NEW YORK (Reuters) - Despite the yen’s recent retreat from record highs against the dollar it remains at a level that is driving Japanese automakers to shift production outside their home base and to North America in particular, industry executives said this week.
The currency’s strength has eaten into automakers’ margins and made it more costly to build vehicles at factories in Japan.
Nissan Motor Co (7201.T) is planning to move output of its Infiniti brand outside Japan, likely to North America or China, Chief Executive Carlos Ghosn said on the sidelines of the New York auto show on Wednesday. He called the yen’s strength a “major handicap” for the luxury nameplate.
Toyota Motor Co’s (7203.T) youth brand Scion has also started to explore the option of building cars at one of Toyota’s U.S. assembly plants and is aiming to boost U.S.-made components, an executive said.
“It pushes our whole engineering team to look at every item even closer because of the yen situation,” said Jack Hollis, head of the Scion brand, while adding it was “nowhere near a decision point” on its production plans.
One dollar bought 82.36 yen in Wednesday trading, having bounced off a record low at 75.31 plumbed last October.
Japanese authorities have intervened to weaken the currency, worried the yen’s strength could sap exports and slow Japan’s economic recovery from the March 2011 earthquake and tsunami.
A soaring yen makes it cheaper to buy commodities and overseas assets, but it also diminishes earnings from major auto markets such as the United States.
That has made things difficult for Infiniti, which is a long way off from meeting Ghosn’s goal of making up 10 percent of global luxury sales.
“We don’t want to find ourselves in a situation where you’re producing in a country with a strong currency and selling in country where the currency is much weaker,” Ghosn told reporters.
Ghosn said he expected sales of the Leaf electric car would jump after the company moves output of the vehicle to Tennessee this summer. Nissan says the yen has made it difficult to build enough Leafs to sate demand.
CUTTING OFF THE ‘COROLLA BRIDGE’
“The dollar yen has obviously been a challenge for the company,” said Toyota’s U.S. sales chief Bob Carter, whose company imports some Toyota Corolla cars from Japan across what Carter calls a ‘Corolla bridge.’
A second shift at a Toyota plant in Mississippi is coming online, Carter said, and the company is working to boost the portion of North American parts on its vehicles.
“Companywide, about 70 pct of our production is built in North America,” Carter said. “That’s going higher now that Mississippi is building Corolla, cutting off the Corolla bridge, so that will be approaching 80 pct (this year).”
Mazda Motor Corp (7261.T) is building an assembly plant in Mexico that will be operational in 2014, said Jim O‘Sullivan, President and CEO of Mazda’s North American operations, which import some vehicles from Japan.
“The exchange rate has put pressure on everybody,” O‘Sullivan said. “It does create stress in the system.”
Mazda also confirmed last month it was offering buyouts to U.S. white collar employees, without specifying how many jobs it expected to cut as a result.
Honda, too, is expanding production in Mexico. The carmaker, which started making cars in Ohio in 1982, says 85 percent of its North American volumes are sourced from North American factories.
“Once we have that factory, probably our ratio will be higher,” American Honda CEO Tetssuo Iwamura said.
Additional reporting by Deepa Seetharaman; Editing by Jonathan Hopfner