Friday, February 02, 2007

Devalued yen and the Auto Industry

US auto companies are facing a tough time as Japanese auto makers like Toyota is making inroads in the US auto market. Devalued yen is perhaps another thing that US auto makers are not too much happy about.

Los Angeles Times wrote:

Daniel Griswold accuses the U.S. auto industry of trying to make Japan a "scapegoat." On the contrary, Daimler Chrysler, Ford and General Motors have been open about the challenges presented by the intense competitive struggle underway in the U.S. market and their on-going corporate restructuring plans.

We apologize to no one for raising to U.S. policymakers Japan's policy of massive currency intervention and manipulation as an unfair trading practice that is damaging our industry. Japan's intervention has pushed down the yen's value to its lowest level in more than 20 years, 20% to 25% below the level at which it would otherwise trade.

In the car business, this windfall currency advantage translates into a $3,000 to $10,000 subsidy for every vehicle exported from Japan. This may be one reason Japanese auto exports have increased by about 1 million units over the last decade.

So, may be the US government will put pressure on the Japanese government to do something about the devalued yen. I wonder if it will be enough to stop the onslaught of the Japanese car makers like Toyota.