The Truth About Cars » Yen The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Thu, 17 Jul 2014 11:00:59 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Yen Honda, Nissan, Toyota Set Production Record Against Weakening Yen Thu, 23 Jan 2014 16:32:38 +0000 Toyota Baja California Assembly Line

As the yen weakened against the dollar for a second consecutive year, Honda, Nissan and Toyota all set production records in their North American plants in 2013, according to Automotive News.

Outputs for the trio last year include 1.86 million units for Toyota, 1.78 million for Honda, and 1.47 million for Nissan, though gains on the production line didn’t match sales in the United States. However, exports took up the slack in U.S. showrooms, with more units sent to growing markets such as South Korea, Saudi Arabia and Latin America.

As far as individual models are concerned, Honda built 466,695 Accords at their Marysville, Ohio plant in 2013, around 20,000 more than the number of Camrys Toyota workers at the automaker’s Georgetown, Ky. plant.

The Japanese Three expanded their presence in North America as insulation against a falling yen, which fell 17.6 percent against the dollar in 2013 after falling 11 percent in 2012, as well as protection from overseas production disruptions that could affect North American output. In fact, Honda will soon open a plant in Celaya, Mexico to build the Fit, with the long-awaited 2015 NSX to be assembled in an experimental plant in Marysville.

Regarding Hyundai and Kia, the two South Korean automakers set a few records of their own in North America, including 399,495 Sonatas and Elantras leaving Hyundai’s Montgomery, Ala. plant, and 105,647 Santa Fes rolling out of the Kia line in West Point, Ga.

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Akio Toyoda Sees Emerging Markets’ Growth Slowing, Uncertainties in China, Japan Thu, 02 Jan 2014 13:00:58 +0000 TOYOTA/

Bloomberg is reporting that Akio Toyoda, president of Toyota Motor Corp. and scion of its founding family said that a slowdown in emerging markets and uncertainty over demand in both China and the Japanese home market makes 2014 “unpredictable”.

While the weaker yen increased earnings for Japanese exporters, those profits are being offset by slowing demand in India, Thailand, Brazil, and Russia. Japanese automakers also continue to face a potential repeat of Chinese consumers rejecting their products, as happened last year as tensions between those countries’ governments increased over who owns a group of Islands under dispute.

“It may be impossible” to shield against tensions between the two countries, Toyoda had told reporters earlier in December. “But we will work to minimize the impact.”

Slowing sales in emerging markets caused Honda Motor Co. to miss analysts’ forecasts for its first-half earnings this year. Nissan Motor Co., which is looking to make Mexico a hub for exports, reduced projected full-year earnings by 15 percent to reflect slower than anticipated sales in the developing world.

Toyota’s own operating profits were down in Asia, excepting Japan, in the third quarter, as Thailand ended government incentives for first-time car purchases. Akio Toyoda was pessimistic about Japan as well because of that country’s planned increase in the national sales tax rate from 5% to 8%. The Toyota president said, on behalf of JAMA, that automakers would like to see a stable yen since production cannot be shifted around the world as quickly as currency values change. The Japanese currency is currently at a five year low against the American dollar.

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Where Is Currency Manipulation When We Need It: Ford Shuts Down Down Under Thu, 23 May 2013 08:41:51 +0000 File picture of Ford Australia's head office in Melbourne

Ford has long been at the forefront of the currency debate, claiming currency manipulation when the yen went to levels that nearly killed the Japanese auto industry, and shouting “currency manipulation” now that the yen is back to normal levels. Now, Ford itself experiences the devastating effects of changing exchange rates:  Ford is shutting down all its manufacturing operations in Australia. The reason: A strong Australian dollar.  Says Reuters:

“Ford Motor Co  will shut its two Australian auto plants in October 2016, blaming a strong currency and costs that are hitting manufacturers just as the country looks for other sectors of its economy to cushion the end of a mining boom.”

According to the report, the closure of Ford’s  engine plant in Geelong and its vehicle assembly plant in Broadmeadows will cost 1,200 jobs. Ford  built 37,000 vehicles in Australia last year, and has been in the country since 1925.

“Our costs are double that of Europe and nearly four times Ford in Asia,” Ford Australia CEO Bob Graziano told Reuters. “The business case simply did not stack up. Manufacturing is not viable for Ford in Australia.”

The Aussie has climbed from just over 60 cents in 2009 to above parity with the U.S. dollar, where it has been for more than two years. Currently, one AUD costs 97 cents.

A few weeks ago, Jac Nasser, the former head of Ford, warned that Australia’s car industry has passed the point of no return, and said it would die within the next few years.

