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Nissan announces 1.4bn factory in Brazil as it moves overseas fleeing Super Yen

Friday, October 7th 2011 - 05:26 UTC
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A stabilized exchange rate please says Nissan CEO Ghosn A stabilized exchange rate please says Nissan CEO Ghosn

Nissan Motor Co CEO Carlos Ghosn said Japan faces a “hollowing out” of its industrial base should the government fail to take steps to counter the Yen’s rise. Ghosn statements could also be interpreted as a subtle message since Brazilian manufacturing faces problems with a too strong Real.

“I have spoken to the prime minister about this directly” Ghosn said in an interview from Rio de Janeiro on Thursday after Yokohama, Japan-based Nissan announced a new 1.4 billion dollars auto plant in Brazil.

“If Japan wants employment, you’re going to have to do something about establishing a normal exchange rate.”

Nissan, Toyota Motor Corp. and Honda Motor Co., Japan’s three largest automakers, are shifting production overseas as the Yen’s surge erodes the profitability of building cars in their home market.

The nation’s currency has risen 5.7% this year against the dollar and touched a postwar high of 75.95. The government, led by the Democratic Party of Japan, last intervened to weaken the yen in August.

A lack of government action “is showing that employment is not their number one priority,” Ghosn said. “At 76 Yen to the dollar, if this rate was to stay for a while, I think you’re going to see a hollowing out of the industry.”

The Yen was trading at 76.65 per dollar Friday in Tokyo.

The Liberal Democratic Party, Japan’s main opposition party, proposed increasing the Bank of Japan’s asset fund and diversifying the methods of Yen intervention to help the country recover from its March 11 earthquake and nuclear disaster.

The LDP called for increasing the central bank’s asset- buying fund by 10 trillion Yen (130 billion dollars) to 25 trillion Yen, according to a document obtained from LDP lawmaker Naokazu Takemoto.

“The DPJ government has left the accelerating Yen’s rise to its own course” the LDP document said. “The Japanese economy runs the risk of becoming like an empty shell.”

“Business people, when they make a decision about where to source a new project or where to source new parts or where to source a new car, well, at 76 yen to the dollar it’s very easy to come to the conclusion that Japan is not a good place to source that,” Ghosn said.

“I don’t think Japanese corporations are going to suffer from it, they are just going to adapt to it. Adapting to it means projects are going to be made outside Japan”.

Nissan’s new 200,000-unit assembly plant in Brazil is scheduled to open in 2014. The company has also boosted investment in factories in Mexico and Thailand for small cars that it says can no longer be built profitably in Japan.

Toyota, Asia’s biggest carmaker, said Sept. 13 it will spend 26.3 billion Yen to build a second factory in Indonesia. The Toyota City-based company is setting up a production hub complete with a network of suppliers in the Southeast Asian country as it aims to get half its sales from emerging markets by 2015.

Likewise Honda, based in Tokyo, said Oct. 5 it plans to reduce exports to as little as 10% of domestic production, from 34% last year.

Categories: Economy, Brazil.

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