By on December 4, 2011

It looks like Carlos Ghosn is tired of talking about the inaction of the Japanese government with regards to the killer yen. He told his people to start packing. The Nikkei [sub] reports today that Nissan will stop making in Japan newly developed cars for export from Japan.  New cars will be produced at overseas plants.

“Under current foreign exchange rates, there can be no shipments from Japan of totally new projects,” Nissan’s COO Toshiyuki Shiga said. According to the report, anything with a new chassis that is intended for foreign markets will begin its life in those foreign markets. Says The Nikkei:

“Shiga’s comments suggest that there are few benefits to producing entirely new models for export in Japan because of the yen’s surge, but new models that use the chassis of existing vehicles can be exported as they are relatively less expensive to produce.”

Nissan makes only 25 percent of its worldwide volume in Japan. However, half of the Japanese production is currently exported. This will change.

In the interview, Shiga indicated that exports from Japan could fall to 400,000 units. At the same time, the Japanese market (which pays in yen) is supposed to absorb 600,000 units, so that the target of 1 million units can be maintained. In the fiscal year that ended in March 2011, Nissan’s Japanese production was 1.07 million units, of which 610,000 were exported and 460,000 were sold in Japan.

In early November, Toyota had announced a similar plan to maintain its commitment to make 3 million cars in Japan: Fewer cars exported means that Japanese will have to buy more cars domestically.

If the domestic sales don’t pan out as planned, both carmakers can say: “Sorry, we tried.”

Nissan’s plan sounds more decisive than Toyota’s.  Usually, cars are developed and made at home first before they slowly filter abroad.  Starting newly developed cars offshore inevitably will mean that R&D has to follow. Development and production must go hand in hand in close vicinity, at least in the early stages of the cycle.

Japan’s innovative power will be dismantled and shipped abroad. And that is a much bigger loss than a few cars. Japan will slowly turn into a 3rd world country. It used to be that those got the older cars, while new models hatched at home.

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35 Comments on “The Exodus From Japan Begins In Earnest...”


  • avatar
    sportyaccordy

    Wow, dude was serious. But I think it’s about more than currency. The long term prospects of manufacturing (or doing any business) in Japan are pretty bleak. Plus I’m sure their propensity for nature related disasters doesn’t help

    I am kind of hoping manufacturers begin to look to Africa. Lord knows we could use the help in building our infrastructure. In exchange, hopefully w/respect for our environment and human rights, we could help them with the manufacturing. There are a lot of stable countries there that would love the influx of work and money.

    • 0 avatar
      Vance Torino

      “Japan’s innovative power will be dismantled and shipped abroad. And that is a much bigger loss than a few cars. Japan will slowly turn into a 3rd world country.”

      This plan worked well in the American industrial Midwest in the last 30 years!

      :(

      What’s next? Yokohama “ruin porn”?

  • avatar
    Conslaw

    Carlos can talk all he wants, but I don’t think the Japanese government is listening. It appears to be a case of what ghosn one ear ghosout the other.

  • avatar
    acuraandy

    Wow. That’d be like Marchionne saying Chrysler will not build new models in Michigan anymore. So what’s going to happen, Nissan to move production to France (they’re still joined at the hip with Renault, no?)?

    Any word on Honda’s plans?

    • 0 avatar
      BoredOOMM

      The best Detroit can offer now is foreign built anymore.
      Instead of what American Drivers want, we get the Bailout gems- Chevrolet Volt and Fiat 500 as offerings.

      • 0 avatar
        damikco

        the cars that came after the bailout where designed years before it. Most of GMs best sellers ARE American made, and if not at least the profits come or stay in America.

    • 0 avatar
      Robert.Walter

      Actually it’s like Sergio saying Fiats will not be built in Italy anymore… Oh wait, he’s been saying that for some years now, and is likely to accelerate these plans.

    • 0 avatar
      John Horner

      There is a big difference between the car building situation in the US and that in Japan. Japan has a very small domestic market. The Japanese auto industry is built on exports, as has been nearly every major Japanese industry.

      But, Japan is geographically and demographically a poor place to manufacture things. The country is small, has minimal natural resources and is literally slowly dying out as the birth rate is well below that required to maintain a stable population.

      The US, by contrast, is a large market, has significant natural resources and continues to have slight net population growth.

      • 0 avatar
        Dynamic88

        A country doesn’t need natural resources – as evidenced by Japan being a major industrial power since before WWII. If it was a serious disadvantage Japan never could have become a major manufacturer.

      • 0 avatar
        jmo

        has minimal natural resources

        For most countries, significant natural resources are more a curse than a blessing.

      • 0 avatar
        John Horner

        The natural resource advantage the US had over Japan during WWII was a major advantage for the US. Don’t discard natural resources as a consideration visa-vis the fate of nations.