I am sure that in this case, Ford would have been grateful for a little currency manipulation – or shall we call in central bank intervention – and would not have complained.  GM’s Holden said it will cut 500 jobs, citing damage from the high Australian dollar.

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Ghosn Wants The Yen Go Lower, Mulally Disagrees Tue, 14 May 2013 19:10:44 +0000 IMG_4402

Of course, Carlos Ghosn did not miss this opportunity to talk about his most favorite topic: The value of the yen.  As last Friday, the CEO of Renault and Nissan still does not want to hear talk of a low yen. Ghosn says the Japanese currency “is coming back to normal levels,” and as far as Ghosn is concerned, the yen still has some ways to go. Even if this freaks-out  the CEO of Ford.


For Ghosn, a normal level would be when a dollar buys 110 yen or more. Today, a dollar bought 102 yen, a four year low of the yen.

In the interest of equal time, let’s listen to what Ford’s chief Alan Mulally had to say about the yen two months ago. In March, when the yen traded at around 93 yen to the dollar, Mulally complained about what he called Japan’s “devaluing of the yen”. and he reiterated his opposition a trade free pact with Japan.

“The markets should determine the exchange rate,” Mulally told Reuters. Japan is “the most closed automobile market in the world,” Mulally said for the umpteenth time. “They should open up their market, they should restructure their industry, and that’s why we’re encouraging the people negotiating the free trade agreements that they deal with that.”IMG_4524

The story of other countries devaluing their currency is an easy sell to an American public that generally lacks sophistication when it comes to currencies. Ford and its lobbyists complained about Japanese currency manipulation when the yen climbed to untenable levels, nearly killing Japanese exports. Ford keeps complaining.


For Ghosn, who was offered the job as Ford CEO, and who turned it down, because he did not want Executive Chairman Bill Ford breathe down his neck, said today that “the abnormal situation of the yen is hopefully something from the past, which means we can continue to build this car at the motherplant.” If the yen would have remained at last year’s levels, Nissan would have had to close shop.  “During the dark years of the yen,” Ghosn said, “we were losing money on practically every single car which we were exporting from Tochigi.”

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Ex-Ford CEO Says Australian Car Industry Is Dead Tue, 30 Apr 2013 13:57:43 +0000

Jac Nasser, the former head of Ford, is warning that Australia’s car industry has passed the point of no return, and expects to see it die within the next few years.

Nasser placed the blame at the politicians doorstep, citing a dearth of state subsidies for the auto industry and a lack of clear vision on the part of politicians for the decline of Australia’s domestic car industry, which employs some 224,000 people. While Holden, Ford and Toyota are the big name vehicle assemblers, the vast majority of jobs come from parts suppliers rather than the manufacturers themselves. The Australian quotes Nasser as outlining the challenges ahead for Australia

“The signs aren’t good,” he said yesterday. “You’ve got an exchange rate at a 30-year high, you’ve got higher costs in Australia, you’ve got excess capacity in the motor industry worldwide, you’ve got a very weak currency in Japan and you’ve got a weak euro. When you put that mix together, it’s very difficult to expect a relatively small but talented Australian auto industry to work its way.

As soon as you have a reduction in the scale of domestic manufacturing – let’s assume one of the three decide to exit Australia in terms of manufacturing – then you end up potentially with sub-scale supplier infrastructure…Once that happens, I think it’s a domino effect. It would be a very sad day for Australia but unfortunately it looks like it could be inevitable.”

One of the major issues cited by many observers (as well as the B&B) is that of tariffs. A report in the Australian business publication BRW states

Australian tariffs on imported motor vehicles fell to 5 per cent by 2010 from 10 per cent in 2005. Where Australia has a free trade agreement, there is a zero tariff. Industry bodies such as the Federation of Automotive Products Manufacturers (FAPM) say the hurdles on entry of foreign vehicles are much lower than those imposed by other car manufacturing jurisdictions and the country should demand reciprocity on tariffs with other producing countries.

The reduction in tariffs is often cited as a reason for the freefall of traditional Australian-made vehicles like the Ford Falcon and Holden Commodore. The big Australian iron has been replaced at the top of the sales charts by vehicles like the Mazda3 and Toyota Corolla and Hyundai i30, as well as the Toyota Hilux and Nissan Navarre pickups, all of which are made offshore. At the end of the quarter, the Commodore was just barely hanging on in 9th place, while its perennial rival the Falcon ranked a dismal 37th in the sales standings.

