Chrysler, Ford, GM expressed concerns about the impact of the weakening yen

Article by Christian A., on March 18, 2013

Detroit executives expressed concerns about the long-term impact of the weakening yen. Japanese automakers are benefiting from this trend. In fact, Toyota Motor Corp. was able to overtake General Motors last year and be named as the largest automaker in the world even as its profit margins fell behind the industry.

Since Oct. 31, the yen has declined by 17% against the dollar as Shinzo Abe, who was named Japan's prime minister in December, supported the drop in order to boost the Japan’s economy. Because of the falling currency, Japanese automakers financially gain on each car.

They can use this to reduce prices, enhance products, and spend more for ads. According to Morgan Stanley, the currency boost means that Japanese automakers get $1,500 per car but the Detroit automakers insist that this figure is $5,700 for each vehicle.

Last month, Joe Hinrichs, Ford Motor Co.'s North American chief, said that he and his colleagues are worried how it will affect the industry in the long run. He added that no one should be disadvantaged because governments have decided to intervene with the currencies.

When interviewed by Bloomberg at the Geneva auto show, Sergio Marchionne, CEO of Chrysler Group LLC and Fiat SpA, said that the declining yen will “make life tougher” for the Detroit companies. The effect of the falling yen is already felt at the bottom line.

Last month, Toyota raised its profit forecast by 10% for the fiscal year that ends on March 31, to 860 billion yen ($9 billion), its highest level reached in five years. This is more than double the profit reported the prior year. It also marks the full comeback of Toyota from the worldwide recalls and the natural disaster in Japan in 2011 that had affected its reputation as a leader in earnings, sales and quality.

On Feb. 5, Toyota Senior Managing Officer Takahiko Ijichi said that Japan has had the “spirit for economic revival" ever since the new government got control. He also said that some don’t believe that the 'Abenomics' phenomenon has any actual substance but because of this, the yen has weakened and stock prices have increased.

Topics: chrysler, gm, ford

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