  • avatar

    Are there realistic options for the Japanese government to influence foreign exchange rates? How would that work?

    • 0 avatar

      Domestic inflation is a big part of the exchange rate, especially in the long term. If you discard Keyesian silliness, it basically is controlled by the emission, which is wholly under control of the government.

      The main reason why Japanse government is not willing to join the arms race of soft currencies is their enormous debt, which is far beyond what is thought possible in a western country. It is only held together because ordinary Japanese keep their savings at the post office, and that only continues because they believe that their savings are safe (please pardon the pun). A hint of inflation would trigger the mother of all bank runs and a financial ruin the likes of which Grece and Argentina haven’t seen.

      So it’s either helping Gosn and Co. and the immediate collapse versus watching export industries shrivel and adjust while managing the inevitable decline at the rate the demographic forces it. Naturally they choose the slow death.

  • avatar
    Robert.Walter

    “Fewer cars exported means that Japanese will have to buy more cars domestically. If the domestic sales don’t pan out as planned, both carmakers can say: “Sorry, we tried.”

    This would also portend a brutal sales race designed to boost Jon domestic sales; shades of the late 50′s competition between the big 3 that killed the independents…

    What is playing out over the short-term on the currency stage also plays into a larger demographic shift (some might say demographic landslide or whirlpool), as Japan has begun the process of drastic depopulation…

    Japanese population was believed to have peaked in 2010, and is forecast to drop by a bit less than 10% in the next 10 years, and to continue steadily that it will have decreased by ca 30% by 2050.

    http://en.wikipedia.org/wiki/File:Population_of_Japan_since_1872.svg

    Not only will there be fewer people to buy the product, there will be fewer to build it, and fewer to engineer it. If this is to become the case, and it will unless the Japanese figure out how to manufacture people, extend their lives, or break-down and allow massive immigration (gastarbeiter problem anyone??) rebalancing development demands and production facilities by moving them to places where there are the resources to do the job and the demand to absorb the results will become necessary because each company which designs and builds in Japan will be competing against every other company that does so, and this will drive both wage inflation and job hopping…

    So Carlos is just getting ahead of the demographic trend because the currency pushes him to do so.

    Against this backdrop, once those jobs and facilities move, Bruce springsteen’s tune will be as fitting to these permanent loses as it was to the losses in Allentown, Pa.

    • 0 avatar

      Well, Japan is overpopulated like most Asian countries. So sooner or later there should be depopulation and it is happening in Japan as well as in Europe. The real tragedy is depopulation in Russia without actually developing industrial base. Russia is looking forward losing land in future and shrinking back to Europe.

  • avatar
    Dimwit

    Ghosn is willingly allowing himself to be the lightening rod in all of this. When Nissan moves their world headquarters out of Japan will be the deathknell of the Japanese car industry.

    That day will come, with Toyota and Honda following suit. It’s a matter of survival of global giants. I wonder where they will choose to settle?

  • avatar
    PenguinBoy

    While I agree that it makes sense to colocate R&D with manufacturing, especially during the new product introduction phase, I think it is an exaggeration to say that “Japan will slowly turn into a 3rd world country” as a result. The UK lost its domestic mass market automakers, and it is far from a third world country.

    It doesn’t surprise me that Carlos Gohsn, a foreigner, is leading the charge to move production off shore. I believe that Japanese managers will do everything they can to protect jobs at home. While I think that we could use a bit more of that attitude here in North America, the further hollowing out of Japan’s economy is inevitable, and the only way for Japanese companies to compete is to move production close to major markets, or to low cost regions.

    The Germans can get away with using high priced union labour with six weeks vacation is because they are producing premium products which sell at a premium price. With the possible exception of Lexus, Japan doesn’t really have any premium brands so they have to compete on price with other mainstream brands. While Toyota and Honda can probably still command a slight (and shrinking) premium over a comparable Ford or Hyundai, I don’t think Nissan has that kind of pricing power.

    If Sergio is right about the auto industry consolidating down to half a dozen major players (and I wouldn’t want to bet against him), even offshoring won’t be enough to save the smaller second tier Japanese automakers.

    • 0 avatar
      highdesertcat

      Nissan is a wholly-owned subsidiary of the French auto conglomerate and Ghosn runs the whole show. Nissan can’t do doodly-squat without approval of Ghosn and the French bosses. Just like Chrysler can’t do doodly-squat without approval from Sergio and the Italian bosses. What Carlos decides, goes. Just like what Sergio decides, goes.

      I hope that Ghosn will bring some additional work to the non-UAW Southern US plants thereby creating jobs for Americans. More likely would be to expand or open new plants in Mexico. That would create far more money for this enterprise.