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Where Is Currency Manipulation When We Need It: Japanese Complain About A Weak Yen For A Change Fri, 26 Apr 2013 15:23:12 +0000

The retreating yen allowed Honda and Mazda to report bigger profits for the last quarter of their April to March fiscal year. Now the two are faced with a new problem, one that will also be shared by its Japanese peers: Higher costs of badly needed foreign investments.

“We are investing a huge amount, especially in new plants … the reality is that such costs related to growth are eating into our vehicle volume growth,” Honda Executive Vice President Tetsuo Iwamura told Reuters today.

The strong yen made exports expensive, but turned foreign investments into a bargain when they hit the books in Japan. In September 2012, the obscenely strong yen took a turn and  lost about 30 percent of its value compared to its highs.  Suddenly, exports make money, at the price of suddenly expensive investments.

Honda plans 700 billion yen of capital spending in the current financial year, and this money now buys 30 percent less bricks, mortar and assembly lines abroad.  Mazda wants to double capital expenditures to 130 billion yen. Honda and Nissan will announce results in two weeks, but will see themselves faced with the same conundrum.


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Weak Yen, New Models, Has Mazda In Reach Of Profitability Fri, 05 Apr 2013 12:00:15 +0000

A weak yen and a slew of new models has Mazda within sight of profitability. With Mazda heavily dependent on exports, the yen’s 16 percent decrease in value relative to the U.S. dollar could not have come at a better time for Mazda, as it readies a whole slate of new products for sale.

According to Bloomberg, Mazda is on track to turn a profit for the first time in nearly 5 years. Aside from the yen, an onslaught of new product and increased demand has helped Mazda revive its fortunes. The new Mazda6 will be followed by the Mazda3, a critical car for the Japanese auto maker. The two models account for half of all Mazda’s sales. Following these two will be the next generation Mazda5, which will incorporate SkyActiv technology and be produced for Nissan as the Lafeasta minivan for the Japanese market. A new MX-5 jointly developed with Alfa Romeo may be derailed by a possible sale of Alfa Romeo, but a plan to build a new subcompact for Toyota is still underway. Mazda plans to introduce a total of 8 new models incorporating SkyActiv technology by 2016.

The Toyota deal resulted in Mazda expanding capacity at its new Mexican plant from 140,000 annual units to 230,000. Despite the favorable exchange rate, Mazda will remain greatly exposed to the yen’s fluctuations as long as the majority of its cars are built in Japan and subsequently exported. The Mexican plant is a positive step towards localizing production, and should insulate Mazda from currency shocks in the crucial North American market.

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Fit To Lead Honda’s Quest For More North American Sales Mon, 05 Nov 2012 21:11:43 +0000

Honda is hoping that the next-generation Fit subcompact will see its volume nearly triple, going from 64,000 units per year to 200,000 by 2016.

Honda is targeting sales of 2 million units in North American by March, 2017. With sales currently resting at 1.7 million, responsibility for the sales increase would largely be up to the Fit.

The next Fit will have some advantages over the current car; production at Honda’s new Mexican factory will mean that the Fit won’t be hampered by poor exchange rates between the dollar and the yen, which make the Fit pricey, unprofitable and hard to come by at dealer lots. New technologies, body styles and fuel efficiency improvements will also be on offer without a substantial price increase, thanks to Mexican production.

Speaking to Automotive News, Honda President Takanobu Ito wouldn’t elaborate on the possible bodystyles, but did say that the next generation Fit Hybrid would be the first Honda to get a next generation IMA Hybrid system, with no carryover components from the previous generation. Unfortunately, we may not get the new Fit Hybrid either.

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Japanese Auto Lobby Wants Yen Intervention Fri, 14 Sep 2012 19:02:09 +0000

The strong yen is putting a major crimp on auto maker profits, and now, Japan’s auto lobby is asking the government to do something about it.

Akio Toyoda, head of both Toyota and the Japanese Auto Manufacturers Association (the lobby group in question), released a statement on behalf of JAMA members, stating

“The current foreign exchange level, which is far from the actual ability of the Japanese economy, goes much beyond the limits of what companies can do through efforts to cut costs. Japan’s manufacturing is facing a great crisis again, and if things remain this way it could have a further impact on employment,”

TTAC readers know that the current manufacturing climate in Japan is defined by a word letter word/acronym: GTFO. Nissan and Honda are looking to move their export production out of Japan, preferably yesterday. Toyota has committed to building 3 million vehicles in Japan annually, but that hasn’t stopped them from moving production of the Lexus RX and Toyota Yaris to other locales. Even Subaru is able to assemble vehicles at their Indiana plant, while Mazda, which designs their vehicles to be profitable at unfavorable exchange rates, is setting up shop in Mexico.

