(FORTUNE Magazine) – DOES THE WORLD need another major Japanese carmaker? With Chrysler's troubles mounting and Japan's share of the U.S. market creeping toward 35%, most Americans would say no. But Mazda hopes anyway to muscle in on Toyota, Honda, and Nissan. And it's getting more than a little help from some unlikely friends. Mazda's new global strategy depends heavily on its import, production, and sales agreements with Ford, which owns 24% of the company, as well as deals with other automakers including Citroen of France and Suzuki of Japan. Think of Mazda's approach as a widening net of strategic alliances. Ford nameplates are on 12% of the cars Mazda makes and sells in Japan. Unlike its / competitors, the company is not large enough or rich enough to move into the big leagues on its own. Pretax profits in the fiscal year ended last March totaled less than $300 million on sales of $15 billion. By contrast, Toyota earned $11 billion on $60 billion of sales. Mazda has just 2.5% of the U.S. market, vs. Toyota's 7.5%, Honda's 6.1%, and Nissan's 4.5%. President Norimasa Furuta, who joined Mazda in 1985 after 29 years at the Ministry of International Trade and Industry, insists that the future of the world auto industry belongs not to companies that wage solitary war against one another but to those that form well-targeted alliances. He thinks that buyers increasingly want cars tailored to their own widely differing tastes, and that smaller companies allied with other automakers will be best able to deliver. He adds, ''Many Americans seem to believe only five or six auto companies can survive past the next decade. I don't agree.'' To buttress its worldwide offensive, Mazda is making big gains at home. Though still No. 4, the company's sales rose 47% for the first nine months of this year. Honda was up 20%, Toyota 11%, and Nissan 9%. After years stuck in the middle among Japan's highly competitive automakers, Hiroshima-based Mazda is finally making a break for the big time. The company has long survived with a limited product line, depending for the most part on its popular but aging midsize 323 sedan, which is called the Familia in Japan. Last year Mazda rolled out a much broader array, including a recreational vehicle called the MPV; the Carol, a minicar based on an engine, transmission, and chassis from Suzuki; and the Eunos Roadster, the Japanese version of the Miata, the little convertible that has been such a smash in the U.S. Mazda revamped the Familia, giving it more power and a plusher interior, and priced it equal to or below such competitive models as Toyota's Corolla and Nissan's Sunny. Familia sales climbed 71% in the year ended last March. Mazda also got a big boost from the Festiva, a small car it makes in Japan under the Ford name. Sales of the Festiva were up 30% last year. In the next year or so, the company intends to introduce four to six more cars but refuses to tip its hand about models or prices. Analysts expect the new cars to range from fancier sports models to higher-performance sedans. Mazda is also developing what it calls a premium car, which will be sold in the U.S. through a separate dealer network similar to those developed by / Toyota and Nissan for their Lexus and Infiniti lines. Mazda's ambitious expansion plans at home and abroad are backed by a $1.9 billion capital spending budget for this year and next. That's nearly double what it invested in the two previous years. FOR A LOOK at Mazda's alliances, walk into an Autorama showroom in suburban Tokyo. Traditionally, cars in Japan have been sold by door-to-door agents who remembered their customers' birthdays and the renewal dates of their insurance policies. Mazda, unable to match the legions of Toyota and Nissan foot soldiers, imported the idea of U.S.-style showrooms. It set up a subsidiary called Autorama in 1981 and last year added two more showroom chains, Eunos and Autozam. Toyota, Nissan, and Honda have also opened their own showrooms, but only Mazda's prominently display foreign and joint-venture cars. Autorama, which sells Ford imports and Ford cars produced by Mazda, has more than 300 showrooms around Japan and plans to have 500 within two years. Ford owns 34% of the subsidiary. Japanese buyers can kick tires on a Ford Festiva, Probe, or Thunderbird. In Eunos showrooms, Mazda displays the French Citroen alongside the Eunos convertible. At Autozam, prospective buyers can look at Fiat's Lancia and the tiny Carol. Furuta believes that imports, now about 5% of the Japanese market, will hit 10% in five years or so. Aiming to capitalize on this, Furuta plans to boost Mazda's imports from the U.S. and Europe from 6,000 units last year to 60,000, worth $1.3 billion, by 1992. He wants to increase Mazda's overall sales in the domestic market from around 600,000 units to 800,000 in 1992. This would give Mazda about 10% of the market, up from 7.8% this year. To provide this