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From Japan's Weak Yen, Toyota Gains Strong Advantage

Japan’s weak currency gives it another edge over U.S. carmakers
Corollas in Ohira: Toyota aims to turn out more cars bound for the U.S.
Corollas in Ohira: Toyota aims to turn out more cars bound for the U.S.Photograph by Yoshikazu Tsuno/AFP/Getty Images

Thanks to an obsessive emphasis on quality, Toyota Motor grew from a tiny spinoff of a Japanese loom manufacturer in the 1930s into the world’s largest automaker. Chief Executive Officer Akio Toyoda has nothing more virtuous than Japan’s weakening currency for a recent assist in his quest for even greater market-share dominance. The yen has fallen 16 percent against the dollar since Oct. 31. That gives Toyota and other Japanese carmakers a financial gain on every car, which they can use to cut prices, boost advertising, or improve their vehicles in ways not open to U.S. rivals.

Morgan Stanley estimates the currency boost to operating profits at about $1,500 per car, while Detroit carmakers put the figure closer to $5,700. “We’re concerned about what the long-term ramifications are,” says Joe Hinrichs, Ford Motor’s Americas chief. Sergio Marchionne, CEO of Chrysler Group and Fiat, also frets about the impact. “We didn’t need this, to put it bluntly,” he told Bloomberg TV on March 5. “It’s going to make life tougher.”