Yen and U.S. slump to put brakes on Japan auto growth
By Nobuhiro Kubo and Nathan Layne
TOKYO (Reuters) - The seemingly unstoppable profit machine that is the Japanese auto industry is about to come to a grinding halt.
The sector, led by Toyota Motor Co (7203.T: Quote, Profile, Research), Nissan Motor Corp (7201.T: Quote, Profile, Research) and Honda Motor Co (7267.T: Quote, Profile, Research), has managed to grow profits for seven straight years by expanding sales in overseas markets and steadily cutting production costs.
But a slide in profits looks increasingly likely in the next business year from April due to a slowing U.S. market, rising costs for steel and other materials, and the dollar’s tumble last week to a 13-year low against the yen.
Daiwa Institute of Research (DIR) estimates the combined operating profit of Toyota, Nissan, Honda, Suzuki Motor (7269.T: Quote, Profile, Research), Mazda Motor (7261.T: Quote, Profile, Research) and Fuji Heavy (7270.T: Quote, Profile, Research) would drop by about one-fifth if the dollar stays at 100 yen through the year.
“It would take a miracle to achieve higher profits with the dollar at 100 yen,” said DIR analyst Shingo Hayashi.
A stronger yen makes cars imported from Japan less competitive abroad while also slicing into profits made in the U.S. when brought back to Japan.
The numbers at stake are not small. Every one-yen gain on the dollar cuts into Toyota’s operating profit by about 35 billion yen. So if the dollar settles at about 100 yen, Toyota could see more than $4 billion wiped away by currency fluctuations alone.
And the nightmare for Japan’s car makers does not end there. Continued…
Tags: Auto, auto industry, car makers, cars, Honda, japanese auto, Mazda, Nissan, reuters, s market, Suzuki, Toyota, toyota motor, yen