As if kuruma banare wasn’t bad enough.

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Say “As-Salamu Alaykum” To Yusuf al-Isuzu Fri, 20 Jul 2012 17:34:17 +0000

Isuzu is joining the “let’s flee Japan and the rising yen” bandwagon, and their latest venture involves assembling export-bound trucks in Saudi Arabia.

Just-Auto outlines Isuzu’s strategy, which has nothing to do with the VehiCross

Isuzu can minimize the effects of the strong yen and better compete for what is expected to be a growing market for commercial trucks as Gulf nations step up infrastructure investment.

Small and large commercial trucks will eventually be added in, with production reaching a total capacity of 25,000 units. As much as Isuzu is made out to be the butt of jokes in North America, their Middle East distributor network looks fairly robust – or at least more robust than the Lebanese parliamentary democracy.

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Honda Moving Civic Hybrid Production To Indiana Thu, 19 Jul 2012 16:38:57 +0000

Honda is shifting production of the Civic Hybrid out of Japan and over to the United States, as part of a plan to boost their Indiana assembly plant.

The Greensburg plant will get a boost in capacity, allowing it to produce 250,000 vehicles per year. The $40 million upgrade will add 300 new jobs, and bring production of the Civic Hybrid to the plant, which currently produces the standard Civic sedan, Civic Natural Gas and the Acura ILX.

Honda’s CEO has mentioned that a strong yen is making Japanese exports unprofitable, and until now, the only hybrid built in North America was the ILX. The addition of the Civic Hybrid should make life a bit easier, but Honda’s financial hurt with respect to Japanese-built hybrids remains. In Canada, the CR-Z and Insight have had their ordering combinations severely restricted. The Insight had one trim level (the LX, with steel wheels and wheel covers) and three color options available, while the CR-Z has two trims with only one color available on the upper trim, and two on the base. US-spec cars, of course, offer much more freedom of choice.

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Subaru Is Like, So Over China, Totally Moved On To America Thu, 17 May 2012 14:07:41 +0000

Subaru’s failed relationship with China hasn’t burdened Subaru with too much baggage; the automaker is already moving on, planning to expand its Indiana plant to build more Legacy and Outback models.

The 52,000 square foot expansion will be worth $75 million. The body assembly facility will be the main area of focus, and is expected to take capacity from 156,000 units to 180,000 units assuming no overtime is worked. 100 jobs will also be added. Further expansion, including an all-new plant, is also on the table for Subaru.

As far as we know, the rising yen and a need to focus on North America makes the case for expanded capacity on this continent even more compelling. One only needs to look at other small automakers like Mazda to see just how badly the rising yen can hammer a company – though Subaru does have the backing of parent company Fuji Heavy Industries, while Mazda is essentially on its own.

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Nissan’s Ghosn Worried About Power. The Power Of The Yen Mon, 07 May 2012 12:08:29 +0000

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.

Carlos Ghosn 2012 Beijing Auto Show - 01. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 02. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 03. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 04. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 05. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 07. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 08. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 09. Picture courtesy Bertel Schmitt Carlos Ghosn 2012 Beijing Auto Show - 10. Picture courtesy Bertel Schmitt Zemanta Related Posts Thumbnail ]]> 13
TTAC Photo Documentary: Carlos Ghosn Talks The Yen Down. And Nearly Succeeds Mon, 27 Feb 2012 18:45:47 +0000

Today, Nissan had invited distinguished guests, from the Governor of Kanagawa province all the way to the chief of the local fire department, to commemorate the 30th anniversary of the Nissan Technical  Center. Nissan’s main R&D hub is a city of 9,500, nestled into the foothills of Mount Fuji and surrounded by hills that keep it away from prying eyes. To get there, you must drive through a tunnel. Let’s see what we find here …

The not so distinguished members of the media totally ignore occasion and location, and ask Nissan CEO his favorite question: What does Carlos Ghosn think of yen and dollar?

That gets the CEO going!

“Usually, a strong currency is a reflection of a strong economy, or a growing economy.”

“We see nothing like this in Japan.  There is nothing that can justify economically the Japanese yen having appreciated so much for the last three years compared to the dollar and compared to the Euro.”

But then, didn’t the yen stop growing a few days ago? On February 2, the dollar bought only 76 yen, yesterday, the dollar fetched 81.6 yen. Isn’t that a positive sign?

