Honda Motor Co. CFO Fumihiko Ike said that exports from Japan to the U.S. have resulted to losses and so it is now allocating shipments to the U.S. Ike clarified though that Honda won’t terminate all the shipments of vehicles that have imported nameplates such as the Fit subcompact and the Insight and CR-Z hybrids.
However, he said that Honda has to lessen the effects of these shipments on the balance sheet. This implies that in several cases, dealers would get fewer vehicles than they had wanted. Honda believes that the long-term solution would be to transfer production to North America and to purchase more components there, such as those used for hybrid powertrains.
Ike said that export business isn’t profitable under the present exchange rate of 80 yen per dollar. He explained that the absolute number of exports to the U.S. will be declining. He said that his statement marks the first time for a Japan-based brand to admit that shipping vehicles from Japan to the U.S. is a money-losing scheme.
Since Honda doesn’t depend on exports from Japan to the U.S. as much as its rivals, it is not as exposed to losses from currency exchange rates. Currently, Honda locally produces about 85% of the vehicles that it sells in North America.
Meanwhile, its rivals Toyota Motor Corp. and Nissan Motor Co., which locally make around 70% of their North American sales volume, are hurting due to the exchange rate losses and are working swiftly to move the production of vehicles and components to North America. Ike’s statements seem to imply that rivals are being pressured to move their production to North America from Japan.
In January 2011, Nissan said that it hopes to cut in half the value of parts and volume of vehicles it ships from Japan by early 2014. Toyota is hoping to produce hybrids with locally sourced parts in North America by 2015. Honda is continuing to sell its exports in the U.S. even when it is losing money partly so that segments would remain covered and so that it will be able to keep its customers.