business

Toyota stays lean to ride out strong yen

15 Comments
By Yuri Kageyama

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15 Comments
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Wow, suddenly the shoe is on the other foot. For years Japanese auto companies benefited from a strong dollar policy and an under-valued yen. Now they have to deal with not having that. Gonna be interesting to see if they can adapt. Lean and mean is not really a Japanese business trait.

Japanese automakers benefited as early as the 70's due to oil shock which resulted in American consumers seeking smaller, less gas guzzing cars. During 1979, the president of UAW threatened Japan to either "limit the exports or to produce within U.S." which subsequently lead to UAW and Ford to request the U.S. government to act on the Trade Act Section 301. The request was reviewed by ITC but their decision stated that their failure was not due to Japanese exports but declining domestic demand and high gas prices which created a demand for smaller cars which the U.S. auto industry could not adapt. (Hint: Classic case of NOT "adapting")

During the early 80's under Regan, he tried to work on limiting the number of Japanese exports through legislation but with opposition from Secretary of Commerce and USTR at that time, the U.S. accepted Japan's self imposed export limit which lasted which lasted through the early 90's. (自動車輸出自主規制)  During this time frame however, despite efforts by Reagan to devalue the dollar (Plaza Accord), the Japanese manufactuers improved on their cost cutting/efficency production which resulted in high profit margins while at the same time built factories within U.S. where in 1994, the aforementioned self imposed export restriction by the Japanese government had become obsolete and useless. (Hint: This is a classic case of "adapting")

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Strong yen? Try weak USD. I'm getting hammered by the conversion rate for NZD at the moment.

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herefornow, not so sudden. Japanese Yen has bee strong for some time now, but Toyota has it's policy to keep it's Japanese production and labour at a certain level, so it seems more difficult for them with Yendaka than other companies like Nissan that will close factories, easily knockoff 15% of their production with one shout from Mr.Ghosn.

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By "lean" they mean stopping production of the Yaris in Japan for NA market and pushing to France thanks to lower taxes and lower energy bills...

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so, japan has Toyota, Honda, Nissa, Acura, Lexus, and Mitsubishi and korea has hyundai, and, um... hyundai. end of story.

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nigelboy Jun. 22, 2012 - 10:53PM JST. During the early 80's under Regan, he tried to work on limiting the number of Japanese exports through legislation. the U.S. accepted Japan's self imposed export limit which lasted which lasted through the early 90's. the Japanese manufactuers improved on their cost cutting/efficency production which resulted in high profit margins while at the same time built factories within U.S. where in 1994, the aforementioned self imposed export restriction by the Japanese government had become obsolete and useless.

The Japanese manufacturer did not improve their cust cutting/efficency production which resulted in the high profit margin. The real reason of increase profit was the result of self imposed export limit of 1.68 million (annually) which resulted in short supply of Japanese cars and this triggered the higher prices of $1K to $3K for each vehicle in the U.S. and also added more options at additonal cost such as air conditioning, power windows, sunroof, automatic transmission, upgraded interior, seats, etc.

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nigelboy Jun. 26, 2012 - 06:19AM JST.Perhaps that may have contributed but you seem to forget the Plaza accord I mentioned.

The Plaza Accord itself didn't cause the asset price bubble. First came the Plaza Accord and then the BoJ's misguided reaction to it was an easy money policy. It was the latter that caused the bubble, not the Accord. The essence of the Plaza Accord was inevitable sooner or later and the idea that the U.S. somehow forced it on an unwilling Japan is bogus. The only way forward for Japan at the time was a floating yen and becoming partners in the global financial system. One big factor would be that it was no longer feasible for Japan to be a cheap labor economy by the 1980s, therefore a rising yen would enable Japanese firms to invest overseas and become truly global players. If you look at the Japanese auto plants in North America, that is exactly what happened.

The pre Plaza Accord situation was tolerated as long as the Japanese economy was in a rebuilding mode. Once the Japanese economy "grew up" it was time to play on a even playing field and the Japanese people understood that. The fact that the fallout was handled badly doesn't make the Plaza Accord a bad thing.

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Niimi said the key was “a total elimination of waste,” such as making assembly lines shorter and more flexible so that profit is generated, even at small volumes.

Maybe they should also be looking at reducing waste at head office (i.e. overtime, business trips (junkets), helicopter shuttle services for senior management) and maybe they could also look at overseas Toyota plants that do the same work with far fewer employees. Then they could say they are being truly lean. Until then its just fluff.

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Hyundai will never be a problem since their cars are so shitty.

Yeah, keep saying that, like Americans used to keep saying about Japanese cars, then look what happened.

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Niimi acknowledged Japanese manufacturing faces tough times. Along with the strong yen, Japan fell behind Korea in promoting free trade, he said.

Japan's all for free trade - as long as it doesn't include unfettered sales of foreign goods in Japan.

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sfjp330

You're diverting. I'm not talking about the asset buble nor other unrelated junk. I'm talking about the profit margin DESPITE the high yen since you're the one that mentioned "higher prices".

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Toyota Executive Vice President Atsushi Niimi acknowledged competition was growing extremely tough with South Korean makers, including Hyundai Motor Co, which have the advantage of a weaker currency.

Wow, suddenly the shoe is on the other foot. For years Japanese auto companies benefited from a strong dollar policy and an under-valued yen. Now they have to deal with not having that. Gonna be interesting to see if they can adapt. Lean and mean is not really a Japanese business trait.

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Hyundai will never be a problem since their cars are so shitty

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sfjp330

Perhaps that may have contributed but you seem to forget the Plaza accord I mentioned.

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Hyundai will never be a problem since their cars are so shitty

lachatamber -- nonsense. Have you been to the U.S. in the past five years? Hyundai is already a "problem" for the Japanese makers. And TSRnow, the fact that the Japanese have made up a cute slogan -- Yendaka -- to be an excuse for their problems tells me they still don't really understand the nature of competing in a global market without the built-in advantages of a protected home market and a favorable exhange rate. With the Japanese auto market set to decline in the long-term, as people age and young people shun car purchasing, plus the government looking to be forced to open it to join the TPP, and the yen likley to remain strong, as cletus points out, fundamental change is required. And Japanese firms are not good at fundamental change, especially Toyota, where incremental change is the mantra.

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