You know who is really freaked about the stronger and stronger Japanese yen? Mazda. Mazda is considered the Japanese manufacturer with the highest exposure to currency swings. Mazda builds 70 percent of its vehicles in Japan. In the first half of 2010, Mazda exported nearly 80 percent of its Japanese output. Ouch. A year ago, a dollar bought 110 yen. Today, it buys only 84. As the yen continues its march upwards against other currencies, Mazda is enacting emergency cost reduction measures to protect their profits from being gobbled up by a steadily advancing yen on its earnings. Here is the plan:
- Suppliers will have to give up 3-5 percent on their parts.
- Mazda’s R&D will be made more efficient, most likely by taking some pages out of Volkswagen’s playbook: They will use a common framework for making differently sized cars.
- Sales operations will be made more efficient.
That’s it. No Nobel Prize material. Mazda expects to save between $350m and $470m (at today’s dollars …) That’s exactly what will be missing in their kitty should the yen remain at current levels. Right now, the Japanese currency is 6 yen stronger to the dollar, and 17 yen to the euro, than what’s in Mazda’s budgets.
According to The Nikkei [sub], Mazda forecasts that group operating profit will jump 220 percent in fiscal 2010. If everything goes as planned.