Ford's Mazda Mafia Under Threat

At Ford they are known as the "Mazda Mafia," a dozen or so high-ranking executives whose efforts to revive Mazda fast-tracked them into the management elite at the No. 2. of America's big three carmakers. The "goodfellas" include Mark Fields, who runs Ford's U.S. operations, and Lewis Booth, the new chief financial officer.

Yet, after twelve years of exercising effective control, hard-up Ford (nyse: F - news - people ) plans to sell some of the 33.4% stake it owns in Mazda (other-otc: MZDAF - news - people ) to raise cash, according to unconfirmed media reports. In doing so, it would not only relinquish its board veto; it would lose its proving ground for up-and-coming Ford executives.

"There would be less representation from Ford; that would be the biggest change," said Andrew Phillips, an analyst in Tokyo for KBC Securities. That Ford might sell a portion of its Mazda holding to a group of insurance companies rather than to a rival automaker is, Phillips noted, a sign that the U.S. carmaker is reluctant to lose the close ties it has with its Hiroshima, Japan-based affiliate.

By buying into Mazda, Ford gained an ally in taking on Toyota and other Japanese automakers that were stealing away its business in the United States. It is a relationship that Ford CEO Alan Mulally wants to keep. He has had few qualms about offloading other foreign units, such as Jaguar, Range Rover and Aston Martin, to focus on core brands and to free up money. So far, though, he has refused to sell Mazda, which survives in Toyota's shadow by building cars designed to lure drivers looking for inexpensive sports cars.

Ford's ties with Mazda began in 1979, when it bought a quarter share in the company. In 1996, Ford upped that stake to a controlling 33.4% in order to save Mazda, then paralyzed by slumping demand. Ford forced it to lay off 2,000 workers, shuttered hundreds of subsidiaries and affiliates and mothballed a large chunk of its production in Hiroshima. It brought in professional marketing executives, shared technologies and platforms and let the Japanese firm tap its procurement muscle.

That tough love, under Fields, Lewis and other executives shipped to Japan, worked. In its most recent business year, net income at Mazda jumped 27% to $803 million. (See "Ford's Proving Ground.")

Ford in return got a peek at Mazda's flexible production methods and rapid translation of design ideas into models ready for the factory. While the only difference between cars coming down a Ford assembly line is often the color, at Mazda it builds several different models at the same time. Mazda, like other Japanese carmakers, can also design and manufacture a new model every four to five years. The American big three sometimes spend twice as long.

The era of big automakers vacuuming up their smaller rivals in a rush to gain scale is over, insisted Osamu Masuko, president of rival Mitsubishi Motors (other-otc: MMTOF - news - people ), until 2004 an affiliate of Europe's DaimlerChrysler, which has since reverted to Daimler (nyse: DAI - news - people ) after selling Chrysler to private equity firm Cerberus Capital Management. A decade ago, the consensus was that no automaker that produced fewer than 4 million cars a day would survive, but "the 4 million club wasn't a viable concept," Masuko remarked in Tokyo recently. His advice: "better to go for alliances and cooperation." It is suggestion that the dons at Ford may heed.