CEO: Strong yen, weak sales could force Honda to leave Japan

[SVT666]

CEO: Strong yen, weak sales could force Honda to leave Japan

Under the pressure of a rising yen, Honda?s Chief Executive Takeo Fukui is calling on the Japanese government to act swiftly in order to stabilize the country?s currency. Fukui has warned Honda will have to take more production out of Japan and possibly even move its headquarters overseas if a solution isn?t found.

?If the government is saying, ?We don?t care about the export industry?, then that?s fine ? we?ll act accordingly,? Fukui told Japanese reporters on Friday.

He said Japanese leaders must work to keep the yen from gaining too much ground against the U.S. dollar. A year ago, one dollar bought 114 yen. Today it buys just 89 yen. This puts Japanese automakers at an extreme disadvantage when it comes to exporting vehicles made in the country.
?If the exchange rate becomes increasingly unfavorable, we would simply have to transfer more production overseas, cut more temporary workers and even start laying off permanent jobs,? Fukui explained.

?Beyond that we could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario move our headquarters offshore. It would cause nothing short of a hollowing out of Japanese industry.?

Just under a week ago, Honda announced it was slashing its earnings forecast for the second half of fiscal 2008, ending March 2009. The company also revealed several cost-cutting measures, including the cancellation of the NSX sports car. Honda indicated its operating profits will be 180 billion yen ($2 billion), down 67 percent from the forecasted 550 billion yen.

[SVT666]

Whoa!  Canada would welcome you with open arms.

[Yawn]

I dont get it.. they make money all these years and one negative year they have all this drama.. lol

[sportyaccordy]

Chrysler has a few buildings it won't be using...

[hotrodalex]

So they're complaining that the yen is no longer being kept so artificially low?

[GoCougs]

It's a bit dubious to explicitly call on the government to "stabilize" the yen, but at least it's not a bailout.

Many countries would welcome a relocated Honda with open arms.

[SVT32V]

I dont get it.. they make money all these years and one negative year they have all this drama.. lol

Well, the Japanese govt generally does what is best for their manufacturing base since they value that part of the economy, unlike Washington. 

So there is a problem, they want it addressed, it was less than 20 yrs ago that a strong Yen decimated the JP economy.

[SVT32V]

It's a bit dubious to explicitly call on the government to "stabilize" the yen, but at least it's not a bailout.

It is only dubious if one is naive enough to think that they haven't continually taken steps to keep the Yen devalued against the dollar.

[nickdrinkwater]

If they're going to move they should keep it quiet.  Honda is a very Japanese brand, so they might lose their identify and selling point if they're not based there anymore (unless people don't know about it).

[Gotta-Qik-C7]

I dont get it.. they make money all these years and one negative year they have all this drama.. lol

Espacially in this (worldwide) economy.

[Minpin]

I dont understand how when the yen i worth say 200 yen=1 dollar benefits them more than say 50 yen= 1 dollar.

Could someone smart help me out?

[GoCougs]

I dont understand how when the yen i worth say 200 yen=1 dollar benefits them more than say 50 yen= 1 dollar.

Could someone smart help me out?

Exchange rates. Let's look at two scenarios for a US Civic with an MSRP of $14,000 that costs 1,000,000 yen to manufacture in Japan:

1.) At 110 yen/$ there is a $14,000 * 110 yen/$ - 1,000,000 yen = 540,000 yen profit.

2.) At 90 yen/$, there is a $14,000 * 90 yen/$ - 1,000,000 yen = 260,000 yen profit.

As we can see that is drastic; profit falls 50% between January '08 and December '08 owing to nothing other than the differences in exchange rate.

Honda of Japan likes a weak yen (more yen to the $).

[Rich]

It's back up to 87 yen/$ now from 84 about a week ago

[GoCougs]

It's back up to 87 yen/$ now from 84 about a week ago

LOL - I'm still on Japan time three days after getting back!

[GoCougs]

It is only dubious if one is naive enough to think that they haven't continually taken steps to keep the Yen devalued against the dollar.

If Japan intentionally devalued the yen, world financial markets would decimate it and thus the Japanese economy. Further, more trades on the yen occur in London and NYC than in Tokyo.

Though a weak yen benefits Japanese exports, it hurts Japanese imports. Japan, more so than most nations, relies on imports for its very existence.

Stagnating economy for the last 15 years (IMO owing to much of the same pitfalls the US is currently engaged in at present), has compelled yen to leave the country to be invested abroad for superior returns, eroding the yen.

Lastly, and in an effort to keep my comments in context, Japanese autos sell at a premium in the US, so even it was possible to intentionally keep the yen devalued, Japan is still disadvantaged.