OK, the yen matters

If there’s one subject that gets a General Motors executive snarling, it’s the yen-to-dollar exchange rate. They have been bleating for years that Japan’s central bank manipulates the currency, making it cheaper for the Japanese to export their cars and parts here. They get a cost and pricing advantage that makes it tough for Detroit to compete. The UAW quotes a study by Detroit-based Harbour-Felax Group that says yen manipulation gives the Japanese a $2,760 subsidy on small cars and as much as $8,280 on a luxury vehicle.

Not surprisingly, the Japanese auto makers deny that they have an advantage. They say the central bank hasn’t touched the yen for two years. And they make most of their cars in the U.S. anyway. Toyota Motor Sales U.S.A. Executive Vice President James E. Lentz points out that when the Japanese juggernaut finishes building a couple of new plants, it will be building 2 million of the 2.7 million vehicles it sells in North America right here on the continent. Nissan and Honda will make a similar claim. They have been building factories and hiring lots of Americans, too.

That’s all true. But GM has a point. In an interview here at the Detroit auto show, Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga told me that the 60 billion yen increase in materials costs (about $500 million) was offset in large part by favorable currency exchange in the first half of the year. That’s a nice little assist for Nissan. That doesn’t explain all of the gains made over the decades by Japanese auto makers. They have made some good cars. But it’s clear that currency is helping them out.

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