Natural disasters a thing of the past, says Nissan/Renault boss, but Japanese currency is simply too strong
One of the more graphic images published with the news of the Japanese tsunami 12 months ago was this one, courtesy of Autoblog.com.
The photo shows a shipment of Nissan and Infiniti cars originally destined for export but damaged beyond reinstatement as a massive wave swept through from the epicentre of the 8.9-scale earthquake off the east coast of Japan.
While the image looks dramatic however, the real problem Nissan (and luxury brand Infiniti) face is the strength of the Japanese yen, according to Chairman and CEO of the Renault-Nissan-Alliance, Carlos Ghosn. Speaking with media during the course of the Geneva motor show, Ghosn claimed that Nissan and Infiniti have overcome the supply problems associated with the natural disaster in Japan, but there's a wider economic disaster looming for Japanese manufacturers: the yen being valued so high against the US dollar and other currencies tied to it.
"We lost a lot of cars, so these are lost sales; you know Nissan has been in short supply most of the year, 2011," Ghosn said. "We have estimated financially the impact. Fortunately for us, the company reacted very well to the earthquake and very quickly we were back on [a solid] footing. I think... thanks to the mobilisation of the Nissan people — not only in Japan, but even globally — we may end the year not very far from what we forecast at the beginning of the year, not knowing that the earthquake would hit us. So, in a certain way, these efforts have completely erased the impact of the earthquake, which means that if there was no earthquake we would obviously have done much better than what we [have].
"I think the earthquake, thanks to the absolutely remarkable attitude and behavior of the Japanese people, is a thing of the past. I'm not talking about the human side of it; people who lost family members... there's nothing that can compensate for that. This part will always be a dark memory in Japan. But economically, the earthquake is behind us. Japan has remarkably overcome the earthquake.
"If there is one drag on the Japanese economy today, it's not the earthquake, it's the yen. This is a real drag... In my opinion the yen made more damage to the Japanese economy than anything else [that has] happened in the past."
And unlike the tsunami, the strong yen is not a disaster that merely strikes and moves on. It has the potential to foil Japanese export efforts for years to come, which is one reason why companies like Nissan are currently seeking manufacturing bases in other countries — to spread the risk presented by natural disasters and also reduce unfavourable exposure to any one unit of currency.