General Motors views weakening Japanese yen as a real threat

Article by Anita Panait, on April 17, 2013

General Motors sees the weakening Japanese yen as "a real threat" as the carmaker seeks to expand its market share in the United States in 2013 by launching a number of new vehicles, Mark Reuss, president of GM North America, disclosed. Reuss remarked during an automotive industry event that the Japanese yen is a real threat, prompting GM to “watch it.”

Reuss, however, said that the carmaker has yet to face pricing pressure from Japanese rivals, adding that GM has so far maintained strong pricing power that it has enjoyed for the last two years. Last week, GM chief executive Dan Akerson expressed concerns that the stimulus measures implemented by the Bank of Japan would further devalue the yen, thereby giving Japanese carmakers a price advantage in the US. 

Ford Motor Co. top honcho Alan Mulally recently expressed similar concerns about the yen's weakening value. In January 2013, Akerson said he expects GM to gain "modest" market share in 2013 after its share dropped to 17.9 percent in 2012. Through March 2013, GM commands an 18-percent share of the US vehicle market. Wall Street analysts have remarked that Japanese carmakers are poised to gain more US market share as the yen depreciates.

A weaker yen drops production costs in Japan, giving Japanese carmakers more profit on vehicles sold in the US as well as more flexibility to lower prices.

Morgan Stanley analyst Adam Jonas wrote in a research note that they see a “significant and growing risk" to the future profitability of the Detroit 3. He noted that while they don't expect a price war, they anticipate a shift in the market share in favor of Japanese carmakers. In the last six months, the Japanese yen has weakened by over 25 percent, falling to JPY99.95 per dollar on April 11, 2013.

Topics: gm, japan

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