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UPDATE 3-Toyota, Nissan mull strategy shift on strong yen
November 17, 2011 / 8:01 PM / 6 years ago

UPDATE 3-Toyota, Nissan mull strategy shift on strong yen

* Toyota may seek tie-ups akin to Ford hybrid truck deal

* Nissan CEO on yen: “Fix the exchange rate. Fix it.”

* Yen hit a record high against U.S. dollar in late Oct.

By Bernie Woodall and Nick Zieminski

Nov 17 (Reuters) - The strong yen is forcing Toyota Motor Corp and Nissan Motor Co Ltd to consider changes in production plans and alliance strategies, the top executives of both Japanese automakers said on Thursday.

The yen, which hit a record high against the U.S. dollar in late October, has undercut profits for Nissan and Toyota, which both build vehicles in Japan for overseas markets.

To offset the strong yen, Toyota may “deepen alliances” with suppliers and dealers, President Akio Toyoda said during the opening of a Toyota plant in Mississippi that will build Corolla cars now being manufactured in Japan.

At a separate event in New York, Nissan Chief Executive Carlos Ghosn said the strong yen may force Nissan and other companies to shift production outside of Japan.

“What’s taking place now is many projects are now basing their manufacturing outside of Japan because they just cannot survive with this 77 yen to the dollar and they have absolutely no visibility they’re going to get out of (this),” Ghosn said in a speech at the Japan Society in New York.

So far this year, the dollar has fallen more than 5 percent against the yen . Since 2007, the dollar has tumbled more than 35 percent against the yen.

The yen’s strength has raised questions about the rationale of Toyota’s commitment to producing at least 3 million cars in Japan each year. By contrast, Nissan has been more willing to shift production abroad.

“We need just one thing,” Ghosn told the Japan Society in New York. “Fix the exchange rate. Fix it.”

The soaring yen makes it cheaper for Nissan and Toyota to buy commodities and potentially buy overseas assets. But it also diminishes earnings from major auto markets such as the United States.

Rather than buy companies outright, Toyota is more likely to enter partnerships similar to one it entered earlier this year with Ford Motor Co to build hybrid trucks and SUVs and develop phone, navigation and entertainment systems, Toyota Motor Sales President Jim Lentz said.

That deal will allow Toyota to tackle an area of vehicle technology where it has lagged.

“We are not good at acquiring companies. We are bad at doing that,” Toyoda said when asked whether the strong yen could trigger a change in the company’s acquisition strategy.

“Perhaps we would like to deepen alliances” with suppliers and dealers, Toyoda said.

Toyoda was in Mississippi to mark the long-delayed opening of its fourth assembly plant in the United States, which was originally expected to open last year.

The plant produces about 40 cars per day and eventually will ramp up to an annual capacity of about 150,000 vehicles, Toyota officials said. The Corolla is Toyota’s second-best seller in the U.S. market after the Camry sedan.

The new plant will help Toyota battle the strong yen, Lentz said. The plant, near Tupelo, Mississippi, will largely displace Corollas now made in Japan. Most Corollas for the U.S. market are made in Ontario.

About 70 percent of Toyotas sold in the United States, Canada and Mexico are built in North America.

Toyota’s luxury brand Lexus is more exposed to a strong yen than its mainline brand. As a result, Toyota is considering making a second Lexus product at a North American plant, Lentz said. He said it was too early to say when that might happen.

The Lexus RX sport utility vehicle, which this year has comprised more than 40 percent of the brand’s total U.S. sales, is made in Ontario and is the only Lexus product not made in Japan.

“I think over time, we just need to study when it makes sense for us to bring other volume Lexus products into the U.S., or North America,” Lentz said. “No decisions have been made, but it’s something we’re looking at.”

Lentz said Toyota would be cautious when making moves based on the strength of the yen.

“One thing we have to be cautious about and that is the yen today is extremely strong,” said Lentz. “These (production) decisions take four and five years to pull off. What you don’t want to do is make a decision when the yen is at 75 (to the dollar) and have it end up at 95 and you’ve just invested $1 billion.”

On Thursday, the U.S. dollar slipped 0.1 percent to 76.979 yen .

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