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Nissan Bucks Trend with Profit Gain

Japanese maker expects full production by October.

by on May.12, 2011

Nissan CEO Carlos Ghosn reports increased earnings but forecasts a loss in market share.

Nissan has become the only one of the major Japanese automakers to post an increase in earnings for the January to March quarter, profits rising 7.2% despite the impact of the March 11 earthquake and tsunami that virtually shut the Japanese auto industry down.

The maker also reported that it expects to be back to full production at its home and foreign-based assembly operations by October, one to two months before arch-rival Toyota, which on Wednesday reports a 77% decline in profits due to a mix of factors including the March disaster and a sharp rise in the Japanese yen.

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Nonetheless, Nissan, like its Japanese competitors, has been hard hit, and “We’re going to have to accept the fact that in some markets we’re going to have significant losses in market share,” acknowledged CEO Carlos Ghosn.

Nissan reported a quarterly net profit of 30.8 billion yen, or $347.5 million, compared with a loss of 11.6 billion yen.  It also announced an 88.6 billion yen, or $1.1 billion operating profit for the final quarter of the Japanese fiscal year, which ended on March 31.

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Quake Sends Toyota Profits Plunging

Quake, strong yen raising serious questions about Toyota continuing production in Japan.

by on May.11, 2011

Good news, but mostly bad news from Toyota's CEO Akio Toyoda, as he reveals a 77% decline in profits.

This is an updated version of the report TheDetroitBureau.com initially posted.

Slammed by a devastating earthquake, tsunami and subsequent nuclear crisis, Toyota Motor Co. says its profits for the first three months of 2011 plunged 77%, dipping to their lowest levels in nearly two years. Net income came in at 25.4 billion yen, or $314 million, down from 112.2 billion yen during the same period in 2010.

Though the maker said it is speeding up efforts to restore its global production network to full operations, Toyota officials warned they won’t have a full sense of just how big an impact the March 11 disaster will have on future profits for some time.

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The quake alone wasn’t the only problem shaking Toyota’s traditionally solid finances.  The strong yen has made it increasingly difficult to export from home market plants, leading CEO Akio Toyoda to acknowledge, during a Tokyo news conference, that, “I fully understand that we can’t go on with just a desire to protect manufacturing in Japan,” Toyoda, 55, said.

The quake-spawned crisis put a downward spin not only on the final months of Toyota’s fiscal year, which ended on March 31, but hints at further problems ahead.  With some lingering effects likely to be felt through year-end, Toyota is all but certain to lose its crown as global sales leader, while profits are expected to be depressed, as well.

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Color Me Relieved: Japanese Paint Plant Back Online

Loss of pigments colored what paint choices American buyers were offered.

by on May.10, 2011

Ford will soon be able to offer the Harley-Davidson F-150 in its signature Tuxedo Black again.

The automotive world is about to become a little more colorful thanks to the resumption of production at a plant in Onahama, Japan that produces some key paint pigments used by automakers around the world.

The plant, owned by the chemical giant Merck, is the only source for some key ingredients required to make such popular hues as Ford’s Tuxedo Black, a high-glass metallic hue offered on a variety of the maker’s products.  Production was halted on March 11, when Japan was struck by a devastating earthquake and tsunami, followed by a crisis at a key nuclear power plant that has left the island nation struggling for electricity.

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As a result of the shortage of Merck’s Xirallic pigment, Ford, Toyota and a number of other automakers around the world were forced to either stop taking orders for colors like Tuxedo Black or offer customers some alternatives.

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Japan Auto Crisis Quickly Going Global

Entire Japanese auto industry likely to lose money, key analyst forecasts.

by on Mar.28, 2011

Honda braces for plant closings in North America, which could play havoc with the upcoming launch of the 2012 Civic.

It’s not going to be a good spring for Japanese automakers, the ongoing industry shutdown likely “push all companies into the red” for at least the first half of the year, warns a key industry analysts.  But the impact, which has already struck General Motors, is rapidly spreading through the rest of the automotive world.

In North America and Europe – as well as Japan – supplies of key Japanese-made parts and components are rapidly dwindling.  That has led several Japanese makers, Toyota and Subaru, to pare back U.S. production, as well as to a week-long shutdown at a General Motors truck plant in Louisiana. Two GM plants in Europe are now being impacted, as well, while Volvo is warning its production plans are also in jeopardy.

