Toyota and Mazda enter business and capital alliance; $1.6B plant in US, joint development for electric, connected vehicle tech
Toyota Motor Corporation (Toyota) and Mazda Motor Corporation (Mazda) signed an agreement to enter a business and capital alliance, with the aim of further strengthening their partnership. The companies agreed to: 1) establish a joint venture that produces vehicles in the United States; 2) jointly develop technologies for electric vehicles; 3) jointly develop connected-car technology; 4) collaborate on advanced safety technologies; and 5) expand complementary products.
In addition, together with the aim of advancing and strengthening their long-term collaboration, Toyota and Mazda agreed to a capital alliance arrangement that preserves independence and equality for both companies. In the capital tie-up, the two companies have agreed that Toyota will subscribe for and acquire shares to be newly issued by Mazda through a third-party allotment, and at the same time Mazda will subscribe for and acquire third-party allocation shares of treasury stock disposed of by Toyota in the equivalent amount in value to the Mazda shares. The value of the shares mutually acquired by both companies will be equivalent.
In May 2015, Toyota and Mazda entered an agreement to build a continuous partnership that would mutually benefit the companies in such forms as leveraging the resources of both companies and complementing each other’s products and technologies toward the goal of making more-appealing cars. Since then, both companies have discussed various areas to explore, based on the principle of building an equal and favorable relationship in the long term.
Under the new agreement on the business alliance, the companies will:
1. Establish a joint venture that produces vehicles in the US. As part of the new alliance, Toyota and Mazda have agreed to explore establishing a joint venture plant in the U.S. with equal funding contributions. The plant would have an estimated annual production capacity of approximately 300,000 units. Pending approvals and authorization by relevant government agencies, the companies will begin to examine detailed plans with the goal to starting operations of the new plant in 2021. The plant will require a total investment of approximately US $1.6 billion, and will create up to 4,000 jobs. In addition to the collaboration in product and technology areas that the companies have enjoyed thus far, Toyota and Mazda intend to improve competitiveness in manufacturing through this new production collaboration.
At the new plant, Mazda expects to produce cross-over models that Mazda will newly introduce to the North American market, and Toyota plans to produce the Corolla for the North American market.
By producing vehicles in the US, Mazda aims to build a production structure to further grow in North America. These activities will allow the company to more quickly respond to its customers’ needs depending on the region and model.
By further increasing its production capacity in the US, Toyota is to further pursue management that is closer to the region, as a measure to improve its response to the growing North American market. At Toyota’s new plant in Guanajuato, Mexico, which is currently under construction, Toyota plans to produce the Tacoma, instead of the Corolla. There will be no substantial impact on Toyota’s investment and employment plan there.
2. Jointly develop technologies for electric vehicles. With increasing demand and expectations for electric vehicles worldwide, Toyota and Mazda are to explore joint development of technologies for the basic structure of competitive electric vehicles, mobilizing and exchanging expertise freely and actively. These technologies will allow the companies to respond quickly to regulations and market trends in each country. Specific details of the collaboration will be determined as the companies work together going forward.
3 and 4. Jointly develop connected technology and collaborate on advanced safety technologies. Toyota and Mazda will work together to jointly develop technologies for onboard multimedia infotainment systems in preparation for increased use of in-car information technologies and the increasing demand for connected technologies. In addition, Toyota will cooperate with Mazda in Toyota’s vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) technologies with the ultimate goal of creating a mobile society devoid of accidents.
5. Expand complementary products. Currently, Mazda is supplying a compact sedan to Toyota in North America. In addition, Toyota is to supply a compact commercial “two-box” van to Mazda in Japan. Beyond this, the companies will further explore the possibilities of other complementary products on a global level.
Details of the capital alliance. Based on the agreement, the companies will aim to develop sustainable collaboration, maximizing the synergies of the business and capital alliance by mutually acquiring shares as stated below.
Toyota will acquire 31,928,500 shares of common stock newly issued by Mazda through a third-party allotment (shareholding ratio of 5.05% on an issued share basis after the capital increase; total value of ¥50 billion/ US $452 million).
Mazda will, through a disposition of treasury stock through a third-party allotment to be implemented by Toyota, acquire Toyota shares that are equivalent in value to the Mazda shares (shareholding ratio of 0.25% on an issued share basis).
The two companies plan to apply proceeds from the capital increase through the third-party allotment and the disposition of treasury stock through the third-party allotment to fund, in part, capital expenditures relating to the establishment of the joint venture to produce vehicles in the US.
Both companies are to consider strengthening their capital alliance further, in line with the progress of their business alliance.
Anticipated date of share acquisition (due date of the payment is 2 October 2017.