TOKYO -- Riding the yen’s ups and downs can be as much a matter of timing as it is planning. Nissan is working both angles.
For years, as the Japanese yen climbed higher against foreign currencies, the nation’s carmakers scrambled to buy more parts overseas where their currency had better purchasing power.
But now that the yen has done an about-face and is weak again, carmakers are switching to buy more at home -- at lightning speed.
The rapid reaction underscores how some Japanese carmakers were caught out by the yen’s wild fluctuations, but also showcases the extreme flexibility they have built into their purchasing.
Nissan Motor Co., for example, was initially one of the more aggressive companies in off-shoring its parts purchasing.
But over the course of the just the past year, it has subbed dozens of overseas parts for Japan-made ones, according to a recent report in the Nikkan Kogyo Japanese business daily.
Sometimes the swaps were linked to a model change. But in other instances, Nissan rushed to phase in the Japan-made parts mid-cycle, the report said, citing Yasuhiro Yamauchi, Nissan’s executive vice president in charge of purchasing.
Parts that weren’t directly related to design or performance were easiest to replace, Yamauchi said. Nissan wasn’t looking to source parts at home just because they were Japanese. But the yen’s decline gave those parts a competitive advantage.
The Note compact car, made in southwestern Japan, was a banner example of Nissan’s rapid reaction. It was redesigned three years ago when the dollar bought just 70 yen. Nissan leveraged the yen to buy cheap parts from nearby South Korea and China.
But since then, the yen has tumbled. Now, a dollar buys around 119 yen, making those imported parts much pricier.
In the Note alone, Nissan replaced 10 overseas-sourced parts with Japanese ones since last autumn, the Nikkan Kogyo said.
Added to the mix is the fact that labor costs in neighboring Asian countries have risen, further elevating their cost.
The yen’s decline is one reason Nissan has decided to resume making the Rogue crossover at its plant in southwestern Japan from next spring. Like its Japanese rivals, Nissan is booking big profit windfalls from favorable foreign exchange rates.
But it can only maximize those gains when it has the flexibility to rapidly respond to the changes. Nissan’s limber response shows just how well oiled the reflex has become.