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Friday, October 24, 2003

Currency fluctuations high on minds of auto executives at Tokyo show

Associated Press
Chiba, October 24

Tokyo's Motor Show is all about futuristic designs and new technology. But
this year, auto executives are also talking about fluctuating currencies,
which can make or break their sales across the world.

"We believe the weak yen has given Japanese automakers an unfair advantage
as they compete in the US market," said US automaker General Motors' chief
financial officer John Devine, ahead of the show's public opening on
Saturday.

The Japanese Government recently intervened in the exchange market to prop
up the US dollar and so keep the yen's value down. Devine said this gas
effectively subsidizes Japan's carmakers and gives them "windfall profits."
Japanese auto giants like Toyota and Honda make more than half their profits
in North America and so exchange rates are crucial.

A weak yen not only means Japanese exporters can keep car prices low, their
overseas earnings gain in value as well. The good times are here for the
Japanese, but there's growing concern that they won't last. A strong yen
could hurt Japan's fragile economic recovery at a time when exports are the
main engine of growth.

Protests by American automakers aren't generating the heat of the late
1980s, when workers, politicians and executives there raised fears that
Japan was taking over the US auto market. Even so, the grumbling is growing
louder these days as Japanese car sales boom in the United States.

In August, Toyota outsold the Chrysler division of DaimlerChrysler in the US
market for the first time. The combined US market share of the Big Three,
which includes Ford and General Motors, fell to an all-time monthly low of
57.9 per cent in August. The combined market share of Japanese automakers,
in contrast, edged up to about 30 per cent. Such gains have come even though
Japanese automakers on average spend far less than US automakers on
incentives, or discounts on car purchases, to win over drivers.

During a visit to Tokyo earlier this month, US President George W Bush asked
Tokyo to end its currency interventions and let market forces determine the
strength of the US dollar, according to US officials.

But Japanese officials have repeatedly said they're ready to step in if
currency swings become too volatile.

The greenback was trading as high as the 120 yen level earlier this year,
but has tumbled lately to between 109 and 110 yen.

The rate of "125 was a ridiculous level for the yen to be at, and to have
people arguing that it should be even weaker was, I think, somewhat
ludicrous," Ford's chief operating officer Nick Scheele said at his
automaker's booth at the Tokyo show, adding that the yen will approach 100
yen soon.

One feature of the global auto industry has changed since the 1980s. Many
Japanese automakers have moved much of their production to where the cars
are sold -- skirting the risks of swaying exchange rates.

Increasingly, Japanese automakers are been viewed as good US corporate
citizens that provide jobs for American workers. Nissan chief executive
Carlos Ghosn reacted calmly when asked about the currency question at the
auto show. Nissan has expanded overseas production, opening a new plant in
Mississippi in the United States this month. It's done so, he said, to be as
"immune" as possible to currency changes.

"One day, it's favorable. One day, it's not. And you never know why, and you
never know when," Ghosn said. "Frankly, you can spend all the time in the
world discussing about these points. But it's beyond your control anyway."

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