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Nissan Strives To Retain Profits While The Japanese Yen Rises

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On: Thu, Jan 13, 2011 at 5:06PM | By: Sherry Christiansen

Nissan Strives To Retain Profits While The Japanese Yen Rises

For financial analysts, spending their days surrounded by facts, figures, and spreadsheets is an everyday occurance. These are the financial gurus who tell us what is right and wrong with the economies of the world. Their pronouncements always have a ripple effect across the globe. Recent analysis has shown that the strong performing Japanese yen has forced Japanese automakers, such as Nissan, to rethink their American export business. Instead of shipping their cars from Japan, it is more economical to build them here. First on the agenda is 100,000 Rogues which are scheduled to be built at Nissan's Smyrna, Tennessee assembly plant.

The Nissan announcement came as an opening salvo for the Detroit auto show. Carlos Tavares, chairman of Nissan Americas, said that Nissan “intends to cut its reliance on imported vehicles by half, to 15% in 2015 from 30% in 2010.” In fact, if all goes according to plan, the Rogue cars made in Tennessee could be shipped out to dealers all over North and South America.

“We are reducing the numbers of cars we import from Japan,” Tavares said. “We are growing rapidly in North America and we have too much yen exposure.”

Here’s how Nissan looks at its numbers: 30% of all the cars sold by Nissan and Infiniti in the U.S. are imported from Japan. With the high demand from American consumers for new electric hybrid vehicles, Nissan recently pumped $1.8 billion into their Smyrna factory to build their electric Leaf sedan and its battery. Before that plant is ready for operation, Nissan dealerships will still be getting their inventory from Japan. That’s going to cut into the profit margins for the automaker.

As the financial wizards explain: when the value of the yen goes up against the dollar, then the amount of yen profits that Japanese automakers realize goes down. The options are to raise the cost of the cars or make less profit. On the other hand, if they can make the same cars in the U.S. and sell them directly for US dollars, then they can keep their profit margins intact.

“The strong yen is a serious challenge for all Japanese manufacturers—but it is one that Nissan has been most aggressive in tackling for many months,” Tavares said.

The Japanese automakers have strived to make most of their cars in North America. The Smyrna factory opened its doors for business back in 1983.

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