added range of products, Mazda is building a superautomated plant near Hiroshima. When production begins in early 1992, it will have the unprecedented flexibility to turn out nine different cars -- ranging from, say, the high-powered Cosmo to the Familia -- at the same time. Mazda is also overhauling its 30-year-old plant. Through automation and design improvements, Mazda plans to enhance quality and cut its work force by as much as 50% in areas such as welding and assembly. Mazda's plans for the U.S. are equally ambitious. This year the company increased its U.S. ad budget by 35% in an effort to catch up with its big Japanese rivals, at least in name recognition. Says Keiji Asano, Mazda's tanned and handsomely graying marketing chief: ''There should be four major Japanese brands in America: Toyota, Honda, Nissan, and Mazda.'' Still, he knows Mazda can't achieve that on advertising alone. ''For us to join,'' he says, ''we must have a premium car.'' UNDER the code name Pegasus, Mazda has completed a marketing plan for its still unnamed entry. The company wants to set up 70 new dealerships in 25 major U.S. cities in the first year or so and another 165 dealers in 50 urban areas in the next two or three years. The launch date has not been set, but could be within the next year. By the mid-1990s, Mazda hopes to be exporting 60,000 cars a year to the U.S. That's ambitious. Sales of Toyota's well- received Lexus should hit 40,000 this year. Nissan is projecting sales of around 20,000 over the next 12 months for the Infiniti. Of course, it takes more than dealers and a marketing plan to crack the luxury market. It also takes a car. Some analysts aren't so sure Mazda can come up with the goods. The company's current upscale car, the 929 (known as the Luce in Japan), which sells in the $19,000-to-$25,000 range, is drifting badly in the U.S. market. The new $41,000 Cosmo, a sports car for the Japanese market featuring a powerful rotary engine and a navigation system that bounces signals off a satellite to tell the driver where he's going, is selling well below Mazda's own forecasts. Says Stephen Marvin, auto analyst for Jardine Fleming Securities in Tokyo: ''Considering that its three Japanese rivals are already entrenched in the U.S. luxury market, Mazda's effort seems headed for perpetual red ink.'' Executives at Mazda admit that they're getting into the luxury market late. But they insist they have little choice. Says one: ''We're not talking about a catch-up strategy, we're talking about survival.'' Furuta argues that Mazda needs to fatten its profit margins, and that premium cars can help. A hot- selling high-priced car can also give the whole company a glitzier image. Mazda's entry will probably be something along the lines of the Lexus, but sportier, cheaper, and with a more efficient engine. The company will offer 24-hour road service and a lifetime guarantee, and is even considering wrapping up each car like a present for delivery to buyers. Says Asano: ''We are aiming for perfection.'' Apart from the new luxury car, Mazda does not expect to be stepping up U.S. exports significantly in the next few years. As a MITI official, Furuta helped negotiate the voluntary restraint agreements limiting Japanese exports to the U.S. The last thing he wants to do, he says, is aggravate trade friction. At the same time, though, he does not plan to increase production in the U.S. The company currently has one 200,000-car-a-year plant in Flat Rock, Michigan. Instead, he says Mazda can meet increased U.S. sales demand with help from partners. Says Asano: ''Our asset is our ten-year association with Ford, something our competitors don't have. Cooperation will be the future of our industry, and in this area we are way ahead.'' Mazda helped Ford design a plant in Mexico that produces a car similar to Mazda's 323. Mazda could use the plant to make cars for the U.S. market. MAZDA IS WILLING to take on other partners. After almost a year of talking with Ford about a joint-venture plant in Europe, the two companies have been unable to agree on cost allocations or model selections. So Mazda has begun negotiations with several European manufacturers, hoping to make some kind of deal by the end of this year. Last summer Mazda set up a joint venture with a Swiss engineering company to make superchargers for diesel engines. This fall it established a car rental and leasing company with Hertz in Japan. It also formed a company with Ford and Sanyo, the Japanese electronics producer, to make car radios in Malaysia. With each deal, according to Furuta, Mazda becomes more profitable. Says he: ''From Ford we've learned about marketing smarter and about controlling costs. They've learned how to produce small cars. We've come to respect each other's strengths.'' In the increasingly tough world of automaking, that may be the key to survival.

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