Disaster and Dollar comps will boost J3 OEM’s

As we pass the first year memorial of the heartbreaking 2011 Tōhoku earthquake and tsunami, it’s only appropriate to think of those who lost everything, including those who lost their lives.  I spent five of the most interesting personal and professional years of my career and life in Japan – my daughter was born in Seibo Hospital in Shinjuku-ku – and I have watched with little surprise, yet great admiration as the nation and its people have “endeavored to persevere” and move on with life and business.

The impact shocking on the J3 automakers, yet it’s amazing to see that they acted quickly to protect the business and prevent recurrence.  A year ago, we were focused on controller wafers and black paint!  Today, we are already seeing new sourcing strategies in place, massive production planning shifts and business growing.

From an earnings perspective, the crises cost the Japanese automakers almost 500 billion, a one-time cost that will give Q1 2012 comps a huge boost and play out over the next three quarters with a huge potential for the full year ending March 2012.THE REAL STORY is the dollar yen.  The biggest news not heralded this week is this chart.  The $/¥ ran around 75 for 2011.  The recent spike in dollar mainly against the yen is the big news for a strong V shaped recovery for Toyota, Nissan and Honda?  If US macro keeps the dollar up and the disaster legacy of the yen support and traditional march push down on the yen to support year-end earnings translations, this could be the real big boost.

Comment: I Googled “strong dollar impact on japan automakers” for the past week and got only 56 hits, as opposed to more than 350 for “earthquake impact on japan automakers” over the same time.  

Toyota, Nissan and Honda will have a better than expected North America rebound with the currency pushing the impact of stronger volume as supply is normal.  All three have been disciplined in pricing year to date.  When I asked each company in Detroit this January where they targeted incentives, the reply was universal:  at 2011 levels, an admirable objective.  I expect somewhere higher then 2011, but still below 2010.  That’s good news.

Yes, yes, yes, I know Ford, GM, VW and particularly Hyundai/Kia are much stronger competitors, but I don’t underestimate the power of the J3 brands and dealer networks.

Some interesting comments:

Automotive NewsHonda refills stocks faster than Toyota.

(Mainichi Japan) March 14, 2012: Dollar rises to 11-month high vs. yen on hopes for U.S. recovery

Automotive News: Tsunami: The aftermath

Ganbatte
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