The US dollar’s weakness is prompting some European car makers to expand their manufacturing capacity in dollar-denominated markets, creating a natural hedge against the currency’s fluctuations, Wednesday’s Wall Street Journal (WSJ) reported.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The report said the dollar has lost about a third of its value against the euro during the past two years which has hurt car makers when their revenues and profits are translated back into their native currencies.
For Volkswagen, for example, the declining dollar reduced 2003 sales by “far more than one billion euros,” or $1.27 billion, chief executive Bernd Pischetsrieder told the WSJ which noted that VW limited the pain last year by hedging about 40% of its exposure to the dollar. Still, Europe’s biggest carmaker is expected to post an operating loss in North America for 2003, the report added.
According to the Wall Street Journal, Japanese carmakers have also been hurt by the weak dollar, but far less than the European companies because Europeans currently build a much smaller number of their vehicles in the dollar area.
The report said Toyota, for instance, made 1.66 million vehicles in its five North American plants last year, and plans to add a plant in Texas in 2006 while, in contrast, DaimlerChrysler’s Mercedes division manufactured about 90,000 M-Class sport-utility vehicles in Alabama last year, and BMW assembled about 150,000 X5 SUVs and Z4 roadsters in Spartanburg, South Carolina.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe WSJ said Europeans now plan to step up their presence in the US and in Mexico and Brazil, where the dollar frequently serves as the principal business currency.
Mercedes already builds some US-market C-class models in Brazil while VW ships Golf hatchbacks to the US from the South American country.
