 19
    ... the area of development, integrated planning is used to achieve common architectures for platform, parts, and systems, which are also designed in line with production lines, to shorten development cycles, make investment more efficient, develop competitive parts and technologies, and provide stable...

  • Page 20
    ...-generation powertrains (a car's engine and transmission), which Basic Policy Provide all customers who purchase Mazda cars with the joy of driving and excellent environmental and safety performance. Mazda announced its "Sustainable Zoom-Zoom" long-term vision for technology development in March...

  • Page 21
    ... Japan and the 2009 Technology Innovation of the Year award by the magazine Car*, one of South Africa's leading automotive magazines. In 2010, i-stop was included in certain grades of the all new Mazda Premacy that was released in Japan in July. * South Africa's largest automotive magazine in terms...

  • Page 22
    Special Feature: FOR INCREASED CORPORATE VALUE Framework for Medium- and Long-Term Initiatives-Five Pillars development of hydrogen Rotary Engine vehicles Currently, Mazda has incorporated hydrogen rotary in two models. The Mazda RX-8 Hydrogen Re is being leased in Japan and Norway and the Mazda ...

  • Page 23
    ... increasingly used in new cars. • In March 2009, developed automated technology covering all stages of recycling old bumpers, from pulverizing through to the manufacture of recycled materials. Aqua-tech paint (water-based painting technology) Reduce VoC emissions by 57% MAZDA ANNuAl RePoRT 2010...

  • Page 24
    ... improvement in paint quality while also greatly reducing emissions of volatile organic compounds (VoCs) and Co2. This new plant is an important production center in terms of Mazda's global strategy, and is seen as supporting further business growth in ASeAN markets. 22 MAZDA ANNuAl RePoRT 2010

  • Page 25
    ... engineering Support Center FAW Mazda Motor Sales Changan Ford Mazda Automobile Mazda Sales (Thailand) PT. Mazda Motor Indonesia Mazda Australia Mazda Motors of New Zealand Shanghai Beijing Bangkok Headquarters for the Chinese market Branch Headquarters for the ASeAN markets Technology and market...

  • Page 26
    ... D`cc`fejf]le`kj Japan Sales for the year Market share K_fljXe[jf]le`kj 261 256 219 221 210 5.6 5.3 4.7 4.9 221,000 units 4.5% 0 )'(' Flkcffb )'( ( )''. )''/ )''0 )'(' P\Xij\e[\[DXiZ_*( P\Xij\e[\[DXiZ_*( North America Sales for the year K_fljXe[jf]le`kj D`cc...

  • Page 27
    ... fourth quarter saw 28% year-on-year growth. Record high sales volume in Australia on 3% growth. Highest market share in 10 years in New Zealand. 76% growth in Thailand, for second-highest sales year. Planning for 7% growth in March 2011 fiscal year, to 246,000 units. MAZDA ANNuAl RePoRT 2010 25

  • Page 28
    ... of special edition models. In terms of products, the new Mazda Premacy, launched in July 2010, has strong customer appeal and is being positioned as a pillar of our sales plan, along with building the Mazda brand as a product that embodies Sustainable Zoom-Zoom. We will also work to increase sales...

  • Page 29
    ... strength of the Mazda brand and our products in the market, and are planning for 18% growth, to 22,000 units. In addition to the strong-selling Mazda3, Mazda6, Mazda CX-7, and Mazda CX-9, we will work to develop a new customer base and increase sales by introducing the Mazda2 to the market. We are...

  • Page 30
    ... in market share, to 1.8%. In terms of sales, we continued to promote a shift to directly operated distributors. The portion of sales volume by these distributors for all of europe grew to roughly 90% in the March 2010 fiscal year. In addition, efforts to reduce incentives and improve residual value...

  • Page 31
    ... of the product lineup, brand building, and an expanded sales network. In addition to increased product recognition for the Mazda2 and Mazda3, sales promotion activities took advantage of automobile acquisition tax reductions. A new model of the Mazda6 was introduced in June 2009 while sales of the...

  • Page 32
    ... market share also rose 1.1 percentage points, to a record 3.0%. Advertising activities were successful in spurring presale demand, and the Mazda2 produced by AAT contributed to increased sales. We are forecasting marginal market growth in the March 2011 fiscal year, but our plan for Mazda's sales...

