Both Akio Toyoda and Carlos Ghosn are in the U.S. and what are they doing here? They complain loudly about the high yen. Akio Toyoda uses an interesting reasoning. It may make Americans wish for an even higher yen. Toyota may shift a “significant” amount of production to the U.S., if the yen stays high, and if demand in Japan will fail to consume Toyota’s vast capacity there. If the majority of Toyota’s output is shipped overseas, then factories will follow.
“If demand in Japan recovers, we will continue and work to maintain production of 3 million units” in Japan, Akio Toyoda said to Bloomberg. “If most of it becomes exports, shifting a significant amount of production to the U.S. may be considered.”
“If the yen continues to stay strong, Toyota will collapse,” Toyoda said at an opening event for a factory in Blue Springs, Mississippi. He reiterated comments he had made recently at a JAMA press conference in Tokyo, where Toyoda said that Japan’s automobile industry may no just hollow out, but “collapse” unless the yen goes back to more palatable levels. Toyoda usually is not prone to grandiose rhetoric, and when he says „collapse“, then he means it.
At the same time, Nissan & Renault co-CEO Carlos Ghosn said yesterday at the sidelines of an event of the Japan Society in New York City: “What’s taking place now is many projects are now basing their manufacturing outside of Japan because they just cannot survive with this 77 yen to the dollar.” Says The Nikkei [sub]:
“Ghosn called the rate of 77 yen per dollar “unbearable” and said many Japanese companies are shifting their operations overseas because they do not see any clear prospects for an end to their predicament. Ghosn criticized the government for lacking effective measures to fight the yen’s record appreciation at “the worst time for the Japanese economy,” citing the March 11 earthquake and severe floods in Thailand.”
Since 2007, the dollar has fallen more than 35 percent against the yen, a currency which some dimwits who had not updated their dog-eared talking points, steadfastly call overpriced and manipulated by the Japanese government.
Listening to Ghosn’s comments, people may remember that he had mentioned building a new entry-premium Infiniti using a Mercedes platform – somewhere. It could be Europe, China, the U.S. or elsewhere (maybe Mexico), but definitely not Japan. Additionally, Financial Times Germany floated rumors of a joint Daimler/Nissan engine plant in the U.S. Infiniti will buy two diesel and one V6-gasoline engine from Daimler, beginning in 2013, but Daimler’s European capacities are tapped out.
Bottom line: The high yen will most likely not help the Detroit 3 as much as it will create jobs on U.S. soil. And that’s where a high yen comes in handy: A yen that buys 35 percent more in dollars makes such an investment 35 percent cheaper.