“What we are seeing now is the beginning of what I hope should be logically a correction which should continue and bring the yen in more neutral territory.”

“I won’t say favorable territory.”

“The yen is moving from very unfavorable territory, to unfavorable territory, to hopefully neutral territory.”

Actually, while Ghosn talks, the yen regains strength. A dollar buys only 81 yen as Ghosn says this. How much (or little) is the Japanese yen worth, thinks the CEO?

“The neutral territory is around 100 yen to the dollar.”

As Ghosn says this, the yen retreats!


Ghosn keeps talking about his favorite topic.

“There are a lot of signals that the yen is going to weaken.”

“Hopefully, this trend will be amplified and supported by the authorities in order to help companies to cope with this headwind that had been hitting us for the last three years.”

What was that? The authorities?

The market hears that Ghosn won’t do it alone, but counts on governments to bring the yen into “neutral territory,” and immediately, the yen starts appreciating again.

As Carlos Ghosn exits stage left, the yen is back doing its old thing. It is getting stronger.

Ghosn chart 3 Ghosn chart 2 Ghosn chart 1 Carlos Ghosn Atsugi Technical Center 2-27-12-1. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-2. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-3. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-4. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-5. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-6. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-7. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-8. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-9. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-10. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-11. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-12. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-13. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-14. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-15. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-16. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-17. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-18. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-19. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-20. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-21. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-22. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-23. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-24. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-25. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-26. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-27. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-28. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-29. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-30. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-31. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-32. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-33. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-34. Picture courtesy Bertel Schmitt Carlos Ghosn Atsugi Technical Center 2-27-12-35. Picture courtesy Bertel Schmitt ]]> 8
Dropping Euro Makes Japanese Carmakers Want To Throw Up Tue, 17 Jan 2012 18:24:01 +0000

Everybody is talking about how much the Euro is losing against the dollar. At closer look, it is not alarming. Even during normal times I have seen lower Euro rates than the current $1.27. But wait until you look at the Euro from a Japanese perspective. (Like the one I have at the moment, sitting in a pittoresk cabin half way up Mount Fuji that could use better heat.) The anemic euro might discourage people like me from coming to Japan. What it really does is discourage Japanese automakers from exporting to Europe. A lot has been said about the strength of the Yen against the dollar. It’s nothing compared to the Euro. Against the Euro, the yen turned into Godzilla. This has Japanese automakers extremely worried. They don’t really know what to do about it.

The Nikkei [sub] made a table of manufacturers’ assumed exchange rates, i.e. the exchange rate that is in the budget, and of the drop in operating profit for each yen below that rate. The table is in yen. The dollar fetches around 77 yen ( it has fetched less) at the moment. If there is 1,000 in the right column, then think there are $13 million.

On Monday, the Euro momentarily dropped to 97 yen in Tokyo, its lowest level in about 11 years. Let’s run the numbers for Toyota. Assume the Euro stays there, that would cost Toyota $779 million in operating profit – in Europe alone. Ouch!

The pain is even greater for small Mazda. Says The Nikkei:

“Among automakers, Mazda Motor Corp. is most seriously affected by the euro’s deprecation because it has no plants in Europe. It exported some 200,000 Mazda 3s and Mazda 2s to Europe, including Russia, in 2010. But because exports are unprofitable at the euro’s current exchange rate, Mazda will try to make due for now with cost cuts.”

Mazda is aiming for a 25 percent cut in procurement and production costs, but that may not be enough. Even for automakers with local production in Europe, the euro is falling faster than they can adjust production.

The low Euro of course is a boon for European automakers, especially for the export-heavy Germans. I would love to see a table that discloses how much more money they make for every cent the Euro sinks, but I have never seen such a table.

If you look closely, and with an open mind, you see something else that is highly alarming: The dollar/euro rate is masking the fact that both are dropping rapidly. Euro and dollar fall, the euro just falls a little faster than the greenback It is like two people who just fell out of another airplane. One watching the other guy, the drop might look benign. Viewed from the bottom (and this is where Japan should be,) it looks like a ….. get out of the way!!!!

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The Exodus From Japan Begins In Earnest Sun, 04 Dec 2011 19:36:02 +0000 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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Ghosn To Japan: Do Like Switzerland, Or Become Like Switzerland Sat, 03 Dec 2011 17:09:05 +0000

For quite some time, Carlos Ghosn had been the booh-leader against the strong Japanese yen. At the sidelines of the Tokyo Motor Show, he launched into his so far strongest worded tirade against the “abnormal” yen. He told the Japanese government to learn from the Swiss, and to basically peg the yen to another currency.

