Car makers widen global footprint

Mathieu Rosemain Geneva

Toyota Motor, Renault and Nissan Motor are among car makers widening their global production footprint to limit exposure to currency risk.

Toyota planned to expand production in Europe to about 75 percent of sales from about 63 percent within two years, chief regional officer Didier Leroy said yesterday. Its luxury Lexus brand is entirely produced in Japan.

“We want to have a business model that completely frees us from the exchange notion,” Leroy said at the Geneva International Motor Show.

The yen has depreciated 6 percent against the euro this year and was trading at ¥121.37 (R12) to the euro as of 11.40am in London after dropping to ¥127.71 last month, the weakest since 2010.

It is down 7 percent against the dollar. Still, the impact on Toyota from the exchange rate this financial year would be less than e10 million (R118m), Leroy said.

Nissan chief executive Carlos Ghosn, who holds the same title at partner Renault, said the yen was not in positive territory for Japanese vehicle manufacturers.

“It’s less of a handicap today,” he said. “It doesn’t mean it’s an asset. They’re more competitive compared to one year ago. It certainly does not make them more competitive compared to four years ago.” The yen reached almost ¥170 a euro in July 2008.

“Currency fluctuations are having a huge impact on where the automakers are choosing to put their production,” Anil Valsan, the global lead analyst for automotive at Ernst & Young, said.

“More natural hedges are what automakers are trying to do rather than financial hedging. That’s where the emphasis will be going forward.”

Philippe Klein, the executive vice-president for corporate planning, product planning and programmes at Renault, said the French car maker was evaluating how foreign exchange fluctuations affected sourcing.

“In an ideal world, we would like to be balanced: if I sell in roubles I would like to build in roubles,” Klein said. “We’re trying to reach that objective.”

Peugeot Citroën chief executive Philippe Varin said his company was also trying to build where it sold.

“When you are a generalist car maker, you have to be close to the markets that you serve, so that you are not exposed to currencies,” the executive said at the car show.

“The future will be more local exposure.”

Nissan still saw “headwinds” from the yen and aimed to produce and sell in the same market to avoid exchange risk rather than hedge, Andrew Palmer, Nissan’s executive vice-president, said in Geneva.

A rate of ¥100 to the dollar was considered “neutral”, Palmer added.

Toyota’s European research and development chief Masahisa Nagata said on Monday that the yen was still too strong and an appropriate rate was ¥130 a euro.

“We’re currently keeping in our forecasts exchange rates at ¥105-110 even if it’s currently at ¥121-123,” Leroy said. “We don’t want to slacken by saying ‘the exchange rate is perfect, we’re in the best of all worlds.’

“We really want to have a cautious business model,” Leroy added. – Bloomberg