  • Page 33
    ... (Japanese name: Mazda MPV) Global sales volume 8,000 Sales markets â- â- Sales market: â- Japan â- North America â- europe â- China â- other * 1 . Global sales volume is for the March 2010 fiscal year, sales markets are as of March 31, 2010. *2. Model tailored to the North American market...

  • Page 34
    ... and their opinions are reflected in the Company's management. Management audit Function Mazda's Board of Corporate Auditors has five members, including three external corporate auditors who have no business relationships or other interests with Mazda, and audits the directors in the performance of...

  • Page 35
    ..., internal auditing departments that are independent of business divisions are established at main centers in light of sales in North America, europe, Australia, and South America. These departments work in close cooperation with the head office to carry out audits including evaluations of internal...

  • Page 36
    ... 2007, the scope of the office was expanded to include domestic and overseas Group companies, and it was renamed the Mazda Global Hotline as a contact point for receiving information. The Mazda Corporate ethics Code of Conduct states that "Persons who report incidences of violation of the law...

  • Page 37
    ... policies and designate priority issues Report on progress in addressing issues Structure in each department • each department: Set operational targets and plans for medium and long term, and for each fiscal year. CSR Strategy Core Team • Meetings: As required • Members: Working members...

  • Page 38
    ...Hiroshima Plant General Manager, Production engineering Div. In charge of Product Planning and Powertrain Development Assistant to the oversight of Global Sales; In charge of Global Marketing General Manager, Corporate Planning Div. General Manager, R&D liaison office General Manager, Product Profit...

  • Page 39
    ... Financial Position Business Risks 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 2010...

  • Page 40
    ... Financial Statements Mazda Motor Corporation and Consolidated Subsidiaries Years ended March 31 2010 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 income (loss) Income (loss...

  • Page 41
    ... dollars*1 ¥ 37.63 3.00 220.22 % ¥ 27.84 2.00 182.91 ¥ 19.80 2.00 159.22 ¥ 7.23 2.00 ¥(126.99) - 129.96 ¥ 21.39 2.00 200.98 $(0.05) 0.03 3.09 141.52 3.1% 18.7% 15.1% 2.4% 16.3% 12.4% 2.1% 13.2% 11.1% 1.4% 5.3% 10.0% (0.7)% (76.7)% 9.1 % 1.2% 8.4% 16.7% MAZDA ANNuAl RePoRT 2010...

  • Page 42
    ...%, a major 55 percentage point improvement from the previous fiscal year-end. Going forward, we will secure long-term, stable funds while working to strengthen the financial base using profits to bolster equity and positive cash flow to reduce net interest-bearing debt. 40 MAZDA ANNuAl RePoRT 2010

  • Page 43
    ... second quarter as earnings showed a steady recovery. In terms of sales volumes for the year in major markets, a 1% increase year-over-year, to 221,000 units, was recorded in Japan from the introduction of the new Mazda Axela, despite a decline in sales of existing models. North American sales were...

  • Page 44
    ... lower prices for materials, and fixed costs were reduced by ¥107.0 billion, mainly through increased efficiency in advertising spending. In terms of sales volume and product mix, the decline in demand in major markets depressed first-half sales volumes, having a major negative impact on operating...

  • Page 45
    ... companies. Mazda is the world's first automobile manufacturer to lease hydrogen hybrid vehicles. In addition, an agreement was concluded on the supply under license of hybrid system technology with Toyota Motor Corporation in March 2010. Mazda aims to develop, manufacture, and by 2013 sell in Japan...

  • Page 46
    ...from the issue of new shares and re-issuance of treasury stock shares in addition to funds procured via long-term borrowings. (Cash Flow from Operating Activities) Operating activities during the year generated net cash in the amount of ¥111.6 billion. The loss before income taxes was ¥7.3 billion...

  • Page 47
    ...of Mazda's total shares outstanding. Nevertheless, there has been no change in the strategic relationship between the two companies; Ford remains Mazda's largest shareholder and the two companies continue to operate joint businesses and use common platforms and powertrains. MAZDA ANNuAl RePoRT 2010...

  • Page 48
    ... to address or respond to changes in customers' sense of value through its dealership network or sales methods. 2. Exchange Rates, Especially the Dollar-Yen and Euro-Yen Rates The Mazda Group exports products from Japan to the rest of the world and consequently its business results and financial...