Currently, about half of the Japanese auto production is exported. At a loss or at the very least at no profit. No sane business person will invest into a country with no return, says Ghosn. Investments and jobs will go elsewhere:

“The main problem we are facing today is the uncompetitive value of the yen. The yen is not so much a problem for the Japanese carmakers. The yen is a problem for Japan. Japanese makers are moving production little by little outside of Japan.  The car industry employs between four and five million people in Japan, and more than half of the industry works for export. If the car industry goes, a substantial part of employment is going to go with it.”

What the strong yen does is strengthen the industries  of Thailand, China, Mexico, or other emerging export bases. Ghosn had said this for quite some time. The answer was that the Japanese government is helpless, that no amount of quantitative easing seems to be able to stem the strengthening of the yen. This time, Ghosn says what should be done:

“People say there is no solution.  Wrong! Wrong! Look what the Swiss have done. Switzerland is a great benchmark of how a small country has drawn a line in the sand. They said: Enough is enough, we will not allow the Swiss Franc to rise above a certain level against the Euro. Everybody laughed, but they stuck with it. What we are encouraging is that the government of Japan takes the same stance. If Japan draws a line in the sand, the market will listen.”

If the Japanese government will not listen to the plight of its carmakers, carmakers won’t suffer, Japan will:

“Japanese car makers will survive this. They already are global. What we are saying is this: If there is nothing that is done, don’t blame us for the consequences.”

In other words: Follow the example of Switzerland, which had a similar problem with its rising currency, until it was effectively pegged against the Euro. Or watch the Japanese industry collapse to  Swiss size.

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Japanese Auto Industry: We’re Outta Here Thu, 06 Oct 2011 19:29:02 +0000  

Again and again, Japanese automakers had been warning that they cannot stomach the strong yen, and that it will eventually cost jobs. Today, the yen stood  at 76.6 to the dollar, and Japanese carmakers are packing.

Mitsubishi  originally wanted to sharply increase Japanese production to make up for lost volume due to the tsunami. The company now “suddenly halved its plan to hire about 800 temporary workers by the end of September, as the yen’s appreciation has been eating into the profitability of its exports to Europe,” says The Nikkei [sub]. Mitsubishi’s President Osamu Masuko told reporters in a press conference today:

“We are fighting to adjust ourselves to the currency’s levels. But these efforts sometimes get wiped out in a single day. Don’t you think there is a growing sense of futility?”

Mitsubishi tried to slash costs as much as possible by becoming leaner and by buying parts abroad. “But the room for reducing costs further is getting smaller,” said Masuko.

A few weeks ago, Nissan’s CEO Carlos Ghosn had warned that a Yen that is not going back to “normal” “will provoke a rethinking of our industrial strategy.”

Some of this rethinking became effective today.

As expected, Nissan announced today at the governor’s palace in Rio de Janeiro that it will plunk down 2.6 billion Brazilian reais ($1.5 billion)  for a new plant in Resende, near the ports of Itaguai and Rio de Janeiro.. When completed 2014, the plant is expected to crank out 200,000 units per year.

Nissan plans to introduce 10 new models to Brazil before 2016.

With only approximately 25 percent of its worldwide capacity in Japan, Nissan should be the least affected of Japan’s majors.

“Just as Nissan has demonstrated in China, Russia and India, we are investing in the regions with the most potential for growth,” said Carlos Ghosn. And that’s not Japan.



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Ghosn On Crusade Against Japanese Yen Wed, 28 Sep 2011 10:57:45 +0000

If anyone again mentions that the Japanese manipulate their currency to get an unfair advantage in international markets, then I will strangle him.  Or make him pay my Tokyo restaurant, taxi, and even subway bills in converted dollars. Strangling would be the more humane punishment.

Nissan CEO Carlos Ghosn has an even more painful option in store: He’ll leave the island. “If the Japanese government wants to really safeguard and develop employment, then something has to be done,” Ghosn told Reuters editors Paul Ingrassia and Kevin Krolicki in an interview in New York.

Ghosn is on a worldwide crusade against the “abnormal” yen. Last week in Kyushu, Ghosn announced a rethinking of Nissan’s production presence in Japan if the yen hasn’t returned to an (unspecified) normalcy six months from now. A week later in New York, Ghosn said:

“We have been talking about this as an industry for a while. Unfortunately, it keeps happening. It looks like whatever effort has been done so far has not delivered results.”

