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Steven Towns on Japan’s Big 3 Automakers

Over at Seeking Alpha, Steven Towns posted an article today entitled “Shares of Japan’s Big-3 Auto Struggling in ‘07, Is it Time to Buy?”

Seriously, he read my mind. I’ve been puzzling this one out over the past week and basically thinking along the same lines, charting and looking for an entry point. Mr Towns has some helpful charts on his post, so please go check it out.

Takenaka: Yen Undervalued

On Wednesday, former Internal Affairs and Communications Minister Heizo Takenaka said during a speech that the yen’s current value against the dollar, at about 120, is undervalued and does not reflect Japan’s underlying economic fundamentals. Takenaka cited the growing number of yen-denominated foreign currency reserves as ’strong pressure’ that could drive up the value of Japan’s currency.

Takenaka also stated his opinion that the Bank of Japan should not raise interest rates at this time.

A few hours earlier, US Deputy Assistant Treasury Secretary Mark Sobel told Congress:

The yen’s real effective value is the result of a protracted bout of deflation in the Japanese economy that coincided with rising prices in the United States and other trading partners of Japan…The recovery has been under way for several years, but it has not been brisk and it has not yet gathered steam…One of the most important contributions Japan could make to the global economy, and to U.S. firms and workers, would be to resume sustainable and robust domestic demand growth and exit completely from deflation.

Did you pick up on the implications there? Sluggish domestic demand and perpetual deflation is somehow good for Japan! Is that what they’ve been after all this time?

At the same hearing, representatives of General Motors blamed the loss of 300,000 jobs in the US since 2000 on the cheap yen, which they claim has given Japanese-made cars an unfair price advantage over American automakers.

Our advice to GM and their ilk was to not get political on this issue, but instead to focus on fixing their revenue problems by building cars people get excited about. They must not read this site.

Quick Update: Japan is the World’s #1 Auto Producer, Toyota Sales up 8.9 Percent

Once again, Japan is the world’s largest producer of automobiles. In 2006, Japan’s auto production surpassed that of the United States for the first time since 1993. Japan previously led the world in automobile production from 1980 to 1993.

In related news, Toyota reported that fourth-quarter profit rose by 8.9 percent. The increase was attributed to a weaker yen and increased sales of Corolla compact cars and Camry sedans.

Don’t tell any US politicians about the ‘weaker yen’ part. They’re supposed to be busy with the war in Iraq.

April imported car sales down 16%, and Dodge isn’t even here yet!

Back in April, DaimlerChrysler Japan announced that it would be re-entering the Dodge brand into Japanese market from June 2007 with four autos: the Caliber, the Nitro, the Dodge Avenger and the Charger.

On April 11, president of DaimlerChrysler Japan Hans Tempel told the media in Tokyo:

The growth of international markets, including Japan, is extremely important for the accomplishment of the goal of regaining profitability for the Chrysler group.

The next day, on the BizCast Japan podcast, Albrecht Stahmer and I discussed why this was a bad idea: quite simply, sales of new cars have been down in Japan on a year-on-year basis for quite some time: Domestic car sales had been down 21 months in a row (now 22), and imported car sales had been down nine months in a row (now 10). Only the minicar market had been growing, and even that declined in April.

Yesterday the Japan Automobile Importers Association announced that sales of new imported cars had declined a whopping 16% in April when compared to April 2006. The top two import brands, Volkswagen and Mercedes-Benz, each posted double-digit declines: Volkswagen was down 23.2% and Mercedes slipped 26.3%.

By only seeing a decline of 11.1%, BMW passed Mercedes in terms of market share, and is now ranked second behind Volkswagen. Congratulations!

13,133 imported vehicles were sold in Japan in April.

So in June, when I go to test drive a Dodge, will they actually be there?

April New Auto Sales in Japan Down 10.2 Percent, 22nd Straight Month of Decline

It’s that time of the month again: The Japan Automobile Dealers Association has announced its report on April 2007 new automobile sales in Japan, and the results demonstrate the continuing of a strong downward trend.

You might remember those opening words from last month; this report is getting frighteningly predictable to write about each month.

In April, 217,911 new cars, trucks and buses were sold in Japan. This figure is down 10.2% from the 242,596 units that were moved in April of 2006 and represents the 22nd straight month of a year-on-year decline in sales for the auto industry. When separated by brand, we see that Mazda’s sales tumbled 13% in April, Toyota’s declined 12%, and Nissan was down 11%.

Honda was the only domestic automaker posting a gain in sales, moving 29,759 vehicles for 3.8% increase over April 2006.

In recent months, brisk sales of minicars have been blamed for the fall in sales of full-size and compact cars. Those critics can start eating their words: Sales of minicars in April were at 139,779 units, down 6.4% and showing their first decline in 16 months.

The breakdown for monthly sales stats:

• Cars: Down 8.6% year-on-year to 183,837
• Trucks: Down 17.9% year-on-year to 32,866
• Buses: Down 8.3% year-on-year to 1,208

By the way, last week Reuters published a confusingly laid-out but helpful “TABLE-Japan auto makers’ earnings preview”

Auto production and domestic auto shipments down in March, exports up

On Friday, the Japan Automobile Manufacturers Association published the results of Japan’s March auto production, and for the first time in 17 months, there has been a fall in domestic auto production. In March, a total of 1,118,009 cars, buses and trucks were built, down 37,821 units (3.4％) from the same month in 2006.

