Nissan CEO Says Cheaper Yen Still in ‘Handicap Territory’

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Carlos Ghosn, chief executive officer of Nissan Motor Co., said the yen remains in “handicap territory” that creates challenges for Japan’s automakers even after the currency’s recent weakening.

Ford Motor Co., Chrysler Group LLC and the American Automotive Policy Council, which lobbies on behalf of those companies and General Motors Co., have said the yen’s decline relative to the dollar in the past six months is a windfall for Japanese carmakers. Such criticism ignores history, Ghosn said in an interview at the New York International Auto Show.

“Before the Lehman Brothers crisis, we were around 110 yen to the dollar, which by the way is the average of the exchange rates” for the past 10 to 15 years, Ghosn said yesterday. The yen peaked at about 75 to the dollar in 2011. “Now it’s at 94. It’s just a correction from an abnormally high level,” he said. “I still consider it to be in what I call handicap territory.”

The yen has weakened by 21 percent against the dollar in the past six months. The slide accelerated since Oct. 31, when Shinzo Abe, who became Japan’s prime minister in December, advocated for the decline to aid his country’s economy. Morgan Stanley has estimated the currency advantage generates about $1,500 a car for Japan’s automakers, while their U.S. competitors put the figure at about $5,700.

Ford’s Concern

Ford Chief Executive Officer Alan Mulally said March 26 that he’s concerned that the depreciation of the yen is bolstering the competitiveness of Japanese automakers.

“The most important thing that most countries around the world believe in is letting the markets determine the currency,” Mulally said from Bangkok in an interview on Bloomberg Television’s “First Up with Susan Li.” “That’s just so important to all of us in the international trading system.”

Jim Lentz, head of Toyota’s U.S. sales unit, said changes in the currency don’t affect how much the company spends on incentives.

“The yen doesn’t determine how aggressively or non-aggressively we operate in the market place,” Lentz said yesterday at the Bank of America Corp. 2013 New York Auto Summit. Incentives for individual models are set based on where products are in their lifecycle, consumer demand and relative to competing models, he said.

At Ford, “We haven’t seen a dramatic increase in incentives and frankly, in the near term, don’t expect to see that” from Japan’s automakers, Joe Hinrichs, the company’s president of the Americas, said at the same auto conference.

Yen History

“If you go back and look at when the yen has weakened in the past, we’ve seen more content changes for the same price, so adding content for the same price, as opposed to incentives,” Hinrichs said. “If you have a lower cost base, you can content the vehicle up and still have the same price and nobody says you’re pricing, but you’re actually offering more value to the customer given the advantage had by the yen.”

The yen’s strengthening in recent years didn’t make economic sense and was a “huge handicap for all Japanese companies,” not just automakers, said Ghosn, who also leads France’s Renault SA. “It has to pass 100 yen to the dollar to be in a kind of neutral.”

The yen this week has been trading at about 94 to the dollar and hasn’t been higher than 100 since 2009, according to data compiled by Bloomberg.

Nissan’s American depositary receipts were little changed at $19.46 yesterday at the close in New York. They have gained 1.9 percent this year, as the Standard & Poor’s 500 Index rose 9.6 percent. Toyota’s ADRs fell 0.5 percent to $103.10. They have gained 11 percent this year.

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