Strong Yen Makes Toyota Rethink Production in Japan

In a press conference by Toyota Motor Corp.’s president Akio Toyoda today, Toyoda announced that the strength of the Japanese yen may cause Toyota to shift production of compact cars to other countries. Toyota is not the first Japanese car company to come out against the yen. Nissan has also pleaded to the government to weaken the yen, or they would pull out of domestic production as well.

The yen has been incredibly strong against the U.S. dollar as of late, causing profit margins to erode for many of the domestic Japanese automotive manufacturers. Coupled with lagging demand in the U.S., and supply chain disruptions due to the earthquake, Japanese brands have had a difficult set of circumstances as they struggle for sales in a tough year.

Toyoda fielded a few questions on if moving production would hurt Toyota’s national image. Toyoda explained that Toyota is an international company, and that although strongly tied to its home country, Toyota must take actions to keep the company healthy in order to keep providing jobs for Japan.

One car whose production may be moved is the Toyota Corolla. This compact car has a low profit margin which makes it more vulnerable to the exchange rate crisis currently affecting Japan. this move would benefit the U.S., though, since Toyota’s new plant in Mississippi was noted as a possible new location for the car’s production.

Toyota is also asking for government assistance in the form of devaluing the yen and giving out tax incentives to stimulate demand in the increasingly car averse cities of Japan.

A safety recall disaster, strong competition in the marketplace, an earthquake, and now currency issues have all taken their toll on the once invincible Toyota. With a revamped product line, and maybe a way around a strong yen, Toyota is looking for a variety of ways to put those past issues aside and reclaim its former dominance.

  

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