Strong yen starts cost-cutting trend among Japanese carmakers image

Automakers that export cars from Japan to the United States are starting to adopt cost-cutting measures in order to offset competitive disadvantages generated by the strong yen.

For instance, for the redesigned GS 350, Lexus is using asphalt spray instead of laminate sheeting on the underbody for noise suppression and recycled plastic instead of virgin for the protective cover under the engine.

More consistent cost-cutting measures include the fitting of the old six-speed transmission instead of the seven or eight-speed transmissions that competitors offer, and the axing of the V8 engine option. With the Japanese yen reaching the record level of 76 to the dollar, Japanese automakers are using lesser-quality materials or removing features that once were seen as essential.

In order not to raise sticker prices, manufacturers are withholding some new technologies and deleting some products altogether, while rethinking which features should be standard and which should be optional.

Toyota reported an operating loss of about $425 million for the April-September fiscal first half. The March earthquake was a factor, but exchange rates accounted for a $1.7 billion swing in the wrong direction. Satoshi Ozawa, an executive vice president, warned that Toyota’s domestic operations could break even next year, but only if the dollar rises to 85 yen.