By on May 7, 2012

With the closure of Japan’s last operating nuclear power plant hitting the news over the weekend,  people asked me what that means for Japan’s auto industry. My answer: Nothing.  The shutdown of the first nukes on March 11 a year ago was much more dangerous than the long scheduled downing of the last. Nissan’s Carlos Ghosn sees a much bigger danger: the power of the yen. The high yen at the currency exchange. And higher yen numbers on the electricity bill.

The sudden loss of electricity generating capacity following the March 11 earthquake and tsunami last year was a shock. Japan and its auto industry rode it out without a blackout.

The work-week was rearranged to smooth out demand. Carmakers built private power plants. Rigorous saving regimes were enacted. When financial results for fiscal 2011 will be announced this week, top brass of Japan’s automakers will leave their ties at home. Signified by open collars, a new “Super Cool Biz” season starts, with thermostats turned to barely bearable, and with hallways dimmer than a Kabukicho cocktail bar.

One year after the quake, Japan’s luckless TEPCO utility is looking at a power surplus. It has added new gas turbine facilities and is increasing capacity by bringing closed thermal plants back online. In the Osaka area, served by Kansai Electric, outages are more likely than in TEPCO’s service area.

In general,  Japan’s automakers are far less concerned of running out of power than a year ago. They are much more worried about the extra cost of power. Nissan CEO Carlos Ghosn writes today in a blog in The Nikkei [sub]:

Tokyo Electric Power (TEPCO), operator of Fukushima Daiichi and the largest energy supplier in Japan, began on April 1 to raise electricity rates for industrial and other large contract customers by an average 17%, the first such hike in three decades, which it attributed to some 830 billion yen in additional fuel costs.

Let me raise some figures. At Nissan, electricity accounts for about 10,000 yen of each car’s assembly cost. This increase will mean an additional 2,000 to 3,500 yen in additional production expense at some factories, which does not include the impact on our parts suppliers.”

2,000 to 3,500 yen per car are about $25 to $44 per unit. This may not sound like a big number, but with razor-thin margins, every yen counts. Ghosn and his Japanese colleagues are more concerned about the power of the runaway yen. After a short respite in March, the dollar has fallen below the 80 yen mark, and the trend points to a further strengthening.

While Ford’s Steve Biegun counts on an ignorant audience when he claims that the Japanese government keeps the yen low, just the opposite happens. A powerless government watches a rising yen destroy the remainder of Japan’s export machine.

Says Carlos Ghosn:

“I have been consistent in my call for urgent action to normalize the value of the Yen. The challenge now faced by industry over the stability and pricing of energy must be taken as seriously.”

Maybe Ghosn and the Japanese government should ask Ford how to manipulate the yen. Ford seems to be the only one who claims to know how it’s done.

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13 Comments on “Nissan’s Ghosn Worried About Power. The Power Of The Yen...”


  • avatar
    Advo

    Haha. Each one of his gestures is probably rude to someone in some part of the world.

  • avatar

    Haha, Super Cool Biz. Love it

  • avatar
    28-cars-later

    So does the strong Yen open the door to Chinese imports overseas?

    • 0 avatar
      schmitt trigger

      What I think it will happen, is that one will start to see Japanese brands with “Made in China” or “Made in Malasya” instead of “Made in Japan”.
      Also see a substantial expansion of the existing factories in the USA and Mexico to serve the North American market.

      With a strong Yen, it is expensive to export from Japan, but also very cheap to invest outside Japan.

      That trend has already happened in Electronics. Look at the label of any Sony or Panasonic product.

      • 0 avatar
        28-cars-later

        Interesting points. So if this trend continues do you forsee a collapse of Japanese domestic manufacturing over time as we saw in the US in the last thirty years?

      • 0 avatar
        onyxtape

        Japan Inc.’s struggle with outsourcing is an interesting one to watch in the past 20 years. Whereas it seemed like American firms jumped on the very first opportunity to outsource, Japanese firms tend to suffer for quite a while before deciding to do the same. While speaking with an executive of a large Japanese conglomerate, he said that America’s biggest advantage in business is its multiculturalism, as it opens up avenues throughout the world for production and consumers. While Japanese consumers are frightful of foreigners making the products that they use, Americans have long ago gotten past that hurdle. One of the more visible holdouts like Panasonic only announced a few days ago that they’ll start offshoring their entire cell phone manufacturing. They were still making portable CD players in Japan well into the 2000s.

      • 0 avatar
        Styles79

        Already happening, here in NZ we get some Nissan, Mazda, Mistubishi, Honda and even Ford product that is made in Thailand. We are also getting more European product from Nissan and Ford. As to increasing plants in Mexico and USA, I know one brand that is looking to import vehicles into NZ and Australia from the US in the future, something that would have been unheard of 10 years ago.

  • avatar
    stuntmonkey

    Even if you tied his arms behind his back, his facial expressions are more expansive than a lot of people’s gestures.

    Just watching this morning after the French elections, looks like the global money flow trend isn’t changing anytime soon and that the rising Yen is not a short term thing.

  • avatar
    minneapolis_lakers

    Japan Inc has been outsourcing to Southeast Asia and China for years. For instance, most of Sony’s cameras are shipped to China/Southeast Asia for final assembly, but the most advanced and lucrative components – such as the CMOS image sensor are still made in Japan; likewise with Panasonic – they are going to move all of its cell phone battery assembly to China, but is keeping the most advanced part – the lithium ion battery for the Prius squarely in Japan.

    It’s same throughout Japan Inc: keep the high-end stuff at home (to protect IP), while assemble the rest in low-cost countries nearby.

  • avatar

    Got Yen?

    Carlos & Team Nissan should buy Mitsubishi’s Evolution brand, and add a halo AWD super sedan to their lineup …

    Incredible Manufacturing Prowess + Selling Dollars and Euros for YEN = strong Yen … my eyes are on Japan’s renewable energy transition. Lots of geothermal? check. Lots of tidal power? check. Lots of wind? check. Equal or more solar than Germany? Check. Biomass? Check. Goodbye nuclear.

    Strong Yen … build abroad, get friends, and go on vacation.

  • avatar
    timotheus980

    I still haven’t figured out how Mr Bean got to run a car company. Does the hilarity ensure at Nissan HQ?

  • avatar
    timotheus980

    Is that Baldrick sitting to his left? Notice the expression on Baldrick’s face in pic 7. Now that’s a looks that says: “I can’t believe he actually said something that stupid here.”


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