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Mazda scraps plans for second US plant

Japan's Mazda Motor Corp has scrapped plans for a new factory in the United States due to deteriorating sales and the troubles at its partner Ford Motor.

Mazda issued a statement saying it had not planned to expand output in the United States in the first place.

The Nikkei business daily reported that the deepening US downturn and global financial turmoil were forcing Mazda and other Japanese carmakers to change their business strategies.

Mitsubishi Motors Corp plans to cut its sales target in Russia by some 10% for this business year, a paper said.

Mazda had considered using a former Ford plant or building a new one with Ford to produce fuel-efficient mid-size cars and other models from the first half of the next decade, according to the report.

A decision by Ford to sell part of its 33.4% stake in Mazda was another reason to scrap the plan for a second US factory, it said.

“Following our mid-term business plan, we have raised our domestic output capacity, and now we are building a plant in Thailand, but we have no plan to build a new factory in the United States,” Mazda said in a statement.

“We believe it was a right decision not to plan output expansion in North America.”

Ford was not immediately available for comment.

Shares in Mazda dropped more than 9%, but Okasan Securities analyst Yasuaki Iwamoto said the fall was triggered by a stronger yen and other concerns over fundamentals rather than the Nikkei report.

“With American market conditions being this devastating, it is an obvious move to review the plan, although it's not something the company has officially announced,” he said. “The stock would have fallen so much more if the company had said it would build a new plant in the US.”

A source familiar with the situation said over the weekend that Ford is considering selling part of its Mazda stake as debt-laden US automakers struggle with weakening auto sales and the global credit crunch.

Analysts have said the potential stake sale could work in Mazda's favor as it may lead to greater strategic freedom and a tie-up with financially sound investors.

Mazda currently builds the Mazda6 mid-size car at a plant jointly run with Ford in Flat Rock, Michigan.

Other automakers are also shifting their plans to cope with the sharp decline in US auto sales, prompted in part by high gasoline prices. Toyota Motor Corp, the world's biggest automaker, for example, is suspending some US production. (Reuters)