Mazda will seek government loans

Naoko Fujimura and Tetsuya Komatsu / Bloomberg News

Mazda Motor Corp., burdened with the second-worst credit rating among Japan's carmakers and a 62 percent surge in short-term borrowing this fiscal year, plans to apply for government aid as it consumes cash.

"We can't sell bonds right now," said Nobuyoshi Tochio, general manager of Mazda's financial services division.

"The market isn't functioning. Conditions are really bad."

Mazda, Japan's second-largest car exporter, used 174 billion yen ($1.8 billion) in cash last quarter as sales of Mazda6 sedans have plunged in the U.S. and Europe. The Hiroshima-based company may turn to the government for low-interest loans as its junk rating prevents it from following Toyota Motor Corp. in tapping capital markets.

"Mazda needs loans from the government badly, as it's vulnerable," said Koichi Ogawa, chief portfolio manager, at Daiwa SB Investments Ltd. in Tokyo, which manages $28 billion.

"The company is important to the local economy, so it should be able to get them."

Mazda's short-term borrowings including leases, loans and bonds due this year surged to 221 billion yen in the nine months ended December, exceeding the company's untapped 200 billion yen credit line.

The carmaker expects a 13 billion yen loss for the year ending this month and analysts forecast the loss will almost triple to 37.5 billion yen next fiscal year.

The company may apply to the Japan Bank for International Cooperation and Development Bank of Japan, both government-owned, for loans to bolster its cash position, Mazda's Tochio said in an interview on March 13 in Tokyo.

Surging unemployment and tight credit has driven overall car demand to an almost 30-year low in the U.S.

In the first two months of 2009, the company's sales plunged 29 percent in the U.S., 16 percent in Europe and 38 percent in Japan.

Mazda shares have risen 4 percent so far this year.