October 14, 2008 / 10:37 AM / 11 years ago

Analysts see Mazda silver lining if Ford sells stake

TOKYO (Reuters) - Ford Motor’s (F.N) potential sale of its stake in Mazda Motor (7261.T) could work in the Japanese carmaker’s favor as it may lead to greater strategic freedom and a tie-up with financially sound investors, analysts said.

Mazda Motor Corp's Mazdaspeed Axela concept model is displayed at the Tokyo Auto Salon 2007 in Chiba, east of Tokyo January 12, 2007. REUTERS/Yuriko Nakao

Burdened by debt and hobbled by an economic slowdown and the credit crunch, Ford saw its shares touch a 26-year-low last week. The U.S. company owns 33.4 percent of Mazda, and is considering selling a 20 percent stake, part of which may be bought back by Mazda itself, media reported.

JPMorgan analyst Takaki Nakanishi said even if Ford sells the stake, Mazda could continue to benefit from business ties with the U.S. automaker while enjoying greater freedom in choosing partners and developing new products.

“The synergy between the two companies is very significant, but we think they can produce this synergy without the management control inherent in its parent-subsidiary relationship,” Nakanishi said in a research note dated Tuesday.

Ford and Mazda jointly run factories in the United States, Thailand and China and have developed some models together.

On Tuesday, the first trading day since news broke that Ford could sell the stake, shares in Mazda closed up 9 percent at 314 yen on Tuesday, riding on the back of a broad stock rally but underperforming other automakers.

Toyota Motor Corp (7203.T) shot up 15.5 percent to 3,720 yen and Honda Motor Co Ltd (7267.T) surged 17.8 percent to 2,485 yen in a broad-based rally.

Mazda’s comparatively subdued share price rise reflected some concern about a possible oversupply of shares.

But Credit Suisse analyst Koji Endo believes the long-term impact of a sale would be positive. Sumitomo Mitsui Financial Group (8316.T), Mazda’s main bank, would probably be able to find new shareholders with a more secure financial footing than Ford, he said.

Ford, which posted a $2.7 billion net loss in the second quarter, went to capital markets to raise more than $23 billion in late 2006. Worries that the global financial crisis could derail turnaround plans have grown along with the credit turmoil.

Ford Chief Executive Alan Mulally on Friday ruled out seeking bankruptcy protection. He said the No. 2 U.S. automaker was focused on its turnaround and managing its cash very carefully as the slowdown in the United States spreads to Europe and Asia.

Analyst Endo said Japanese trading houses such as Sumitomo Corp (8053.T), Itochu Corp (8001.T) and Marubeni Corp (8002.T) were likely to be interested in Mazda.

“Major Japanese trading houses count on automobile businesses as their growth driver,” Endo said.

Mazda said in a statement on Saturday no specific decision had been made. Ford also said it had nothing to announce and did not want to comment on speculation.

A spokesman for Sumitomo said the company has received no offer from Ford or Mazda and declined to comment further, while an Itochu spokesman said he could not comment on the matter.

A Marubeni spokesman said the trading house is not considering taking a stake in Mazda.

JPMorgan’s Nakanishi said that investors should not expect a substantial share buyback by Mazda in the event of a stake sale by Ford.

“Mazda is relatively weaker financially ... and we think this would make it difficult for Mazda to buy back a large amount of its shares,” Nakanishi said.

Reporting by Kiyoshi Takenaka, Yumiko Nishitani

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