Yen hurting Toyota’s low-cost exports to U.S.

by Alan Ohnsman

Bloomberg

Toyota Motor Corp., the biggest exporter of autos to the U.S., is trying to cut production costs for Yaris and Corolla cars as the rising yen makes it unprofitable to build economy cars in Japan for sale abroad.

“Given the current exchange-rate situation, it isn’t feasible, in terms of a business model, for us to produce Corolla or Yaris in Japan and export them,” Atsushi Niimi, executive vice president for global manufacturing, said in an interview in San Antonio on Friday. “We’re working very hard to reduce costs to maintain the appeal of these cars.”

Toyota and its domestic competitors are scrambling to combat the surging yen, which is up at least 3 percent against each of the world’s 16 major currencies this year. The currency is up more than 7 percent against the dollar and more than 14 percent against the euro.

Speculation that Europe’s sovereign debt crisis will worsen and the U.S. economic recovery will slow has boosted demand for the relative safety of the yen.

Toyota sold 325,398 Toyota, Lexus and Scion cars and light trucks imported to the U.S. this year through July, down 15 percent from a year earlier.

The total is more than four times the 75,357 imports sold by Honda Motor Co., which sells the highest proportion of North American-built vehicles among Asian automakers in the United States. Nissan Motor Co.’s import sales grew 19 percent through July to 159,904, the second-highest volume after Toyota.

For now, Toyota is focused on productivity improvements at its Japanese plants to compensate for exchange-rate swings, Niimi said at Toyota’s Texas factory.

“By way of technological innovation, we’d like to realize a high level of productivity, as well as a low amount of investment, so we can maintain a system where we can export some vehicles overseas,” he said without elaborating.

While Toyota makes Corollas in Canada, it is exporting more of the compact cars to the U.S. from Japan after a California joint-venture plant that built the model closed in April. That will continue until Corolla assembly starts at a plant in Blue Springs, Miss., that will open in September 2011, Toyota spokesman Jim Wiseman said.

Toyota is also studying whether subcompact Yaris cars, its cheapest U.S. model, can be built and sold at a profit in North America.

“That’s the problem we have to solve,” Niimi said.

Nissan has already moved some production overseas from Japan, citing the yen’s rise. The company has begun assembling its new March small car in Thailand and will start making it in Mexico in 2011.