Detroit automakers need to stop whining about the weak yen damaging their ability to compete against Japanese automakers. It conjures up decades-old images of excuse-making, when the Detroit 3's problems were everyone's fault but their own.
Let's take a look at the scoreboard, shall we?
The yen was trading in the range of 80-90 to the dollar for the past couple of years, before its recent correction, meaning the yen was strong while the dollar was weak. But what got it there?
The yen was consistently trading at 110 to 120 to the dollar for nearly a decade, whereupon the 2008 Lehman Brothers bankruptcy shocked the global economic system. The dollar weakened horribly as U.S. banks suffered huge losses and the U.S. economy stalled.
During the global economic doldrums, Japan and its yen became comparatively strong, and the yen zoomed to 80 to the dollar. Today, the American economy is in recovery, and Japan is finally taking steps to get its own economy in shape.
Japan's Abenomics measures to boost its economy rely on loads of new public debt -- in a country with a larger budget deficit than the United States. They have strengthened its economy but weakened its currency.
Detroit loves to harp that every time the yen weakens by ¥1 against the dollar it means $350 million in extra profit for Japanese car companies. A ¥10 swing means $3.5 billion more in the black for Japan Inc., which, to be fair, has been borne out in recent earnings reports.
But anyone who has taken an Econ 101 course can draw the 25-year trend line. The yen is right around where it should be.
We hear lots of currency-manipulation talk from protectionists, but none of them were asking us to take it easy on Japan when the dollar plummeted 40 percent against the yen in the mid-'90s, and again a few years ago.
For the past five years, the Detroit 3 have basically had a free shot at stealing profit and market share from Toyota, Honda and Nissan. Now that opportunity has run its course.
You may e-mail Mark Rechtin at [email protected]