UPDATE 4-Weaker ties with Ford seen as boon, risk for Mazda

* Further break from Ford seen as positive - analyst

* Sumitomo Mitsui bank head: may buy Mazda stake by yr-end

* Focus is on if/when Mazda will form new capital alliance

* No rush for Mazda to find new partner - analyst

* Mazda shares end down 0.9 pct (Updates Ford share performance, adds background)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Oct 18 (Reuters) - Mazda Motor Corp 7261.T may gain a freer hand to make decisions if Ford Motor Co F.N cuts its ownership share, though the Japanese automaker may want to seek another partner eventually.

Ford, once the controlling shareholder in Mazda, plans to sell most of its remaining 11 percent stake in Mazda, a source with knowledge of the matter told Reuters on Saturday. Trading house Sumitomo Corp 8053.T and other Japanese business partners of Mazda were in talks to buy the shares, the source said.

Sumitomo Mitsui Banking Corp, the core unit of Sumitomo Mitsui Financial Group Inc 8316.T, was considering a purchase of part of Ford's Mazda stake by year's end, President Masayuki Oku said.

Oku told reporters Ford was not planning to sell its Mazda stake because it needed cash, as some media reported, but for other reasons that could not be disclosed.

“If we become Mazda’s top shareholder, the operational and psychological relationship between Ford and Mazda will not change,” Oku said.

He also said the bank did not intend to sell any stake it buys in Mazda to other automakers.

Ford said in a statement that it continued to work with Mazda in areas of mutual interest and offered no comment on what it called “speculation” about its Mazda holdings.

Mazda made a similar statement.

Sources said Ford was looking to sell its Mazda stake to gain more freedom for its Chinese operations. Ford, Mazda and Chongqing Changan Automobile Co Ltd 000625.SZ are seeking Chinese government approval to split their three-way partnership into two, with Ford and Mazda each partnering with Changan separately.

“It sounds like Ford decided to cut its ties with Mazda, and it would rather nurture its Chinese venture businesses,” said Fumiyuki Nakanishi, a manager at SMBC Friend Securities.

IHS Automotive analyst Aaron Bragman said on Monday it would not be a surprise if Ford distances itself from Mazda, given its plan to work on small-vehicle development in-house.

“Mazda needs Ford a lot more than Ford needs Mazda,” Bragman said.

“They (Ford management) will focus more on Ford than in the partnerships they have. They have the resources, they have the people to do it without an outside partner.”

JP Morgan Securities analyst Kohei Takahashi said he viewed a further break of Mazda from Ford as positive for Mazda.

“Mazda has indicated that it wants to expand sales of its ‘SKY’ series of next-generation powertrains in the future, and we believe that achieving greater capital independence would help Mazda expand its business with companies outside the Ford group,” he wrote in a note to clients.

Shares of Mazda ended down 0.9 percent at 212 yen on Monday after falling almost 5 percent earlier. Ford’s shares rose 0.6 percent to $13.88 on Monday on the New York Stock Exchange.

Ford, the largest single shareholder in Mazda, has 195 million shares valued at about $510 million.

Ford bought a 25-percent stake in Mazda in 1979 and in 1996 increased that share to 33 percent.

Ford reduced its stake in late 2008 to 13 percent, raising cash as insurance against the severe U.S. economic downturn and continuing its plan to focus on overhauling the Ford brand.

Its stake was later reduced to 11 percent when Mazda issued more shares to raise cash for investing in hybrid and other technologies.


With Ford’s equity participation heading lower, the next big question would be whether -- or how long -- Mazda will hold out on its own as a smaller but technologically savvy maker of sporty cars without a major capital alliance.

“Ultimately this could mean that at some point Mazda finds itself aligned with someone else,” CLSA Asia-Pacific Markets auto analyst Christopher Richter said.

There is no shortage of emerging Asian automakers harboring big global ambitions ranging from Changan Auto to India's Mahindra & Mahindra Ltd MAHM.BO, which will soon take over South Korea's Ssangyong Motor Co 003620.KS.

Analysts said, however, that Mazda would likely prefer to stay independent. Mazda officials have privately lamented the lack of flexibility in the past even under Ford’s control.

“They’re not desperate, so (a new grouping) doesn’t have to happen tomorrow or even next year,” Richter said.

Mazda has forecast a net profit of 5 billion yen ($61.4 million) for the year to March 31, 2011, but faces worsening conditions under the yen’s rise. Mazda, which builds most of its cars in Japan, is especially vulnerable to a strong yen.


The partnership with Mazda helped Ford supply competitive small- and mid-size car platforms at a time when the No. 2 U.S. automaker relied heavily on its pickup truck franchise.

Last month, Ford’s global manufacturing and labor affairs chief, John Fleming, said the tie-up with Mazda produces two to three shared manufacturing opportunities a year.

Mazda and Ford are partners in a Thailand plant that will build a new compact pickup truck starting in mid-2011. Three months ago, Ford and Mazda opened a $500 million plant in Thailand to build Ford Fiesta and Mazda2 passenger cars.

Mazda aims to improve the fuel economy on its cars by 30 percent by 2015, compared with 2008 levels through a new generation of gasoline and diesel engines and transmissions.

The long-time partners have many intertwined operations, but have been growing apart. In a recent sign of the distance, Mazda in March turned to Toyota Motor Corp 7203.T for help in developing its first hybrid car. [ID:nTOE62SO5N]

In separate statements, Ford and Mazda said their alliance was intact and the stake sale report was speculation. Mazda CEO Takashi Yamanouchi will address the media on Wednesday about the company’s next-generation technology. ($1=81.2 Yen) (Additional reporting by Daiki Iga, Aiko Hayashi and Taiga Uranaka in Tokyo and Bernie Woodall in Detroit; editing by Joseph Radford, Andre Grenon and Carol Bishopric)