When the yen falls, Japanese automakers reduce the cost burden on their suppliers

Tokyo — For decades, Japan’s strong automakers have had guidance in dealing with deflation. We ask our suppliers for all the low prices and promised quantities, from seat belts to wire harnesses.

Inflation is now intensifying around the world, and Toyota and Nissan are burdened with soaring raw material prices and are providing other support to parts makers that have been hit, executives said. rice field.

Fragmented support to suppliers negotiated across the Japanese automotive industry highlights the potential turmoil of the current weakest yen in 20 years.

Japanese automakers, which have historically benefited from currency depreciation through overseas sales, are now focused on managing threats to their suppliers. For many component manufacturers, the depreciation of the yen exacerbates the pain of rising material input costs.

“Inflation is happening and we definitely need to deal with it,” Nissan Chief Operating Officer Ashwani Gupta recently told reporters. “Ultimately, we are discussing with our suppliers because the sustainability of our suppliers is our sustainability.”

Tokai Rika Seisakusho, a manufacturer of handles and other products owned by Toyota, is one of the suppliers that received its support.

Initially, higher material costs were expected to reduce operating profit by 9.1 billion yen ($ 68 million) this fiscal year. Instead, its customers, mostly Toyota, have absorbed almost 15% of the higher costs and will cost more this year, a spokesman said. Tokai Rika Seisakusho predicts that Toyota and other customers will bear nearly two-thirds of the expected 7.9 billion yen hit due to soaring prices of materials such as metals and resins.

A spokeswoman said he continues to discuss rising costs for semiconductors and logistics with customers.

“Pay more attention”

A spokeswoman for Tokai Rika added that Toyota “is paying close attention” to the concerns and problems of its business partners. The world’s largest automaker by sales owns almost one-third of parts makers, accounting for about three-quarters of sales.

Toyota spokesman Shiori Hashimoto said automakers are taking steps to reduce the burden on suppliers and declined to comment on Tokai Rika.

The shortage of semiconductors and pandemics have forced Toyota to repeatedly reduce production plans, increasing the cost burden for component manufacturers. There are 400 major suppliers and a total of about 60,000 suppliers. Toyota warns that an “unprecedented” rise in raw material prices will cost $ 11 billion this year and could reduce full-year profits by a factor of five.

Nissan already bears much of the cost of increasing raw materials and precious metals, Chief Operating Officer Gupta recently told reporters.

Nissan CEO Makoto Uchida told Reuters in an interview last month that investing in all-electric vehicles is not just focused on “significant increases in volume,” but a longer-term approach to suppliers. He said he needed.

Cost transmission

Honda Motor Co., Ltd.’s supplier Musashi Seimitsu Industry Co., Ltd. (a supplier of transmission gears and suspension parts) is negotiating with automakers to reflect the impact of rising transportation and material costs, the company told Reuters. .. Another Honda supplier, fuel tank and sunroof maker, Yachiyo Industry is largely unaffected by purchasing raw materials directly from Honda and considering the high cost of parts sold to parents. Said.

Honda declined to comment.

In a recent earnings call, Chief Financial Officer Takeuchi said automakers were working with suppliers to keep costs down in the face of price increases for the second year in a row. Still, he said he expected profits to decline for the whole year.

Maki Shiraki, Satoshi Sugiyama, Norihiko Shirotsu