      Nissan used to have a modern design center in La Jolla, CA, during the 90′s but its significance has diminished since Ghosn took over. No doubt a lot of design input is furnished from the French side of the house, like that flaky CVT that is so widely used in European cars. The value of the Yen makes the value of a Nissan product overpriced for value received, unless you lease.

    • 0 avatar
      Dynamic88

      Volkswagen isn’t a premium brand, nor does it sell at a premium price.

    • 0 avatar

      Agree that there are more Japanese manufacturers than market can sustain. I heard that Japanese are planning to move to badge engineering to keep second tier companies in the business. It actually happening already. Mazda are rebadged Fords with Ford or developed with Ford engines. Suzuki is using GM platforms and Subaru is moving to rebadged Toyotas, Nissan and Renault use the same platforms and engines. Small companies do not have resources to compete in global market.

  • avatar
    daveainchina

    Lexus isn’t really a premium brand around the world. Mostly only in Japan and the USA.

    Japan is in a tough spot, I don’t know that they have any good choices, I suspect before all automakers jump ship, you’ll see some movements by the Japanese government, but probably not enough.

    this makes me wonder what Sony and Nintendo are doing also, two other fairly large companies in Japan.

    • 0 avatar
      PenguinBoy

      Not many consumer grade Sony products are made in Japan these days – maybe the ES series, and some other high end models. A lot of this stuff has been made in low cost regions for a while now…

  • avatar
    Dimwit

    >>this makes me wonder what Sony and Nintendo are doing also, two other fairly large companies in Japan.<<

    Sony doesn't export from Japan anymore. Look at any of their products and it's from somewhere other than Japan. Most of the electronic giants are the same.

    Manufacturing is on the wane because of the Yen and the tsunami didn't do any favours either.

  • avatar
    Lorenzo

    At least America doesn’t have to worry about a strong currency. With the Fed moving to weaken the dollar further and inflate our debt away, we must look good to Japanese manufacturers and others. The high priced Euro has even forced the Germans to assemble their premium products here. With all those manufacturing jobs coming, will America end up re-industrializing?

    • 0 avatar
      toxicroach

      I think so.

      People like strong dollars because it sounds, you know, strong. But what it really means is that imports are cheap and its harder to export product. A “weak” dollar means more jobs for Americans, because the incentive to buy imports is weakened and the incentive to buy our exports is strengthened. A weak dollar has its silver lining. There’s a reason Canadians groan whenever their dollar gains value on our dollar. The know its better to have the ‘weak’ currency for domestic purposes.

      That’s all well and good when you have a healthy economy, not so great when your currency is artificially inflated and your manufacturing base is being flayed alive by a currency value that is too high.

      IMO (and I’m not anyone whose opinion merits any particular weight), what we’re currently going through economically is a readjustment to where we would have been the whole time if we hadn’t had several decades of inflated currency value.

    • 0 avatar
      PenguinBoy

      “With all those manufacturing jobs coming, will America end up re-industrializing?”

      Quite possibly. I also think that Mexico will get another kick at the can – ten years ago, consumer electronics manufacturing was moving out of Mexico and heading to China. With increasing logistics cost, and inflation in China, it wouldn’t surprise me to see some of those lines moving back.

      • 0 avatar
        Conslaw

        You mention increasing transportation costs. The costs to ship goods to the west from China may actually decrease in the next few years, in part due to the widening of the Panama Canal and the introduction of “E-class” container ships like the Emma Maersk http://en.wikipedia.org/wiki/Emma_M%C3%A6rsk

        The extra large tankers and container ships they are building these days are scary. Some of them weigh almost twice as much as a modern aircraft carrier.

  • avatar
    MrWhopee

    Well, Japan can indeed become like Switzerland, manufacturing only premium products. So for Nissan, maybe only Infiniti and top-line Nissan like the GT-R is made in Japan, the lower priced stuff is all made elsewhere. Germany is also heading that way, most lower-priced VWs sold in the US is made elsewhere (Mexico). Can’t meet cost target otherwise. Of course Germany still made lower-priced cars, but they’re mostly for European consumption, where car prices are higher.

    • 0 avatar
      PenguinBoy

      The problem is, Japan has well respected mainstream brands – but they don’t have the kind of pricing power to pull this off. A GT-R many be fast, but it sells for less than a comparable Porsche. The NSX was well regarded, but Honda no longer makes it – while Fiat continues to churn out Ferraris.

      Also, premium products don’t sell in the volumes needed to sustain Japan Inc.

  • avatar
    John Horner

    Anecdotally, I’m told by an acquaintance who helps Japanese ex-patriots relocate to the US that there are quite a large number of people leaving Japan and picking up cheap-for-them property on California’s West Coast.

  • avatar
    GS650G

    I hate to say it but Japan is going through many of the same changes we have here.


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