Ghosn Wants The Yen Go Lower, Mulally Disagrees
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.”
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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The American public does not lack informational sophistication on currency issues, nor are companies like Ford engaged in unwarranted anti-Japanese lobbying. The US has a substantial trade deficit with Japan (and other countries). Prolonged trade deficits suggest the yen should be trading considerably higher. As long as Japan purchases US securities to alter exchange rates and boost exports, they are engaged in currency manipulation, regardless of the actual spot exchange. If Japan needs strong demand from the American middle class, what can they possibly hope to gain by making the American middle class dirt poor? The futility of currency manipulation has been twice realized, first by the Asian Crisis and now by the US subprime mortgage crisis. Many nations have demanded a half-step towards sanity. Japan, it seems, is getting incrementally worse. I'm sympathetic with Japan's plight, but they have chosen to go-it-alone, and a few specious economic arguments against American companies is not going to change the nature of Japan's economic policy.
On a lighter note; Ghosn must be one of the most expressive car CEOs anywhere. He is truly a man of a thousand faces, and much has been written about this trait here and everywhere. But has anyone noticed that his female translator has started acquiring that same trait?