“We have to make investment decisions all the time. This is one of the factors that we have to consider when we look at a project and say are we going to do it in Japan or are we going to do it in another country?”

The yen doesn’t seem to listen. A dollar buys you 76 yen, and 76 yen will buy you next to nothing in Japan. Attempts to bring down the yen have failed.

Investment decisions are made on a long-term basis. It appears as if the decisions have already been made at Nissan, and Ghosn is simply softening the blow that is soon to come.

Already, Nissan and other Japanese manufacturers are growing their capacity abroad with no expansion at home. Percentage-wise, the Japanese capacity shrinks. Nissan had made commitments to keep Japanese production at 1 million units. Toyota had committed to 3 million units. Even that is no longer sacred. Both have made noises that either the yen drops or their Japanese production will. At some point, moving production abroad will also mean that engineering follows. Engineering without attendant production is like surgery without a body.



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Honda Joins The Guanajuato Gold Rush, Toyota On The Way? Sat, 13 Aug 2011 00:08:47 +0000

Around the time of the founding of the United States, the Mexican state of Guanajuato became home to of the one of the biggest silver mines in the world, which produced as much as 2/3rds of the world’s supply of silver at its peak. Today it’s not precious metal that’s driving Guanajuato’s booming economy, but cars, as the world’s automakers flock to Central Mexico. Between 2005 and 2008, GM, Ford and Michelin dumped $1.8b into production in the state, and the expansion is still picking up steam. In the last year, Volkswagen invested $800m in engine production capacity in Silao, Pirelli built a $210m facility and Mazda just revealed it would build a new compact car plant there in June. Toyota is said to be the next to set up shop in Guanajuato, but for the moment Honda is the latest automaker to announce new operations in Guanajuato, as Automotive News [sub] reports the Japanese automaker will spend $800m on an assembly plant there. Honda, which is fleeing a strong yen which has battered Japanese exports, will start building 200k subcompacts per year in 2014. Clearly Guanajuato’s got it’s automotive mojo flowing… but are the days of new Japanese transplant factories in the US over? Is it only a matter of time before the coyotes start smuggling Detroiters into Silao, Celaya, and the Puerto Interior??

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Japanese Automakers And Unions To Government: Lower Then Yen, Or We are Out Of Here Thu, 09 Jun 2011 14:20:49 +0000

In an (especially for Japanese tastes) strongly worded joint statement, Toshiyuki Shiga. Chairman of  Japan Automobile Manufacturers Association, and Koichiro Nishihara, President of the Confederation of Japan Automobile Workers’ Unions threw down the gauntlet to the Japanese government. Executive summary: “We are sick as hell of the high yen and we can’t take it anymore. Do something, or kiss those jobs sayonara.”

Current foreign exchange rate levels represent, for the yen, an appreciation that not only far surpasses all prior projections by Japanese automakers, but also totally fails to reflect Japan’s economic fundamentals.

Over the decades, the Japanese automobile industry has carried out a steady series of cost-cutting and other measures necessary to maintain its international competitiveness.  The yen’s present exchange rate level, however, clearly exceeds the limits of such efforts.  The continuation of this trend seriously threatens the ability to maintain the foundations supporting the manufacturing craftsmanship that has long been the basis of Japan’s competitive edge.  There are also fears that these currency market conditions will have a profoundly adverse impact on employment throughout Japan’s motor industry, including the parts supply and other vital sectors.

Having been heavily affected by the devastating March 11 earthquake and tsunami, automobile production in Japan is at last moving towards recovery.  The yen’s excessive appreciation risks gravely hampering this nascent recovery and, in doing so, imperiling the resurgence of Japan’s weakened economy.

In view of these realities, JAMA and the CJAWU strongly demand that the Japanese government take swift and effective action aimed at reducing the yen’s current strength.

In other countries, talk like this would be shrugged-off as posturing. A joint statement by employers and unions would raise eyebrows anywhere. In highly polite Japan, such a statement is the last step before a suicide note. Shiga is also the COO of Nissan, a company far less exposed to the high yen than Toyota or Honda. One dollar buys 80 yen today.

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Buy Your Toyota Now. These Prices Won’t Last Thu, 11 Nov 2010 14:41:08 +0000

Unless you plan a trip to Toyko, you probably aren’t concerned about the exchange rate of the yen. Is a Japanese car on the list of your possible purchases? Then you should be concerned. Those prices will go up.

Toyota will raise its prices in the U.S. and Europe to cope with the strong yen, says The Nikkei [sub]. But raising prices is like sex between porcupines: You need to do it very carefully. Hyundai is just waiting for such a move.

