Subonda and Mitsazda Bullish On Production, Sales, Profits
Business Week's ed forgot the "compare" side of the "compare and contrast" assignment to scribe Ian Rowley re: Japanese and American automakers' fortunes. Wander 'round TTAC for the U.S. side of the equation (hint: falling market share is rarely a good thing). For Japan, BW tells us that reduced targets for operating profits paint a bleak picture for Honda, Mazda and Mitsubishi (trimmed by 32, 29 and 45 percent, respectively). But it ain't all that bad, when you think about it. "All $3 billion of the projected decline in Honda's operating profitability is explained by the yen's sudden rise against the dollar and other currencies. Against the greenback, for example, Honda is projecting a dollar-yen rate of 100, compared to an average of 114 in the previous year. That alone is enough to wipe off $2.4 billion from profits when sales made in dollars are translated back into yen. Yet when it comes to selling vehicles Honda shows few signs of slowing down, despite weak market sales in the U.S. and Japan, its two biggest markets." All the Japanese majors are expanding production– and for good reason. "In markets including China, India, and the Middle East there is a major change in their trend toward higher ownership levels and the Japanese majors are well placed to benefit from this trend,' says Deutsche Bank's Sanger. After a tough 2008, look for an earnings recovery at Japan's carmakers." [NB: Toyota and Nissan have yet to sign-in with their numbers. We'll update you as and when.]
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What is the likelyhood the Japanese will invest the dollar profits directly into say the U.S. rather than lose value by converting them back to Yen to bring home to Japan? It seams like it would make sense for them to boost design and engineering in the U.S. with those profits and take advantage of the dollars buying power as far as salaries and facility costs in the U.S. at least while the dollar is so low. I can't see them boosting production too much because of the declining auto sales. It would be ironic to see them invest even more in our country while Detroit keeps divesting.
Nah... they will most likely put the money in Japan or in emerging markets like China, India and Russia. Of course some $$$ will go to the US but... Emerging markets have a huge potential and will demand, as the US, Japan and Europe, cars designed and tailored to their specific needs.