Mazda to seek aid after bond market difficulties

BLOOMBERG

Wed, Mar 18, 2009 - Page 10

Mazda Motor Corp, burdened with the second-worst credit rating among Japan’s carmakers and a 62 percent surge in short-term borrowing this fiscal year, plans to apply for government aid as it consumes cash.

“We can’t sell bonds right now,” said Nobuyoshi Tochio, general manager of Mazda’s financial services division. “The market isn’t functioning. Conditions are really bad.”

Mazda, Japan’s second-largest car exporter, used ¥174 billion (US$1.8 billion) in cash last quarter as sales of Mazda6 sedans plunged in the US and Europe.

The Hiroshima-based company may turn to the government for low-interest loans as its junk rating prevents it from following Toyota Motor Corp in tapping capital markets.

Mazda’s short-term borrowings, including leases, loans and bonds due this year, surged to ¥221 billion in the nine months ended December, exceeding the company’s untapped ¥200 billion credit line. The carmaker expects a ¥13 billion loss for the year ending this month and analysts forecast the loss will almost triple to ¥37.5 billion next fiscal year.

The company may apply to the Japan Bank for International Cooperation and Development Bank of Japan, both government-owned, for loans to bolster its cash position, Mazda’s Tochio said in an interview on Friday in Tokyo.

Mazda slashed production by at least 221,000 vehicles in the second half of the fiscal year, slowing down the rate it was burning cash.

“We’re adjusting inventory in the fourth quarter,” chief financial officer Kiyoshi Ozaki wrote in an e-mailed response to questions. “We’re aiming to have our cash flow at least break even this quarter.”

The company does not plan to use its ¥200 billion credit line in the fiscal year ending this month as it has enough cash, Ozaki said.

Mazda also added to its debt after it bought back 6.9 percent of its own shares from Ford Motor Co last year. Ford relinquished control over the smaller company, forcing it to do more development by itself.