Honda Cars : Honda Counters Weak Yen Criticism After U.S. Objections | 2013 New Honda Car Reviews 0

Hmmm, where were The American Automotive Policy Council when the yen was at a disadvantage for Japanese Auto Makers????

By Craig Trudell - Feb 8, 2013

 

Honda Motor Co., targeting record U.S. sales this year, said the weaker yen isn’t giving the Japanese company an advantage after a group representing U.S. automakers called for government intervention.

“I defy anybody, when we’re building 90 percent of what we sell here, to say we have a currency advantage,” John Mendel, the Tokyo-based company’s executive vice president of U.S. sales, said yesterday at a J.D. Power & Associates conference in Orlando, Florida. “I don’t think the current level of 90-plus yen to the dollar is a cause for alarm.”

Honda, Japan’s third-largest automaker, relies on the U.S. for more than 30 percent of its global sales. The American Automotive Policy Council, which represents Ford Motor Co., General Motors Co. and Chrysler Group LLC, said in January that President Barack Obama should tell Japan’s new government that the U.S. will retaliate for policies aimed at weakening the yen.

The yen, which has weakened more than any currency since mid-November, trades at about 93 to the dollar and 124 to the euro. Honda’s operating income gains by 16 billion yen annually for every 1-yen drop in the dollar rate, and 1 billion yen for each 1-yen drop in the euro rate, according to the company.

Honda on Jan. 31 cut its net income expectation for the year ending in March by 1.3 percent to 370 billion yen ($4 billion), countering other Japanese exporters that have raised their forecasts after the yen tumbled. The company cited a slower-than-expected recovery in sales in China and weakness in European demand.

‘Deathbed’ Rates

“Nobody worried about Japan” when the yen “went from 115 to 78, and said ‘Geez, I hope those guys are OK,’” Mendel told reporters yesterday. “Now all the sudden it’s moderately off deathbed kind of rates, and everybody’s going ‘Unfair.’ Let’s focus on the quality of products. Let’s focus on the customer.”

Honda’s American depositary receipts fell 1.1 percent to $37.89 at the close yesterday in New York. They’ve gained 3.4 percent for the 12 months ended Feb. 8 as the Standard & Poor’s 500 Index rose 12 percent.

U.S. automakers have said the undervalued yen distorts trade and stunts job growth for American manufacturers. Japan’s Liberal Democratic Party, which reclaimed power in December, has let the yen continue its slide against the dollar, making U.S. auto exports relatively expensive, the American Automotive Policy Council said in a Jan. 17 statement.

“We urge the Obama administration to make it clear to Japan that such policies are unacceptable and will be met by reciprocal measures,” Matt Blunt, a former Republican governor of Missouri and president of the Washington-based industry group, said in last month’s statement.

‘Japanese Giant’

A weaker yen is “awakening the Japanese giant,” Adam Jonas, a New York-based analyst at Morgan Stanley, wrote in a Jan. 28 report. He said he expects market share for Honda, Toyota Motor Corp. and Nissan Motor Co. to rebound on an improved ability to market their vehicles and equip them with better content and interior features.

“With the correction in the yen trend, they are likely to switch from a defensive to an offensive mode,” Jonas wrote of the Japanese automakers. “Short-term positives include access to a wider selection of pricing strategies with regards to incentives and cutting prices.”

Honda Incentives

Honda’s Mendel said he expects the company will reduce its incentives in the U.S. this year because of recently introduced models such as the revamped Civic small car and Accord sedan. Honda increased spending on marketing promotions last year by 3.9 percent to $2,206 a vehicle, as the industry average fell 1.7 percent to $2,482, according to researcher Autodata Corp.

U.S. sales for Honda climbed 24 percent to 1.42 million cars and light trucks last year, rebounding from natural disasters in Asia that disrupted production in 2011. Honda’s best year in the U.S. was 1.55 million Honda and Acura vehicles sold in 2007, and the company wants to exceed that mark in 2013, Tetsuo Iwamura, the automaker’s executive vice president, said last month at the Detroit auto show.

Output at the company’s North American plants surged last year to a record 1.69 million vehicles. Honda plans to be a net exporter as its plants in the U.S., Canada and Mexico take more responsibility for developing global models for sale in multiple countries, the company said in December.

“While the purpose of local production is really to build products close to the customer, this strategy also has minimized the effects of exchange rates in our business,” Mendel said.

Honda is adding a factory in Mexico to produce Fit hatchbacks starting in 2014. With the addition of that plant, Honda has said it will have capacity to build at least 1.9 million vehicles in North America annually.

“Renewed rhetoric about exchange rates giving an advantage to Japanese automakers just really doesn’t pass the sniff test,” Mendel said.

Source;
http://www.bloomberg.com/news/print/2013-02-08/honda-counters-weak-yen-criticism-after-u-s-criticism.html