Last week, a freshly minted Ford CEO Mark Fields paid an inaugural visit to Capitol Hill, and he arrived singing a familiar tune. He blasted the nasty Nips for currency manipulation. Fields “urged lawmakers to take a tough line with Japan in ongoing trade talks as part of the proposed Trans-Pacific Partnership,” said the DetN. To rile against alleged Japanese currency manipulation appears to be part of the job description of any Ford exec. In February, Ford Americas president Joe Hinrichs “took Japan and specifically Toyota to task for benefiting unfairly from currency manipulation,” wrote Automotive News. A year ago, it fell to then Ford CEO Alan Mulally to “chide Japan for currency manipulation.” Take one look at the chart above, and you begin to understand Ford’s obsession with Japan and specifically Toyota.
While GM’s deteriorating U.S. market share has received a lot of attention from the punditry, Ford’s erosion has been mostly ignored. At home sweet home, Ford is under constant threat of being outsold by Toyota. In 2007 and 2008, Toyota already passed Ford in U.S. market share, a fact that was drowned out by the wails of carmageddon. Ford was able to regain its #2 post by the end of 2009, and could solidify its lead in the subsequent years.
Ford’s return to #2 glory was aided by two factors. By the end of 2009, GM and Chrysler had gone bankrupt, Ford was leveraged to the hilt, Toyota was in spitting distance of being America’s largest automaker. Something had to be done. Toyota suddenly developed mysterious unintended acceleration problems. A witch hunt ensued, operatives of Ford were happily fanning the flames.
Helping Ford much more than a whisper campaign was the mighty yen. The world had lost faith in both the dollar and the euro, and dumped its money into the least rotten currency available, the Japanese yen. The Japanese currency became obscenely expensive. Along with the Yen, Japanese exports became either obscenely expensive, or had to be sold at a loss at market prices. To make matters worse for Japan and the rest of the world, the Fed was busy cheapening the dollar with wave after wave of quantitative easing.
In 2007, a dollar bought more than 120 yen. Three years later, in 2011, a dollar bought 76 yen, and just about nothing in Tokyo. Just as a for instance, a subway ticket that takes me from where I live in Tokyo across town to Ford’s nemesis Toyota, did cost more than 6 dollars in 2011 yen. A taxi would have meant bankruptcy if you earned increasingly worthless dollars.
The high yen had the effect that each car exported from Japan to the U.S. lost money. Profits from U.S. operations had lost 37 percent of their value compared to 2007 pre-crisis times.
In 2012 – the dollar still bought not much more yen than in 2011 – the American Automotive Policy Council, the lobbying arm of Chrysler, Ford and GM published a study that claimed that Japan is manipulating its currency. A look at the currency charts made you think they had lost their minds. It made as much sense as accusing a waterfall of being an arsonist. Actually, the APC and its paymasters were not as stupid as they looked. They knew that the U.S. public usually has no clue about currencies. They also knew that the yen had to turn around, or else.
Which it did. In late 2012, the yen begun its trip back to more normal levels Currently, the dollar buys a little more than 100 yen, still way too expensive than the 120 yen of 2007. That subway ticket now costs $4.70.
Along with that, something else happened. In recent months, Ford gave back market share to both GM and Toyota, and I honestly do not know what bothers Ford more. In the first seven months of the year, Toyota relegated Ford to #3 position again, with a 15 percent market share slightly ahead of Ford’s 14.7. No wonder that Ford is stepping up the “currency manipulator” rhetoric, and the resonance it receives in the U.S. proves once again the old Goebbels axiom that if you repeat a lie often enough, it becomes the truth. It does not matter that when Mulally called Japan a currency manipulator, Fed chief Bernanke contradicted him in front of the House Financial Services Committee, saying that Japan is “not manipulating their exchange rate, they are not directly trying to set their exchange rate at a given level,” a fact that even Automotive News had to concede. It does not matter that one look at a long term currency chart immediately exonerates Japan from any suspicions of currency machinations. Propaganda is job one at Ford, and it works.
The currency allegations are a whale-sized red herring. Ford, and along with it all of Detroit, is in a fight for its life and against the Trans Pacific Partnership agreement. If accepted, even a highly watered down TPP eventually might bring down the 25 percent “chicken tax” that turned the U.S. into a closed market for light trucks. As much as Ford tries to be green, without the outsized trucks profits, it would be deeply in the reds. For lack of foreign competition, blue collar trucks now cost more than many imported luxury cars.
Japan wants to protect its aging rice farmers just as much as Washington wants to protect decrepit Detroit. At the begin of formal TPP negotiations with Japan in 2013, a deal was reached that keeps the chicken tax around for “the longest feasible period,” as economy minister Akira Amari said. In exchange, American rice will be kept out of Japan. The American farmer is being screwed twice. His work truck costs more than a BMW. And he is kept out of a market eager for cheaper rice. The American farmer needs a better lobbying arm.
Nonetheless, even the longest feasible period is too short for Ford & Co. Ford wants the TPP dead. The currency manipulation story may sound silly, but it is a sharp weapon against the TPP. According to the Brookings Institute, “TPP countries are unlikely to agree that the current proposals in the United States on currency manipulation are a faithful interpretation of the IMF principles to which they already subscribe. Demanding that American trade negotiators introduce such a chapter at this critical stage in the negotiation process is akin to throwing a wrench in the works.”