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“This is the biggest impact ever in the history of the automobile industry,” said Koji Endo, managing director at Advanced Research Japan in Tokyo.

The worst effects, however, are being felt by Japanese makers.  With only a few exceptions, auto assembly operations in the home market remain shut down.  In large part, that’s a direct result of damage from the March 11 earthquake and tsunami which hammered many parts and component plants in the northeast corner of Japan.

As much as 20% of Japanese automotive semi-conductor production may have been lost for months due to the damage to one particular plant, but other silicon-based operations have also suffered at least short-term damage.

Even the production of paint pigments has been impacted, Ford Motor Co. last week forced to temporarily stop taking orders for a number of models in Tuxedo Black and three shades of red.  Chrysler is also taking steps to restrict orders for some colors using Japanese pigments.

“We see the situation as severe but definiable,” said Deutsche Bank analyst Kurt Sanger.  “We assume the impact to production should push all (Japanese car) companies into the red” for the first half of the fiscal year which, for makers like Toyota, Honda and Nissan, begins on April 1.

Collectively, Sanger estimated that Japanese production, initially forecast at 23 million vehicles, will come in about 15% lower.

Barring significant additional setbacks, however, the DB analysis projects the makers will be able to return to profitability during the second half of the fiscal year, beginning on October 1, “and we do not see permanent impairment to corporate value.”

But other analysts have warned that shortages of products and delays in the resumption of production could make Japanese brands more vulnerable to their European and North American competitors.

That’s especially worrisome to Honda, which on Friday issued an advisory to its North American employees that production could soon be interrupted due to parts shortages.  The timing couldn’t be worse considering the upcoming launch of the 2012 Honda Civic.  Long a mainstay in the compact segment, the Civic is now facing tough new competition from rivals like the new Ford Focus, Chevrolet Cruze and Hyundai Elantra.

Honda was the only Japanese automaker to report an earthquake-related death at one of its facilities.  And the Tochigi technical center where that occurred is expected to be out of operation for months, which could delay future product development programs.

Toyota has announced the delay of the Japanese launch of its Prius V, a new model that will share the well-known Prius badge with a current, smaller hybrid.  It is unclear whether Toyota will have to postpone the U.S. roll-out of the Prius V, scheduled for late summer.

Goldman Sachs estimates the shutdown of production has been costing Japanese automakers a collective $200 million a day.  Toyota is suffering a disproportionate share of the impact not only because of its overall size but because it depends more heavily on a Japanese production base than major rivals.

Nissan may, in fact, be able to leverage its North American operations to help restart production back home.  The company is considering the possibility of increasing production of engines at a plant in Decherd, TN, which would be shipped back to Japan to replace output lost when the quake and tsunami damaged a home market engine plant.

Domestic Makers Wary of Disruptions from Japanese Disaster

Problems with Japanese suppliers threaten Detroit’s Big Three.

by on Mar.15, 2011

Shortages of Japanese-made components, such as semiconductors and batteries, could bring trouble for U.S. makers, including Ford, which uses Japanese batteries in its Fusion Hybrid.

While the Japanese auto industry reels from the devastating one-two-three punch of earthquake, tsunami and multiple nuclear accidents, domestic carmakers are also growing increasingly anxious about the global reach of the catastrophe.

Officials from General Motors, Ford Motor Co. and Chrysler Group report they are monitoring the situation carefully – while also exploring the potential for alternate sourcing of components currently purchased from Japan.

The lack of a single key component could bring an assembly plant to a sudden halt, industry insiders fear.

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“One area of growing concern is the supply of automotive semiconductors,” noted analyst Rod Lache, of Deutsche Bank.  “Auto Industry purchasing execs had already expressed concern about tight supply of Auto Semis even prior to the disaster.”

These are the central components of today’s digital automotive componentry, whether used in engine management systems, airbag controllers or an infotainment like Ford’s Sync.  Japan, said Lache, produces about 22% of global auto semiconductors.  But the production process is particularly sensitive, and “even millisecond (electric) outages or small tremblers can result in the scrapping of weeks of in-process production.”

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