Morgan Stanley estimates the currency boost to operating profits at about $1,500 per car, while Detroit carmakers put the figure closer to $5,700. “We’re concerned about what the long-term ramifications are,” says Joe Hinrichs, Ford Motor’s Americas chief. Sergio Marchionne, CEO of Chrysler Group and Fiat, also frets about the impact. “We didn’t need this, to put it bluntly,” he told Bloomberg TV on March 5. “It’s going to make life tougher.”
Toyota in February raised its profit forecast by 10 percent for the fiscal year ending March 31 to 860 billion yen ($9 billion), a five-year high. That would more than double the previous year’s profit and signal a convincing comeback from the global recalls and 2011 Japanese earthquake that shook Toyota’s standing as a leader in earnings, sales, and quality.
Detroit automakers are watchful for a replay of the 1990s and 2000s, when a weak yen allowed Japanese automakers to offer American buyers cars loaded with extra features at prices U.S. companies couldn’t match. It took government-backed bankruptcies at General Motors and Chrysler in 2009 and a wrenching restructuring at Ford to get their costs in line with Toyota’s. Those gains are being eroded by the currency shift, says Morgan Stanley auto analyst Adam Jonas. “This is, without a doubt, the biggest change affecting the global auto industry,” Jonas says. “The dollar versus the weak yen will make the Japanese automakers richer, and they can use those profits to target more aggressive growth. Ford and GM are in their bull’s-eye. This is a real threat.”