Toyota: Building economy cars in Japan not feasible as yen climbs
ALAN OHNSMAN
Bloomberg News
Toyota Motor Corp., the biggest exporter of autos to the United States, is trying to cut production costs for Yaris and Corolla cars as a rising yen makes it unprofitable to build economy cars in Japan for sale abroad.
"Given the current exchange-rate situation, it isn't feasible, in terms of a business model, for us to produce Corolla or Yaris in Japan and export them," Atsushi Niimi, executive vice president for global manufacturing, said in an interview in San Antonio on Friday. "We're working very hard to reduce costs to maintain the appeal of these cars."
Toyota, the world's largest automaker, and its domestic competitors are scrambling to combat the surging yen, which is up at least 3 percent against each of the world's 16 major currencies in 2010. Speculation that Europe's sovereign debt crisis will worsen and the U.S. economic recovery will slow has boosted demand for the relative safety of the Japanese currency.
The yen traded at 85.38 against the U.S. dollar as of 8:08 a.m. in Tokyo, from 85.51 yen in New York on Aug. 6, when it reached 85.02 yen, the strongest since Nov. 27. The currency is up more than 7 percent against the dollar and more than 14 percent against the euro this year.
Toyota sold 325,398 Toyota, Lexus and Scion cars and light trucks imported to the United States this year through July, down 15 percent from a year earlier.
The total is more than four times the 75,357 imports sold by Tokyo-based Honda Motor Co., which sells the highest proportion of North American-built vehicles among Asian automakers in the United States. Yokohama-based Nissan Motor Co.'s import sales grew 19 percent through July to 159,904, the second-highest volume after Toyota.
Shares in Toyota fell 1.3 percent to 3,075 yen as of 9:29 a.m. in Tokyo. The stock has declined 21 percent in 2010.
For now, Toyota is focused on productivity improvements at its Japanese plants to compensate for exchange-rate swings, Niimi said at the Toyota City, Japan-based company's Texas factory.
"By way of technological innovation, we'd like to realize a high level of productivity, as well as a low amount of investment, so we can maintain a system where we can export some vehicles overseas," he said, without elaborating.
While Toyota makes Corollas in Canada, it's exporting more of the compact cars, with a base price of $15,450, to the United States from Japan after a California joint-venture plant that built the model closed in April. That will continue until Corolla assembly starts at a Blue Springs, Miss., plant that's to open in September 2011, said Jim Wiseman, a Toyota spokesman.
Toyota is also studying whether subcompact Yaris cars, its cheapest U.S. model with a starting price of $12,605, can be built and sold at a profit in North America.
"That's the problem we have to solve," Niimi said.
The carmaker is also planning to start production of Prius hybrid cars in Thailand as early as this year, the Nikkei newspaper reported on Aug. 7, without saying where it got the information. Keisuke Kirimoto, a Tokyo-based spokesman for Toyota, said he couldn't comment on future product plans when asked about Thai production of the Prius.
Nissan, Japan's third-largest automaker, has already moved some production overseas from Japan, citing the nation's rising currency. The company has begun assembling its new March small car in Thailand and will start making it in Mexico in 2011. Nissan is also investing $600 million in assembly plants in Mexico to boost exports from that country to Latin America and the United States.
Yoichi Hojo, Honda's chief financial officer, said last week if the yen stays at or below 85 to the dollar, Japan can't earn enough from exports to pay for commodities from overseas.
"If the Japanese economy is forced to create a production structure based on 85 yen to the dollar, that would be disastrous," Hojo said.
"The yen could reach 80 or 75 to the dollar given the current momentum," said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co.
The Yaris is the only small car left that isn't made here. I think Toyota wants that changed. The fact that the car costs so much now and is selling in declining numbers probably means the next one will be made here. But on the contrary, much of their lineup is made in North America. The Prius is probably the next model they want to make here since they sell so many of them.