  • Page 49
    ... could adversely affect the Mazda Group's business results and financial position. 8. Protection of Intellectual Property In order to maintain competitiveness, the Mazda Group is working to accumulate and protect its technologies and expertise that help it to develop unique products. At the same...

  • Page 50
    Consolidated Balance Sheets Mazda Motor Corporation and Consolidated Subsidiaries March 31, 2010 and 2009 Millions of yen ASSETS 2010 2009 Thousands of U.S. dollars (Note 1) 2010 Current assets: Cash and cash equivalents Short-term investments Trade notes and accounts receivable Inventories (Note...

  • Page 51
    ... 2009 Thousands of U.S. dollars (Note 1) 2010 Current liabilities: Short-term debt (Note 9) Long-term debt due within one year (Note 9) Trade notes and accounts payable Accrued expenses Reserve for warranty expenses Other current liabilities Total current liabilities Long-term liabilities: Long...

  • Page 52
    Consolidated Statements of Operations Mazda Motor Corporation and Consolidated Subsidiaries Years ended March 31, 2010 and 2009 Millions of yen 2010 2009 Thousands of U.S. dollars (Note 1) 2010 Net sales Cost and expenses: Cost of sales Selling, general and administrative expenses ¥2,163,949...

  • Page 53
    ... in accounting policies applied to foreign subsidiaries on the beginning balance of retained earnings - Treasury stock - Net loss Cash dividends paid Land revaluation Adjustments for prior year deferred taxes by a foreign subsidiary Net unrealized loss on available-for-sale securities Net loss on...

  • Page 54
    ... Increase/(decrease) in trade notes and accounts payable Decrease in other current liabilities Other Subtotal Interest and dividends received Interest paid Income taxes paid Net cash provided by/(used in) operating activities Cash flows from investing activities: Purchase of short-term investments...

  • Page 55
    ...BaSIS OF PRESENtINg CONSOlIdatEd FINaNCIal StatEMENtS The accompanying consolidated financial statements of Mazda Motor Corporation (the "Company") and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law of Japan...

  • Page 56
    ... Code of Japan. In the year ended March 31, 2009, the Domestic 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. Refer to Note 3 for more details. 54 MAZDA ANNuAl RePoRT 2010

  • Page 57
    ... equivalent to the provisions of the Corporate Tax Code of Japan. Software for internal use is amortized on a straight-line basis over the period of internal use, i.e., 5 years. Leased property Finance leases are capitalized in the balance sheet. Depreciation or amortization expense is recognized...

  • Page 58
    .... For the years ended March 31, 2010 and 2009, research and development costs were ¥85,206 million ($916,194 thousand) and ¥95,967 million, respectively. Derivatives and hedge accounting Derivative financial instruments are mainly stated at fair value, and changes in the fair value are recognized...

  • Page 59
    ...ended March 31, 2009 were to increase operating loss and loss before income taxes each by ¥2,461 million. Also, the effects of adopting the new standard on segment information are discussed in the applicable section of the notes to the consolidated financial statements. MAZDA ANNuAl RePoRT 2010 57

  • Page 60
    ... net position. Short-term investments consist mainly of certificate of deposits and other highly-liquid short-term investments. Investment securities consist mainly of stocks of our business partner companies and are subject to the risk of market price fluctuations and other factors. Long-term loans...

  • Page 61
    ... counterparty risk. For both short-term investments and derivatives, the credit risks of counterparty financial institutions are reviewed on a quarterly basis. Management of market risks (i.e., risks associated to fluctuations in foreign exchange rates and interest rates) The Company and some of its...

  • Page 62
    ... of U.S. dollars Carrying Fair Difference values values Assets 1) Trade notes and accounts receivable Allowance for doubtful receivables (*1) Trade notes and accounts receivable, net 2) Short-term investments and investment securities Available-for-sale securities 3) Long-term loans receivable...

  • Page 63
    ... years 10 years Over 10 years Within 1 year Thousands of U.S. dollars Over 1 year, Over 5 years, within within 5 years 10 years Over 10 years Trade notes and accounts receivable Short-term investments and investment securities Available-for-sale securities with maturities Long-term loans receivable...

