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Renault-Nissan to Add Capacity in Korea on Strong Yen

Nissan Motor CEO Carlos Ghosn
Renault SA and Nissan Motor Co. Chief Executive Officer Carlos Ghosn. Photographer: Dimas Ardian/Bloomberg

Aug. 31 (Bloomberg) -- The Renault SA-Nissan Motor Co. alliance plans to increase production in South Korea to cut its reliance on Japan as a manufacturing base as the yen strengthens, Chief Executive Officer Carlos Ghosn said.

“With the strengthening of the yen and the competitiveness of the yuan, those who have capacity in Korea today have a plus,” Ghosn told a media roundtable in Abu Dhabi yesterday. “If something erratic happened in the exchange rate, you don’t find yourself with your eggs in the same basket.”

Renault said Aug. 10 it was exploring other ways to expand its business after dropping out of the bidding for Ssangyong Motor Co., the South Korean carmaker operating under bankruptcy protection. Korea’s Renault Samsung Motors Co., 80 percent owned by Renault, operates a plant in Busan that exports the Nissan Sunny to the Middle East.

Nissan, Japan’s third-largest carmaker, is exporting 50,000 cars annually to the Middle East from the South Korean plant, Ghosn said today. Renault separately is using the factory, with maximum capacity of 240,000 vehicles, to ramp up production of a “Latitude” version of its SM5 sedan for export to the Middle East and Europe.

Crown Prince

Ghosn, who was visiting the United Arab Emirates capital for the second time this year, also spoke at a conference at the invitation of the emirate’s Crown Prince Sheikh Mohammed bin Zayed al Nahyan.

Nissan, based in Yokohama, Japan, fell 1.8 percent to 642 yen in Tokyo trading today. Renault, based in the Paris suburb of Boulogne-Billancourt, fell 1.3 percent to 32.11 euros on the Paris exchange yesterday.

Every one-yen increase in the Japanese currency against the dollar reduces Toyota Motor Corp.’s annual operating profit by 30 billion yen ($354 million), according to the world’s biggest carmaker. Sony Corp., which generates more than 70 percent of revenue outside of Japan, says it loses about 2 billion yen of annual operating profit for each yen gain against the U.S. currency.

The yen has advanced 14 percent this year based on Bloomberg Correlation-Weighted Currency Indexes, the biggest gain among the currencies of the developed world.

Middle East

The yen rose as high as 83.60 per dollar on Aug. 24, the strongest since June 1995, from 2009’s low of 101.44 yen reached in April that year. The currency gained to touch 105.44 per euro, the highest since July 2001 and up from 134.38 in January.

Nissan plans to sell 200,000 vehicles in the Middle East and North Africa in the fiscal year through March 2011, Ghosn said today. The figure includes 130,000 units for the six countries making up the Gulf Cooperation Council.

Sales in the Middle East, North Africa and India grew by 27 percent in August from a year earlier, Gilles Normand, vice president for the region, said today.

Nissan continues to export cars to Iran “for the time being” and is cooperating with the Japanese government on sanctions on Iran from the United Nations, Normand said.

“We are respecting all sanctions,” he said. “We are waiting for the Japanese government to tell us what to do.”

Nissan also plans to begin production at a new plant in eastern China next month to keep pace with rising demand in the world’s biggest auto market.

The carmaker will start producing multipurpose vehicles at a plant in Zhengzhou that will build 120,000 units a year from September, spokesman Mitsuru Yonekawa said today by phone.

The new plant, a joint venture with Dongfeng Motor Group Co., may ease capacity constraints at another factory in the Huadu district of Guangzhou, which builds the Dualis and X-Trail sport-utility vehicles, Yonekawa said.

To contact the reporters on this story: Vivian Salama in Abu Dhabi at vsalama@bloomberg.net; Laurence Frost in Paris at lfrost4@bloomberg.net.

To contact the editors responsible for this story: Claudia Maedler at cmaedler@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net.

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