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JAPAN: Yen will keep new Nissans in overseas factories - COO

By Graeme Roberts | 5 December 2011

Nissan will in principle produce newly developed cars at its overseas plants in future as the strength of the yen continues to hit the profitability of its exports, according to the carmaker’s chief operating officer.

Toshiyuki Shiga told Asahi Shimbun newspaper: "Under current foreign exchange rates, there can be no shipments from Japan of totally new projects."

His comments suggest that there are few benefits to producing entirely new models for export in Japan because of the yen's strength although existing models remain more profitable.

Shiga told the newspaper the company will maintain its domestic production capacity of 1m vehicles per year even assuming that exports fall to 400,000 vehicles.

Last week, Nissan CEO Carlos Ghosn warned that Japanese car manufacturers could start to move more production to emerging markets like Thailand, India and Mexico if the yen remains at its current "unrealistic" level.

He said at the Tokyo motor show: “The yen is our main problem. When it stands at 77 to the dollar it is uncompetitive.  It is an incentive to move production out of Japan. Our company is profitable, but there is no profitability in cars made in Japan for the export market. It is difficult to make investment in a company with no profitability.

"Producing in Japan for the Japanese market is not a problem because we are competing on an equal level. What is at risk is that part of our production that is exported when we are neck to neck with the Koreans and some of the Americans and Europeans. For now we are going to hope for the best, but if we see a risk we are going to shift it."

Ghosn said he is already warning the Japanese government that it has to be careful about what the value of the yen is doing to the country's industrial base.

He added: “Even if the yen was at 100 to the dollar it would still be too high, but Japanese industry could be extremely competitive. But I don't think the economy in Japan is in such a shape that the strategy is working. There is something very artificial about this."

In the fiscal year that ended in March 2011 Nissan's domestic production totaled 1.07m vehicles with 610,000 for export and 460,000 for sale in Japan.