By category, car output declined 2.6% to 937,390 units, the first decrease in 17 months. Truck production fell 10.2% to 133,178 units, the second consecutive month with a drop, and bus production was up fro the 26th straight month, rising 23.8% to 9,620 units.

At the same time, vehicle exports last month increased 8.1% to 568,303 units while domestic shipments were down 8.1% to 767,366 units.

Why was there lower production this March? There seem to be two factors: 1) April, along with August and January, is one of the slowest month for new cars sales in Japan. This would indicate that production should be lower than normal in March and the growth in the market is not anticipated, thereby causing downward pressure on production targets. At the same time, 2) the ongoing decline in domestic sales would seem to increase that downward pressure by giving no reason to increase production. What other factors might be at play here?

Toyota Surpasses GM in First Quarter Sales

This story, understandably, has been all over the news: For the first time ever, Toyota has surpassed General Motors in global quarterly sales.

The stats:

Toyota’s first-quarter sales rose 9.2 percent to 2.35 million vehicles.
GM’s sales in the same period gained 3 percent to 2.26 million vehicles.

The total number of units sold was a record high for both companies. There are plenty of statistics and figures out there; at this point writers could just be making figures up and we would hardly tell the difference. However, I think Bloomberg nailed down the most significant numbers, especially as far as the US market is concerned:



GM and Toyota - US Market Share
	2000	2007 (1Q)
GM	28.1%	23.1%
Toyota	9.3%	15.6%

That said, let’s look at a roundup of what the experts and analysts had to say, with my humble commentary:

Read more

Barbarian on the Board at Toyota! James Press set to Become Toyota’s First Foreign Board Member

For the first time, Toyota Motor Company has named a foreigner as one of its 25 board members. James E Press, currently the president of Toyota Motor North America, is set to become a senior managing director of the auto giant from June, pending approval at the annual shareholder’s general meeting.

Press is currently ranked as a “Managing Officer” within Toyota’s hierarchy. Managing Officers are in charge of directing day-to-day activities at the firm. Including Press, four of the current 49 Managing Officers are non-Japanese. According to the proposed reshuffle, Press’ position as a Managing Officer will be taken over by Didier Leroy, who is currently the President of Toyota Motor Manufacturing of France.

Press became president of Toyota Motor North America in May 2006 and has since been in charge of overseeing the automaker’s operations in North America.

Japanese automakers doing better in the US; Congress to react?

Despite continued weak domestic sales results, Japanese automakers continue to do exceptionally well in the United States. Toyota’s sales rose 7.7% in March, Nissan’s were up 3.9%, and Honda has said it is expecting to post a record year.

On the US side, Ford saw its sales fall 12.4%, GM’s sales were down 7.7%, and DaimlerChrysler saw sales slip 4.6%.

These results seem sure to intensify the debate that is going on over dollar/yen exchange rates. Last week, in reference to Japan, Democratic senator Debbie Stabenow said, “Unfair trade practices, like currency manipulation, that cost American jobs cannot be allowed to continue, no matter who the culprit is.”

On March 28, Stabenow introduced a piece of legislation called the “Japan Currency Manipulation Act” which is meant to stop the Japanese government from participating in what she called the “unfair trade practice of manipulating its yen currency.”

The bill proposes steps to “prove that the Japanese manipulate the yen” and would require Washington to work with other countries to put a stop to such practices.

Back in November 2005, the Cato Institute published a paper by Daniel T. Griswold entitled “GM’s Woes Are Homemade, Not Imported,” in which he argues:

Most foreign-owned auto plants in the United States are non-unionized. Their workers are not as generously compensated as GM’s workers, but they are relatively well-paid with good benefits. And because their employers are not saddled with the uneconomic pension and healthcare costs of a UAW contract, they can produce cars at a more competitive price, creating more opportunity and job security for existing workers. Michigan-based GM’s toughest competition these days is not from Japan, but from Ohio, Kentucky, Tennessee, Mississippi, South Carolina and the other states where foreign-owned auto companies have established production facilities.

Trade barriers and harangues about exchange rates won’t save GM from itself and its unions. In an internationally competitive domestic market, GM will need to earn back its market share the old fashioned way: by controlling its costs and by producing cool cars at a price that more Americans are willing to pay.

Japan’s new auto sales in March: Down 12.6 percent year-on-year

The Japan Automobile Dealers Association has announced its report on March 2007 new automobile sales in Japan, and the results demonstrate a continuing of a strong downward trend: sales of new cars, tracks and buses decreased for the 21st consecutive month, and were down 12.6% against March of 2006.

For the financial year ending March 31, sales of new cars, trucks and buses were down 8.3% year-on-year, showing the fourth consecutive year of decline. About 3,588,000 units were sold during that time.

The breakdown for monthly stats:

• Cars: Down 12.4% year-on-year to 420,486
• Trucks: Down 13.8% to 64,001
• Buses: Down 12.3% year-on-year to 3,151

The breakdown for yearly numbers:

• Cars: Down 9.3% year-on-year to 3,028,000
• Trucks: Down 2.6% year-on-year to 542,756
• Buses: Down 4.6% year-on-year to 17,045

These numbers do not include those for minicars, which have seen an increase in sales that has prompted some to think that sales of minicars in Japan is damaging the full-size car market.

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