Nissan Yen-Aided Cuts Threaten Detroit Price Discipline is a well-written article that brings awareness to Japan’s history of currency manipulation and the consequences for Americans.
Nissan’s sales boom has the industry on edge. It’s the first sign of a Japanese automaker taking advantage of the weakening yen that Prime Minister Shinzo Abe has pushed down to improve Japan’s economy. That currency’s 15 percent swoon versus the dollar since Oct. 31 gives Japanese automakers an extra $1,500 per car they can use to cut prices or offer additional features while keeping prices even, according to Morgan Stanley.
Nissan’s marketing moves “strike me as a scorched earth policy of going for market share and sales volume at seemingly all costs,” said Michelle Krebs, a Royal Oak, Michigan-based analyst with auto researcher Edmunds.com.
That’s pressuring Detroit to maintain new-found discipline on discounting. An over-reliance on rebates and price cuts helped lead to Detroit’s downfall last decade. In order to survive, the predecessors of General Motors Co. (GM) and Chrysler Group LLC required government-funded bankruptcies in 2009 and Ford needed a self-financed reorganization.
The practice of manipulating their currency to gain advantage at the expense of American industry and jobs has been used extensively in the past and was a primary reason for the automakers needing bridge loans in 2008-2009. As discussed in last week’s post regarding my appearance on Auto Talk with Dave Finkelstein I made this point to listeners of St. Louis’ right -wing radio station 97.1 FM.
How did currency manipulation help the Japanese firms steal market share?
Japanese automakers may wage a “silent price war,” in which they outfit new
models with extra features while keeping sticker prices in check.
Combine that with bigger profits,
The weaker yen will add $2.7 billion to Nissan’s operating profit this year,
Deutsche Bank estimated.
So the practice of currency manipulation helps Japanese manufacturers gain an advantage in the form of lower prices, more content, and higher profits. All this from a government policy not more productive, efficient, innovative, or higher quality products. Add in other practices such as direct research and development and a variety of subsidies courtesy of the Japanese and Korean government is it any wonder American automakers were pressured?
Of course a floating tariff to equalize the value of a currency’s manipulation would create a level playing field for all producers and avoid the circumstance in which domestic manufacturers, the ones providing tax revenue and jobs, are disadvantaged because policymakers don’t want to intervene.
Funny, how many of these same policymakers literally go ballistic if a foreign nation would invade this nation to take our freedom but are nonchalant about these nations destroying American industry, jobs, and futures. OK, not that funny.