Don’t count Nissan Motor Co. (7201) President Carlos Ghosn among those impressed with new Japanese Prime Minister Shinzo Abe’s ability to weaken the yen against all major global currencies.
“We are way long from what I consider a neutral territory” of about 100 yen to the dollar, the Brazilian-born president of Japan’s second-largest automaker told reporters during a year-end briefing at Nissan’s headquarters in Yokohama, Japan. “Please bring it back to the neutral territory so that we can do our job without a handicap.”
Ghosn’s exchange-rate dissatisfaction, echoed by Toyota Motor Corp. (7203) President Akio Toyoda, underscores the frustrations of manufacturers in a country where the yen surged almost 40 percent over four years to a postwar high in 2011. While pledges of weakening the currency and stoking inflation helped Abe and his party win a landslide victory in Japan’s mid-December elections, currency forecasters predict the yen may strengthen from current levels.
The yen has tumbled more than 10 percent this year, including a 4 percent drop in the past month, making it the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
Prior to 2012, it had been the best-performing major currency for three of the preceding four years, undermining Japanese automakers’ ability to compete against Detroit-based General Motors Co. (GM:US), Germany’s Volkswagen AG (VOW) and South Korea’s Hyundai Motor Co. (005380)
Toyoda, who heads Japan’s largest automaker, said at a separate year-end briefing last month that compared with decades ago, the yen has more than quadrupled.
The exchange rate is at a level that is “beyond what companies can cope with” and continues to hurt Japanese manufacturers, Toyoda said on Dec. 20, speaking as chairman of the Japan Automobile Manufacturers Association.
Ghosn, who made his comments before Abe’s swearing in as premier, has led Japanese automakers in moving production outside Japan in the past years to counter the yen’s strength. Nissan made three in four vehicles outside Japan, compared with about half for Toyota, according to data compiled by Bloomberg.
Every one-yen move against the dollar will have 20 billion yen ($232 million) and 35 billion yen impact on Nissan and Toyota’s annual operating profits, respectively, according to the companies.
Regarding China, where a territorial dispute with Japan led to a consumer backlash that hurt sales of Japanese brands in the world’s biggest auto market, Ghosn said the company will continue monitor to assess how long the slump persists.
Nissan, which announced in June that it will invest 5 billion yuan ($803 million) to build a new plant in Dalian, northeast China, doesn’t see risks to current and planned capacity, Ghosn said. The country accounted for about a quarter of its worldwide sales in 2011.
“If this turmoil is going to have a long term impact on Chinese consumers shying away from Japanese brands, obviously we will have to reflect it in our long-term plans,” he said.
Nissan will be “watching very carefully the first few months of each government” in Japan and China, before making decisions on further investments in China, Ghosn said.
The automaker’s sales have fallen every month in China since September, when large-scale anti-Japan protests broke up and consumers shunned Japanese products over the disputed islets known as Senkaku in Japanese and Diaoyu in Chinese.
“Japanese carmakers may not have to change their strategies in China immediately,” said Satoru Takada, a Tokyo- based auto analyst at Toward the Infinite World Inc. “But they are approaching closer and closer to the timing that they will have to re-examine the plans.”
Abe, who was sworn in as prime minister on Dec. 26, also campaigned by pledging to defend Japanese territory and waters. China hopes Japan will stick to its “path of peaceful development and play a positive role in maintaining peace in Asia,” Foreign Ministry spokeswoman Hua Chunying told a briefing in Beijing Dec. 26.
Ghosn said he expects 2013 to be another record year for the global auto industry, with total sales rising 3 to 4 percent to 82 million to 83 million vehicles.
Demand will mainly come from China, the U.S., Russia, India, Brazil, the Middle East and Southeast Asia, while Europe will extend declines and Japan is “very likely to contract” if the government doesn’t intervene to boost consumption, he said.
Toyoda said he hopes bilateral ties between Japan and China normalize as soon as possible to prevent further impact on auto sales.
“Next year, I want it to be a peaceful year where nothing goes wrong,” said Toyoda. “A year where we can go to work every day, build every day, and sell every day. That’s it.”
Ghosn said Nissan remains committed to electric vehicle technology even as the sales of EVs fall short of the company’s target in 2012. The maker of the battery-powered Leaf vehicle said last month that it plans to introduce or refresh 15 hybrid models by March 2017.
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