Mazda slashes budget

Mazda Canada has slashed its 1993 media budget by nearly one-third in the wake of a precipitous rise in the value of the Japanese yen versus the Canadian dollar.On April 8, 1992, according to the Bank of AmericaCanada, a Canadian dollar...

Mazda Canada has slashed its 1993 media budget by nearly one-third in the wake of a precipitous rise in the value of the Japanese yen versus the Canadian dollar.

On April 8, 1992, according to the Bank of AmericaCanada, a Canadian dollar would buy 111.55 yen.

A year later, the upward spiral of the strengthening yen had eroded the Canadian dollar’s buying power by 24%, to just 90.10 yen.

The widening gap between the two currency exchanges has made it more expensive for the Canadian subsidiaries of Japanese firms to buy products from their Japanese parents.

Jeff Kess, Mazda’s national advertising manager, says the Toronto-based automobile marketer has had to cut costs in a variety of places to make up for the shortfall, and the media budget was not spared.

In December, Mazda budgeted to spend $38 million on paid media advertising during 1993. (Mazda’s fiscal year begins Jan. 1.)

Since establishing the budget, Kess says Mazda has twice reopened its advertising books to slash costs, once at the end of January and again at the end of March.

For competitive reasons, Kess declines to reveal how much the budget has been reduced, but he acknowledges the cuts were deep.

‘For an importer like us, the rise of the yen puts severe strains on the financial picture,’ he says.

Industry sources say Mazda’s original 1993 budget of $38 million has been reduced by $13 million.

Kess says ‘our strategy right now is to protect our tv budget, adding the cuts were deepest in its spending allocation for magazine and newspaper advertising.

In Mazda’s original 1993 media plan, tv advertising accounted for 60% of the total budget, while magazines and newspapers each accounted for 20%.

Mazda Canada is not the only Japanese automotive subsidiary to grapple with the rising yen, but industry observers say its position is among the most sensitive.

For the last year, Mazda has been aggressively pursuing market share with low prices at the expense of its profit picture.

Now that product from its Japanese parent is costing more, observers say Mazda Canada has fewer financial reserves to make up the difference.