Will Ford be forced to sell Mazda?

Some analysts fear the ailing U.S. automaker may be forced to raise funds by unloading its interest in its much healthier Japanese partner. Just a week after Ford's (F) disastrous quarterly earnings announcement on July 24, (BusinessWeek.com, 7/24/2008), Mazda (MZDAF), the Japanese company one-third owned by the ailing U.S. automaker, on July 31 once again highlighted how much better it is faring than its larger partner.

In a tough environment for all automakers, Mazda's operating earnings slid an expected 12%, to $265 million, but that was largely explained by a sharply stronger yen. Perhaps more important, the company said it still expects net earnings of $750 million during the current financial year. Despite weaker U.S. sales in July, Mazda plans to sell 1.48 million cars this year, up 9% from 2007.

The Japanese carmaker's prospects for the second half of 2008 also look relatively bright. On July 23, it began production at AutoAlliance International in Flat Rock, Mich. of a fully remodeled version of the popular Mazda6 sedan. In January, the company will launch a new version of the Mazda3 hatchback, its global best-seller. In North America, despite a weak July—news of which triggered an 8.8% slump in Mazda's stock in today's Tokyo trading—Mazda's sales are down just 1.7% during the first seven months of the year.

Casting a Shadow over Mazda
That contrasts starkly with the grim news from Ford, which has scrapped a plan to return to profitability by 2009 and now has a market value of $10.4 billion—just $2.4 billion more than Mazda. Ford's year-to-date sales are 1.265 million, down 14.4% from a year ago.