Nissan faces export pressure as strong yen squeezes profits
Nissan CEO Carlos Ghosn warns prolonged yen strength could force Japanese carmakers to rethink domestic production, with Infiniti models set for overseas manufacturing.
Nissan president and CEO Carlos Ghosn has warned that the continued strength of the Japanese yen threatens the company’s export profitability and could force a major rethink of its manufacturing strategy if currency conditions persist. Speaking during a visit to Nissan’s plant in Fukuoka prefecture, Ghosn said that if the yen remains at its current high levels for another six months, Japanese automakers would have to reconsider their industrial plans.
The yen’s historic appreciation has hit Japanese exporters hard, making vehicles built in Japan less competitive in overseas markets. Nissan, like other Japanese carmakers, has so far kept a minimum level of production at home, both to support domestic jobs and in the hope that the currency would eventually weaken. But the situation has tested even the largest players. Ghosn said the company could be forced to shift more production overseas if the currency does not ease, echoing warnings from other industry leaders.
Infiniti production heads overseas
The strong yen has already prompted Nissan to confirm that its next generation Infiniti models will be built outside Japan. The decision, announced at a press briefing with partner Daimler, is a direct response to the currency’s impact on profitability. Building premium models closer to their main markets allows Nissan to avoid the punishing effects of currency conversion and reduce costs. The move follows similar strategies from other Japanese brands, with Honda considering exports from its US factories to South Korea to sidestep the yen’s strength.
- Nissan: Next-generation Infiniti models to be built overseas
- Honda: Considering exporting US-made cars to South Korea
- Toyota: Maintains commitment to some domestic production despite losses
Japanese production under pressure
Japanese automakers have repeatedly stressed their commitment to domestic manufacturing, but the currency’s record highs have made this increasingly difficult. Export profits have been squeezed, forcing companies to look for ways to protect margins. While Nissan’s global sales rose 10.6% in the first quarter of fiscal 2011, and net revenue increased to 2.082 trillion yen, the company’s leadership remains concerned about the sustainability of Japanese production if the currency remains elevated.
The pressure from the strong yen is not unique to Nissan. Toyota and Honda have also voiced concerns, with Toyota’s quarterly profits down and Honda exploring new export routes. Japanese automakers face a delicate balance between supporting domestic employment and maintaining global competitiveness. For now, they continue to hope for a correction in currency markets, but the industry is preparing for more production to move abroad if the situation does not improve.
For more on Nissan’s global sales performance, see Nissan’s US Sales Hit Record 1 Million in 2011 as December Gains 7.7%.
