Kanda-Machi, Japan: Nissan Motor Co may need to rethink its strategy of building at least 1 million vehicles a year in Japan if the yen is trading around today’s levels in six months time, CEO Carlos Ghosn said on Tuesday.
Despite the yen’s historic strength and the losses it has forced on exports, automakers such as Nissan and Toyota Motor Corp have pledged to keep a minimum level of production at home to protect Japanese manufacturing and in the hope that the yen will weaken.
But the dollar has stayed below 80 yen for months, stoking fears of a hollowing out of manufacturing as companies look for cheaper production sites abroad.
“If six months down the road we are still in this situation, this is going to provoke a major rethink of our industrial strategy,” Ghosn told reporters at Nissan’s factory in Japan’s southernmost main island of Kyushu, calling the current dollar-yen rate “abnormal”.
“But personally I don’t think this is going to be the case. I don’t think (the current exchange rate) is sustainable for the economy, for Japan, for the industry.
“So we (will) stick with our 1 million cars in Japan because we believe in common sense and we believe that at the end of the day, nothing abnormal will remain abnormal and long-term trends will prevail,” he said.
Ghosn stopped short of saying what he considered a “normal” dollar-yen level that could protect Nissan’s commitment to Japan, but said 100 yen seemed to be the consensus inside the Japanese auto industry.
The dollar was far from that on Tuesday, trading around 76.5 yen.
Ghosn made his remarks at Nissan Motor Kyushu, which Nissan has spun off as a separate company to eventually cut wages and make the factory more competitive.
The move is among many that Nissan - and others - are taking to overcome currency headwinds to compete against rivals such as South Korea’s Hyundai Motor benefiting from a relatively weak won currency.
Ghosn said Nissan Motor Kyushu will aim to raise the ratio of parts procured within Kyushu and neighbouring Asian countries to 80-90% from 70% now to make use of a strong currency.
The 5,30,000 vehicles-a-year factory will also begin building a new series of high-volume compact cars next year that will help Nissan boost its market share in Japan to 15% in 2013, he said.
“This new company, Nissan Motor Kyushu, will help our manufacturing stay competitive in Japan and keep our goal of domestic production of a minimum 1 million units annually,” Ghosn said at the company’s opening ceremony.
Ghosn met with Prime Minister Yoshihiko Noda on Monday, showing him around Nissan’s Yokohama factory, which produces a high-value motor for electric cars, and sought the government’s help in reining back the yen.
Noda’s cabinet agreed on Tuesday a list of subsidies and loan guarantees to offset the pain that some companies are feeling from the strong yen, but this caused little stir in the currency market.
Japan has also said it will take its complaints about the strong yen to a Group of 20 (G20) finance ministers’ meeting this week, but it remains to be seen how sympathetic other countries will be with Europe’s debt crisis likely to dominate the agenda.
Last week, Ghosn said the next generation of high-end Infiniti cars, which are not sold in Japan, would be built outside the country. Nissan had already decided to shift production of the Infiniti JX sports utility vehicle (SUV) to the United States in 2012 from Japan.