Japanese automakers: The currency party is over

Honda - Picture courtesy Bertel Schmitt

A year ago, Ford execs all the way to Mulally riled against a weaker yen, saying it gives Japanese automakers an unfair advantage. Indeed, when the abnormally strong yen came back to acceptable levels later in the year, profits of Japanese automakers surged. That party appears to be over. Yesterday, Nissan reported no appreciable currency effects on its earnings. Today, Honda reported same.Honda 3 - Picture courtesy Bertel Schmitt

In the quarter ending June 30, 2014, Honda actually lost a little money due to currency effects, and it expects to lose a little more going forward. The Wall Street Journal correctly states that “now that the yen has stabilized against the dollar and the euro, Honda no longer benefits from favorable currency translations.” When Toyota announces its quarterly results on Tuesday next week, we will probably hear a similar tune.

With the exchange rate effects dissipated, money has to be made the old-fashioned way, by selling cars. Honda’s net income for the quarter rose to 146.5 billion yen ($1.44 billion) from 122.50 billion yen a year earlier. For the current fiscal year, Honda expects a net income of 600 billion yen ($5.88 billion) on 4.83 million units sold globally.