Yen Goes Up, Mazda Goes Down

The Japanese yen is currently trading strongly against the US dollar, having – as I write this – just come down from a 15-year high.  This is bad news for any Japanese manufacturer hoping to sell small cars in the US, but it’s especially bad news for Mazda.

Mazda has announced several potentially important new green technologies in recent weeks (click here, here, and here for just a few examples) and, unless something changes for them soon, the future of those innovations is clouded by serious, “capital-D” Doubt.

Find out more about Mazda’s yen-anxiety, and what they plan to do about it, after the jump.

With nearly 80% of its 2010 product line being built in Japan, Mazda is considered the manufacturer with the highest exposure to currency swings.  Consider that, barely a year ago, $1 bought over 100 yen.  Today, $1 buys 84 … and the yen continues to strengthen against the dollar, which is forcing Mazda to either raise prices (which is bad for business) or de-content their cars (which is bad for business).

Since neither option seems particularly promising, Mazda is planning to enact emergency cost reduction measures to protect their profits from being gobbled up by a steadily advancing yen on its earnings – and the auto-industry analysts over at the Truth About Cars blog (who have been covering the impact of the strengthening yen on US car sales all month) have laid out Mazda’s plan – which I’ve reproduced, below.

  • Suppliers will have to give up 3-5 percent on their parts.
  • Mazda’s R&D will be made more efficient, most likely by taking some pages out of Volkswagen’s playbook: They will use a common framework for making differently sized cars.
  • Sales operations will be made more efficient.

That’s it. No Nobel Prize material. Mazda expects to save between $350m and $470m (at today’s dollars …) That’s exactly what will be missing in their kitty should the yen remain at current levels. Right now, the Japanese currency is 6 yen stronger to the dollar, and 17 yen to the euro, than what’s in Mazda’s budgets.

According to TTAC and the Nikkei, Mazda forecasts that enacting these changes will bump operating profits by 220% in fiscal year 2010 – and I hope they can pull it off because, frankly, I’d love to try out a rotary-powered and KERS-equipped Mazda Furai sometime.

SOURCE and PHOTO CREDIT:  the Truth About Cars, Speedmotiv.

 

Jo Borrás

I've been in the auto industry 1997, and write for a number of blogs in the IM network. You can also find me on Twitter, at my Volvo fansite, or chasing my kids around Oak Park, IL.