  • Page 64
    ... Financial Statements 5 SECuRItIES The Company and its consolidated subsidiaries had no trading or held-to-maturity debt securities at March 31, 2010 and 2009. Available-for-sale securities as of March 31, 2010 and 2009 were as follows: Acquisition costs Millions of yen Carrying values...

  • Page 65
    ... in the consolidated statement of operations for the years ended March 31, 2010 and 2009 amounted to ¥2,495 million ($26,828 thousand) and ¥28,262 million, respectively. 9 ShORt-tERM dEBt aNd lONg-tERM dEBt Short-term debt as of March 31, 2010 and 2009 consisted of loans, principally from banks...

  • Page 66
    ... on the non-consolidated financial statements of the Company in accordance with the Law. Cash dividends charged to retained earnings during the fiscal year were year-end cash dividends for the preceding fiscal year and interim cash dividends for the current fiscal year. 64 MAZDA ANNuAl RePoRT 2010

  • Page 67
    ... yen 2009 Thousands of U.S. dollars 2010 As of March 31 2010 Deferred tax assets: Allowance for doubtful receivables Employees' severance and retirement benefits Loss on impairment of long-lived assets Accrued bonuses and other reserves Inventory valuation Valuation loss on investment securities...

  • Page 68
    ... Statements The net deferred tax assets are included in the following accounts in the consolidated balance sheet: Millions of yen 2009 Thousands of U.S. dollars 2010 As of March 31 2010 Current assets-Deferred taxes Investments and other assets-Deferred taxes Current liabilities-Other Other long...

  • Page 69
    ..."Financial Instruments." (*3) The fair value of these forward foreign exchange contracts are based on prevailing forward exchange rates at the year-end date. This information is not provided as of March 31, 2009 in accordance with applicable provisions of Japanese GAAP. MAZDA ANNuAl RePoRT 2010 67

  • Page 70
    ... sales, operating income/(loss), and identifiable assets by geographic area for the years ended March 31, 2010 and 2009 were as follows: Millions of yen For the year ended March 31, 2010 Japan North America Europe Other areas Total Elimination or corporate Consolidated Net sales: Outside customers...

  • Page 71
    ... revised Corporate Tax Code of Japan. The effect of this change on the Japan segment for the year ended March 31, 2009 was to increase operating loss by ¥2,325 million. International sales for the years ended March 31, 2010 and 2009 were as follows: For the year ended March 31, 2010 North America...

  • Page 72
    ... are accounted for as sale of receivables. The balance of short-term debt in the consolidated balance sheet as of March 31, 2009 was ¥5,472 million. 19 SuPPlEMENtaRy CaSh FlOw INFORMatION Assets and liabilities related to finance lease transactions that were newly recognized in the year ended...

  • Page 73
    ... the financial statements and other financial information included in the company's annual report for the year ended March 31, 2010 are presented fairly, in all material respects, in conformity with the generally accepted accounting principles in Japan. President and Chief Executive Officer Senior...

  • Page 74
    ...' Report To the Board of Directors of Mazda Motor Corporation We have audited the accompanying consolidated balance sheet of Mazda Motor Corporation and consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated statement of operations, equity and cash flows for the years...

  • Page 75
    ... 31, 2010) RESEaRCh aNd dEvElOPMENt SItES Hiroshima Head Office, Mazda R&D Center (Yokohama), Mazda North American Operations (U.S.), Mazda Motor Europe (Germany), China Engineering Support Center MaNuFaCtuRINg SItES Japan Hiroshima Plant (Head Office, Ujina), Hofu Plant (Nishinoura, Nakanoseki...

  • Page 76
    ... thousand shares Japanese securities companies 1.6% 28,744 thousand shares Japanese government and municipal corporations 0.0% 21 thousand shares MaJOR ShaREhOldERS Shareholder No. of Shares Owned (Thousands) Ratio (%) Ford Motor Company The Chase Manhattan Bank 385036 Japan Trustee Services Bank...

  • Page 77
    ... presentation materials, streaming video, financial results, and annual reports. Investor Relations Internet Site http://www.mazda.com/investors/ Sustainability Report 2010 Mazda issues a sustainability report recognizing that information disclosure of the corporate social responsibility (CSR) is...

  • Page 78
    Mazda Motor Corporation This report was produced from soy ink. Printed in Japan New Mazda5 (Japanese name: Mazda Premacy)