Japanese automakers are bracing for a steep plunge in group operating profits for fiscal 2011, and perhaps beyond, due to the sharp appreciation of the yen.
Group operating profits by the 10 leading car makers are expected to hit a combined 1.36 trillion yen ($17.7 billion) for fiscal 2011 ending in March, according to their forecasts released by Feb. 8.
The figure represents a drop of more than 760 billion yen from a year earlier.
The forecasts are based on an assumed exchange rate of between 76 and 80 yen to the dollar for all of fiscal 2011. This is 6 to 9 yen higher than the previous year.
The yen's rise is expected to wipe out one-third of 2 trillion yen in combined operating profits reported in fiscal 2010.
Toyota Motor Corp. and Fuji Heavy Industries Ltd., which produces Subaru models, are particularly vulnerable to fluctuations in the exchange rate because the percentage of their production in Japan is higher than other carmakers.
Toyota expects 270 billion yen in consolidated operating profits, a decrease of 42.3 percent, while Fuji Heavy Industries predicted 38 billion yen in group operating profits, a decline of 54.8 percent.
Toyota forecast the yen’s rise will wipe out 310 billion yen in profits, while Fuji Heavy Industries put its estimate at 45.1 billion yen.
Mazda Motor Corp. is expected to log 40 billion yen in consolidated operating losses for the first time in three years.
Its losses resulting from the yen’s surge are estimated at 40.5 billion yen.
Among all the automakers, Nissan Motor Co. forecast the highest group operating profits, at 510 billion yen. Even so, that was down by 5.1 percent.
The company estimated its losses stemming from a strong yen will be in excess of 150 billion yen.
Some automakers are scrambling to shield themselves from a prolonged appreciation of the yen.
In January, industry giant Toyota formed a unit to expedite production and local procurement of parts and components in foreign markets.
It also established a task force to import more parts made overseas. Its percentage of such imports at that time stood at less than 10 percent of what it is now.
Mazda, which is predicting a fourth straight year of group net losses, plans to raise its ratio of overseas output to 50 percent by fiscal 2015 from the current 30 percent.
Fuji Heavy Industries is considering bolstering its production capacity in the United States.
As for consolidated financial results in the first three quarters of fiscal 2011, all but Nissan, whose sales in emerging markets have surged, reported a decline in revenues.
Apart from the yen’s surge, flooding in Thailand last year forced Japanese car makers to cut back production due to disruptions in supply chains.
Eight automakers reported a decline in group operating profits between April and December from the previous year.
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