November 9, 1996

For Japan's Automakers, a Windfall From Yen's Value

By ANDREW POLLACK

OKYO -- A sharp fall in the value of the yen in the last year has been providing an earnings windfall to Japan's major automobile companies.

Owing largely to currency fluctuations, Toyota Motor Corp. reported Friday that net income for the first half of its fiscal year more than quadrupled as automobile exports surged. Nissan Motor Co., meanwhile, recorded a first-half profit for the first time in five years.

Even with the help of currency, however, Mitsubishi Motors Corp. reported a 26.3 percent first-half decline in net income as its sales in its home market declined.

Toyota, Japan's largest automobile manufacturer, said its unconsolidated net income for the six months ended Sept. 30 reached 131.5 billion yen, or $1.17 billion, its highest level since the tail end of Japan's bubble economy in 1990. Sales rose 9.6 percent to 4.08 trillion yen, or $36.46 billion.

Operating income grew more than sevenfold to 205.4 billion yen, or $1.83 billion. But 140 billion yen of that gain resulted from the fact that a given amount of dollar-based sales overseas was worth a lot more yen this year than last year. The currency rates averaged 108 yen to the dollar in the first half of this year compared with 89 yen to the dollar a year earlier.

The weakening yen also helped Toyota register a stunning 17.1 percent increase in exports, as measured by units, more than offsetting the company's slight decline in sales in its home market. Paced by strong demand for its 4Runner and RAV4 sport-utility vehicles, Toyota's exports to the United States rose 12.1 percent to 228,000 units in the half.

Automobile exports from Japan have been declining steadily in the last few years as the yen had strengthened and as the companies moved production offshore. Now the export slide has halted and might even be reversing, which could heat up trade tensions.

Exports for the Japanese automobile industry as a whole, however, are nowhere near as strong as for Toyota, and many executives say the long-term trend is still to move more manufacturing out of Japan.

Nissan's exports, for instance, declined by 9.5 percent in the first half as measured in units. Its domestic vehicle sales also declined 2.8 percent.

Yet thanks to currency changes and cost-cutting it recorded a net profit of 11.6 billion yen, or $103.5 million, compared with a loss the year before of 13.4 billion yen. Sales were 1.74 trillion yen, or $15.5 billion, up 1.5 percent.

Mitsubishi said its net income was 7.90 billion yen, or $70.5 million, down 26.3 percent. Sales fell 8.1 percent to 1.18 trillion yen, or $10.5 billion.

The results for all the companies were for the parent company only, meaning they excluded subsidiaries like Toyota's manufacturing operation in Kentucky and Nissan's in Tennessee. Nissan officials said the company had also returned to the black on a consolidated basis.

There are now signs the currency windfall will shrink. On Thursday the dollar tumbled more than 2 yen to 111.6 yen amid speculation that the United States and Japanese governments would relax their support for a strong dollar. Toyota said it expected a further decline, with an average currency rate of 105 yen to the dollar in the second half.

Even without the currency tailwind, Toyota looks to be in a strong position. It has recently introduced several fast-selling vehicles in Japan. It revised upward its forecasted results for the full year.

Nissan and Mitsubishi, however, revised some projections downward, saying it was difficult to sell in the fiercely competitive Japanese market. The two companies are losing out to Toyota and Honda, which is rapidly expanding its market share on the strength of its popular new sport-utility vehicles, minivans and station wagons.