According to The Nikkei, Toyota “will have to get the timing and size of the price hikes right to avoid a plunge in demand for its cars.” Easier said than done. Toyota’s sales are already a bit iffy, the SUA inquisition has left its marks that take years to heal.

But Toyota ” cannot just sit idly by while the yen keeps rising. We will raise the sticker prices of our cars,” Toyota Senior Managing Director Takahiko Ijichi told The Nikkei. They will also focus more on higher-margin models.

Higher prices in the U.S. and Europe? That will cost them.

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Toyota To Japanese Government: If The Yen Gets Any Stronger, We Go Sat, 06 Nov 2010 12:50:15 +0000

Despite the riproaring profit numbers, there is trouble in Toyota City. The ever appreciating yen is gobbling up ToMoCo’s profits. Message from Toyota to the Japanese government: “Do something, or we leave.”

Reports The Nikkei [sub]: “In comments that appeared to be aimed at Japanese currency authorities, Satoshi Ozawa, Toyota’s chief financial officer, said the carmaker might move more production outside Japan if profits in the six months to March declined further than expected.”

Translation: Bring the stronger and stronger yen in check, or you’ll be writing unemployment checks instead. Koji Endo, an automotive analyst at Advanced Research Japan already says that Toyota’s carmaking business is losing money, while their financing business is bringing in the bacon.

According to The Nikkei, “the warning, delivered at a quarterly earnings briefing in Friday, will add to pressure on the government over the yen’s ascent toward a 15-year high against the dollar. Akio Toyoda, Toyota’s president, last month called the surge a “big problem” that threatened all of Japanese industry.”

Now before the contingent that hasn’t passed currencies 101 yells “currency manipulation,” here a short primer. There is “currency manipulation,” there is “quantitative easing,” and there is “central bank intervention.” Just like with terrorists and freedom fighters, it depends on which side you are on. Maybe the Japanese should ask Bernanke on how to weaken a currency. He’s quite good at it at the moment. Recently, the stronger yen was a function of the weaker dollar.

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Honda: Stronger Yen? We’ll Make it Up With Volume Thu, 04 Nov 2010 08:12:02 +0000

Honda is finally doing something against the ever stronger yen: They are selling more cars to make up the difference. Honda’s CFO  Yoichi Hojo told The Nikkei [sub] today that his company can make profits, even with the yen at its current near-record high against the dollar, if it can increase its global sales by 200,000 vehicles per year. The figure is already in their current budget. In the current fiscal, which ends March 31,2011, the want to sell 3.615m vehicles worldwide, modestly up from 3.392m a year earlier. They’ll probably do better.

The Nikkei calls the comments “a rare example of optimism in the Japanese auto industry, as the strong yen cuts into profits and forces automakers to slash their earnings forecasts for the rest of the fiscal year.”

It’s not just the strong yen. It’s also the anemic dollar. Bernanke’s announcement of “quantitative easing” made the greenback take out the critical 1.40 level against the Euro. Currently, a buck buys 81 yen, or just about nothing in Tokyo. Don’t plan on any trips abroad this coming year.

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Nissan. Coming Soon To A Factory Near You? Tue, 26 Oct 2010 16:33:13 +0000

As the Japanese Yen reaches new highs against the US Dollar, so does the anxiety in Japanese boardrooms. How does an export-heavy country like Japan cope with an ever appreciating currency? That’s the topic of conversation at Nissan HQ. The Wall Street Journal reports that Nissan’s COO, Toshiyuki Shiga, is concerned. Extremely concerned.

“We can’t adequately express our concern about the sharp yen rise on our earnings by simply saying…we are worried about it. The company is now working with a sense of crisis,” said Mr Shiga at a press conference. He kept quiet, however, when asked whether Nissan would change its assumption for the US dollar for the fiscal year. Right now, Nissan have assumed that the US dollar is worth 90 Yen. At time of writing this article, it’s just over 81 yen. There was some good news, however, as Nissan has already earned half of the operating profit it expected to make for the fiscal year in its first quarter. So barring a disastrous 3 quarters, Nissan should be fine for this fiscal year. But then came more bad news. Mr Shiga said that not only are they decreasing exports from Japan and increasing imports, but they want to speed up moving production abroad for the long term. Oh dear. Is that the sound of worried Japanese unions and government officials I hear? On the plus side, Nissan’s factory in Tyne and Wear in the UK is viewed very favourably by Nissan’s top brass. Also we’ve got a weak pound against the Euro at the moment. Any extra production would be gratefully received. Every cloud…

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