Yearend outtakes and new info
Looking back at the year that is about to end, I remember omitting some things from two columns last month due to lack of space. Here are the outtakes and new info gained after those columns and an earlier one in August were published:
Jeep Grand Cherokee and Ford Explorer: A Comparo (Nov. 16, 2011). Regarding the two SUVs and their all-wheel-drive systems, I wrote that both are lifestyle vehicles incapable of serious, hard-core off-road adventures. However, the 2011 Jeep Grand Cherokee’s Quadra Trac II (R) 4WD system with torque-on-demand two-speed transfer case and Electronic Limited Slip Differential in the rear axle makes it much more capable than the 2011 Explorer in tackling severe off-road and towing situations. As Wall Street Journal motoring columnist Dan Neil noted, “The Explorer’s archrival Jeep Grand Cherokee utterly crushes the Ford off road.” Perhaps this is why the Jeep Grand Cherokee 3.6L Limited costs P3,680,000 while the Ford Explorer Limited costs P1,380,000 less at P2.3 million?
Fearless Forecast for 2012 (Nov. 09, 2011). In the Iffy Forecast section, I wrote that Honda Cars Philippines Inc. is expected to unveil the long-awaited 2012 Civic that was launched at the New York International Auto Show last April. But its Philippine arrival next year could be delayed since Honda Motor Co. is rushing to improve and redesign it for launching late in 2012 in the United States as the 2013 version. Per an article in The WSJ, the newest Civic was met with disappointing reviews and was excluded for the first time from Consumer Reports’ closely watched Recommended list. The Civic has been criticized for having too many hard plastic parts in its interior, for ride and handling characteristics that fall short of earlier versions of the car and for retaining a five-speed automatic transmission while its rivals in the compact car segment like the Ford Focus, Chevrolet Cruze and Hyundai Elantra have six speeds. At a dealers’ conference in Las Vegas, the president of American Honda acknowledged that Honda had erred with the Civic and had underestimated the models its competitors were developing. “We produced a good car when we should have produced a great car,” he was quoted by The WSJ as saying.
No Longer World’s No. 1. In the same section, I wondered whether the 2012 Toyota Camry will be launched here next year and noted that Toyota’s plant in Thailand was also flooded and had been temporarily closed. Now comes the news that damage to suppliers from Thailand’s floods in October had forced Toyota to scale back production again just as it was recovering from the recall of more than 10 million vehicles globally in 2009-2010 plus the March 11, 2011, earthquake and tsunami in Japan’s northeast coastline. The setbacks have eroded Toyota’s position against global rivals including General Motors, Hyundai Motor Co. and Volkswagen AG. But production disrupted by the Thai floods has mostly returned to normal and Toyota recently forecast a 20-percent jump in global sales to a record 8.48 million vehicles in 2012.
Although resilient Toyota remains No. 1 in sales in the PH, a decline in global sales due to production shortfalls and a consequent 54 percent drop in profit to 180 billion yen ($2.3 billion) in the fiscal year ending in March 2012 could put Toyota behind General Motors, which it had overtaken as the world’s biggest automaker in 2008, and behind Volkswagen. While Toyota still produces more cars than any of its Asian rivals, its lower profit projections could place it behind Nissan, which forecast a net profit of 290 billion yen this year and Hyundai, which could earn more than $6 billion this year.
When Supply Cannot Meet Demand (Aug. 24, 2011). This column noted how the supply chain disruption caused by the March 11 twin disasters in Japan reduced the output of Toyota and Honda worldwide. Now, it appears that the strengthening of the yen versus the US dollar and euro is inflicting a longer-term impact on major Japanese automakers than the natural disasters. The yen has strengthened by nearly 40 percent in the last four years. At exchange rates below 80 yen to the dollar (it was 77.64 yen earlier this month), the price competitiveness of Japanese exports in overseas markets is reduced and erodes the value of foreign profits on the balance sheets of Japan’s corporations.
To combat a strengthening yen that makes its cars too expensive to export around the world, Honda Motor Co. plans to increase production capacity by as much as 40 percent in North America, its most important market, in order to export between 200,000 and 300,000 vehicles a year therefrom while eventually reducing its exports of the vehicles it makes in Japan to between 10 and 20 percent over the next decade. Honda plans to build a new plant in Mexico and expand its seven existing assembly plants.
The stronger yen makes it hard to make money on small cars because profit margins are already thin. Honda recently began to ship Fit subcompact cars (a.k.a. the Jazz) from China to Canada to reduce the number of Fits it exports from Japan. For the last five years, Honda has been exporting the Fit from China to 27 countries, mostly in Europe. Honda has also reduced production of the CR-V in Japan and increased its assembly in North America.
Nissan Motor Co. is also moving more manufacturing plants overseas to plants closer to international customers. While Nissan maintains a production volume of one million vehicles a year in Japan, the country’s second-largest auto manufacturer led the way in moving production out of Japan and using more foreign-made parts at domestic plants. Last year, Nissan began importing all of its March subcompacts sold in Japan from Thailand. Over the next two years, Nissan plans to shift production of the Rogue crossover and Infiniti JX SUV to the U.S.
Toyota, on the other hand, is sticking to its pledge to build at least three million cars a year in Japan, half for export. This is the company’s social responsibility commitment to protect Japanese jobs and Japan’s industrial base. Viewing its manufacturing technologies and skills owned by its home factories and suppliers, known as “monozukuri” as an infallible weapon, Toyota expects to ride out slow sales and the yen’s strength as it did in the mid-1990s. Toyota is streamlining its domestic production lines instead of uprooting them so that when the yen returns to a more balanced level, the company will be tremendously competitive.
Still, Toyota is losing $5 billion a year in its home market while the strong yen has reduced profits on exports. It recently began making the Corolla at a plant in Mississippi and is considering an expansion of its Baja, Mexico, plant to make a new small car to replace the Yaris subcompact, which is currently made in Japan. And in his 2011 New Year’s message, Toyota president Akio Toyoda, grandson of the company’s founder, warned that while he does not want to abandon the foundation of monozukuri by relocating production facilities elsewhere, if the company is simply unable to make a profit, it may be forced to do so.
