UPDATE 1-Mazda shares slip on news Ford to wind down stake

* Further break from Ford seen as positive – analyst

* Mazda shares lose as much as 5 pct but then pare losses

* Focus is on if/when Mazda will seek new capital alliance
(Adds background)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Oct 18 (BestGrowthStock) – Shares of Mazda Motor Corp (7261.T: )
slipped on Monday after news at the weekend that top shareholder
Ford Motor Co (F.N: ) plans to sell almost all of its remaining
stake in the Japanese automaker it once controlled.

A source told Reuters on Saturday the U.S. automaker would
slash its ownership of Mazda to a few percent from 11 percent,
and that trading house Sumitomo Corp (8053.T: ) and other Japanese
business partners of Mazda were in talks to buy the shares.

Ford’s stake has been declining, so the move was not seen as
a big surprise, and JP Morgan Securities auto analyst Kohei
Takahashi said he viewed a further break from Ford as positive
rather than negative.

“Mazda has indicated that it wants to expand sales of its SKY
series of next-generation powertrains in the future, and we
believe that achieving greater capital independence would help
Mazda expand its business with companies outside the Ford group,”
he wrote in a note to clients.

Mazda’s shares lost as much as 4.7 percent to 204 yen soon
after the market opened in Tokyo, but recovered to 213 yen, down
0.5 percent, by the end of the morning session. The benchmark
Nikkei average (.N225: ) was up 0.5 percent.

With Ford’s equity participation down to just a few percent,
the next big question would be whether — or how long — Mazda
will hold out on its own as a smaller but technologically savvy
car maker without a major capital alliance.

“Ultimately this could mean that at some point Mazda finds
itself aligned with someone else,” CLSA Asia-Pacific Markets auto
analyst Christopher Richter said.

“As I scan the horizon of other Japanese, European or U.S.
automakers, nobody jumps out. The most likely suspect would be a
Chinese or Indian automaker with global ambitions.”

Analysts said, however, that Mazda would likely prefer to
stay independent. Mazda officials have privately lamented the
lack of flexibility in the past even under Ford’s control.

“They’re not desperate, so (a new grouping) doesn’t have to
happen tomorrow or even next year,” Richter said.

“They can make an argument (to their shareholders) to stay
independent as long as they’re profitable. And because a sale to
a Chinese automaker, for example, would be controversial, they
may not need a hell of a lot of convincing.”

Mazda has forecast a net profit of 5 billion yen ($61.40
million) for the year to March 31, 2011, but faces worsening
conditions under the yen’s rise. Mazda, which builds most of its
cars in Japan, is especially vulnerable to a strong yen.

ENGINEERING SAVVY

While Mazda has no hybrid technology of its own, it is seen
as among the most advanced in internal combustion engine
technology, becoming one of the first Japanese automakers to
introduce an automatic engine-idling feature to the market.

Through a new generation of gasoline and diesel engines and
transmissions under its “SKY” series, Mazda is aiming to improve
the fuel economy on its cars by 30 percent by 2015, compared with
2008 levels, without using a hybrid or pure electric system.

While the long-time partners have many intertwined
operations, Mazda and Ford have been growing apart in some areas.
In the most recent distancing, Mazda in March turned to Toyota
Motor Corp (7203.T: ) for help in developing its first hybrid car,
instead of Ford. [ID:nTOE62SO5N]

Ford’s stake sale will likely be made by the end of the year,
the source, who spoke on condition of anonymity because the deal
has not been made public, told Reuters. The news was first
reported by the Nikkei business daily.

Both Ford and Mazda called the report speculation, issuing
similar statements stressing their strategic alliance remained
intact.

Mazda Chief Executive Takashi Yamanouchi is due to address
the media on Wednesday about the company’s next-generation
technology.
(Additional reporting by Daiki Iga; Editing by Edwina Gibbs)

UPDATE 1-Mazda shares slip on news Ford to wind down stake