Nissan chief welcomes yen fall for luxury brand
KAMINOKAWA-MACHI, Japan (AP) -- Nissan Motor Co. President Carlos Ghosn welcomed the yen's recent decline to what he called "neutral" levels for the Japanese automaker's profitability, but said Tuesday it must drop further to be "normal."
"The abnormal situation of the yen is hopefully something of the past," he told reporters at the roll-off ceremony for a new Infiniti luxury model, the Q50. Workers cheered as Ghosn, a rare foreigner to lead a Japanese company, toasted the first Q50 off the assembly line with an energy drink and a speech in Japanese.
The Infiniti, which is not sold in Japan, is exported to the U.S., Europe, Asia and other regions, and Yokohama-based Nissan is eager to expand Infiniti sales in other markets, such as China, the world's largest luxury car market.
Japanese automakers have been trying to move production to where their vehicles are sold to reduce risks from a strong yen, which lowers the value of their overseas earnings.
But the yen has lost more than 20 percent of its value against the U.S. dollar in recent months, thanks to the monetary easing and inflation target policies of Prime Minister Shinzo Abe who took office last year, delivering a boon for giant Japanese exporters such as Nissan.
Ghosn said when the dollar was at 75 yen to 80 yen over the last two years, Nissan lost money on every car it built at the Tochigi Infiniti plant, 100 kilometers (60 miles) north of Tokyo.
He said the dollar trading at about 100 yen, which it did last week for the first time in four years, was merely neutral and that it should fall to 110 yen or 112 yen, the average over the last two decades, which he called "normal."
Keeping production in Japan has been a challenge for Japanese automakers, but pressure is high on the companies to keep jobs in Japan as a social responsibility.
Maintaining the production of luxury models, or other special vehicles such as gas-electric hybrids or electric cars, is one option because Japan has the workforce with the needed skills, and production will be kept closer to research and development.
But some analysts warn that the cheap yen won't be enough to stop more production moving out of Japan, where the auto market has stagnated. Growth is expected abroad in places such as China, India and South America, they said.
"The perk from the cheap yen is momentary," said Masatoshi Nishimoto, analyst at IHS Automotive in Tokyo.
The favorable currency rate will help boost the profits of Japanese automakers, but they may choose to invest that in marketing or development, and continue to expand production abroad.
Ghosn said Nissan expects sales of the Infiniti to grow overseas and it had not yet made a decision about whether to sell Infiniti models in Japan.
Nissan is targeting 10 percent of the premium auto market, which would mean that its annual global sales of luxury models must grow from the current 160,000 to 500,000 vehicles.
Nissan's rival Toyota Motor Corp. has committed itself to making 3 million vehicles in Japan, half of which are exported. Skeptics say that it is almost impossible for Toyota to sell 1.5 million vehicles in Japan a year because the population is shrinking and car ownership is less of a priority for a younger generation of Japanese.
The cheap yen is a blessing and feels like "the wind blowing from behind," pushing along Toyota's move forward, President Akio Toyoda told The Associated Press on the sidelines of a Japanese Automobile Manufacturers Association reception on Monday.
"But we can't be responding each time to currency shifts," he said.
Honda Motor Co. President Takanobu Ito agreed.
The cheap yen was a plus only in the short term, and it could work as a minus in other ways because of rising raw material costs, he said.
"What's best is that currencies remain stable," Ito said.
Honda already has 80 percent of its overall production abroad.
Ghosn said the cheap yen means that Infiniti production will remain in Japan, although its production abroad is likely to expand. He declined to say where the new production was being planned.
"It's a complement, not a substitution," he said of the overseas production.
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