Toyota Warns That Strong Yen Could Force it to Leave Japan

May 18 2011

As if the recent earthquake and tsunami was not enough bad news for the company, Toyota is now also hampered by the strong yen.  The company has warned that it might be forced to move production elsewhere if the yen remains at its current high levels for too long.  The strong yen is making it hard for Toyota to compete against cheaper rivals from China and countries in South East Asia.  Tough economic times have also forced an increasing number of car credit buyers to opt for cheaper cars.

The yen has now reached a record high since the Second World War.  On Wednesday Toyota revealed that the strong yen has caused the company’s net income to shrink by ¥290bn (£2.2bn).

The Chief Financial Officer at Toyota, Satoshi Ozawa, said in a press interview on Wednesday: “I feel strongly that our efforts may have exceeded the limits of what is possible in dealing with the yen's impact.”

About 50% of Toyota’s vehicles are produced in Japan and the company has always promised that it would protect jobs in its homeland.  Things are, however, now becoming untenable.  During the first quarter of 2011 Toyota’s profits dropped by 77%, both as a result of the strong yen and the earthquake/tsunami that hit the country.

The company’s chief executive issued a clear warning when he said that Toyota simply cannot go on protecting manufacturing in Japan at its own expense.

The Japanese disaster has up to now cost Toyota a massive ¥110bn.  This was mainly as a result of electricity blackouts and component shortages that severely disrupted production.

Author - Louise Hutchinson
 

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