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Tokyo Motor Show 2011: Renault-Nissan production hampered by the yen

Japanese car manufacturers could start to move more production to emerging markets like Thailand, India and Mexico if the yen remains at its current "unrealistic" level, said Renault-Nissan CEO Carlos Ghosn at the Tokyo Motor Show this week.

"The yen is our main problem. When it stands at 77 to the dollar it is uncompetitive," he said. "It is an incentive to move production out of Japan. Our company is profitable, but there is no profitability in cars made in Japan for the export market. It is difficult to make investment in a company with no profitability.

"Producing in Japan for the Japanese market is not a problem because we are competing on an equal level," he went on. "What is at risk is that part of our production that is exported when we are neck to neck with the Koreans and some of the Americans and Europeans. For now we are going to hope for the best, but if we see a risk we are going to shift it."

Ghosn said he is already warning the Japanese government that it has to be careful about what the value of the yen is doing to the country's industrial base. "Even if the yen was at 100 to the dollar it would still be too high, but Japanese industry could be extremely competitive," he added.

"But I don't think the economy in Japan is in such a shape that the strategy is working. There is something very artificial about this."

The financial problems in the euro zone are another worry, he said.

"Orders are dropping and the slowdown will hit the market at the beginning of next year."

And all this comes on top of the March 11 earthquake and tsunami which hit parts supply in Japan, only three years after the collapse of Lehmann Brothers triggered an international banking crisis.

"What happened on March 11 didn't change our strategies, but it did change our processes, organisation and mindset," Ghosn said.

"We became a more mature company. We reacted well, and with solidarity. It taught us that things can hit you from anywhere, and you don't know when it might happen."

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