Nissan to Buy More Foreign Parts After Yen Surge, Palmer Says

Nissan Motor Co. is seeking to buy more foreign parts for its Japanese-made cars as the strong yen hurts export profitability, Senior Vice President Andy Palmer said in an interview.

Nissan wants parts billed in other currencies to account for 35 percent to 40 percent of purchasing for models such as the Cube mini, which currently has almost no foreign content, Palmer said today at the Paris Motor Show. The carmaker is holding back sales of some models until that happens, he said.

“We either increase the non-yen content or we close factories,” Palmer said. “We never imagined that the yen would go to 85 to the dollar -- in our worst nightmares it was 90.”

The Japanese currency has gained 11 percent against the dollar this year, slashing the value of overseas sales and profit margins on cars that incur manufacturing costs in yen. The yen’s surge has hurt earnings from sales of key models such as the Rogue in the U.S. and X-Trail in Europe, as well as the luxury Infiniti brand’s exports.

A replacement for the current X-Trail model, due around 2013, is likely to be manufactured in China as well as Japan, Palmer said.

Besides the push to use more foreign parts, Nissan is putting the brake on sales of some Japanese-made models, Executive Vice President Colin Dodge said today. Production of the X-Trail is down about 30 percent year-on-year as the carmaker focuses marketing and incentive spending on more profitable sales, he in an interview.

Cube, Juke

The Cube will likely miss its original full-year volume target as Nissan refrains from promoting it overseas, Palmer said. “We’re currently not making any money on it.”

For Europe and the U.S., Nissan is ramping up output of locally assembled models to fill the gaps, with production of the Qashqai and Juke SUVs in Sunderland, England, now running at full tilt on three shifts.

The carmaker is targeting record deliveries of 3.8 million vehicles this year, Dodge said today. “We may even do significantly better than that.”

To contact the reporter on this story: Laurence Frost in Paris at lfrost4@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.

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